AirBridge Zrt, an investment vehicle for Russian billionaire and OAO Krasair owner Boris Abramovich, will pay Ft 200 million ($1 million) to buy Hungary's Malév Zrt airline and pledged to spend more.
The company will invest €50 million ($66 million) to upgrade Malév Zrt, Hungary's asset-sales agency said in an e-mailed statement yesterday. OAO KrasAir also agreed to pay back Ft 13 billion ($67 million) of Malév's debt to the European Investment Bank and KBC Groep NV by December 31. Hungary invited offers for Malév after failing to agree with KrasAir in August 2005, amid calls from labor unions and politicians the carrier was being sold for too little.
This was the government's seventh attempt to unload the unprofitable carrier since communism collapsed in 1990. The government has spent Ft 16.2 billion ($83 million) propping up the airline in the past six years, yet it hasn't posted a profit since the 1990s and has debt of some Ft 30 billion. Krasair will provide €32 million to wipe out another loan, provided by Hungary's state-owned development bank MFB Rt, the statement said.
Malév, founded in 1946, is struggling because of competition from discount carriers like EasyJet Plc and Ryanair Holdings. Its loss widened last year from 9 billion forint in 2005 because of higher airport fees and kerosene prices, and a weaker Hungarian currency, CEO János Gönci said on February 7.
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 to enter the European Union and connect the Hungarian carrier to its alliance serving Russia and Central Asia. (Bloomberg)