Hungary’s national airline Malev said early yesterday that it had grounded its planes after running out of cash almost a month after the European Union said the carrier must pay backstate aid.
“At 0500 GMT on February 3, after 66 years of almost continuous operation, Malev stopped taking off,” Malev chief executive Lorant Limburger told a news conference.
The immediate reason was a refusal by Israeli ground staff to service a Malev flight in Tel Aviv without immediate payment of a “hefty sum,” Mr Limburger said.
This would have set a precedent and the airline would have been unable to foot further similar bills, he explained.
“Since the government can no longer provide resources due to the EU’s decision and there is no feasible partner in sight, the company’s operations became impossible,” Malev chief Laszlo Berenyi added.
“Every (partner) has asked for payments in advance, and claims accelerated incredibly. No company can honour payments months in advance,” he said.
Partners had become jittery after the European Commission ordered Hungary’s flag carrier on January 9 to repay various forms of state aid received between 2007 and 2010.
That aid amounted to 38 billion forints (€130 million), a sum equal to its entire 2010 revenue.
The EU decision prevented Malev’s owner, the Hungarian state, from providing liquidity to the stricken airline.
Budapest had moved on Thursday, however, to prevent a forced grounding of Malev, appointing an administrator to shield it from creditor claims.
It also declared Malev a “strategically important company,” a status that prevented the launch of bankruptcy procedures against the carrier.
“Now that the company has become insolvent, the court can move to launch bankruptcy procedures,” lead administrator Balazs Fabian told journalists.
“The company will soon announce mass layoffs,” he added, without specifying how many of the 2,600 staff would be affected. Following yesterday’s announcement, Hungarian Prime Minister Viktor Orban told state radio MR1-Kossuth that a new national airline could be still established if investors were prepared to operate it profitably and risk their own money.
Malev informed passengers at Budapest’s Liszt Ferenc Airport early yesterday that all its flights were being grounded.
The airline said 3,500 passengers were stranded at the airport and that a further 3,700 were stuck abroad.
The latter were told they could purchase tickets from other companies and send the bill to Malev for reimbursement, the carrier said.
Hungary also set up this week a two-billion-forint fund to compensate passengers set to fly yesterday and over the next three days.
Other passengers might be compensated by their credit card companies or travel agencies, Malev said.
The airline continued to sell tickets through Thursday, a few hours before the announcement that the airline was halting operations.
According to Hungarian newswire MTI, 64 Malev flights were scheduled to fly from Budapest yesterday.
The airline was sold to Russian investors in 2007 but effectively re-nationalised in 2010, with the state buying a 95 per cent stake.
Responsible for 40 per cent of the traffic at Budapest’s airport, Malev posted a loss of 24.6 billion forints in 2010, but had forecast improved figures for 2011.