Turning round Hungary's Malév would be a test for Abramovich

On Friday, a total four groups put in bindng bids for a 99.95% state-held stake in Malév, including LAL, Lithuania's largest carrier; an Irish investment group led by Tom Mulcahy, a former head of Aer Lingus; and Sky Alliance, a Hungarian group established by Malév pilots. Abramovich, who is no relation to Russian tycoon Roman Abramovich, controls AirUnion, an airline alliance based 5,000 miles from Budapest in the Siberian city of Krasnoyarsk. His group is growing fast, flying to about 80 destinations, mostly in the former Soviet Union, but also to Vienna, Frankfurt, Bejing and Bangkok. Abramovich now covets a European hub through which he can deliver his passengers across Europe. Malév flies to more than 50 European cities, as well as to New York and Toronto. Abramovich sees it as a perfect fit. "Malév has a young fleet, a good name and a good network around Europe," he said in a recent interview. "If we tried to build a network like this, I would not have enough time in my life." He also believes AirUnion is the best match for Malév because it would bring thousands of transit passengers from Asia and Russia to fill up Malév's European flights. "Malév needs us. It's a two-way street," he was cited as saying. AirUnion already made an attempt to buy Malév for Ft 41 billion in August 2005, but failed to reach terms with privatization officials. It was to pay Ft 1 billion for the company, raise its capital by Ft 4 billion and also take over its Ft 36 billion debt. Abramovich said he believed the deal was sunk not by anti-Russian sentiment but by political considerations. Parliamentary elections loomed in April 2006, and the government might not have wanted to sell the national flag carrier before the vote, he explained. Politics still hot issue. The election is over but Abramovich is still worried about political interference.  Russian President Vladimir Putin has recently raised the topic of the sale when meeting Ferenc Gyurcsány, Hungary's Prime Minister, and asked for assurances that politics would not play a role.

Abramovich started his career on the technical side of airline operations in Krasnoyarsk in the 1980s. He became a senior official in the region's civil aviation authority by 1990 and founded Sibaviatrans, a small airline, in 1995. In 1998 he was named CEO of KrasAir, Russia's fourth largest airline, which had split from Aeroflot. Abramovich linked KrasAir and Sibaviatrans and three other small airlines he controlled to form Russia's first airline alliance in 2005.  Today, Abramovich and his brother Alexander own 49% of KrasAir, with the state holding 51%. A merger is under way between the alliance members. Boris and Alexander Abramovich will hold a majority stake in the merged group, which will have annual revenues of about $100 million. Malév has lost money for several years and, in spite of improvements, has been hit hard recently by competition from discount airlines. It lost Ft 4.9 billion in 2004 and Ft 1.3 billion in 2005. Its debts now total Ft 30 billion. “If Abramovich succeeds in buying Malév, turning round the Hungarian carrier will be a test," the FT noted. (portfolio.hu)