New battle to save Malév


Hungarian investor and industrialist, Sandor Demjan, confirmed he and foreign investors are part of talks regarding the future of Hungary’s flag carrier airline Malév. Talks are centred on reviving the carrier technically and convincing the Hungarian Government to settle the carrier’s debt. Options include a possible takeover, with MRO and ground services units to be transferred to the Hungarian national asset management company.

Malév was majority owned (99.9%) by Russia’s state-owned development bank, Vnesheconombank, which acquired it from Russian investor Boris Abramovich in 2007 as ‘AirBridge.’ Abramovich was also the backer of Russian airlines KrasAir and AiRUnion. It is rationalising its fleet, for example by returning five F50s to the lessor (AWAS), and will henceforth "operate with a fleet comprising just two types: 18 B737NGs and four Bombardier Q400s carrying out regional services".

The Hungarian Finance Ministry had hinted it would consider ownership or financing of Malév to ensure the carrier continues to operate and in Feb-2010 the Hungarian State acquired a 95% majority share in Malév through the state holding company MNV, investing EUR93.4 million, EUR37.5 million of which came from its own reserves. AirBridge will retain a 5% shareholding. Effectively Malév thus became the first European airline of any consequence to be re-nationalised. The carrier is reportedly able to maintain its operations without state intervention until Oct-2010.

Malév reported a pre-tax loss of EUR94.4 million for 2009 as passenger numbers rose slightly to 3.2 million and continues to need fresh capital to continue operations.

Malev Hungarian Airlines passenger numbers and passenger number growth: 2005 to 2009

Wizz Air considers the renationalisation of Malév to be an illegal state subsidy and immediately called on the EC to investigate following the deal.

Malév is the national airline of the Republic of Hungary, but only the country's second largest carrier after the home grown LCC Wizz Air. From its base at Budapest Ferihegy International Airport, Malév offers scheduled services to 50 cities in 35 countries with its fleet of B737s and Bombardier Q400s. Malév is a member of the oneworld alliance since Mar-2007, despite Czech Airlines’ offer to sponsor Malév as an associate member of the SkyTeam alliance, and Malév's codeshare agreements with several SkyTeam carriers.

Sandor Demjan is Chairman of TriGranit, one of the largest property developers in Europe. TriGranit has completed projects with a total value of EUR2 billion and is currently working on several developments in eight countries across the CEE region. It is also responsible for the Coco de Mer hotel in the Seychelles though its primary focus is on dominant, mixed-use ‘city centre’ projects in strategic urban locations such as retail & entertainment centres, office buildings, hotels, residential developments, waterfront resorts and cultural facilities. TriGranit is also regarded as one of the pioneers in the field of public private partnerships (PPP) projects but has no track record in aviation. It recently bought the Hungarian Milton Bank.

For the moment Malév is a pawn in a power struggle between private and public interests, but not because it is an attractive investment. Rather to try to ensure its survival.

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