Malev, Hungary’s National Airline, Collapses

Another major European airline has collapsed, an indirect victim of the ever-deepening Eurozone crisis.

Just days after the implosion of Spain’s budget airline, Spanair, Hungary’s national airline Malev has ceased operations after the European Commission order the carrier to repay various financial loans totaling about 38-billion florints ($171 million) it had received from the state during 2007 and 2010.

Reportedly, the money Malev owed was equal to its entire annual revenue.

In a statement, Malev’s chief executive officer, Loránt Limburger, said: “The situation of the airline became untenable. It is also known that the owner, despite the best intentions, is unable to provide additional financial resources to operate after the [European Commission] decision. Considering all these the Board decided to order the cease of operation of the Hungary’s National Airline. We apologize to all of our passengers.”

The collapse of the airline means some aircraft and passengers are stranded overseas. Hungary’s Prime Minister Viktor Orban told state Kossuth radio that two Malev planes are stuck in Tel Aviv and in Ireland. They are grounded due to Malev’s debts.

The European Consumer Organization commented that Malev’s collapse “is yet more incontrovertible proof that the current update of European legislation on air travel must incorporate a mandatory guarantee against airline bankruptcies.”

Malev’s destruction will likely wipe out about 2,600 jobs -- the carrier accounted for about one-half of all air transport in an out of the Liszt Ferenc airport in Budapest.

In 2010, the airline posted a loss of 25-nillion florints ($113-million).

The grounding of Malev presents dire issues for the Budapest airport.

If this situation continues for a longer period of time, then we will obviously have to revise our business plans for this year and all our contractual obligations, Mihaly Hardy, a spokesman for the airport, told Reuters.

There are some estimates that over 20 or 23 routes of Malev will never be served by other airlines.”

Orban commented to reporters: It is painful ... We tried to keep Malev operational as long as possible, but we could no longer do it as we would have lost our aircrafts seized abroad ... We had to stop.”

But Orban also held out some hope.

I think restarting is not impossible, and if we can get rid of the burdens inherited from the past, there could still be a Hungarian national airline, he added.