Hungary Denies Report on Malev’s Revival as Job Cuts Proceed

Hungary denied a newspaper report that it was seeking to revive state-owned carrier Malev Zrt., while keeping open the possibility that a new Budapest-based airline may be set up in its place.

Malev’s liquidation may begin “in a matter of days,” the Development Ministry said in an e-mailed response to questions. Malev is cutting 2,080 of 2,600 jobs, state-run MTI news service reported today, citing Malev spokeswoman Marta Rona.

Malev, weighed down by debts of 60 billion forint ($269 million), halted flights on Feb. 3 after 66 years in operation. 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.

“There is no realistic possibility to keep Malev alive because of the inherited burdens, the commission’s ruling on the repayment of state aid and the ban on further state aid,” the Development Ministry said.

Napi Gazdasag newspaper reported today that Hungarian negotiators held talks with Vnesheconombank, Russia’s state development bank known as VEB, on a possible loan to revive Malev. Hungary acquired a 95 percent stake in Malev in 2010 to replace VEB as a controlling shareholder when a previous privatization failed.

VEB Debt

Malev owes VEB 112.4 million euros ($148.1 million), Yekaterina Grishkovets, the Russian bank’s spokeswoman, said by e-mail. While the bank doesn’t directly own shares in Malev, it’s a shareholder in AirBridge Zrt., which controls slightly more than 2 percent in Malev, she said.

A Budapest-based airline “can only be imagined with an industry investor with a strong capital position and a strategy that can be reconciled with national interests,” the ministry said. “All other solutions would just reproduce the problems that led to the halt of Malev’s operations.”

There are no solutions in sight for creating a new national carrier, Janos Lazar, head of the ruling Fidesz party’s parliamentary group, told reporters today in Eger, MTI reported.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE