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Hungary picks KrasAir, LAL of Lithuania for talks in Malév sale

Hungary picked Airbridge Zrt, a local investment vehicle for OAO KrasAir owner Boris Abramovich, and Lithuanian airline owner LAL Investiciju Valdymas for further talks to sell unprofitable state airline Malév Zrt.

The government's asset-sales agency (ÁPV) ended talks with Ofer Hava, an entrepreneur in a group with former Aer Lingus Chairman Tom Mulcahy, in its seventh attempt to sell 99.95% of Budapest-based Malév Zrt, the agency said in a statement yesterday. It earlier ruled out Sky Alliance Zrt, a group of former Malév employees. Hungary invited bids last September after failing to reach an agreement with OAO KrasAir in August 2005 to buy Malév, amid calls from labor unions and politicians it was being sold for too little.

The government has spent Ft 16.2 billion (€36.2 million) propping up Malév the past six years, yet it hasn't posted a profit since the 1990s. ÁPV wants a buyer to also overtake the carrier's debt of Ft 30 billion. Malév, founded in 1946, is struggling because of competition from budget carriers such as EasyJet Plc and Ryanair Holdings Plc, after Hungary joined the European Union in 2004. Malév gained affiliate status with British Airways Plc's Oneworld Alliance a year ago, raising its profile in western Europe.

Abramovich, who heads an alliance of five Russian airlines called AirUnion, bid for Malév through AirBridge Zrt, a Hungarian holding company of which he owns 49%. KrasAir, Russia's fifth-largest airline, bid for Malév a second time in order to enter the EU and connect the Hungarian carrier to its alliance serving Russia and Central Asia. LAL Investiciju Valdymas owns Lithuania Airlines, or flyLAL, which was founded in 1991 after the Baltic state won independence from the Soviet Union. (Bloomberg)