Icarus descending: The word Olympic usually evokes visions of top performance, but not if you couple it with airlines. Now a British Airways rescue team, led by Rod Lynch, is at the controls in a bid to get the spluttering Greek flag carrier back off the

Icarus descending: The word Olympic usually evokes visions of top performance, but not if you couple it with airlines. Now a British Airways rescue team, led by Rod Lynch, is at the controls in a bid to get the spluttering Greek flag carrier back off the

by MATTHEW GWYTHER
Last Updated: 31 Aug 2010

Any airline that calls its frequent-flyer programme 'Icarus' has obviously got a few problems. Add to that financial losses so great that nobody in its finance department can even get a computer to put a vague figure on them.

Then complement the grief with an angry European Union transport commissioner accusing the airline's management of law-breaking duplicity. Top off this grim mix with an in-flight magazine called Motion and the problems start to look terminal. Welcome to the precarious world of Olympic Airlines, last sighted in a long, slow glide heading for the azure waters of the Mediterranean.

Olympic, the national carrier of Greece, is the basket case among Europe's airlines. Now that previous no-hopers such as Air France, Iberia and Alitalia have started to look quite classy and can arrive on time without the a member of the cabin crew spilling coffee in your lap, the last remaining major state-owned airline in Europe has begun to come under real pressure.

And that pressure may well be too much for it to bear. Neil Kinnock, who was transport commissioner before he changed office in last year's hasty Brussels clean-up operation, had already made it clear that time was running out for Olympic. If it failed to get its house in order, to start telling the truth and take steps to remedy things, then it would be axed.

Olympic's malaise has been long-term. It was founded by the legendary Aristotle Onassis way back in 1957 when he took over a small local airline and it grew to be the pride of the Mediterranean. Its brilliant deep-blue aircraft were well-run. Its international brand value - as symbolised by the linking of those magic rings - was priceless. The Greeks were proud of it - and the Greeks are a proud people. But Onassis lost his son and then lost interest in his airline, which was taken over by the Greek state.

Civil servants and politicians the world over have never shown much promise at running businesses, and Olympic was no exception.

More generally, Greece has been an almighty economic mess for quite some time. Its commercial outlook has been weak and backward for years. In the past decade, the nation underwent the cruel humiliation of failing to get anywhere near the convergence criteria for entry to European Monetary Union - not on one but on several counts. It receives vast sums from Brussels in an effort to drag it up to European development standards and large amounts of that cash gets salted away into a domestic black economy that is the most vigorous in Europe. Greeks hate many things besides the Turks, but they hate paying taxes more than anything.

For as long as anyone can remember, the wait for a telephone line in Greece was officially 15 years because so many engineers installed wires for cash on their days off. Automatic banking machines remain a novelty and Greeks are still puzzled about how to stick their cards into them.

Personal computer penetration is among the lowest of any country in Europe.

But things are improving. The Athens stock exchange - and Greeks love a punt - went digital this year and the economy is now growing.

Olympic, however, has up until now remained in the sin bin. The whole thing is a salutary reminder of just how bad things can get when they wither in the public sector. If Olympic had been a private company it would have been grounded and its aircraft sold off ages ago. With no profits made for the past 20 years, the airline has been given the once-over by more management consultants than it has served hot towels.

A restructuring plan was put in place back in 1994 but it soon ran into trouble. After Olympic proudly announced a profit of six billion drachmas (pounds 18.3 million) for 1997, an audit conducted by PricewaterhouseCoopers came up with a slightly different figure - a loss of 38 billion drachmas.

Clearly someone in Olympic's accounts department made a slip of the abacus.

The EU blocked further state aid until the conditions of the plan were complied with. They were not. The final ouzo in the Last Chance Saloon for the airline's managers and the 18 unions that represent the workforce came nearly a year ago when Brussels insisted that the management of Olympic be handed over to outside consultants in an effort to get a clearer view through the murk. One of the bidders for this task was Speedwing, the consultancy arm of British Airways. It was up against Lufthansa, and BA won - a welcome piece of good news for Britain's troubled flag carrier.

The deal that was struck was subtle, however, and for BA is a jam-tomorrow deal. For the modest fee of dollars 14 million (pounds 8.8 million), BA gets to run the airline for 30 months and at the end will have the option to buy up to 20% of Olympic - if and when it ever gets privatised. BA's team was headed by Rod Lynch, who spent many years with the airline before joining the ill-fated Air Europe and then the BBC where, as John Birt's man, he created BBC Resources. Joining Lynch on the Olympic team was his old friend Jock Lowe, a celebrated and popular figure inside BA who not only pilots Concorde but is also commercial director of the supersonic fleet. They were joined by Paul Giblin, another pugnacious BA senior figure whose last job was as general manager of its highly successful World Cargo division.

The lower-profile member of the Magnificent Four - and none them is a spring chicken - was the finance man, Graham Jones, aged 60, from Australia.

'Most of my friends think I'm off my rocker,' said Lynch in his first interview after he took on the job.

Indeed, this judgment looked not far off the mark when the reaction inside Greece to his appointment got into swing. Michalis Perros, president of the combined unions, described the deal as a 'gravestone' for Olympic, adding that bringing in Speedwing was like asking 'a wolf to attend sheep'.

To help matters further, the former foreign minister, Theodoros Pangalos, remarked that the only people who would ever willingly use Olympic were 'masochists', while most of the comment from the Communist Party of Greece, which regularly scoops 8% of the popular vote, was barely printable.

Lynch was sworn in as CEO by the Greek parliament in early July 1999 after a lengthy grilling from deputies and lawyers. Outside the parliament there was an anti-Lynch riot complete with flying bricks and petrol bombs.

One protester tried to burn a British flag but it was so old and grimy it wouldn't light. An unperturbed Lynch went to his desk and began struggling with the numbers.

In the first two weeks of July, Olympic's employees staged two major walkouts in protest at Speedwing's appointment. About 50 of the 70 daily flights had to be cancelled. There was even a bomb threat. Then on 11 August, the day of the solar eclipse, Management Today went out to Athens to see how the BA team was getting on. Lynch was going off on a day trip to rally his troops in Crete - but his departure was delayed for some time by the breakdown of the elderly 737 that was to fly us to Heraklion. (There are 15 airlines in the punctuality league table of the Association of European Airlines. At that time, Olympic was, and for some time had been, ranked as 15th. The same applied to long-haul.) The ailing 737 was replaced with commendable rapidity by a dog-eared Boeing 727 that was labelled Macedonian and looked old enough for Onassis to have bought it.

But off we went to the west and then south as Lynch set out his table.

The Scot is a fluent and energetic talker - a natural leader. His years at the BBC have made him a master of the sound bite - but you believe him because there is no doubt he is completely in earnest. As a people person, he is truly gifted. 'The problem here isn't cost,' he said 'This airline has some of the lowest costs in Europe - roughly 60% of those of our northern European competitors. Our problem is simple - revenue, or the lack of it.

'Because the product standard has collapsed, we're unpunctual, the aircraft are shabby and down-at-heel, and we're understaffed. We just cannot attract the premium revenue we need to be competitive. So we're in a vicious downward spiral of lack of investment, which drives the product quality down.'

He had no illusions about the magnitude of the task ahead or the obstacles - for example, Greece's archaic labour laws. 'It's amazing. We actually need to get a law through parliament to reduce the lengthy layover times (rest periods) for stewardesses in New York.' (Olympic loses a small fortune on this route and other long-haul flights to service the Greek diaspora of some seven million in North America, South Africa and Australia.) 'Even their meal-break times are in statute. The extent of government interference has been absolutely horrendous.'

Now he was really into his stride. 'The airline has simply been used and abused for political patronage. Nepotism means boyfriends, girlfriends anyone in the know gets a job here. Don't forget Mimi Papandreaou, who ended up the prime minister's wife, was a stewardess here. The result of this is that the management has just thrown in the towel. The day we turned up, the head of legal services, in protest, left his desk and hasn't been seen since.'

But Lynch's first reaction was not what the unions were expecting. 'I did the read-my-lips thing and told them that the last thing they needed here were job cuts. I said to the unions, 'Look, this is a very sick patient on the operating table. If we cut off his legs, we'll kill him. If we stabilise him, we can help him get better.' But there will be no cheap fixes or short cuts. This is bad and Brussels has made it clear what will happen if we don't do something fast.'

So what was clear was his insistence that none of this was remotely the fault of 95% of his staff. 'I've already met 1,500 to 2,000 people personally and I want them to know we're not consultants - we're airline professionals. If we're seen as patronising colonialists from London, they will simply reject us. They're incredibly proud and stubborn, and they are survivors. They've had to be to get this far.

Many of them are highly competent and highly professional. They've been like a religion in exile.

'They make spare parts for high-loaders - just like the Cubans keep Chevrolets from the '50s going - because there's no money to get a new one. But their safety record is outstanding. They don't have a Y2K problem because they don't have enough computers to create one.'

To his amazement, one of the first things Lynch observed was the cack-handed way Olympic was selling tickets. In the airline business, seat yield is all. You squeeze what you can from each spot on an aircraft and some unbelievably sophisticated software does this for all the world's major airlines. BA has about 25 different price codes for its seats. The system Olympic bought from Swissair has about eight and the staff were not even using them. So they were selling stuff off cheaply, at the same price, regardless of demand which should send prices up. (Even the airline's cleaners were getting to Australia for next to nothing.) 'We can add tens of millions to the revenue stream simply by using that system properly,' says Lynch, downing his orange juice. 'The entire profitability of BA is generated by its yield management system. It's THE differentiator between success and failure.'

On the ground at Heraklion, Lynch was wondering why his press people hadn't warned him that a ruck of cameramen and reporters wanted a news conference. The airport manager, greeting Lynch as 'a fine young man', presented his new boss with a Cretan hunting knife that has a 10-inch blade. 'You will be Braveheart and you can wear it in your sock or your pants,' Lynch was told.

As a Scot, Lynch liked this. He strode round the conference room, speaking without notes as he went, challenging his simultaneous translator to keep up: 'We're on the edge of an abyss, but if this is the basement we're heading for the penthouse suite as fast as we can.' Olympic's chief pilot, a survivor par excellence, stood silently, listening.

Down in the bowels of the terminal building, a baggage handler was struggling to keep up with the vast numbers of swollen Samsonites and buggies. The machinery was battered and broken. The handler had a badly swollen and bandaged wrist but was still going. (That is nothing. The local union committee here once apparently insisted that the terminal manager take on a loader who only had one arm.) The oil-soaked chief mechanic (there were no Indians) was brought forward to give testimony, leaving a fire-tender in pieces in the workshop. He was the only qualified fitter for the whole airport. 'God this drives me potty,' said Lynch. 'This man has eight types of specialist vehicle to keep running, no spare parts. Please tell him I appreciate what he's doing, and we'll have to improve things, but I can make you no promises.'

The departure back to Athens showed precisely what Olympic was up against.

The 737 was nearly two hours late - and full. Outside the sun was blazing down, creating an air temperature above 40 degrees. As soon as the doors were closed passengers started fiddling with the ventilation ducts to get some cool air out. None came. The 737's air conditioning unit had broken down. By the time we were over the southern Cyclades, all the passengers looked as if they had jumped in a swimming pool. One woman fainted with the heat. Others just tried to fan themselves with their copies of Motion.

The stewardesses bravely struggled on with their trolleys, the sweat pouring off them. The pilot said nothing. As we exited at Athens, a fellow passenger shrugged and said: 'It's Olympic. What do you expect?'

Come November, and MT's second visit to view progress. Jock Lowe, now operations director, was proud that inside three months he'd got the away-on-time figure for his aircraft up from 38% to 80%. He had the graphs to prove it. The summer had presented more than the usual share of difficulties: an earthquake in Athens that had killed 100 people, a thunderstorm that dumped 40cms of rain on the airport in a couple of hours and flooded the hangars. Not to mention Lowe's inability to find someplace to live other than the Intercontinental Hotel. (His flat had been built but still had no electricity.)

But ever the optimist, Lowe was looking forward, thinking about how to move 'the natural warmth, personality and hospitality of the Greeks' into his cabin staff via a new customer-service initiative. 'I've never been more excited by a job in my life,' he admitted with a shy smile as he showed off the interior of one of his brand new Airbus A340s. He was even considering bringing his own plane, a two-seater Chipmunk, to Greece and have some flying fun next summer.

Graham Jones, meanwhile, was sitting in his office on Sygrou in the city centre, looking tired but quietly pleased with himself. After a five-month search, the group finance director of a company turning over a billion dollars a year had finally found himself a secretary. 'Yeah, I coaxed her out of the press office,' he said. Jones is a widely experienced man.

An accountant by training, he has worked as finance director of House of Fraser, for PA Consulting and, most importantly, as financial director of Qantas, when it was privatised. In the airline business, he has become one of the world's leading change managers.

Jones was having quite a week. In an adjoining office were four Deloitte functionaries trying to make some sense of what was going on so they could report back to Brussels. If the auditors, who were accompanied by a senior civil servant from the European Commission's directorate general, could see no light at the end of the tunnel and persuade the transport commissioner there was hope, then it was almost certainly going to be the end. Deloitte had already been presented with a slight shock. The original plan back in July, written by an unnamed firm of consultants, had predicted a 1999 operating profit of 26 billion drachma. After wading through the data that were available, Lynch and Jones had been forced to revise this to a predicted loss of at least 20 billion. On the positive side, they had also produced the airline's first five-year business plan.

Jones was loyal to his staff, and diplomatic, but clearly had been bewildered by what he found when he arrived. 'Well, we've only just got an audited balance sheet for 1998,' he said. 'We just don't have any contemporary operating or financial data on which to make management decisions in this airline at the moment. It's the old garbage-in, garbage-out syndrome.'

Down the corridor, Lynch was in his office, the very same one once occupied by Onassis. You can see the Acropolis behind the partition. He was still bullish but looked tired. He was well into rationalising the fleet, seeing off the opposition of the new start-ups (one had already bent one of its planes in a heavy landing in Salonika), and he'd struck a union deal linking all future pay increases to productivity.

'There is a fantastic opportunity here,' he said. 'With the demise of Yugoslavia, Greece has become the regional mini-power. It's economy is convergent and growing, and inflation is under control. It's the centre of this region. The nearest airport hub is Rome, Milan or Vienna. The only other alternatives are Beirut, which is out of the game, or Istanbul, which is probably too far east and too strongly linked with the Middle East and Asia. We've got the only new airport in Europe coming along, with two runways and 24-hour operation, and that airport is bang in the middle of one of the highest-growth areas in the hemisphere. And, finally, there's talk of a trillion dollars going in to rebuild the Balkans over the next 10 years. Our catchment area is the whole of the Levant, near-East and Middle-East - a huge chunk of real estate. If we play it right, it's all ours.'

Once it all belonged to Greece. A couple of thousand years ago, anyway.

On the final day of MT's second visit to Athens, one member of the press office, George Papanikolaou, asked if I wanted to look at some really old stuff. And he didn't mean 727s. We went for a wander round the Parthenon.

He had over 20 years working as an Olympic steward, while spending his time on the ground creating a second career as one of Greece's leading economic journalists. 'Do you know when I joined, Onassis used to make every steward go and spend three months working in the finest hotel in Monte Carlo before he let us on the planes,' he said. 'That's how we learnt.' He wanted to show me the ancient Agora where Socrates wandered about in his sandals, when the Greeks enjoyed their glory days. 'This is where it all started,' he said, standing on the flat rocks. 'This is where democracy began. I'm coming up here on Millennium night and putting my tent up.' Never mind the next thousand years, Papanikolaou will be grateful if his employer makes it through the next 12 months.

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