Do you remember the Hungarian Airlines? This is the reason why MALÉV bankrupted

Several go-round debts and poor management of privatisation all contributed to the bankruptcy of the Hungarian Airlines – according to the former Operational Manager of MALÉV, Géza Fehérváry. As he said, there were some plans to start-up a new airline company; however, the idea could not get executed.

The company was liquidated not so long ago, in 2012. The ex-manager clearly recalls the exact time: it was 3^rd February 2012, 6 a.m. when the airline announced the bad news. The 66-year-old company meant the world to 2600 employees working as a ‘big family’.

MALÉV delivered 3.5 million passengers on a yearly basis, bringing them to 45 different destinations.

What was the market situation like at this time?

As Géza Fehérváry described to Hungarian news portal novekedes.hu, it consisted of four main parts. The national airline provided flights to the West-European junctions, while it also meant a regional interconnectedness with the neighbouring countries and the Balkans. Besides these, it was an element of interstate conventions as well, by which permissions were given to fly to destinations outside the European Union such as Istanbul and Saint Petersburg. The fourth category consisted of long-haul flights which operated in cooperation with OneWorld airline alliance. The national airline represented a significant part of the Hungarian economy and infrastructure. 1 million passengers, almost half of the whole amount, were transit passengers. This phenomenon seems to be disappeared by now, people choose other airports to transit.

According to Géza Fehérváry, the bankruptcy of MALÉV happened intentionally. Competitors could profit from it, especially the biggest rival, Lufthansa. “Quite suprising that the Chief Executive was also German, Martin Gauss, and the best airline rights were inherited by WizzAir!” – he added.

Several factors resulted in the sorrowful end of the Hungarian Airlines. One thing is for sure: the main decision-makers were missing some necessary competencies, prolonged processes and bad decisions were made, which all lead to the decline of the company.

What was the particular reason for the failure?

It was already evident in 1992 that the company did not get sufficient capital to become a joint stock company. There was a trial to operate under the wings of a capital intensive company, the Italian Alitalia airlines which gained 35% share from MALÉV; however, five years later it stepped out of business, while Hungarian banks repurchased its shares. Then in 1999, Hungarian National Privatization and Asset Management received the major proprietorship of Malév, numerically 99.5%, while the rest 0.5% was represented by minor investors. After that came the Russian affair, during the Gyurcsány government. MALÉV was sold to the largest Russian cargo airline, AirBridge company, whose Director purchased 99.95% of the Hungarian Airlines for 200 million HUF. However, this deal did not succeed either. The Hungarian State managed to regain 96.5% of the company, paying more than 40 billion HUF.

The main problem was that the owners of the company did not identify that the model represented by MALÉV was loss-making. Namely, one would choose junctions like Istanbul or London as a transit point, and not Sarajevo. There were some developments expected from the Russian part, though none of them was realised. Indebtedness increased to 126.5 million EUR claimed by the Russian Development Bank, which might be still an important issue of negotiations.

How do you remember the few last days?

Previously, 9^th January 2012, the European Commission reclaimed the amount of financial support dedicated to Malév from The Hungarian State. This happened due to the denunciation realised by Wizzair. As a result, the Hungarian infrastructure was totally damaged. Afterwards, the bankruptcy of the company became more evident day by day until that specific morning when it was officially announced.

How did the Operational Management think about the occurrences?

According to the ex-manager, everything was well-planned from the beginning, as a perfect choreography. The operation needed to stop in the night when there were no more departures, and the last aeroplanes had arrived. “This was a logistical aspect, and we knew it would happen as soon as we had no financial reserves” – he said.

Summarizing the reasons in a few words, the most detrimental factors were: several go-round debts, bad management decisions, lack of professional knowledge, the failure of the privatisation, the denunciation, and the most irritating according to Géza Fehérváry was the continuous prolongation of making decisions.

The company officially terminated last summer. It was cancelled from the trade register; without a legal successor. It left behind an indebtedness of 170 billion HUF.

Source: novekedes.hu