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Malev appear to be the latest airline running into financial problems
"Hungarian national airline Malev Zrt. (MALEV), weighed down by debts of 60 billion forint ($268 million), has until the end of the week to submit a survival plan that could include a Chinese takeover, or face being grounded."
It's not just Malev having problems, but Hungary as a whole.
Problem is who could take them over. I think any non European carrier would face regulatory hurdles and apart from Lufthansa I can't think of anyone else financially capable. BA is still absorbing BMI and I can't really think of a major advantage for them in owning it.
They can't be subsidised due to EU competition rules, unlike AF where the state blithely ignores the rules!
Is it time for a re-think of the EU competition rules regarding air travel? They were written many years ago for a very different EU to the one we have now.
Currently we have one very big group (LH) and two smaller ones after which we have a number of legacy national carriers and then the low cost airlines who have blossomed since the rules were written.
For some countries in the EU, it is essential that they are able to retain a presence in the air transport market to protect the wider business interests of the country. I'm thinking here particularly of Cyprus and Malta as islands but there are other routes which are not necessarily profitable but which have to be retained for the wider good of a national economy.
As we know, the low costs do not operate anything unless they are making a profit and the needs of an economy for air travel cannot be left to the whims of O'Leary et al to decide whether he will operate a route or not.
I'm not advocating any sort of return to a situation, the best example of which I can recall was Olympic who never operated anything at a profit but was validly subsidised to operate services to islands and some remote towns. They probably were worthy of subsidy just as now the Cypriot or Maltese governments may decide that it is in their best interests economically to ensure there is a link to LHR or FRA then they should be allowed to do it.
Controversial in the free market maybe but I think it's time for a bit of a re-think.
Or instead of subsidies they become State owned.
Am I right in thinking Air France is still owned by the state?
If i'm right, Malev is owned by the Hungarian gouvernement, after a russain private investor said that it could not make the company viable and resold it to the state.
FYI France hold a 16% of Air France shares.
Malev also has to repay around £284 million in state aid that was ruled illegal by the EU a few weeks ago.
Bucksnet is spot on here, as the real liquidity issue is the state aid that supposedly need to be re-paid. That is what is driving the problems.
Let's see if Hungary becomes the first country to leave the EU over this.
Malev - Financial Problems are down to the EU ruling on sate aid, the Hungarian gouvernement, will keep funding them. AF and LH get state aid and other EU airlines one rule for one and one for a other.
ChrisBuda82,
Can you prove your claim that LH is getting direct, EU-prohibited state aid from the German or Austrian government? Do you have facts to share, pending EU Court cases etc?
In the case of the SAS Group, the three Scandinavian governments still own share of a publicly traded company, and have covered their stakes in previous rights issues (2009) which is not the same as state aid. They have merely as owner, and in line with other owners raised equity.
So, I am eagerly waiting for some concrete proof-points as this would be news to me.
Senator getting the feeling that you work for LH so hit some buttons you dont like.
EU-prohibited state aid from country's to some companies but it happens. If you own a company that going down your going to put money in it to save it. Maybe Malev should have done a rights issues!
ChrisBuda82,
I am merely a loyal LH customer, and a normal bloke on the street :-) I am however, one that guards the right of people and organisations not to be wrongly accused and assume them to be (as per US legal practise) innocent until proven guilty. Hence, the suggestion of legal proof of claims before putting something out in public.
Where you and I will be in agreement is that there are many transactions/rules that is probably an indirect aid. For example, the German government has fought hard against allowing slots for EK in German airports. This could be construed as indirect aid.
I also tend to agree with LPPSKrisflyer that perhaps it is time to review the role of aviation in the EU.
The issues that affect Hungary do however make for some rather good airfare deals. BUD to HKG is currently £1777.90 return in club and for 3 days in January could have been had for just £1618 when the exchange rate hit 386 HUF to the £.
Compare that to the fare ex LHR on the same day and same aircraft on £3139! ..................43% less ex BUD.
What I find more worrying is this is another One World member in trouble. Mexicana-no longer but oddly still listed, KingFisher-on last legs, AMR dba American Airlines-Chapter 11 with the vultures circling, IB-the strike season has only just started, LAN-no decision yet which alliance the merged carrier will stay in, Qantas has had some major publicity screw ups in 2011. I Like BA, and travel with them when I can, but also like the possibility of using my earned mileage on other carriers, and these seem to be dwindling or could possibly dwindle!!
It is sad to see another airline go bust.
Bucksnet is right to point out that it was the EU´s obligation on the airline to pay back "illegal" government aid that led to Malev´s bankrupcy today.
That ruling also forced the hand of the Catalan government, stopping them from pumping more money into Spanair. Result, Spanair went "belly up" a week ago.
Does anybody see any more bankrupcies round the corner?
At least Kingfisher and Air Berlin join oneworld the next two months with Malaysia (MAS) to follow on. None of the three is flush with money. What is IAG doing to secure its alliance?
And now I read that Kingfisher has to wait to join oneworld so it can sort out its finances - more discomforting news.
The latest edition of the Emirates Airlines publication Open Sky has an article entitled "Subsidy Watch"
In it Emirates says the following,
"Half of the members of Star Alliance, the world’s largest airline group, have received subsidies and state aid over the years - to the tune of several billion.
In the rampant subsidy debate some of our rivals have accused Emirates, without offering proof, of being a subsidised airline. To genuinely and credibly refute these allegations Emirates has produced a comprehensive position paper called ‘Aviation and
Subsidy: Our position’.
The paper, which is scheduled to be released in the first quarter, explains our business model and rebuts the misrepresentations, including claims about subsidised fuel, financial support, staff conditions, environmental policies and airport charges."
It then goes on to list subsidies it says have been paid to Star Alliance airlines, including
"Lufthansa - €800 million German Government contribution to Lufthansa pension fund in 1995."
We are currently preparing an article on this subject for a future edition.
Tom Otley
dutchyankee, As odd as it may seem, I understand Oneworld is awaiting legal clearance before it can remove Mexicana as a member from public materials.
Sadly Malev ceased operations this morning after 66 years.
http://www.bbc.co.uk/news/business-16866872
"It came after the European Commission ordered Malev to repay various forms of state aid received from 2007 to 2010"
"High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email mailto:ftsales.support@ft.com">ftsales.support@ft.com to buy additional rights. http://blogs.ft.com/beyond-brics/2012/02/01/malev-to-buyers-anybody-there/#ixzz1lMG9DNIO
"Hungarian government announced compensation plans for any passengers left stranded with should the turbofans stop turning – although Budapest has also pledged to keep the carrier airborne as a company of strategic national interest.:"
I read the above not on the ft site on the Hungarian government seems they lost out to the EU when other AIrlines won:S But the FT news is a good read.
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