KrasAir to bid for Hungary's Malév to gain European foothold

„This is a good chance for us to set up a network that is serving Europe, Russia and Asia,” OAO KrasAir, Russia's fifth-largest airline, co-owner Boris Abramovich said in an interview in Budapest yesterday. The company will submit a bid next week and Hungary's state assets sales agency „should look carefully at it and what we offer.” Malév Zrt is going back to the auction block for the seventh time since the end of communism after Hungary spent Ft 16.2 billion (€61.7 million) propping it up. The company is struggling with Ft 30 billion of debt as it faces increasing competition from discount carriers like EasyJet Plc and Ryanair Holding Plc.

Hungary canceled KrasAir's last offer in August 2005 after both sides failed to reach an agreement. Labor unions and politicians complained Malév was being sold for too little. Now, Abramovich who heads an alliance of five Russian airlines called AirUnion, will bid for Malév again through a Hungarian holding company of which he owns 49%. Abramovich would not say how much he plans to pay for Malév. He refuted Hungarian newspaper reports that he agreed to pay half of Malév's debt in exchange for the carrier. „Malév is not in the best financial position and there are areas in definite need of help,” he said. „It's credit portfolio must be raised and we must set up an investment program.”

The Russian carrier would benefit from Malév when airspace restrictions between Europe and former Soviet countries are lifted, said Boris Rybak, director of Infomost, an aviation consulting company in Moscow. „It would be a very nice role for KrasAir to establish a foothold in eastern and central European markets,” he said. Airspace restrictions may be lifted when Russia joins the World Trade Organization, which could take place sometime next year, Abramovich said. He added that Malév's imminent admission to British Airways Plc's Oneworld airline grouping will further raise the Hungarian carrier's profile in western Europe. „We told Malév one and a half year ago to join Oneworld,” he said. „It's good that they heard us.” (Bloomberg)