The frustrated merger Olympic-Aegean and the competitive situation in the Greek air travel market

The Olympic-Aegean merger, unlikely to happen anytime soon

The Greek aviation industry has been flying through turbulent times in recent years and one of the consequences has been the proposed merger between the country's two main airlines: Olympic Airlines and Aegean Airlines.

But it looks like industry consolidation will have to wait, since this merger has recently been blocked by the European Union on the basis that such a merger would bring about a virtual monopoly on Greece's domestic air routes. The people at Anna Aero have been doing some research on the competitive environment in the Greek aviation market. In a couple of articles (beware if you click on the links from work, as they contain some animations and sounds!) they have assessed what the market share of the merged airline would be, it would account for nearly 95% of the Greek domestic routes, but the situation would be significantly different on European routes, were it would be competing with foreign airlines in practically all city pairs.

They have also looked at what is the market concentration at other European markets. Greece would be at the top of the table after the merger, but France is, already now, not far behind. Although it is also true that overland communications might be easier in France, that has a well developed high-speed rail network and that Greece's many islands lack a fast transportation alternative.



The Greek aviation sector has been transformed and has got a face-lift recently but the islands remain dependent on the same old links to the mainland

When reading these articles other considerations come to my mind, maybe material for further analysis, for example, when considering the long-haul market. There is currently no Greek airline flying long-haul (these were large loss-makers for the old Olympic) and there aren't many international airlines flying long-haul into Athens either, so the offer is quite limited. A merged Greek airline would possibly have a better chance to do them, increasing capacity on this market segment.

Another point to consider is whether the resulting airline would join Star Alliance, of which Aegean is already a member, or Sky Team, as Olympic was on track to do. So how the competitive analysis in European routes would vary once taking into account code-sharing agreements and the alliance's partners routes?

In any case, the latest news is the an appeal has been filed regarding the blocking of the merger, so this story might go on for still quite a while...