BRUSSELS — The European Union's top competition regulator on Wednesday blocked the merger between Greek airlines Olympic Air and Aegean Airlines SA, saying a combined carrier could monopolize Greek air travel.
The merger "would have led to higher fares for four out of six million Greek and European consumers traveling on routes to and from Athens each year," the European Commission said.
Together, the two carriers control more than 90 percent of the Greek air transport market, making it impossible for a new airline to enter and keep a check on prices and the quality of services through competition, the Commission said.
It is the first time the Commission has blocked a deal since it squashed Ryanair Holdings PLC's attempt to take over Aer Lingus Group PLC in 2007.
Aegean and Olympic offered to give up takeoff and landing slots at Greek airports, but the Commission said airports in the country did not suffer from congestion like travel hubs elsewhere.
"My services and myself did our best to find a solution, but unfortunately the remedies offered by the companies would not have adequately protected the interests of the four million consumers that use the routes," Competition Commissioner Joaquin Almunia said in a statement.
To win EU approval the airlines could have offered to sell part of their fleet to a potential competitor or let another airline use one of their brand names, Almunia said.
A combination of the two airlines would have given them a near monopoly for the routes between Athens and Thessaloniki, Greece's second-biggest city, and between Athens and some of the country's most popular holiday destinations, such as Crete, Rhodes, Santorini, Mytilini, Chios, Kos and Samos, the Commission said.
When they announced the merger in February, Olympic and Aegean cited Greece's dire economic situation as one of the reasons for a combination. Greece received a €110 billion ($151 billion) international bailout in May.
On Wednesday, Andreas Vgenopoulos, the chairman of Marfin Investment Group, which owns Olympic, said the Commission's decision "will have negative consequences for consumers as well as our country's economy." He added the two airlines would review the ruling to decide whether they will challenge it in EU courts.
But Almunia argued that the economic crisis heightened the need for a "competitive and strong airline sector to boost industry and tourism" in Greece. "We cannot afford that companies place the burden of the crisis on consumers, charging them higher prices and reducing choice," he said.
Theodore Vassilakis, Aegean's chairman said "an important opportunity for a consolidated representation in the European aviation market has been lost."
Over the past two decades, the European Commission has ruled on more than 4,500 mergers and takeovers and has so far blocked 21. "Our merger control policy does not change. Prohibition decisions will remain very rare," Almunia stressed.
Derek Gatopoulos in Athens contributed to this report.