Hungary to Liquidate Malev, Seeks Airport Deal
Hungary will liquidate Malev Zrt. (MALEV) in the “near future” and is seeking a compromise with Budapest Airport on compensation payments stemming from the collapse of the state-owned carrier, the Development Ministry said.
“Malev’s liquidation can start in the near future once a court concludes that the company is insolvent,” the Development Ministry said in an e-mailed response to questions. The government, which is in “continuous negotiations” with the management of Budapest Airport, is “seeking a rational, manageable compromise,” the ministry said.
Malev, weighed down by debts of 60 billion forint ($275 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.
While Malev’s liquidation “doesn’t directly trigger legal consequences,” according to the airport privatization contract, the expected decline in airport revenue may force compensation payments in an “extreme case,” the ministry said. German construction company Hochtief AG (HOT) owns 50 percent of the airport.
“The exact amount may depend on several factors, but can reach several hundred billion forint,” the Development Ministry said.
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 ($2 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.
Yesterday, government commissioner Gyula Budai said Hungary may have to pay as much as 1 trillion forint to the operator of Budapest Airport if Malev is liquidated, MTI news service said.
Potential budget payments come as Hungary is seeking to revive bailout talks with the International Monetary Fund and European Union to quell investor concern about its ability to service the highest debt level among the trading bloc’s eastern members. Hungary sought aid in November as the forint fell to a record low and the country’s credit grade was cut to junk at Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.
Budapest Airport has recovered more than 60 percent of the point-to-point traffic that Malev had provided as existing airlines expanded capacities and new services were announced, the operator said in an e-mail late yesterday. Deutsche Lufthansa AG, Wizz Air Ltd., Ryanair Holdings Plc, Air Berlin Plc, and Aegean Airlines SA were among the carriers that have announced new routes, the airport said.
Still, Malev’s collapse has resulted in the “complete loss” of 1.5 million annual Malev transfer passengers, which has created an “extremely difficult financial situation,” the airport said.
“In order to be able to cope with this dramatic situation Budapest Airport calls the Ministry Of National Development and the relevant authorities to take urgent and coordinated joint steps together with the airport,” the operator said.
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