Malév ordered to repay state aid, now bankrupt

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sn26567
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Malév ordered to repay state aid, now bankrupt

Post by sn26567 »

Malév Zrt. was ordered by the European Union to repay loans and guarantees to the government. The European Commission said Hungary gave Malev financial help from 2007 to 2010 when the company wouldn’t have got financing on similar terms “nor possibly any financing at all” from any private investor “given its consistently difficult financial situation.”

“Hungary now needs to recover the unlawful aid,” the Brussels-based authority said in a statement today. The country must calculate exactly how much aid to reclaim from Malév, said Cristina Arigho, a spokeswoman for the commission in Brussels.

Hungary’s government “respects” the commission’s decision and wants to ensure Malév’s continued operation. The cabinet will discuss the EU repayment decision on Jan. 16.

Hungary is seeking a buyer for Malev after it took a 95 percent stake to replace Russian bank Vnesheconombank as controlling shareholder when a previous privatization failed. Hungary is in “advanced” talks with possible investors in the airline after China’s Hainan airlines withdrew from negotiations.

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Last edited by sn26567 on 03 Feb 2012, 09:10, edited 1 time in total.
Reason: Changed title after actual bankruptcy
André
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sn26567
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Re: Malev ordered to repay state aid

Post by sn26567 »

Business as usual for Malév despite EU competition ruling

Malév Airlines has moved to reassure passengers and suppliers that it will continue business as usual after an EU investigation ruled it must pay back millions of euros in loans from the Hungarian government judged illegal under competition law.

Dr Janos Berenyi, chairman of the Malév Board of Directors, said the state-owned airline would continue scheduled operations “as normal” after receiving assurances of support from the Hungarian government.

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andorra-airport
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Re: Malév ordered to repay state aid

Post by andorra-airport »

Business as usual?

News from last month:

"Malev Hungarian Airlines (MA) could face bankruptcy in the coming weeks.
Hungarian Minister of Finance Tamas Fellegi confirmed to Hungarian media that the Budapest government is holding talks with an investor from the Czech Republic to form a new carrier and a deal could be reached by the middle of next year. The investor is also owner of Czech leisure carrier Travel Service."

Every year huge losses (90 Million in 2010, 30 Million in 2011) , and now they have to pay back 355 Million euro. Business as usual people....

Didymus
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Re: Malév ordered to repay state aid

Post by Didymus »

Those who follow the news reports on Hungary are well aware that the country is no longer a democracy and that the freedom of the press is restricted severely.

Passenger
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Re: Malév ordered to repay state aid

Post by Passenger »

Official press release European Commission:

http://europa.eu/rapid/pressReleasesAct ... anguage=en

(language choice : EN-FR-DE-HU)

FHPJE
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Re: Malév ordered to repay state aid

Post by FHPJE »

Didymus wrote:Those who follow the news reports on Hungary are well aware that the country is no longer a democracy and that the freedom of the press is restricted severely.
You should really check your news sources in that case, or your definition of democracy before writing such comments!

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Re: Malév ordered to repay state aid

Post by tolipanebas »

FHPJE wrote:
Didymus wrote:Those who follow the news reports on Hungary are well aware that the country is no longer a democracy and that the freedom of the press is restricted severely.
You should really check your news sources in that case, or your definition of democracy before writing such comments!

http://www.deredactie.be/cm/vrtnieuws/m ... /1.1192310

Sounds like Didymus is spot on....

The policies of the Hungarian government show striking similarities to those of Mr Putin's government in Russia: not what we want in the EU!

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earthman
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Re: Malév ordered to repay state aid

Post by earthman »

FHPJE probably works for Hungary's secret state police.

FHPJE
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Re: Malév ordered to repay state aid

Post by FHPJE »

First, if you want to discuss Hungarian politics, you should watch this video;

http://www.youtube.com/watch?v=xbCjbUCn ... re=related

(politically motivated protest in 2006)

Then this one;

http://www.youtube.com/watch?v=DZ_NqgmkZUQ

(politically motivated protest in 2012)

I think that the latter clearly shows more signs of a democracy, but if shooting at someone who has a different opinion is more democratic, so be it…

Second, if you want to discuss politics and aviation; Malev was sold to AiRunion (since bankrupt Russian carrier) in 2007, under an agreement between the previous Hungarian government and Mr. Putin (I hope you see the links here), despite the fact that there were more competent bidders at the time. AiRunion never lived up to its contractual obligations and went bankrupt. Malev at this point came under the ownership of Vnyesekonombank, who clearly did not have any interest in the airline, so Malev continued to make losses, and came to the verge of collapse. In 2010, still under the previous government, Malev was brought back by the Hungarian State with all its debt, partially because the collapse of Malev would have meant even less votes for the previous government in the subsequent elections and partially because letting the airline go, would have meant a lot of debt to Vnyesekonombank, a Russian bank, where Mr. Putin is also involved. Pissing off Mr. Putin would have probably done no good for gas supplies coming to Europe. So it was pretty much a catch 22 situation; either let the airline go and piss-off Mr. Putin, or save it by pumping money into it and be condemned by the EU. Also let me emphasize, that all of this was under the previous government, who had lot better relationships with Putin, than the current government (despite the above comparison).
Yet another complicating factor is that Budapest Airport was also sold off by the previous government. When the deal between the (previous) Hungarian Government and the German Hochtief was signed, a contractual obligation was included, that the Hungarian party has to guarantee the 40% of the traffic to the airport, and if it fails to do so, it will have to pay Hochtief the missing income (Hint, hint: Malev makes up for 40% of the traffic at BUD). I am well surprised that such a deal is not being investigated by the EU, and it is not something that “you do not want in the EU”.
So all-in-all, the problem is something that was inherited by the current government, and it is something that is highly irrelevant in an aviation forum anyway, so please take that into account before condemning our democracy and legitimately elected government! On the same premises, we could be discussing Greek democracy, Italian democracy with Czech democracy just down the pipeline, with a similar EU decision expected regarding CSA.

Third (and what we are here for), AVIATION!
Despite the very pleasant personal memories related to Malev, it is quite clear that it cannot be run the way it is at the moment and has to go (at least in its current form). As an armchair CEO, a sustainable Hungarian airline would keep the traditionally high yielding routes ex-BUD, which are responsible for the point to point traffic, such as Brussels, Paris, London, Berlin, Rome, Bucharest, etc. It should also keep the profitable regional connecting (e.g. from the Balkans) routes, regional point to point routes (e.g. Targu-Mures) and the traditionally high-yielding connecting Middle-Eastern routes. Personally, I would also see opportunity in Dubai and Abu Dhabi (the latter of which used to be served by Malev years ago), since they are doable from Hungary with NB equipment, and therefore the risk would be less in the sense that no investment would be necessary in WB equipment.
As it stands, the plan is probably to have a national carrier similar to the one described above. Whether that is going to be done by somehow saving Malev, or by saving the brand only (similarly to OA), or even yet by a completely new airline, remains to be seen. Us, local aviation enthusiasts have been well curious for an answer for the recent years. One would say that business will go on as usual, but with this recent EU decision, something must be done pretty fast now.
Best regards,
F-HPJE
(From the State Police ;-))

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Re: Malév ordered to repay state aid

Post by Squelsh »

(..) the freedom of the press is restricted severely.
.
Hungary's only opposition radio station faces closure
.

.
While the European Commission is investigating Hungary's controversial new laws governing the media, Klubradio, the country's only opposition radio station, is fighting for survival. The media regulators plan to cancel the station's licence in March, with some arguing it's a set back for press freedom.
.
Via AFP, 18JAN

FHPJE
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Re: Malév ordered to repay state aid

Post by FHPJE »

I assume you must have been listening to “klub radio” all the time. Now that you are missing the voice of the opposition, may I suggest you the following media in that case;
www.classfm.hu
www.neofm.hu
www.rtlklub.hu
www.tv2.hu
www.nol.hu
www.nepszava.hu
The first four links will take you to the most popular tv and radio channels over here. As a former “klub radio” listener, I assume your Hungarian must be pretty good, but just to be on the safe side, let me tell you, that you are unlikely to hear anything positive about current government on any of these tv/radio channels in our “heavily restricted” freedom of speech.
The fifth link will take you to probably the most popular newspaper’s site in Hungary, with quite some criticism about the current government…aaaaaaand guess what!? Still plenty of them available on the newsstands and the link is still up in our “heavily restricted” freedom of speech.
The sixth link will also take you to a popular newspaper’s website, which is (what a miracle!) also alive and well. Should you pay us a visit, you can even buy a copy in our “heavily restricted” freedom of speech! (You can also get a free copy if you fly Malev, to be slightly on topic.)

Concerning your worries about “klub radio”, let me inform you that in Hungary, you have to make a bid to have a frequency allocated to your business. Better bid wins, end of story. BUT if you are seeing political motivation behind the “klub radio” decision, then where were you in 2009 (when we still had the “oh so democratic” government) when both “slager radio” and “danubius radio” were shut down for the same reason? …and even more generally, where were all those EU politicians worrying about the Hungarian democracy in 2006 when this ( http://en.wikipedia.org/wiki/Ferenc_Gyu ... n_May_2006 ) happened? Where was everybody who is so critical now, when they were shooting at people and preventing protests in front of the parliament? Was that not anti-EU standards? Why didn’t anybody start talking about Hungarian internal politics on aviation forums at the time? Especially when Malev was being sold to the Russian mafia (I am exclusively referring to a specific “investor” here!)? Double standards would be the best answer I guess…
HONESTLY, if you want to debate, you should at least go into some depth of what you are talking about! I personally find it rather worrying, that EU politicians are debating the Hungarian constitution without knowing what its content is!

There is absolutely nothing wrong with debating! Exactly the opposite, it is something that should be endorsed, as long as there are educated arguments clashing in an orderly and civilized manner. Posting a link every now and then, completely out of context and without knowing the context is not something I would call debating! The problem is that this fashion of throwing arguments around is not exclusive to this forum, but is present on a very high political level in the EU! I am NOT arguing that everything is perfect, but practically insignificant issues have been blown up to way out of proportion by the media and even those buy it, who bring related decisions. Sure, problematic issues have to be dealt with, but this is to be done by reasonable arguments!

AS FOR THE AVIATION ENTHUSIASTS I am sorry that this thread is turning into a political debate! I have been a passive reader of luchtzak.be for years, mostly for the sake of Belgian aviation related news. However, when I came across this topic, I had to join, because it is exactly the sort of one-sidedness and misinformation present here that is doing the bulk of the harm to our economy, rather than real problems!
Best regards!

andorra-airport
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Re: Malév ordered to repay state aid

Post by andorra-airport »

May I suggest to some people that this is an airline forum, not a political one.

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earthman
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Re: Malév ordered to repay state aid

Post by earthman »

Yes, how is the repayment of the state aid coming along?

FHPJE
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Re: Malév ordered to repay state aid

Post by FHPJE »

Apparently the next general meeting of the Malev management will be held on the 27th, but this will already be about the third such meeting since this thread has started, so there may not be any developments this Friday.

Concerning the repayment of the state aid, it is for certain that Malev is unable to pay back the amount in question, so AFAIK there are two options left;

- let Malev go bust as it is, and establish an entirely new airline. The Malev brand is actually not owned by the airline itself, but was transferred to a separate entity (along with some other valuable parts of the airline), so if this scenario happens, the new airline may also be called Malev. This may be similar to what Alitalia or Olympic did. It is also possible that the new airline would have a new name.

- sell Malev to an investor by the Hungarian State paying the investor the state aid in addition to the value of the airline. I don’t know how this works out legally, but apparently this is a viable solution and is similar to what the Austrian state did to Austrian before selling it to Lufthansa.

Apparently for the past year, the government wanted to sell Malev as it is, with its debt to a foreign investor. Bearing that in mind, it does not really come as a surprise that it was not sold to anybody, because there are plenty of other airlines in the region for sale with similar (or maybe even better?) conditions (Jat, Tarom, CSA, LOT just to name a few). So now that no-one brought Malev with its debt, I assume, that potential buyers are getting a deal (such as getting the airline for free, or even being paid for buying the airline) that would actually make sense for them. On a Hungarian forum, the name of Vueling came up as a rumor besides Travel Service, which is already mentioned in this thread. But those are just rumors, no-one knows what is going on behind the scenes…

Best regards

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tolipanebas
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Re: Malév ordered to repay state aid

Post by tolipanebas »

Malev is a relatively small and heavily loss making regional airline from a country which is basically bust, it has no attractive (longhaul) routes whatsoever and it seems even its alliance partners at OneWorld couldn't care less about it, so I would go beyond me WHY anybody would be willing to actually pay any money for such an airline, knowing he'd be taking over not only the debts from the past, but also the huge burden of having to repay the illegal state aid as well as a less than rosy future (for both airline and country).

As such, IMHO, that leaves open only the first option, but again, I'd question WHY there needs to be an airline to replace Malev in the first place? Does Malev serve any important destinations that are currently NOT served by another airline non-stop from BUD? Would Hungary really be worse off without a flag carrier of its own, strategically? Slovakia seems to be doing great without it....

Besides, setting up a new airline is going to costs loads of money (creating SN out of the ashes of Sabena costed roughly €200M, and that is 10 years ago, when fuel was dirtcheap...you can easily double the costs now): does the Hungarian government have nothing better to spend hundreds of millions of euro on, knowing it is currently living on emergency loans from the IMF????

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Re: Malév ordered to repay state aid

Post by sn26567 »

The vultures are ready to share the remains of Malév.

Ryanair is to launch five new routes to Budapest including flights from Stansted, Birmingham and Bristol.

The no-frills carrier will begin the services, which also include Dublin flights, to the Hungarian capital from March.

Ryanair’s new Stansted-Budapest route will be competition for fellow no-frills airline Wizz Air which currently flies from Luton to Budapest.

The fifth new route to Budapest is from Bologna in Italy.
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earthman
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Re: Malév ordered to repay state aid

Post by earthman »

Ah yes, Wizz Air is partly Hungarian, so it's not like they will be left without their 'own' airline.

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Re: Malév ordered to repay state aid

Post by Boeing767copilot »

Interesting article about Ryanair and his Budapest base

http://www.anna.aero/2012/01/25/ryanair ... interview/

FHPJE
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Re: Malév ordered to repay state aid

Post by FHPJE »

The news (nothing new really) in the media are that operations are likely to stop in about a month, when Malev eventually will run out of cash. Once Malev ceases operations, many routes will disappear. Clearly, connecting traffic can be redistributed amongst other hubs. As for the point-to-point routes, it remains to be seen whether there will be anything taking Malev’s place, or competitors will increase frequencies. The demand is clearly there, it depends on the business plan really whether a BUD based airline or simply a BUD base is viable or not.

Some recent research by the government has shown, that although Malev is heavily mismanaged, letting it go will cost almost as much as saving it due to its debts that will have to be paid. Besides that, Malev has a lot of local contractors, so the loss of indirect employment and business will also be significant. Since it is also one of the biggest Hungarian companies, the tax paid after employees will also be gone, while there will be many left unemployed living on support. With the loss of links between the foreign and Hungarian markets, business will also be affected badly; however this last statement is probably the hardest to judge independently. Also, as I mentioned in a previous post, the sale of Budapest Airport includes a contractual obligation of the Hungarian State to “provide” 40% of the BUD traffic, or compensate for the missing income if it fails to do so. So there are arguments for a new airline, but it remains to be seen if there will be one.

Comments such as “bust country” may contain an element of truth, but are nevertheless exaggerated… As for “living-off IMF funds”, I could go into a long discussion about that, but as some others have pointed it out (very correctly so) this is not a forum to discuss that, so I will refrain. Consequentially, I would ask myself the question whether such comments are really necessary? :roll:

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Re: Malév ordered to repay state aid

Post by sn26567 »

Malev battles for survival

Hungarian carrier Malev is drawing up a last-minute plan to try to ensure its survival as the airline faces a cash crisis that could force it to stop flying.

The management of Malev, which is a member of the Oneworld alliance, has until Friday to put together a strategy to secure enough financing for its “immediate future”.

Malev CEO Lorant Limburger told the airline’s board that “despite the continually improving commercial results the financing of activities had become unviable”.

Although he added that Malev had reached a deal with its US-based aircraft leasing company ILFC to ensure it could continue to operate its services.

The company’s chairman Janos Berenyi has requested that the airline’s management put together a “liquidity plan” by the end of the week.

The Hungarian government said maintaining a national airline based in the capital Budapest was a “priority objective” but its room for manoeuvre is “extremely limited” because of an EU ruling last month that government funding for the airline between 2007 and 2010 was “unlawful state support”.

The Hungarian government took a 95% share of Malev in March 2010. Malev currently has debts of around $270 million.

(after ABTN)
André
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