By Angeliki Koutantou and Karolina Tagaris

ATHENS (Reuters) - A crumbling former Athens airport complex housing thousands of stranded migrants will be transformed into one of Europe's biggest coastal resorts if a Greek development company realizes its ambitions.

The 7-billion-euro plan to develop Hellenikon, a site three times the size of Monaco, has the potential to help kick-start an economy that is limping back to growth after seven years of recession.

Co-investor Lamda Development will obtain a 99-year lease to turn the wasteland of crumbling terminals and rusting airplanes into a glitzy seaside town of hotels, residences and shops.

Efforts by successive governments in recent years to turn the 620-hectare (1,530 acre) plot into a profitable venture have all fallen through, including plans in 2011 to build a financial district similar to London's Canary Wharf with Qatari backing.

But the chief executive of Lamda, which is owned by Greece's powerful Latsis family, is confident things will be different this time.

"This project is a game-changer," Odisseas Athanassiou told Reuters in an interview. "It is going to change the psychology of foreign capital toward investment in Greece."

Backed by Chinese conglomerate Fosun, an Abu Dhabi-based company and other prospective investors, Lamda intends to spend about 1.5 billion euros ($1.66 billion) on roads and other infrastructure.

A further 5.5 billion euros is being earmarked for about 8,000 homes, hotels, shops and a 494-acre park, making the project one of Greece's biggest private investments.


For about six decades, Hellenikon was Athens's only airport.

Those with long memories will recall its 1960s jet-set heyday, when shipping magnate Aristotle Onassis ran Olympic Airlines in lavish style and his partner at the time, opera diva Maria Callas, added a dash of glamor and gossip.

But in 2001 Athens decided to shut the by then run-down facility to make way for a more modern airport before the city hosted the 2004 Olympic Games.

In its latest incarnation, Hellenikon is housing more than 3,000 migrants and refugees who have fled war and poverty in the Middle East and Asia.

Its once-busy arrivals terminal is tightly packed with scores of tents where more than 1,300 mostly Afghans live in squalid conditions. One woman said she sleeps in shifts to protect her younger siblings from people-smugglers.

Prayer mats are laid in the direction of Mecca beneath signs pointing to shuttered Duty Free shops and announcement boards offering eerie reminders of long-departed flights.

Greece's shipping minister said the government planned to move the migrants by the end of July, taking them to other sites across the country already hosting 54,000 others.

For Lamda, that is welcome news. "From the start we had assurances that when we took over the project, it would be ready from all aspects," Athanassiou said.


Those living at Hellenikon say they have been told nothing.

"We have no idea what we're going to do," said Afghan Ali Ahmad Jafari, who has spent a "miserable" five months there sharing a tent with his wife and two sons.

The family spent all their savings to reach Greece, he says.

Lamda, meanwhile, hopes excavations at the site will begin in the first half of next year and many of the commercial buildings will be ready in 2020.

The company will use 300 million euros in private funds as a down payment on the site, and another 500 million for construction work in the first two years. It will also invite investors to join the project, Athanassiou said.

He is confident demand for property there will be satisfactory despite years of crisis.

"Since it's not only for the elite - there will be several mid-range residences - I believe a lot of people would like to live there."

But investing in Greek state assets is not always easy.

A privatization program linked to Greece's international bailout has been progressing slowly, and the Hellenikon plan still lacks parliamentary and court approval - decisions that can take months.

Greece, which has lost about a quarter of its output during the recession, is desperate for investors as it struggles with record unemployment, and Athanassiou believes his project could help fix the mood.

"Instead of saying 'I am not investing because I don't trust you' they (investors) will say 'I should invest because others are investing and I don't want to miss that'."

(Writing by Karolina Tagaris; editing by John Stonestreet)