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The Greek Commercial Air Transport Industry
Copyright © IFAC Transportation Systems Chania, Greece, 1997
THE GREEK COMMERCIAL AIR TRANSPORT INDUSTRY
J.S. Lainos Prof at Athens Technological Educational Institution
Abstract: Despite the privileges of the international institutional environment and those based on the convention between Olympic Airways SA (O.A.) and the Greek State, the financial results of OA since its nationalisation in 1975 up to 1994, reached an actual cumulative deficit of more than 558 billion GRD, (2 billion US$). The aim of the present paper is to determine the phenomena and the causes of the Olympic's crisis and to elaborate efficient proposals for a developmental overcoming of this crisis.
Keywords: Aircraft operations, Economics, Management systems, Recovery, State assignment, Transportation, Uncertainty.
1. INTRODUCTION
the law 2271 concerning measures for the recovery of O.A. . The regulations of this law were based on the Greek Government's recovery program that was approved by the European Union on October 1994. The main financial group of measures of the recovery law 2271 were undertaking by the State Shareholder of almost 520 billion GRD of OA debts. Before the application of the recovery program of O.A., the European Union gave the right to private investors to establish from 1-1-1993 charter Airline companies under certain presuppositions 3.
The 1944 Chicago convention and those that followed, determined the regulations for the different activities of the domestic and international A basic commercial Air Transport industry I . regulation determined that for each country only one national carrier was permitted to operate. Based on the aforementioned international institutional environment, the established convention of Olympic Airways between Onasis and the Greek State 2, determined among the other terms, that the company would have the exclusive rights for every commercial air transport activity into the domestic network. These privileges combined with the article of the Chicago convention which prohibited cabotage (Eight Freedom) gave to Olympic a monopolistic power into the domestic network. Despite the aforementioned and other privileges, the annual financial results of Olympic Airways from its nationalisation in 1975 up to 1994, reached an actual cumulative deficit of more than 558 billion GRD, more than 2 billion US$. On the 12-23-1994 the Greek parliament passed
l.l. Aim
The aim of the present article is: a)the determination of the financial position of Olympic Airways, b) the determination of the main causes that brought o A to the present position, c) the determination of the influence of the aforementioned financial position of the Greek airline industry on the National Economy. d) to infer conclusions and to elaborate the proper proposals for overcoming the crisis.
1 J.S. Lainos "Air Transport Economics". Editions Stamoulis. Athens - Piraeus 1995. Pages 78-107. 2 J.S.Lainos "Is privatisation the only way~ File Olympic Airways S.A. "Editions "Stahy" . Athens 1992, Part one, Chapter 1. Pages 29 - 31.
3
187
European Union "Third Package of Liberalisation" 1992.
1.2. Contribution
emphasized that the same phenomena ofcnsls manifestation among different companies do not necessarily imply similar causation. However the basic causes of the manifestation of the crisis in the air transport industryare not different than those of the periodic and structural crisis of the entire free economy system s. The internal environment of O.A. concerns the internally operating conditions (the institutional, managerial, organisational financial e.t.c. framework). The external environment of O.A. does not only concern the domestic and international institutional operational framework of the airline industry but the general economic and other conditions as well by which the operation of the airline industry is affected. Irrational composition of an Airline fleet is defined by the absence of adoption of the number and the type of the aircrafts (technical specifications and operational characteristics, most importantly their range and capacity), to the distance and the demand density and allocation of the served itineraries.
The contribution of the author is: a) The detennination of the causes of the crisis in Greek Air Transport Industry. b) The proof of the ability for healthy operation of Olympic Airways, the Greek National air carrier under certain presuppositions, c) The applied methodology of analysis and synthesis which can be used in any similar case.
1.3. Structure of the article - Assumptions
The structure of the present article is the following . a. Definitions. b. The private Greek Airlines. A brief reference. c. Determination of the phenomena by which the crisis is manifested in O.A. d. Determination of the causes that induced the appearance of those phenomena. e. Conclusions. f Proposals. The present article is concentrated mainly on the Greek National Air carrier since Olympic Airways represents more than 95 % of the total annual traffic of the Greek Air Transport Industry 4 The examined period starts from the nationalisation of Olympic Airways 1975 up to 1994 when the E.U. approved O.A ' s recovery program presented by the Greek government. The applied methodology is the analytical approach of O.A. ' s crisis. separating the phenomena of the crisis's manifestation from the causes that provoked it. The synthesis is followed with the proposals.
2.2. Private Greek Airlines
A basic presupposition put b~ the Third Pack~e. of Liberalisasion for the estabhshment of an arrhne company is its healthy financial position, since theE.U. believes that an unhealthy financial position of the airlines affects negative to flight safety. The "open skies" policy of the E.U. resulted in the establishment of a number of Greek based private Airlines for domestic and int'l charter flights. The total traffic of the five major private Greek airlines cumulative never exceeded the 4 % of Olympic Airways total annual traffic 1,5% of which concerns the domestic network 6. However, after four years of operation the financial position of the five major private airlines is not encouraging. The South-Eastern European Airline SEEA went bankrupt in October 1994 after one and a half years of operation. The "Apollo" stopped its flights in November 1996 due to "reconstruction". On November 1996 the Greek Civil Aviation Authorities withdrew the operation license from "Venus" because a) the company did not have any more airplanes, b) its debts to Civil Aviation Authorities, to Olympic, to the tax authorities, to the employees, to the National Health Service, to Eurocontrol e.t.c. were cumulative five times more than its equity. The case is still pending .The two other Greek private Airlines still in operation (Cronus, Air Greece) are almost on Brake Even Point.
2. THE COMPOSITION OF THE GREEK COMMERCIAL AIR TRANSPORT INDUSTRY According to ownership's regime criteria, the Greek commercial air transport industry (passengers and cargo carriers) has been composed since 1993, by a number of small private owned airlines and the state owned, former national carrier, Olympic Airways. 2.1. Definition
The term "crisis" - on a micro-economic level defines the inability of a company not only for a profitable operation. but even for a self-preservation (brake even point). Phenomena of crisis manifestation in a company, are what is defined as malfunctions, simultaneously occurring in many parts of company' s operations. The causes are not entirly in due to any certain activity, but they constitute the form through which wider weaknesses in general and superior level in company' s life , are manifested. Therefore, it must be
5 1. S. Lainos "The impact of supply and demand on the appearance of the current crisis of the international scheduled air transport industry" PROCEEDINGS of the "International conference on the mondemisation of railway and airway transport. The impact of liberalisation" May 1994 Dernocritus University, Xanthi, Greece. 6 Greek Civil Aviation Authorities data.
Elaborated data of O.A. and Greek Civil Aviation Authorities.
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2.3. The main phenomena through which the crisis was manifested in Olympic Airways. 2.3.1. The absence program 7.
of a
reliable
2.3.3. The high rate of loan dependence.
The total annual interests mainly on loans for cash flow fluctuated from 10 to 30% of Olympic's total annual expenses reached three times more than the average company of the Association of European Airlines (AEA) - (TABLE 2).
development
From its nationalisation in 1975 to present day OA operated without discrete strategic goals. In this period the company has implemented the different tactical aims of each government. The latter burdened OA with the cost offulfillment of these aims .Since 1985 some long , medium and short term development programs were processed These programs were unreliable due to unscientific : admissions, data collection and elaboration methods. Although the goals of these programs were never fulfilled, has ever been held responsible for these continuous deviations to present day.
2.3.4. The irrational composition of the fleet
9.
The irrational composition of OA's fleet is a result of the violation of scientific - rational rules during the scheduling of the fleet composition. TABLE 2 PARTICIPATION OF FINANCING COST TO TOTAL ANNUAL COST OF O.A 10 YEAR
PERCENT.
YEAR
PERCENT.
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984
1,7 1,4 1,6 2,1 3,2 13,6 19,3 24,0 31,4 25,3
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
29,6 17,1 17,6 19,3 19,3 18,7 10,0 10,9 5,6 9,2
2.3.2. The high accounting deficits
These deficits were rapidly increasing since 1977 (two years after its nationalisation) reaching on 1231-1994 558 billion GRD. (TABLE 1). TABLE 1 ANNUAL CUMULATIVE DEFICITS OF OA " (in Million GRD) 8 YEARS 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
ANNUAL CUMULATIVE (38) (38) 267 229 36 265 (398) (133) (506) (639) (2.831) (3.470) (4.970) (8.440) (6.661) (15.101) (4.986) (20.087) (8.959) (29.046) (16.025) (45 .071) (19.862) (64.933) (7.623) (72.556) (13.746) (86.302) (24.859) (111.161) (25 .979) (137.140) (94.257) (231.397) (44.362) (275.759) (142.470) (418.229) (140.000) (558.229)
2.3.5. The over-pricing of the purchased aircrafts' l
.
Is a result of the absence of rules, clarity and unimpeachable procedures during the purchasing process of the aircrafts by O.A The accusation ofa former president ofO.A that the aircrafts Air Bus A300-600 were bought for US$ 95 million instead of US$ 65 million which was their current list price is still pending. For this case the accused Board of Directors has been pressed with charges by the public prosecutor. It becomes obvious that the over -pricing of the purchased alc's increased the operating cost ofO.A 2.3.6. The irrational organizational structure
12.
The organizational structure, of OA is irrational consequently ineffective- because is not adapted
. a. JS.Lainos "Is privatisation the only way') File Olympic Airways SA "Editions "Staby". Athens 1992, Part two, Chapter 6. Pages 180 - 20l. b. JS. Lainos "Air Transport Economics". Editions Stamoulis. Athens - Piraeus 1995. Pages 317-330. 8 Data from Olympic's balance sheets.
189
, JS.Lainos "Is privatisation the only wayry File Olympic Airways SA" Editions "Staby", Athens 1992, Part two, Chapter 5. Pages 112-177 and 208. 10 Elaborated data of Olympic's Annual Reports. II JS.Lainos "Is privatisation the only way? File Olympic Airways SA "Editions "Stahy' ,Athens I 992, Part two, Chapter I I. Pages 244-247,253-280 and Epilog. 12 a. O.A.·s Recovery program approved by European Union oh October 1994 . b. Law 2271/12-23-1994 for the recovery of OA
effective motives for different specialties and for each level of hierarchy. The implication being that for example some drivers' salary is higher than that of the manager since there is not any substantial differences between the wage of these two categories of employees and the executives often are obliged to work beyond the normal labor hours without being paid overtime. These regulations are the result of the equation- downwards - aspect of trade union leaders as well as of the majority of employees, and the non meritocracy criteria of appointment of the executives.
towards the implementation of the goals of the company's program. The irrational organisational structure of O.A. is one of the consequences of the substitution of the rational criteria of organisation with personal relationships. That resulted a 30010 of the employees in O.A. to be hierarchy's executives with substantial negative effects to the productivity, to the product cost and quality and finally to the effectiveness ofO.A.
2.3.7. Non meritocracy criteria of promotion to the hierarchy 13.
2.3.11. The low and declining trend of the productivity level in relation with the competitors
It is not exist any program determining O. A. ' s annual
needs of a certain number of employees per job specialty according to the requirements of the fulfiIlment of company's goals . The number and the qualifications of the annually hired and promoted to the hierarchy, employees, were - and we are afraid they still are - mainly determined by political mechanisms based on relationships and criteria absolutely different than the meritocracy (employee's qualification adapted to its job description) and O.A.'s efficiency.
(l.A. T.A.)
16.
The average level of O.A.'s productivity'S level, fluctuated on the 50 % of the average LA.T.A.'s airline following a declining trend .(TABLE 3) That trend is a result of the absence: - of a reliable program, - ofa rational composition of the fleet of ale's, - of contemporary and effective management, - of a rational and effective organisational structure, - of rational criteria of appointment and promotion of the employees - of efficient control mechanisms at all levels of hierarchy.
2.3.8. The frequent change of the board Of directors 14. It is a sad reality that in 22 years under public
TABLE 3
ownership, the board of directors of the Greek National Air Carrier has changed 32 times with an average life span of eight months. The criteria of the appointment and dismissal of O.A.'s board of directors were other (political equilibrium) than knowledge, experience and evaluation according to the degree offulfillment ofO.A's goals.
COMPARATIVE VARIATION OF THE AVERAGE PRODUCTIVITY'S TREND OF O.A. TO THE AVERAGE LA.T.A.'s AIRLINE. 1986 1987 1988 1989
2.3.9. The absence ofeffiCient control mechanisms. That concerns of all the company's hierarchy levels, and led to inefficient control of O.A.'s economic transactions and all other activities That not only provoked substantial losses but burdened the reputation and the entire efficiency of the company.
50,00% 52,50 % 58,13 % 57,25 %
1990 1991 1992 1993
52,14 % 45,00 % 44,66 % 46,29%
2.3.12 The low quality level of the offered product, with exception offlight safety. With exception of flight safety where O.A. is one of the first companies in the world, the low quality of the offered services of all the distinct places of O.A. in both networks (int'l and domestic) is not random.
2.3.10. The absence of efficient management methodsl5 . There is an absolute absence of contemporary and
2.3.13 The comparatively high operational cost. 13 a. Protest of the Greek Economic Chamber to the President of OA 25-2-94 and 3-3-95. b. Proclamation of the governmental (PASOK) trend of Scientists Union ofOA on 11-5-95. c. Letter of the Scientific Union of O.A to the federation (OSPA). d. Law 2271/12-23-1994 for the recovery ofOA 14 0.A ·s recovery program approved by E.U I~ a. O.A 's recovery program approved by E.U b. Collective Laber Agreements.
In relation with its main international competitors O.A. is generally a low cost company. This advantage however is reversed by its comparatively
16 Elaborated data from "World Air Transport Statistics", 19851993.
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lower productivity's level and the lower quality of the product, with exception of the flight safety.
3.2. Causes of Olympics crisis from its external environment point of view. 3.2.1. The conditions ofO.A. 's nationalisation .
3. The main causes that provoked o.A. 's crisis. These conditions are considered to be one of the main cause for the creation of crisis. O.A.'s net value was over-estimated during its buy-out process from the Greek State for the benefit of the interests of its former-owner. It must be pointed out that the amount agreed to be paid by the State for the acquisition of O.A. was the subsidization that Onasis demanded by the Government only for 1975 19
The examination of the causes that provoked O.A.'s crisis is considered to be made under two points of view: O.A.' s internal and its external environment.
3.1. Causes that provoked O.A. 's crisis from its internal environment point of view. 3.1.1. The involvement of the State-shareholder on OA. 's management that burdened O.A. 's results with expenses of the State Budget e.t.c. 17
TABLE 4 LOSS OF REVENUES AND THE BURDEN OF OLYMPICS RESULTS WITH THE COST OF THE OBLIGATORY FULFILLMENT OF THE STATESHAREHOLDER POLICIES. (UP TO 31-12-1992 IN 1994 PRICES)
The State-shareholder not only did not fulfill the terms of State - O.A. convention but after nationalisation burdened O.A.'s financial position with expenses of the State budget. (TABLE 4) The total sum of Olympics revenues lost and its financial results burdened from 1975 up to 12-31-92 in 1994 prices due to obligatory application of the State - Shareholder policies, reached on 865 billion GRD or 3,8 billion US$. It must be emphasized that the aforementioned sum has not included the lost revenues and the burden of O.A's financial results due to application of the governmental ( shareholder's) policies during 1993 and 1994 which fluctuated at 50 billion GRD (2 million US$) in 1994 prices (estimated). Given that the total financial accounting deficit since O.A.'s nationalization in 1975 up to 31-12-1994 does not overcome 558 billion GRD, it is obvious that if the State-shareholder - had not burdened O.A.'s financial results with the cost of the application of its policies, the company on 31-121994 could have net profits of :865+50-558=367 billion GRD. (1 ,6 billion US$).
1. Non deposit of the share capital ...... 13 7 bi!. GRD
3.
4.
5.
6.
3.1.2. Inadequate qualifications of the members of the board of directors 18 7. The persons appointed by the State - shareholder to the board of directors of O.A. were not only lacking minimum knowledge and experience on airline management and economics, but in some cases some of them were of opposing interests to those of O.A. (suppliers, clients, competitors).
8.
OA's Research Division, J.S. Lainos, "The impact on O.A.·s efficiency from:a. the violation by the State shareholder of the State-O.A. convention. b. the burden of O.A.·s cost with expences of the State Budget" ,research on behalf of the Board of Directors. It was included in OA 's recovery program approved by E.U. 18 a. J.S.Lainos "Is privatisation the only way? File Olympic Part two, Airways SA "Editions "Stahy". Athens 1992, Chapter 12 b. Decision of 3-28-95 Congress of Air Transport Technicians Union ofOA
Discounts to some groups of passengers of the domestic network due to obligatory application of governmental policy ............ ...... ...... 138 bi!.GRD Burdened the economic results ofO.A. with the cost of the flights of Prime Ministers and Presidents of Greece in application of governmental policy .. ... 9 bi!. GRD Unpaid debts of Ministries and other state services from ticket fees for official flights of public employees .. ...... ....... 15 bi!. GRD Discount 95% on the fares of the daily and weekly press, transported daily by O.A. in application of governmental policy ........ .... .. .. ........ 33 bi!. GRD Under-pricing of passenger fares in domestic flights in application of governmental policy on violation of the 11th article ofO.A.- State convention .. .. ................................... 500 bi!. GRD Lost revenues ofO.A. due to the refusal of the Greek Civil Aviation Authorities to pay to Olympic fees from incoming charter flights of foreign airlines according to State - Olympic convention ............... 30 bi!. GRD Strains on O.A. due to the debts of political parties, from air transportation of their voters during the election periods ...... .. ..................................... 3 bil.GRD
17
J.S.Lainos "Is privatisation the only way? File Olympic Airways SA" Editions "Stahy" . Athens 1992, Part one, Chapter 2.
19
191
3.2.2. The permanent involvement of State, Governmental and other mechanisms, on O.A. 's management.
4.2. Today O.A. is in a very critical situation which is Basic expressed by the mentioned phenomena. sources of the crisis are considered : a. the conditions of O.A.' s national isation which burdened its operational cost. b. The insufficiency of the known, until today, as « State Management System » mainly : the absence of permanent operational criteria. the permanent involvement of the State shareholder and other mechanisms on company's management which burdened O.A with expenses of the State Budget, and dictated certain relationships with suppliers, clients, competitors, employees e.t.c. c. The circular crisis of the global economy as it is manifested in the air transport industry. d. The intense seasonality.
The aim of the permanent and suffocating involvement of the aforementioned mechanisms on O.A ' s management, was and still remain the dictation of certain relationships with certain suppliers, clients, competitors, employees e.t.c. 20
3.2.3. The intense seasonabty. As seasonality is defined the grate difference of the demand ' s level between two periods of the year (winter - summer) which provoke over-demand on the peak season and over supply on the low season. Seasonality is due to O.A's network's structure and to the market segments (basically leisure) where O.A. were applied and still is. That resulted overutilisation of product's factors on the peak season and under utilisation on the low. Seasonality had and still has extremely negative impact on O.A ' s efficiency.
4.3 . Despite E.U.'s institutional framework, the Greek Government was not obliged to involve E.U. in Olympic's recovery. As it has already been mentioned on 12-31-1994 O.A was actually profitable by almost 341 billion GRD (1,8 billion US$). The certain financial position come from the co-calculation of the debt of the State shareholder to O.A. due to the obligatory application of the State policies by Olympic. These debts were not registered in O.A. 's balance sheet. The only explanation for E.U.'s involvement may be considered to be the Greek Governments pursuit to avoid its burden of the political cost resulting from the application of unpopular measures necessary to achieve the Governments perception ofO.A,s recovery.
3.2.4. The International crISIs of Air Transport Industry and the change of the international institutional framework. The O.A crisis became deeper due to the international crisis of the air transport industry which is tended by the application of the deregulationliberalisation of the international institutional Air Transport environment.
4.4. That conclusion does not mean that the overcoming of the crisis, demands only the payment by the State-shareholder of its debts to O.A. On the contrary, it signals the necessity for more global approach, deeper analysis of the main problems and malfunctions of O.A. by taking the proper measures for overcoming the entire causes of the crisis.
4. CONCLUSIONS. 4.1. The failure of the majority of the private Greek air transport companies to survive is due to : -Their narrow financial base, -Their dependence on the unstable factors (international tourism - certain tour operators) , - The intense seasonality - Their irrational cost structure (fleet composition e.t.c) - The applied under cost pricing policy. - The small size of the Greek air transport market, -The inefficient organisational structure and the application of inefficient administrational systems.
5. PROPOSALS. 5.1. The necessary measures for the survival of the private Greek Airlines is considered : - The enlargement of their fund infrastructure, - The enlargement of their market, - The avoidance of the negative consequences of the seasonality through the extension of their peak season and orthe allocation of low season's fixed cost on other activities. - The elaboration of an objective strategic plan. - The adoption of their organisational structure and the applied management methods on the needs of the fulfillment of the planed targets. - Rationalisation of cost structure and pricing policy.
20 a. J.S.Lainos "Is privatisation the only way? File Olympic Aimays SA • Editions "Staby· . Athens 1992, Part one, Chapter I and Part three Chapter 11 . b. Research of Ministry of Economics of 3-21 -86 for O.A. · s recovery. c. Press conference of 3-14-95 of a former General Director of Ol)'ropic Catering (affiliated company ofOA) d. "Economist", 3/25-31 /95.
192
5.2. Concerning the necessary measures for overcoming O.A's current crisis towards a developmental direction, is a tragic mistake that affects even on the survival of the company: a. to be considered that the occurrence of identical crisis phenomena necessarily imply identical causes. In this case if the measures would be focused on the abolition of specific phenomena, is certain that the crisis will appear in the immediate future through different phenomena and or through the same but of different magnitude. b. if the measures are the same with those applied by other companies where the crisis appeared through identical phenomena. It is noticed that identical phenomena in different companies, may be due to different causes. Referring to the aforementioned phenomena and causes of the crisis, must be pointed out that there can not be any recovery for O.A on developmental direction - the only viable recovery selection - without applying the following measures
members according to the principle "the appropriate The person to the appropriate job position ". hierarchy should be under annual assessment based on the extend and the quality of fulfillment of their duties. In the case of substantial and unreasonable deviations they have to be replaced. 5.9 The qualification of the members of the board of directors. The members of the board should be appointed at least by the two major parties of the Parliament so that to be assured that the minimal conditions of inter - control, no matter what negative phenomena may arise from such a measure. The period of their service to be no smaller than five years. The qualification of the members of the board of directors has to be relative to air transport.
5.3. Definition of the content and orientation of the operational criteria and the company's goals.
5.11. Seasonality and its impacts can be faced with : - increasing of the quality of the product, - penetration into high income markets (business), - extension of the peak season in cooperation with the Greek Tourism Organisation, Flexibility of fleet's utilisation, - flexibility of labor relations.
5.10. Introduction of contemporary and effective management methods. The participation of the employees not only to the board of directors but to the main decision centers is considered as one of the effective motives. (F.A.A, E.U.) 21
5.4. Strategic plan based on certain operational criteria and market's demand. The adoption of Olympics operation on the changes of the international environment (liberalisation-competition) have to be reflected on the long, medium and short tenn development plans. A special reference has to be given to the delay of the necessary researches and studies for an on time and effective transfer of Olympic's basis from «Hellinikon » airport to new «Venizelos» airport at Spata area as well as the sources of financing .
5.12 Focusing on the consumer-passenger. All of O.A's activities have to focus on the adaption of its the needs of the product on the satisfaction of different passenger categories . 5.13. Cooperation with other air transport companies. The tenns of this cooperation should be accepted from all the parts, as being mutually beneficial. Such tenns could be (generally not specifically) the cooperation in commercial and technical service, code sharing, exchange of stocks and bonds e.t.c. Obviously for the survival in this cooperation Olympic has to be on continuous alert .
5.5. Rationalisation of the investments. The adoption of the investments, mainly the alc's fleet, the alc's maintenance base and the computer reservation system, on the effective development plan of Olympic is a "sine qua non" presupposition for decreasing the cost and improving the quality of the air transport product.
5.14. Release ofO.A's operation from the permanent and suffocating involvement of the State shareholder who dictates certain relationships with certain suppliers, clients, competitors , employees e.t.c. which burden the O.As operational cost .
5.6. Establishment of effective control mechanisms for all decision making centers in the company. 5.7. Construction of an effective organization chart, with exclusive content regarding its adaption to the effective achievement of the planed goals of O.A.based on the economic principle. The transfonnation of the following organisational units into O.A ' s affiliated companies is considered as part of the aforementioned effective organisational restructuring: Maintenance base, Ground handling, Computer center, Training center including flight simulator.
5.15. If the application of the aforementioned measures, for the recovery and development of O.A, is delayed, or if their application is piecemeal and selective then it is mathematically proven that in less than five years, O.A will undergo a worse position than the current one.
,l H.Johannssen "Employee Involvement Process" NAVAIR 111994.
5.8. Re-evaluation (from zero base) of the hierarchy
193
5.16 Finally, it must be emphasized that effective recovery and development of O.A. can be achieved only in a general developmental plan of the entire transport system of the country.
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THE GREEK COMMERCIAL AIR TRANSPORT INDUSTRY
J.S. Lainos Prof at Athens Technological Educational Institution
Abstract: Despite the privileges of the international institutional environment and those based on the convention between Olympic Airways SA (O.A.) and the Greek State, the financial results of OA since its nationalisation in 1975 up to 1994, reached an actual cumulative deficit of more than 558 billion GRD, (2 billion US$). The aim of the present paper is to determine the phenomena and the causes of the Olympic's crisis and to elaborate efficient proposals for a developmental overcoming of this crisis.
Keywords: Aircraft operations, Economics, Management systems, Recovery, State assignment, Transportation, Uncertainty.
1. INTRODUCTION
the law 2271 concerning measures for the recovery of O.A. . The regulations of this law were based on the Greek Government's recovery program that was approved by the European Union on October 1994. The main financial group of measures of the recovery law 2271 were undertaking by the State Shareholder of almost 520 billion GRD of OA debts. Before the application of the recovery program of O.A., the European Union gave the right to private investors to establish from 1-1-1993 charter Airline companies under certain presuppositions 3.
The 1944 Chicago convention and those that followed, determined the regulations for the different activities of the domestic and international A basic commercial Air Transport industry I . regulation determined that for each country only one national carrier was permitted to operate. Based on the aforementioned international institutional environment, the established convention of Olympic Airways between Onasis and the Greek State 2, determined among the other terms, that the company would have the exclusive rights for every commercial air transport activity into the domestic network. These privileges combined with the article of the Chicago convention which prohibited cabotage (Eight Freedom) gave to Olympic a monopolistic power into the domestic network. Despite the aforementioned and other privileges, the annual financial results of Olympic Airways from its nationalisation in 1975 up to 1994, reached an actual cumulative deficit of more than 558 billion GRD, more than 2 billion US$. On the 12-23-1994 the Greek parliament passed
l.l. Aim
The aim of the present article is: a)the determination of the financial position of Olympic Airways, b) the determination of the main causes that brought o A to the present position, c) the determination of the influence of the aforementioned financial position of the Greek airline industry on the National Economy. d) to infer conclusions and to elaborate the proper proposals for overcoming the crisis.
1 J.S. Lainos "Air Transport Economics". Editions Stamoulis. Athens - Piraeus 1995. Pages 78-107. 2 J.S.Lainos "Is privatisation the only way~ File Olympic Airways S.A. "Editions "Stahy" . Athens 1992, Part one, Chapter 1. Pages 29 - 31.
3
187
European Union "Third Package of Liberalisation" 1992.
1.2. Contribution
emphasized that the same phenomena ofcnsls manifestation among different companies do not necessarily imply similar causation. However the basic causes of the manifestation of the crisis in the air transport industryare not different than those of the periodic and structural crisis of the entire free economy system s. The internal environment of O.A. concerns the internally operating conditions (the institutional, managerial, organisational financial e.t.c. framework). The external environment of O.A. does not only concern the domestic and international institutional operational framework of the airline industry but the general economic and other conditions as well by which the operation of the airline industry is affected. Irrational composition of an Airline fleet is defined by the absence of adoption of the number and the type of the aircrafts (technical specifications and operational characteristics, most importantly their range and capacity), to the distance and the demand density and allocation of the served itineraries.
The contribution of the author is: a) The detennination of the causes of the crisis in Greek Air Transport Industry. b) The proof of the ability for healthy operation of Olympic Airways, the Greek National air carrier under certain presuppositions, c) The applied methodology of analysis and synthesis which can be used in any similar case.
1.3. Structure of the article - Assumptions
The structure of the present article is the following . a. Definitions. b. The private Greek Airlines. A brief reference. c. Determination of the phenomena by which the crisis is manifested in O.A. d. Determination of the causes that induced the appearance of those phenomena. e. Conclusions. f Proposals. The present article is concentrated mainly on the Greek National Air carrier since Olympic Airways represents more than 95 % of the total annual traffic of the Greek Air Transport Industry 4 The examined period starts from the nationalisation of Olympic Airways 1975 up to 1994 when the E.U. approved O.A ' s recovery program presented by the Greek government. The applied methodology is the analytical approach of O.A. ' s crisis. separating the phenomena of the crisis's manifestation from the causes that provoked it. The synthesis is followed with the proposals.
2.2. Private Greek Airlines
A basic presupposition put b~ the Third Pack~e. of Liberalisasion for the estabhshment of an arrhne company is its healthy financial position, since theE.U. believes that an unhealthy financial position of the airlines affects negative to flight safety. The "open skies" policy of the E.U. resulted in the establishment of a number of Greek based private Airlines for domestic and int'l charter flights. The total traffic of the five major private Greek airlines cumulative never exceeded the 4 % of Olympic Airways total annual traffic 1,5% of which concerns the domestic network 6. However, after four years of operation the financial position of the five major private airlines is not encouraging. The South-Eastern European Airline SEEA went bankrupt in October 1994 after one and a half years of operation. The "Apollo" stopped its flights in November 1996 due to "reconstruction". On November 1996 the Greek Civil Aviation Authorities withdrew the operation license from "Venus" because a) the company did not have any more airplanes, b) its debts to Civil Aviation Authorities, to Olympic, to the tax authorities, to the employees, to the National Health Service, to Eurocontrol e.t.c. were cumulative five times more than its equity. The case is still pending .The two other Greek private Airlines still in operation (Cronus, Air Greece) are almost on Brake Even Point.
2. THE COMPOSITION OF THE GREEK COMMERCIAL AIR TRANSPORT INDUSTRY According to ownership's regime criteria, the Greek commercial air transport industry (passengers and cargo carriers) has been composed since 1993, by a number of small private owned airlines and the state owned, former national carrier, Olympic Airways. 2.1. Definition
The term "crisis" - on a micro-economic level defines the inability of a company not only for a profitable operation. but even for a self-preservation (brake even point). Phenomena of crisis manifestation in a company, are what is defined as malfunctions, simultaneously occurring in many parts of company' s operations. The causes are not entirly in due to any certain activity, but they constitute the form through which wider weaknesses in general and superior level in company' s life , are manifested. Therefore, it must be
5 1. S. Lainos "The impact of supply and demand on the appearance of the current crisis of the international scheduled air transport industry" PROCEEDINGS of the "International conference on the mondemisation of railway and airway transport. The impact of liberalisation" May 1994 Dernocritus University, Xanthi, Greece. 6 Greek Civil Aviation Authorities data.
Elaborated data of O.A. and Greek Civil Aviation Authorities.
4
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2.3. The main phenomena through which the crisis was manifested in Olympic Airways. 2.3.1. The absence program 7.
of a
reliable
2.3.3. The high rate of loan dependence.
The total annual interests mainly on loans for cash flow fluctuated from 10 to 30% of Olympic's total annual expenses reached three times more than the average company of the Association of European Airlines (AEA) - (TABLE 2).
development
From its nationalisation in 1975 to present day OA operated without discrete strategic goals. In this period the company has implemented the different tactical aims of each government. The latter burdened OA with the cost offulfillment of these aims .Since 1985 some long , medium and short term development programs were processed These programs were unreliable due to unscientific : admissions, data collection and elaboration methods. Although the goals of these programs were never fulfilled, has ever been held responsible for these continuous deviations to present day.
2.3.4. The irrational composition of the fleet
9.
The irrational composition of OA's fleet is a result of the violation of scientific - rational rules during the scheduling of the fleet composition. TABLE 2 PARTICIPATION OF FINANCING COST TO TOTAL ANNUAL COST OF O.A 10 YEAR
PERCENT.
YEAR
PERCENT.
1975 1976 1977 1978 1979 1980 1981 1982 1983 1984
1,7 1,4 1,6 2,1 3,2 13,6 19,3 24,0 31,4 25,3
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
29,6 17,1 17,6 19,3 19,3 18,7 10,0 10,9 5,6 9,2
2.3.2. The high accounting deficits
These deficits were rapidly increasing since 1977 (two years after its nationalisation) reaching on 1231-1994 558 billion GRD. (TABLE 1). TABLE 1 ANNUAL CUMULATIVE DEFICITS OF OA " (in Million GRD) 8 YEARS 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994
ANNUAL CUMULATIVE (38) (38) 267 229 36 265 (398) (133) (506) (639) (2.831) (3.470) (4.970) (8.440) (6.661) (15.101) (4.986) (20.087) (8.959) (29.046) (16.025) (45 .071) (19.862) (64.933) (7.623) (72.556) (13.746) (86.302) (24.859) (111.161) (25 .979) (137.140) (94.257) (231.397) (44.362) (275.759) (142.470) (418.229) (140.000) (558.229)
2.3.5. The over-pricing of the purchased aircrafts' l
.
Is a result of the absence of rules, clarity and unimpeachable procedures during the purchasing process of the aircrafts by O.A The accusation ofa former president ofO.A that the aircrafts Air Bus A300-600 were bought for US$ 95 million instead of US$ 65 million which was their current list price is still pending. For this case the accused Board of Directors has been pressed with charges by the public prosecutor. It becomes obvious that the over -pricing of the purchased alc's increased the operating cost ofO.A 2.3.6. The irrational organizational structure
12.
The organizational structure, of OA is irrational consequently ineffective- because is not adapted
. a. JS.Lainos "Is privatisation the only way') File Olympic Airways SA "Editions "Staby". Athens 1992, Part two, Chapter 6. Pages 180 - 20l. b. JS. Lainos "Air Transport Economics". Editions Stamoulis. Athens - Piraeus 1995. Pages 317-330. 8 Data from Olympic's balance sheets.
189
, JS.Lainos "Is privatisation the only wayry File Olympic Airways SA" Editions "Staby", Athens 1992, Part two, Chapter 5. Pages 112-177 and 208. 10 Elaborated data of Olympic's Annual Reports. II JS.Lainos "Is privatisation the only way? File Olympic Airways SA "Editions "Stahy' ,Athens I 992, Part two, Chapter I I. Pages 244-247,253-280 and Epilog. 12 a. O.A.·s Recovery program approved by European Union oh October 1994 . b. Law 2271/12-23-1994 for the recovery of OA
effective motives for different specialties and for each level of hierarchy. The implication being that for example some drivers' salary is higher than that of the manager since there is not any substantial differences between the wage of these two categories of employees and the executives often are obliged to work beyond the normal labor hours without being paid overtime. These regulations are the result of the equation- downwards - aspect of trade union leaders as well as of the majority of employees, and the non meritocracy criteria of appointment of the executives.
towards the implementation of the goals of the company's program. The irrational organisational structure of O.A. is one of the consequences of the substitution of the rational criteria of organisation with personal relationships. That resulted a 30010 of the employees in O.A. to be hierarchy's executives with substantial negative effects to the productivity, to the product cost and quality and finally to the effectiveness ofO.A.
2.3.7. Non meritocracy criteria of promotion to the hierarchy 13.
2.3.11. The low and declining trend of the productivity level in relation with the competitors
It is not exist any program determining O. A. ' s annual
needs of a certain number of employees per job specialty according to the requirements of the fulfiIlment of company's goals . The number and the qualifications of the annually hired and promoted to the hierarchy, employees, were - and we are afraid they still are - mainly determined by political mechanisms based on relationships and criteria absolutely different than the meritocracy (employee's qualification adapted to its job description) and O.A.'s efficiency.
(l.A. T.A.)
16.
The average level of O.A.'s productivity'S level, fluctuated on the 50 % of the average LA.T.A.'s airline following a declining trend .(TABLE 3) That trend is a result of the absence: - of a reliable program, - ofa rational composition of the fleet of ale's, - of contemporary and effective management, - of a rational and effective organisational structure, - of rational criteria of appointment and promotion of the employees - of efficient control mechanisms at all levels of hierarchy.
2.3.8. The frequent change of the board Of directors 14. It is a sad reality that in 22 years under public
TABLE 3
ownership, the board of directors of the Greek National Air Carrier has changed 32 times with an average life span of eight months. The criteria of the appointment and dismissal of O.A.'s board of directors were other (political equilibrium) than knowledge, experience and evaluation according to the degree offulfillment ofO.A's goals.
COMPARATIVE VARIATION OF THE AVERAGE PRODUCTIVITY'S TREND OF O.A. TO THE AVERAGE LA.T.A.'s AIRLINE. 1986 1987 1988 1989
2.3.9. The absence ofeffiCient control mechanisms. That concerns of all the company's hierarchy levels, and led to inefficient control of O.A.'s economic transactions and all other activities That not only provoked substantial losses but burdened the reputation and the entire efficiency of the company.
50,00% 52,50 % 58,13 % 57,25 %
1990 1991 1992 1993
52,14 % 45,00 % 44,66 % 46,29%
2.3.12 The low quality level of the offered product, with exception offlight safety. With exception of flight safety where O.A. is one of the first companies in the world, the low quality of the offered services of all the distinct places of O.A. in both networks (int'l and domestic) is not random.
2.3.10. The absence of efficient management methodsl5 . There is an absolute absence of contemporary and
2.3.13 The comparatively high operational cost. 13 a. Protest of the Greek Economic Chamber to the President of OA 25-2-94 and 3-3-95. b. Proclamation of the governmental (PASOK) trend of Scientists Union ofOA on 11-5-95. c. Letter of the Scientific Union of O.A to the federation (OSPA). d. Law 2271/12-23-1994 for the recovery ofOA 14 0.A ·s recovery program approved by E.U I~ a. O.A 's recovery program approved by E.U b. Collective Laber Agreements.
In relation with its main international competitors O.A. is generally a low cost company. This advantage however is reversed by its comparatively
16 Elaborated data from "World Air Transport Statistics", 19851993.
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lower productivity's level and the lower quality of the product, with exception of the flight safety.
3.2. Causes of Olympics crisis from its external environment point of view. 3.2.1. The conditions ofO.A. 's nationalisation .
3. The main causes that provoked o.A. 's crisis. These conditions are considered to be one of the main cause for the creation of crisis. O.A.'s net value was over-estimated during its buy-out process from the Greek State for the benefit of the interests of its former-owner. It must be pointed out that the amount agreed to be paid by the State for the acquisition of O.A. was the subsidization that Onasis demanded by the Government only for 1975 19
The examination of the causes that provoked O.A.'s crisis is considered to be made under two points of view: O.A.' s internal and its external environment.
3.1. Causes that provoked O.A. 's crisis from its internal environment point of view. 3.1.1. The involvement of the State-shareholder on OA. 's management that burdened O.A. 's results with expenses of the State Budget e.t.c. 17
TABLE 4 LOSS OF REVENUES AND THE BURDEN OF OLYMPICS RESULTS WITH THE COST OF THE OBLIGATORY FULFILLMENT OF THE STATESHAREHOLDER POLICIES. (UP TO 31-12-1992 IN 1994 PRICES)
The State-shareholder not only did not fulfill the terms of State - O.A. convention but after nationalisation burdened O.A.'s financial position with expenses of the State budget. (TABLE 4) The total sum of Olympics revenues lost and its financial results burdened from 1975 up to 12-31-92 in 1994 prices due to obligatory application of the State - Shareholder policies, reached on 865 billion GRD or 3,8 billion US$. It must be emphasized that the aforementioned sum has not included the lost revenues and the burden of O.A's financial results due to application of the governmental ( shareholder's) policies during 1993 and 1994 which fluctuated at 50 billion GRD (2 million US$) in 1994 prices (estimated). Given that the total financial accounting deficit since O.A.'s nationalization in 1975 up to 31-12-1994 does not overcome 558 billion GRD, it is obvious that if the State-shareholder - had not burdened O.A.'s financial results with the cost of the application of its policies, the company on 31-121994 could have net profits of :865+50-558=367 billion GRD. (1 ,6 billion US$).
1. Non deposit of the share capital ...... 13 7 bi!. GRD
3.
4.
5.
6.
3.1.2. Inadequate qualifications of the members of the board of directors 18 7. The persons appointed by the State - shareholder to the board of directors of O.A. were not only lacking minimum knowledge and experience on airline management and economics, but in some cases some of them were of opposing interests to those of O.A. (suppliers, clients, competitors).
8.
OA's Research Division, J.S. Lainos, "The impact on O.A.·s efficiency from:a. the violation by the State shareholder of the State-O.A. convention. b. the burden of O.A.·s cost with expences of the State Budget" ,research on behalf of the Board of Directors. It was included in OA 's recovery program approved by E.U. 18 a. J.S.Lainos "Is privatisation the only way? File Olympic Part two, Airways SA "Editions "Stahy". Athens 1992, Chapter 12 b. Decision of 3-28-95 Congress of Air Transport Technicians Union ofOA
Discounts to some groups of passengers of the domestic network due to obligatory application of governmental policy ............ ...... ...... 138 bi!.GRD Burdened the economic results ofO.A. with the cost of the flights of Prime Ministers and Presidents of Greece in application of governmental policy .. ... 9 bi!. GRD Unpaid debts of Ministries and other state services from ticket fees for official flights of public employees .. ...... ....... 15 bi!. GRD Discount 95% on the fares of the daily and weekly press, transported daily by O.A. in application of governmental policy ........ .... .. .. ........ 33 bi!. GRD Under-pricing of passenger fares in domestic flights in application of governmental policy on violation of the 11th article ofO.A.- State convention .. .. ................................... 500 bi!. GRD Lost revenues ofO.A. due to the refusal of the Greek Civil Aviation Authorities to pay to Olympic fees from incoming charter flights of foreign airlines according to State - Olympic convention ............... 30 bi!. GRD Strains on O.A. due to the debts of political parties, from air transportation of their voters during the election periods ...... .. ..................................... 3 bil.GRD
17
J.S.Lainos "Is privatisation the only way? File Olympic Airways SA" Editions "Stahy" . Athens 1992, Part one, Chapter 2.
19
191
3.2.2. The permanent involvement of State, Governmental and other mechanisms, on O.A. 's management.
4.2. Today O.A. is in a very critical situation which is Basic expressed by the mentioned phenomena. sources of the crisis are considered : a. the conditions of O.A.' s national isation which burdened its operational cost. b. The insufficiency of the known, until today, as « State Management System » mainly : the absence of permanent operational criteria. the permanent involvement of the State shareholder and other mechanisms on company's management which burdened O.A with expenses of the State Budget, and dictated certain relationships with suppliers, clients, competitors, employees e.t.c. c. The circular crisis of the global economy as it is manifested in the air transport industry. d. The intense seasonality.
The aim of the permanent and suffocating involvement of the aforementioned mechanisms on O.A ' s management, was and still remain the dictation of certain relationships with certain suppliers, clients, competitors, employees e.t.c. 20
3.2.3. The intense seasonabty. As seasonality is defined the grate difference of the demand ' s level between two periods of the year (winter - summer) which provoke over-demand on the peak season and over supply on the low season. Seasonality is due to O.A's network's structure and to the market segments (basically leisure) where O.A. were applied and still is. That resulted overutilisation of product's factors on the peak season and under utilisation on the low. Seasonality had and still has extremely negative impact on O.A ' s efficiency.
4.3 . Despite E.U.'s institutional framework, the Greek Government was not obliged to involve E.U. in Olympic's recovery. As it has already been mentioned on 12-31-1994 O.A was actually profitable by almost 341 billion GRD (1,8 billion US$). The certain financial position come from the co-calculation of the debt of the State shareholder to O.A. due to the obligatory application of the State policies by Olympic. These debts were not registered in O.A. 's balance sheet. The only explanation for E.U.'s involvement may be considered to be the Greek Governments pursuit to avoid its burden of the political cost resulting from the application of unpopular measures necessary to achieve the Governments perception ofO.A,s recovery.
3.2.4. The International crISIs of Air Transport Industry and the change of the international institutional framework. The O.A crisis became deeper due to the international crisis of the air transport industry which is tended by the application of the deregulationliberalisation of the international institutional Air Transport environment.
4.4. That conclusion does not mean that the overcoming of the crisis, demands only the payment by the State-shareholder of its debts to O.A. On the contrary, it signals the necessity for more global approach, deeper analysis of the main problems and malfunctions of O.A. by taking the proper measures for overcoming the entire causes of the crisis.
4. CONCLUSIONS. 4.1. The failure of the majority of the private Greek air transport companies to survive is due to : -Their narrow financial base, -Their dependence on the unstable factors (international tourism - certain tour operators) , - The intense seasonality - Their irrational cost structure (fleet composition e.t.c) - The applied under cost pricing policy. - The small size of the Greek air transport market, -The inefficient organisational structure and the application of inefficient administrational systems.
5. PROPOSALS. 5.1. The necessary measures for the survival of the private Greek Airlines is considered : - The enlargement of their fund infrastructure, - The enlargement of their market, - The avoidance of the negative consequences of the seasonality through the extension of their peak season and orthe allocation of low season's fixed cost on other activities. - The elaboration of an objective strategic plan. - The adoption of their organisational structure and the applied management methods on the needs of the fulfillment of the planed targets. - Rationalisation of cost structure and pricing policy.
20 a. J.S.Lainos "Is privatisation the only way? File Olympic Aimays SA • Editions "Staby· . Athens 1992, Part one, Chapter I and Part three Chapter 11 . b. Research of Ministry of Economics of 3-21 -86 for O.A. · s recovery. c. Press conference of 3-14-95 of a former General Director of Ol)'ropic Catering (affiliated company ofOA) d. "Economist", 3/25-31 /95.
192
5.2. Concerning the necessary measures for overcoming O.A's current crisis towards a developmental direction, is a tragic mistake that affects even on the survival of the company: a. to be considered that the occurrence of identical crisis phenomena necessarily imply identical causes. In this case if the measures would be focused on the abolition of specific phenomena, is certain that the crisis will appear in the immediate future through different phenomena and or through the same but of different magnitude. b. if the measures are the same with those applied by other companies where the crisis appeared through identical phenomena. It is noticed that identical phenomena in different companies, may be due to different causes. Referring to the aforementioned phenomena and causes of the crisis, must be pointed out that there can not be any recovery for O.A on developmental direction - the only viable recovery selection - without applying the following measures
members according to the principle "the appropriate The person to the appropriate job position ". hierarchy should be under annual assessment based on the extend and the quality of fulfillment of their duties. In the case of substantial and unreasonable deviations they have to be replaced. 5.9 The qualification of the members of the board of directors. The members of the board should be appointed at least by the two major parties of the Parliament so that to be assured that the minimal conditions of inter - control, no matter what negative phenomena may arise from such a measure. The period of their service to be no smaller than five years. The qualification of the members of the board of directors has to be relative to air transport.
5.3. Definition of the content and orientation of the operational criteria and the company's goals.
5.11. Seasonality and its impacts can be faced with : - increasing of the quality of the product, - penetration into high income markets (business), - extension of the peak season in cooperation with the Greek Tourism Organisation, Flexibility of fleet's utilisation, - flexibility of labor relations.
5.10. Introduction of contemporary and effective management methods. The participation of the employees not only to the board of directors but to the main decision centers is considered as one of the effective motives. (F.A.A, E.U.) 21
5.4. Strategic plan based on certain operational criteria and market's demand. The adoption of Olympics operation on the changes of the international environment (liberalisation-competition) have to be reflected on the long, medium and short tenn development plans. A special reference has to be given to the delay of the necessary researches and studies for an on time and effective transfer of Olympic's basis from «Hellinikon » airport to new «Venizelos» airport at Spata area as well as the sources of financing .
5.12 Focusing on the consumer-passenger. All of O.A's activities have to focus on the adaption of its the needs of the product on the satisfaction of different passenger categories . 5.13. Cooperation with other air transport companies. The tenns of this cooperation should be accepted from all the parts, as being mutually beneficial. Such tenns could be (generally not specifically) the cooperation in commercial and technical service, code sharing, exchange of stocks and bonds e.t.c. Obviously for the survival in this cooperation Olympic has to be on continuous alert .
5.5. Rationalisation of the investments. The adoption of the investments, mainly the alc's fleet, the alc's maintenance base and the computer reservation system, on the effective development plan of Olympic is a "sine qua non" presupposition for decreasing the cost and improving the quality of the air transport product.
5.14. Release ofO.A's operation from the permanent and suffocating involvement of the State shareholder who dictates certain relationships with certain suppliers, clients, competitors , employees e.t.c. which burden the O.As operational cost .
5.6. Establishment of effective control mechanisms for all decision making centers in the company. 5.7. Construction of an effective organization chart, with exclusive content regarding its adaption to the effective achievement of the planed goals of O.A.based on the economic principle. The transfonnation of the following organisational units into O.A ' s affiliated companies is considered as part of the aforementioned effective organisational restructuring: Maintenance base, Ground handling, Computer center, Training center including flight simulator.
5.15. If the application of the aforementioned measures, for the recovery and development of O.A, is delayed, or if their application is piecemeal and selective then it is mathematically proven that in less than five years, O.A will undergo a worse position than the current one.
,l H.Johannssen "Employee Involvement Process" NAVAIR 111994.
5.8. Re-evaluation (from zero base) of the hierarchy
193
5.16 Finally, it must be emphasized that effective recovery and development of O.A. can be achieved only in a general developmental plan of the entire transport system of the country.
194