Budapest public transport in deep trouble

More and more suppliers are cancelling their contracts with BKV, mainly due to the Russian-Ukrainian war and the high euro exchange rate. This puts BKV in a difficult situation. The number of terminated supplier contracts at the company has doubled in two months. This has made expenses unpredictable. Continue reading below for more details on the matter.

“The daily and significant exchange rate fluctuations mean that partners are now setting unit prices only on a euro basis,” this is how BKV describes the situation to Népszava. They wrote that the most common reason for partners to cancel contracts was the war between Russia and Ukraine, as the resulting inflation, price increases and shortages of raw materials made it impossible to fulfil them.

BKV’s budget has a huge hole in it even without supplier price increases. The company’s business plan for this year – adopted at the end of April – foresees a loss of HUF 26,000,000,000 (EUR 65,180,000). To fix this, the government was expected to provide HUF 14,000,000,000 (EUR 35,100,000) to offset the energy price explosion.

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Contracts terminated with Budapest public transport

According to the above source, 36 contracts had been cancelled by BKV’s business partners by the end of April. It is rising to 75 by July. Most of the partners who backed out of contracts were suppliers of oil, grease, chemicals, electrical and vehicle parts, and tyres.

This has also resulted in the fact that tyres, for example, can no longer be sourced at all. In this area, the supplier had already indicated at the beginning of the war that it could only supply at a much higher price because of the halt in deliveries to Ukraine, writes Index. In the end, they failed to agree on a price, which terminated the contract.

Last week, the transport company launched a public procurement procedure for purchasing 5,100 tyres, and as an indication, a price was given which suggested an average price of over HUF 83,000 (EUR 208.92) per tyre.

BKV also said that the contract cancellations had not yet caused any disruption to its operations, but the expenses – which had not been very favourable – were now simply unpredictable. In May, they were expecting ‘only’ tens of millions of euros in additional expenditure, but now they could not even forecast what the consequences of the negative economic trends would be.