Bloomberg News

Hungary’s Chance of Replacing Malev Wanes, Budapest Airport Says

February 07, 2012

Feb. 6 (Bloomberg) -- Hungary’s likelihood of replacing the collapsed state-owned airline Malev Zrt. with a carrier focused on serving Budapest is waning, the capital city’s airport operator said.

“The chances of a new Budapest-based airline being set up to fill the void left by Malev is reduced with each passing day,” Mihaly Hardy, a spokesman at Budapest Airport Zrt., said in a phone interview today.

Malev, weighed down by debts of 60 billion forint ($270 million), halted flights on Feb. 3 after 66 years in operation. Malev went bankrupt after the European Commission, the regulatory arm of the European Union, ruled last month that the airline must return the equivalent of $390 million in government aid from 2007 to 2010.

Budapest Airport, which is 50 percent-owned by German construction company Hochtief AG, is reviewing this year’s business plan following the demise of Malev, the biggest carrier serving the Hungarian city, the operator said in a statement late yesterday. The airport handled 8.9 million passengers last year, of whom 3.2 million were Malev customers including 1.5 million people using the carrier to connect to other flights, Hardy said.

‘Critical Consequences’

Plunging revenue as the result of Malev’s collapse may trigger a clause in Budapest Airport’s privatization contract that will force the government to pay the operator 1.5 billion euros ($1.96 billion), with “critical consequences” for the budget, according to a state document published on Dec. 5. The government sold a majority stake in the airport in 2005, and Hochtief has been a shareholder since May 2007.

While a profitable flag carrier should be part of Hungary’s “national economy,” a replacement will be set up only with the backing of private money, Prime Minister Viktor Orban told MR1 state radio on Feb. 3.

The Hungarian government should designate an airline to replace Malev on routes where the folded carrier had exclusive rights, such as destinations in Russia, Turkey, Israel or Ukraine, Budapest Airport said.

European carriers such as British Airways Plc, Air France- KLM Group, Deutsche Lufthansa AG and its Brussels Airlines unit, Air Berlin Plc, Ryanair Holdings Plc and Budapest-based Wizz Air have announced capacity expansions and new routes since Malev’s collapse, the airport operator said.

--Editors: Tom Lavell, Chad Thomas

To contact the reporters on this story: Zoltan Simon in Budapest at zsimon@bloomberg.net; Edith Balazs in Budapest at ebalazs1@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; James M. Gomez at jagomez@bloomberg.net


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