Board, government OK Olympic turnaround plan

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NEW YORK -- Olympic Airways' new business plan was approved by the airline's board of directors and by the Greek government. Unlike many turnaround schemes, the plan aims at building rather than shrinking the airline.

It includes a major fleet replacement program, retiring old 747s in favor of new A340s (it just received its fourth); an order for 24 narrow-body aircraft, now under consideration; additional frequencies to key markets in the U.S. and Europe, and new long-haul service to points including Sydney, Australia, and Johannesburg, South Africa.

Once the pride and joy of its founder, Aristotle Onassis, Olympic has become something of an embarrassment in recent years, more resembling a third-world carrier than one belonging to a modern European nation.

Several months ago, Speedwing, the consulting unit of British Airways, contracted to manage the carrier for the Greek government and get it into shape for privatization.

Speedwing tapped Rod Lynch, a former head of customer service at British Airways, to head up a management team made up of retired but still robust airline executives, "a bit like the Magnificent Seven," Lynch said.

They found a mess: "The entire service platform had collapsed," Lynch said. "Marketing was a forgotten science."

But they also found some encouraging signs: Even as everything around them deteriorated, the pilots and maintenance workers saw to it that the airline's safety was never compromised, Lynch said.

They also found an unusual situation: Unlike those of most government-owned European carriers, Olympic's problems stem not from overinflated costs but from its "horrendous underperformance on yields and revenue."

The carrier had a good yield-management system -- Hermes, marketed by Swissair -- but didn't have people who knew how to run it, Lynch said. Olympic, in fact, suffered from a serious brain drain; several Greek start-up carriers had lured away its best people.

The arrival of the Speedwing team was "like sending in the cavalry," Lynch said. The first reaction by the carrier's labor unions was a series of mini-strikes. But the labor unions have since come around, Lynch said.

"They know the party's over," he said, "and self-interest is a positive driver."

Olympic already has received two government subsidies and will receive a third only if the European Union deems it worthwhile to resuscitate the airline one more time.

If the labor unions try to shut the airline down, the EU can shut it down for good.

Another positive factor for the Greek line is that tourism to the country is "upmarket," Lynch said.

"It's archaeology, it's villas," he said, adding that it has not, like some other countries on the Mediterranean, been overrun by rowdy holidaymakers on cheap packages.

And the country is looking forward to a tourism bonanza from the Olympic Games in 2004.

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