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MÁV: Taxpayersʼ Dues Deflect Railroad Blues

The 08:30 “Citadella” pulls out of Budapest’s Déli Train Station on time on June 12. True, it’s an eight-hour haul to Ljubljana, the capital of Slovenia, and it stops at some settlements that would struggle to make “big village” status in both countries, but our air-conditioned carriage gives relief from the summer heat, and the free wi-fi should help make use of time. And at EUR 49 for a 1,000 kilometer round trip, all seems well on MÁV, the Hungarian state railway company.

It certainly chimes with the message Ilona Dávid, the rail group’s chief executive sought to give out at the end of May, when summing up the 2017 results.

“MÁV closes a successful year”. So read the headlines in the Hungarian media after the press conference, which revealed an after-tax profit of HUF 7.8 billion on income of HUF 152 bln.

True, profit was almost 35% down on the 2016 figure, but that had been boosted by one-off land sales, so the comparison was not like for like. Income was almost unchanged on 2016.

Of course, for most of the public, MÁV means passenger trains, and MÁV-Start, the subsidiary charged with moving people, announced a HUF 3.2 bln net profit after shifting 139 million folks around in 2017.

So far, so hum drum.

But MÁV is an important company. Perhaps the numbers need a bit more context. Even ignoring the freight traffic, MÁV transports an average 2.7 million folk – that is about the population of the Budapest agglomeration – each and every week. It employs nearly 18,700 – and is having to raise salaries, in line with the national average of 12%, to keep the skilled employees it so desperately needs. Indeed, it is to try “new solutions” the company said, without giving details, in order to recruit new staff.

But the picture painted by management becomes less rosy if one looks into the accounts. Yes, MÁV made a profit in 2017, but that is only after a bewildering array of state subsidies go into the coffers.

Devil in the Detail

After some searching, the accounts can be accessed on the website, and in English, too.

Frankly, it would need a chartered accountant to nail-down the figure for the total state subsidy transferred to MÁV last year, but Page 9 of the report indicates the state provided a total of almost HUF 70 bln for “operations and renovation” in 2017 – that is 46% of total revenues.

So while MÁV may make a profit, it clearly does not make it in a way similar to your normal widget manufacturer or hair dresser.

Of course, in Western Europe, almost all rail companies receive state subsidies, because all countries see rail as a necessary element of modern transport portfolios. It may even be that MÁV has lower average state subsidies per passenger-kilometer than many peer systems.

What is worrying, however, is that the public is largely unaware of this. From a perusal of the Hungarian media reports, not only did MÁV fail to mention the subsidies in its portrayal of the year, but the journalists on the job failed to question the figures.

This leaves the average Magyar punter with the belief that the company makes a profit, whereas, in fact, taxpayers contribute HUF 70 bln a year to keep services running. They may approve of that, but they should be conscious of giving their approval.

Postscript on the journey: the wi-fi barely worked and the train arrived in Ljubljana 20 minutes late, but that was all down to track work in Slovenia. The “Citadella” arrived at the Slovene border on time.

The Bottom Line is a monthly column written by Kester Eddy, a long-standing and well respected Budapest-based business and economic journalist, who has written for the Financial Times and many regional publications. The opinions expressed in the column are not necessarily those of the Budapest BusinessJournal. To comment on this column, or on anything else in the BBJ, email the editor at