Wikileaks about Aegean Air.

Viewing cable 05ATHENS1903, AEGEAN CEO: IT'S JUST BUSINESS, AIRBUS FITS OUR

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Reference ID	Created	Released	Classification	Origin
05ATHENS1903	2005-07-18 07:17	2011-08-30 01:44	CONFIDENTIAL	Embassy Athens

This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 ATHENS 001903 
 
SIPDIS 
 
E.O. 12958: DECL: 07/14/2015 
TAGS: EAIR ECON GR
SUBJECT: AEGEAN CEO: IT'S JUST BUSINESS, AIRBUS FITS OUR 
OLYMPIC-LESS FUTURE 
 
REF: A. ATHENS 1832 
 
     ¶B. ATHENS 1836 
     ¶C. ATHENS 1851 
 
Classified By: AMB Charles Ries According to reasons 1.5 (b) and (d) 
 
¶1.  (C) Summary:  Ambassador met with Aegean Airlines CEO 
Theodoros Vassilakis and fellow Board-member and son, 
Eftihios Vassilakis, to discuss Aegean's recent decision to 
purchase six Airbus aircraft over Boeing aircraft.  Theodoros 
denied any political angle in the Airbus decision, claiming 
that Aegean is merely looking ahead toward a future without 
main rival Olympic Airlines, where Aegean expands its service 
throughout Europe.  Noting that Airbus and Boeing had made 
very similar offers on price, the decision had come down to 
the novelty marketing potential of switching to Airbus, 
lingering irritation with unspecified support problems during 
their relationship with Boeing, and most significantly, 
greater flexibility in training air crews in the Airbus 319 
through 321 family as opposed to Boeing aircraft. 
Furthermore, father and son confirmed that the switch to 
Airbus would mean the complete phasing out of Boeing aircraft 
by 2010, when the Aegean fleet might number as many as 25 
aircraft.  Theodoros did agree to entertain a final approach 
from Boeing, although they felt the likelihood of the 
decision being changed was no more than "10 or 20 percent." 
End Summary. 
 
¶2.  (C)  Ambassador met with Aegean Airlines CEO Theodoros 
Vassilakis, as well as Vassilakis's son and fellow Aegean 
Board-member, Eftihios Vassilakis.  Ambassador outlined U.S. 
concern regarding Aegean's recent decision to negotiate the 
purchase of six Airbus 320s instead of Boeing 737s, even 
before Boeing's scheduled final presentation.  Theodoros 
denied that political objectives had played any role in the 
decision, citing Aegean's desire to remain independent. 
Eftihios laid out the three major factors that had influenced 
the decision to go with Airbus:  a "novelty" effect of 
switching airframes that could boost passenger interest and 
market share, the effect of unspecified past support problems 
Aegean had had with Boeing, and that the Airbus 319 to 321 
family of aircraft provided the greatest growth flexibility, 
especially in flight crew training requirements.  Given that 
the price quoted by the two competitors was similar, and that 
the economics were highly dependent on future operating 
conditions, the decision had come down to these less 
quantifiable factors. 
 
¶3.  (C)  When asked if there wasn't an offsetting cost 
penalty in operating a split Boeing/Airbus fleet, Eftihios 
noted that in the short-term Airbus would absorb direct, 
non-personnel costs of retraining flight crew, and that in 
the long-term there would be no split fleet, as Aegean 
intends to completely phase out its Boeing aircraft. 
Expanding on this bombshell, Eftihios outlined Aegean's plan: 
BAE RJ turboprops are to be immediately phased out and 
replaced by leased 737s until 2007, then all Boeing aircraft 
will be phased out for Airbus aircraft by 2010.  Eftihios 
noted that Aegean's Board, envisioning a future without an 
Olympic Airlines, sees Aegean's size as potentially 25 
aircraft by 2010, all of which may be Airbuses. 
 
¶4.  (C) In discussing the privatization of Olympic Airlines, 
both father and son were confident that Olympic would be 
defunct within six months.  They calculated that Olympic 
Airlines, and the ground services company Olympic Airways, 
were costing the GoG 600-800 million euro in losses annually. 
 Ambassador noted that it had been observed that EC 
Transportation Minister Barrot's cabinet was suddenly showing 
great interest in the Olympic privatization, and that rumors 
were circulating that Aegean had agreed to buy Airbus in 
return for increased EC pressure on the GoG to scuttle any 
Olympic privatization effort and force the company into 
liquidation.  Ambassador noted that even in the absence of 
any overt agreement, the rumors looked bad.  Theodoros 
bristled at the thought that the EC would help Aegean, 
observing that the EC had done nothing to stop Olympic's 
illegal subsidization for over six years.  He admitted that 
EU ambassadors had been in to see him about purchasing Airbus 
aircraft, but denied that he, or anyone else from Aegean, had 
asked for any political assistance.  He stressed that he was 
not naive, and after years of frustration in trying to level 
the playing field between Aegean and Olympic, he did not 
believe that anyone in the EC would ever help his company. 
 
¶5.  (C) Ambassador posed the question of whether one of those 
EU ambassadors might have, even without a direct request, 
approached Barrot to step up the pressure on the GoG 
regarding the fate of Olympic Airlines in an attempt to sway 
the balance.  Father and son agreed that this might have 
happened, but denied it had had any impact on Aegean's 
decision.  Eftihios outlined Aegean's strategic view: with 
Olympic Airlines out of the picture in no more than six 
months, Aegean has to position itself to take advantage of 
its future position as Greece's only air carrier.  In the 
Board's view, the 737 family is too limited in size, 
especially if Aegean finds itself eventually needing to fly 
wide-bodied aircraft.  With the Airbus purchase, Aegean can 
purchase smaller aircraft for current needs, yet be 
positioned to move more easily into larger aircraft to meet 
future needs.  Returning to the issue of Boeing having lost 
its final presentation opportunity, Theodoros offered to 
allow Boeing to come in with a final offer if they would like 
to do so.  Eftihios agreed, but noted that in his opinion, 
there was only a ten or twenty percent chance of Boeing being 
able to present a package attractive enough to reverse the 
Board's decision. 
 
¶6.  (C) Comment: It is unfortunate to hear that Aegean is 
planning to drop Boeing from its fleet entirely, even more so 
given that they are planning on expanding their total fleet 
size, possibly to include large aircraft.  The rationale 
behind Aegean's decision is clearer, however, given it's 
Board's view that Olympic Airlines is doomed and that Aegean 
should position itself to become a larger player in the 
European market.  Although neither Vassilakis admitted to any 
overt political influence in the Aegean purchase decision, it 
is hard to escape the conclusion that the Board was not 
averse to becoming "more European" by purchasing Airbus, 
given their expansion interests.  It is likewise difficult to 
avoid concluding that, expressly or implicitly stated, 
Brussels was in a position to help Aegean out with its 
control over the fate of Olympic Airlines.  If the Europeans 
were aware that this deal was potentially larger than a 
one-time, six aircraft deal, then their willingness to use 
that influence, even if not directly requested, is readily 
explained. 
 
¶7.  (C) The final variable in this saga is the role the GoG 
might play in the event that it concludes that Aegean had a 
hand in scuttling, or attempting to scuttle, the Olympic 
privatization deal.  Local press has reported that Olympic's 
fifth privatization tender is in jeopardy, and if it fails, 
it is hard to imagine that GoG will not carry out their 
earlier promise to finally liquidate the company.  If the GoG 
has already approached Aegean about the alleged Barrot 
connection between increased EC pressure on the Olympic deal 
and the Aegean Airbus purchase, neither Vassilakis gave any 
indication to that effect.  It is more likely the GoG is 
waiting until after the July 15th meeting between Minister of 
Transportation Liapis and Barrot in Brussels before taking 
action.  Ambassador will seek a readout of that meeting as 
soon as Liapis returns next week.  End Comment. 
RIES