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Malév CEO says airline could become profitable within two years after privatization - extended

Malév Zrt, the country's unprofitable airline being sold for a seventh time, will post a wider loss in 2006 from the year before after airport fees and fuel prices rose and Hungary's currency weakened.

The carrier paid Ft 3 billion ($15 million) more in fees to Budapest Airport Zrt in 2006 while kerosene costs rose by Ft 10 billion, Malév CEO János Gönci said in an interview today. He declined to provide figures for the 2006 loss. The company reported a Ft 9 billion loss in 2005. “Our loss widened last year, but due to better efficiency not by as much as the increased costs would suggest,” Gönci said at Budapest's Ferihegy International Airport. Hungary is in final talks with Lithuanian carrier FlyLAL and Airbridge Zrt, a local investment vehicle for OAO KrasAir owner Boris Abramovich to sell Malév by the end of January, its seventh time on the auction block since communism ended. Hungary has spent more than Ft 16 billion propping up Malév as the unprofitable company struggles with debt and competition from budget carriers. A weaker Hungarian currency last year cost Malév about Ft 1 billion, while severance payments to former employees added another Ft 2 billion, Gönci said. Debt at the carrier didn't change “considerably” from 2005's Ft 30 billion, he said. Malév posted its highest-ever loss of Ft 13.5 billion in 2003. The airline may become profitable within two years after being sold, Gönci added. The State Privatization and Holding Company (APV) started talks on Malév's sale with two potential buyers: one, AirBridge, backed by a Russian airline owner, and the other the investment arm of Lithuanian airline LAL. Both parties will inject more than €100 million into the airline if they purchase it, according to unconfirmed press reports. He added that Malév had signed hedging deals for more than half of its kerosene requirement. Gönci said ÁPV had not approved Malév's request to sell one of its CRJ-200 Bombardier aircraft before its privatization. Malév had requested approval to sell the aircraft in January after an interested buyer came forward. The aircraft is one of four Malév has intended to sell. Malév said earlier it had operating losses 44.7% more than one year earlier. Hungary has spent more than Ft 16 billion propping up Malév as the unprofitable company struggles with debt and competition from budget carriers. (Bloomberg)