Friday, February 3, 2012

Malev Halts Operations

As speculated in Monday's blog post, Hungarian flag carrier Malev has ceased operations. See Hungarian Airline Malev Collapses, BBC, Feb. 3, 2012 (available here). The shut down was prompted by the refusal of airport officials in Tel Aviv to allow a Malev plane to depart without payment. The carrier's desperate financial condition became clear three weeks ago when the European Commission ruled that Malev had been receiving aid from the Hungarian government from 2007-2010 in violation of EU competition law. See European Commission press release available here. Malev was ordered to repay an amount on par with its entire 2010 revenues, demonstrating the degree to which it was reliant on State aid. Earlier this week, the Hungarian government declared Malev a "strategically important company" which temporarily protected it from bankruptcy proceedings. That protection was short-lived, as bankruptcy procedures are now likely to begin. The government has announced plans to compensate or find alternate arrangements for today's stranded passengers along with those holding tickets for flights departing within the next three days. See Nicola Clark & David Jolly, Hungarian National Airline Halts Flights, N.Y. Times, Feb. 3, 2012 (available here). Reportedly, Hungarian low-cost carrier Wizz Air intends to expand operations in the wake of Malev's collapse. In addition, Ryanair has announced plans to establish a base in Budapest, while Deutsche Lufthansa and British Airways are also considering expanding services to Hungary. See Gergo Racz, Airlines Move to Fill Gap in Hungarian Aviation Market, Wall St. J., Feb. 3, 2012 (available here). Malev’s failure comes exactly one week after the demise of Spanair.

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