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Lessons to be learned from the grounding of MALÉV

February 6th, 2012

Commentators voice their views on the bankruptcy of the Hungarian national airline – and according to their political bias, blame either the previous administration or the current government. They also wonder what the long-term implications of MALÉV’s insolvency will be.

On Friday morning MALÉV cancelled all its flights, declared bankruptcy and announced massive layoffs (see BudaPost February 4). Portfolio reported that although current company accounts have been improving in the past months,  MALÉV has been on the brink of insolvency since early 2010 due to a 60 billion Forint debt accrued over the previous years, and was only able to keep running courtesy of billions of Forints of  government subsidy. The final blow to the company came from the European Commission, which ordered MALÉV to repay 88 billion Forints worth of illegal government subsidies. Prime Minister Viktor Orbán told national public radio that a new national air company could come into being if enough private investors can be found to keep it afloat. As Index notes, several airlines have already announced the introduction of new destinations to replace cancelled MALÉV flights, which will make it difficult to find investors to resume the operations of  the national airline company. The company employed 2,600 individuals and paid 6 billion Forints yearly to its Hungarian suppliers. MALÉV accounted for around 40 percent of the turnover at Budapest Airport. If Budapest Airport becomes insolvent, the Hungarian state will have to pay another 450 billion Forints in liabilities.

Orbán has written off MALÉV and with it also the employees of the Hungarian airline company, writes Tamás Bihari in Népszava. The left-wing columnist wonders whether the bankruptcy is the result of the ineptitude of the right-wing government, or if it follows a shrewd and secret blueprint worked out by Orbán. Although the Orbán government has itself allotted billions of Forints to the airline company, it will without doubt blame the default of MALÉV on the previous Socialist governments, Bihari predicts.

As regards the future implications of the MALÉV case, Bihari wonders what the government’s hidden agenda was, when it let the company go bankrupt. “Whose interests are served by such a swift insolvency? Could it be possible that an investment group closely associated with Fidesz is planning to restart MALÉV, once the company’s debts have been written off?” Bihari speculates.

In Népszabadság, Anna Szalai ponders whether MALÉV will be followed down the drain by further state-run companies. BKV, the Budapest Transport Limited Company which runs all public transport in the capital city has also been teetering on the brink of bankruptcy for months, and despite the efforts by Budapest mayor István Tarlós (who won his seat in 2010 as a Fidesz-backed independent candidate), there seems to be no obvious way to avoid the complete breakdown of the service, Szalai believes. The left-wing commentator suggests that the government seems to believe that state-owned companies should solve their problems themselves, or face the consequences, as MALÉV did. She contends that such an approach would of course be criticized by Fidesz as a highly irresponsible act, were the Socialists in power.

After the MALÉV affair, one may speculate what the future implications are, Szalai wonders. She believes the message is that “tomorrow anything may happen”. Szalai fears that the government’s approach will create uncertainty, which will increase public discontent and anger.

The fate of MALÉV is indeed a bad omen for other indebted state-run companies, Gyula Jámbor contends in Magyar Nemzet. The bankruptcy of the Hungarian Airline foreshadows what BKV, the Volán Coach Company and MÁV (the Hungarian Railway Company) may also have to face at some point.

As for the causes of MALÉV’s default, Jámbor lists the controversial messages sent by the current government on its intentions. But he also adds that MALÉV was grounded primarily because the previous, Socialist governments kept financing the deficit of this uncompetitive state-run firm.

Jámbor also hints that by subsidising MALÉV, the Socialist government helped some of their “comrades” into well-paid positions, and also kept payments to subcontractors closely associated with the party alive. All this made the Hungarian airline insolvent, but the Socialist kept subsidising and filling the holes as long as it was possible.

All this, however, does not imply that there is no need for a state run carrier, Jámbor adds. One can only hope that a new national airline company will be set up, and that it will succeed in boosting tourism, he concludes.

Both the government and the opposition are trying to make the most political capital out of the MALÉV case by offering interpretations which highlight the ineptitude of their opponents, Ferenc Kumin comments. While the opposition parties blame the bankruptcy on the government, Fidesz holds the Socialists responsible for the accumulated debt of MALÉV. Kumin believes that it is too early to judge which of the narratives will win and convince the public.

As for the international repercussions, it would be very unfortunate if the Western media used the opportunity to criticize the Hungarian government by connecting the bankruptcy of MALÉV to the debates around the new Fundamental Law and the other disputed policies of the Orbán government, Kumin concludes.

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