Hungarian government acquires majority stake in ailing Malev

BUDAPEST, Feb 27, 2010 (AFP) - The Hungarian government has acquired a 95-percent share in debt-ridden airline Malev, effectively renationalising the company two years after it was privatised, the finance ministry said Saturday. "The Hungarian state increased the capital stock of the airline by 25.2 billion forint (93 million euros), partly with money, partly by converting debts" due to the state, the ministry said in a statement obtained by AFP.

The deal was struck with the airline's Russian-backed owner, the AirBridge consortium.


"After the agreement was reached overnight Friday to Saturday, the state will hold 95 percent of the company, with AirBridge holding the remaining five percent," the ministry added.

Malev was last privatised in 2007 with the sale of a 99.95-percent stake in the carrier to AirBridge.

Finance Minister Peter Oszko announced in November that the government was in talks with Malev shareholders on the possibility of it acquiring a stake in the loss-making carrier.

Ten million euros had been injected in fresh capital in March last year but the airline failed to bounce back, as its debt rose to 70 billion forint by mid-2009 after losses of 15 billion forint in 2008.

With Malev piling up huge arrears, the company managing Budapest airport had also warned of taking drastic steps against the airline.

The ministry said the state investment would allow Malev to restructure so it would cost less for Hungarian taxpayers, while the government must make sure it does not contravene European Union rules that ban state aid.

Malev competitors have already warned that they will appeal to EU authorities if the company is nationalised.

The Hungarian airline has been rescued with state funds before. In 1997 Budapest bought back Malev from Alitalia which had acquired the flag carrier in 1993 after a first privatisation.


by Amy Coopes
© 2010 AFP