BUDAPEST/GENEVA (eTN) – Global air alliance, Oneworld, is entering turbulent times, as two of its members are in dire straits. Hungarian carrier, Malev, has been facing difficult times for a couple of years due to heavy competition from low-cost carriers in its home market of Budapest. Over the last years, the Hungarian national carrier received various financial aid from the government, up to HUF100 billion (€343 million). However, state subsidies are deemed illegal by the European Union, and Malev was summoned to pay back those aids.
On Friday morning, Malev surprisingly suspended all its operations, while Malév CEO Lóránt Limburger published the following statement: “Unfortunately, what we had been most fearing and had done everything to avoid has occurred today. 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. That accelerated the outflow of money to such an extent, that the situation of the airline became unsustainable.”
In December, the Hungarian government still assured the public, as well as Malev management, that it would not let the airline go after rumors circulated about a possible bankruptcy to help create a new national carrier based in Budapest. The government had, however, already rejected investment proposals from Russian and Chinese private investors.
As the state could not, however, bail out Malev anymore, Mr. Limburger’s statement indicates that “in the light of those factors, the Board of Directors decided today to stop the operations of the Hungarian national carrier. We apologize to all passengers.”
Malev was one of Europe’s oldest carriers, with a 66-year-old history. According to OAG data, Malev represented approximately 45 percent of scheduled seat capacity at Budapest airport, with non-stop services to over 50 destinations. The second largest carrier – and from now the largest – is low-cost Hungarian carrier, Wizz Air, with some 13 percent of all seat capacity out of Budapest to 23 destinations.
Malev was a member of Oneworld, which loses an important feeder traffic to Central Europe and the Middle East. And the alliance woes are probably not over, as Kingfisher seems to be close also to bankruptcy.
The Indian carrier was on Friday, February 3, suspended from its clearing house (ICH) due to non-payments of dues to airline members. ICH is a financial mechanism within IATA. The airline’s management explained the failure through a technical glitch in its automated system. Even if this is the case, Kingfisher’s financial situation seems to be deteriorating rapidly. Last September, information came out that Kingfisher had not paid the taxes that had been deducted from employees’ paychecks as indicated by the Indian Tax Ministry. In October, fuel suppliers started to ask to be paid cash for refueling operations as the carrier already owed them money. In November and December, the carrier started to downsize operations and ground aircraft. Indian Civil Aviation Authorities speak now of revoking Kingfisher’s license, as it fears that a financial cash crisis might compromise safety on board.
Oneworld is probably already prepared to lose the Indian carrier, which joined only a year ago. There is, however, a glimpse of hope for the global alliance. AirBerlin (and its subsidiary Niki, based in Vienna) will become the alliance’s newest member, replacing Malev in Central Europe. After facing some financial troubles last year, AirBerlin is breathing again. Abu Dhabi-based Etihad is taking over 29.2 percent of AirBerlin’s share and promised to secure US$350 million for the acquisition of new aircraft with 5-year financing facilities.