Airlines rush to Budapest to replace Malév

Ryanair has swooped in to take on 26 additional routes from the Budapest airport after Hungarian national carrier Malév suddenly ceased all flights Feb. 3 in response to an "unsustainable" financial situation. Industry analysts say the Irish low-cost airline is just the first of a swarm of companies that will try to expand routes to Budapest now that Malév is out of the running.

Malév, which had flown continuously since 1946, has debts of around 60 billion forints ($270 million/206 million euros) and last month the European Commission slapped it with an order to pay back $400 million in illegal state subsidies received between 2007 and 2010. As the company's financial problems finally caught up with it, 7,000 passengers were left stranded when services were abruptly halted.

"Although there was still hope of being able to continue to operate and the trust of passengers was undiminished, as a result of the information published in the past few days, our suppliers lost their trust and from one day to the next began insisting on advance payments for their services," Malév Managing Director Lorant Limburger said.

The 95 percent state-owned carrier was put under bankruptcy protection by the Hungarian government Jan. 30, a move that may have led to the crisis of confidence among the company's suppliers.

"Having to repay the state aid was a big problem, but then came the bankruptcy protection, and it's not easy," said Jan Procházka, an airline industry analyst with investment advisory company Cyrrus.

"The Hungarian government said the airline is strategically important, but it just can't work if the company is cashless and under bankruptcy protection. It was better to just be done with it."

Malév, like the Czech national carrier (ČSA), had been looking for a private buyer for some time without success. But while ČSA is also undergoing a difficult restructuring process in the hopes of attracting more suitors from the private sector, Procházka says it is unlikely the airline will suffer the same fate as Malév.

"For Malév, it wasn't easy to find a buyer because of the huge amounts of debt. With that much debt, it's better to start a new company," Procházka said.

"From what I've heard, ČSA officials fly to Brussels every month to make sure there is no problem with the EU, and Malév wasn't as communicative."

On the heels of Ryanair's announcement, several other European carriers, including Lufthansa and Air Berlin, have said they plan to increase services to Budapest to fill in the hole left by Malév's services to the city, which accounted for nearly 40 percent of all the air traffic at the Budapest airport.

Emily Thompson can be reached at
ethompson@praguepost.com