Founded in 1957 by the late shipping magnate Aristotle Onassis, Olympic in its heyday dressed its cabin crew in Pierre Cardin-designed uniforms and served food to first class passengers on golden cutlery.
But the carrier, which services some 30 domestic destinations and some Balkan cities, fell into decline during decades of state control before being bought by investment group Marfin in 2009.
More lately it has not been able to escape the effects of the Greek recession, now in its sixth year.
Aegean, which flies to 18 countries from Greece, has said the proposed 72 million euro ($96.4 million) deal is crucial for both airlines.
“It is clear that, due to the ongoing Greek crisis and given Olympic’s own very difficult financial situation, Olympic would be forced to leave the market soon in any event,” said EU Competition Commissioner Joaquin Almunia on Wednesday.
The European Commission, the EU’s executive, said the Greek crisis had dampened air travel, with domestic demand down by 26 percent last year compared with 2009. Demand in the first half of this year fell 6.3 percent.
The Commission, which blocked Aegean’s first takeover bid in 2011 because of the combined company’s near-monopoly of the Greek market, said the current situation was different from that almost three years ago.
“We approved the merger because it has no additional negative effect on competition,” Almunia said.
Reuters had reported on October 2 that the Commission would clear the deal because of Olympic’s weak finances.
An official for Marfin - whose shares touched a near five-month high - said the carrier expects to post a smaller loss this year compared with 2012. Turnover is seen at about 170 million euros ($231.1 million) and passenger numbers at 1.9 million.
Aegean returned to the black in the first half of the year with a 16.5 million euro profit as international demand offset weak domestic travel. Law firm White & Case advised the company on the Olympic takeover.
Marfin said the deal would be completed within two weeks following the Commission’s approval.
The regulator’s approval marks the first time it has cleared a deal it previously rejected. Ryanair (RYA.I) made history in February when it suffered a third block from the Commission for its attempted takeover of Aer Lingus (AERL.L).
Marfin shares rose as high as 0.489 euros, their highest since a peak of 0.4930 set in May.