Hungarian National Airline Halts Flights
PARIS — The Hungarian national airline, Malev, halted all flights Friday, stranding thousands of passengers after creditors started seizing its planes outside the country over unpaid debts, and becoming the second state-owned airline in a week to succumb to Europe’s economic woes.
The airline, which was re-nationalized two years ago after a failed privatization, had been losing money for years, while its debt had ballooned to 60 billion forints, or $271 million. On Thursday, a court in Budapest placed Malev under the control of a bankruptcy trustee, saying the airline could only make payments that were essential to continue offering service.
The government, which is itself seeking help from the European Union and the International Monetary fund to handle its own heavy debt load, had hoped the court move would stave off the claims of creditors while Malev, a member of the Oneworld airline alliance, drew up a restructuring plan.
But with the airline’s future in doubt, creditors at airports in Ireland and Israel refused to allow Malev aircraft to take off, necessitating the decision to ground the airline’s flights. In recent days, a number of suppliers and service providers had begun to demand payments in advance, draining the airline’s cash reserves to levels it said were “unsustainable.”
“What we fretted about the most and what we’ve done the most to avert has come to pass,” Lorant Limburger, Malev’s chief executive, said in a statement posted on the airline’s Web site. “We apologize to all of our passengers.”
Malev’s situation had been more tenuous since the European Commission ordered it in January to repay about 100 billion forints of state aid, including loans and debt deferrals, that it had received from 2007 to 2010.
The commission, which polices Europe’s competition rules, said there was no reason to believe that Malev could turn itself around.
Malev and other airlines that have relied on state support to stay afloat are seeing the flow of government cash dwindle as Europe’s protracted sovereign debt crisis leads governments to cut spending.
Spanair, based in Barcelona, collapsed on Jan. 27, stranding 23,000 passengers. The Spanish airline had been kept aloft with the help of €150 million, or about $200 million, of subsidies from regional authorities in Catalonia. A consortium of investors led by the Catalonian government held a stake of nearly 86 percent in Spanair, while SAS, the Scandinavian carrier, held 10.9 percent.
Such carriers, which turned to governments after failing to drum up support from private-sector investors, are likely to find access to new funds difficult in the current environment, analysts said.
But Europe’s economic downturn, combined with high fuel prices and rising airport taxes and fees, has been threatening the viability of smaller, privately owned airlines as well. Czech Connect Airlines, based in Brno, ceased operations last month, as did the Italian carrier Air Alps and Cirrus Airlines of Germany. CargoItalia, a freight operator based in Milan, wound up its business last month.
“The classic way that airlines go bankrupt is they run out of cash,” especially in the low season from January to April, said Paul Sheridan, global head of risk at Ascend, an aviation consulting firm in London.
“There will be more airlines like Malev facing a squeeze on revenue and profit generation in 2012,” Mr. Sheridan said. “They will also be facing lack of access to finance and the rising cost of finance.”
Malev’s grounding was likely to have affected 5,000 to 6,000 passengers Friday. The airline said that it would arrange alternate flights for passengers with confirmed bookings for the next three days, provided those tickets were purchased before the groundings Friday.
At Roissy-Charles de Gaulle airport near Paris, most of the confusion had been cleared up by late Friday afternoon, as Air France, a code-sharing partner, was working to accommodate stranded Malev passengers there.
“I really trusted Malev,” said Eszter Vegh, 26, a medical student from Szeged, Hungary, who had been in France for training and was still waiting to hear whether she would be able to make it home Friday night. “I’m very disappointed.”
“What I really liked about Malev was that the price you saw on the page was the price you pay,” Ms. Vegh said, “unlike so-called cheap airlines where you ended up paying 50 percent more by the time you’ve added in baggage fees and stuff.”
Malev’s market share has stalled in recent years, faced with growing competition on its European routes, particularly from low-cost carriers. The airline carried roughly three million passengers in 2011 and 2010, down from 3.3 million in 2009. The Budapest-based budget airline Wizz Air, meanwhile, saw its Hungarian traffic climb 13 percent last year, to 1.4 million passengers. EasyJet, which is based in London, had traffic on its Hungarian routes rise 10 percent in the year to Sept. 30, to 556,000.
Analysts predicted that rival airlines would quickly move in fill the void left by Malev’s demise.
Ryanair, the largest low-cost carrier in Europe, which had stopped its Hungary services two years ago, said Friday that it would start operating 31 routes from Budapest in April, in the hope of capturing two million passengers a year.
Wizz Air has announced plans to invest 25 billion forints to expand its Budapest operation this year and to nearly double the number of its weekly flights. Wizz Air said it expected its passenger numbers to reach two million this year, a jump of more than 40 percent from 2011.