MALÉV Airlines to terminate collective agreement

Having failed to reach a consensus with trade unions, MALÉV Hungarian Airlines decided to terminate its collective agreement. The company intends to replace the current agreement with one which ensures flexible terms and conditions of employment and adapts more easily to market changes. Trade unions at MALÉV were surprised to learn about the company’s decision from the media. The agreement is still in force until the end of May 2008, which may give the parties involved enough time to re-negotiate its terms.

After several rounds of negotiations with the trade unions, the management of MALÉV Hungarian Airlines decided to withdraw from the company’s collective agreement, which was originally signed in 2000 and stipulated that its unilateral termination was not permitted before the end of February 2008. Due to the required three-month notice period of termination, the agreement will remain in force until the end of May 2008. MALÉV, which was privatised last year (HU0707019I), is committed to continuing negotiations with trade unions in order to sign a new agreement as soon as possible.

Privatisation background

Since 2004, the Hungarian Privatisation and State Holding Company (Állami Privatizációs és Vagyonkezelő Rt, ÁPV Rt) attempted to sell MALÉV’s shares by privatisation procedures, all three times without success. Eventually, in 2007, the privatisation tender was won by the Russian cargo airline AirBridgeCargo (ABC) and thus MALÉV was privatised. The new owner paid about HUF 26 billion (about €102 million as at 9 April 2008) for the company’s shares. With the conclusion of the transaction, AirBridgeCargo became the majority shareholder of MALÉV with full management rights, and the company can now commence the implementation of the national airline’s new strategy.

Reasons behind withdrawal of collective agreement

The Chief Executive Officer (CEO) of MALÉV, Péter Leonov, considered it crucial to sign a new agreement because, apart from having been amended several times, both the airline market and business conditions have significantly changed since signing the collective agreement in 2000 – these changes are a result of the events of 11 September 2001 and the rising fuel prices. The most important reason for concluding a new agreement, however, lies in the fact that the old one represents an excessive financial burden for the airline. Mr Leonov pointed out that decreasing corporate costs was inevitable. For the same reason, at the end of 2007, MALÉV announced its decision to reduce staff by 9%, expecting to save at least HUF 1.2 billion (€4.7 million) annually as a result.

The company’s management claims to have handed over a proposal to the trade unions which conforms to the regulations and will be acceptable by them. The revision of the Employee Benefits Programme ‘Cafeteria’ is also part of the new proposal. At present, under this programme, each employee of the company puts together his or her own benefit package up to an agreed value from a broad selection of services, including a public transport pass, food or meal vouchers, an internet voucher, voluntary pension funds, as well as life, accident and health insurance.

The President of the company’s Supervisory Board, Magdolna Költő, emphasised that the change is a necessity, as the new business plan can be reached only by the amendment of old structures, creating more flexible and efficient regulations.

Position of trade unions

The representative trade unions at MALÉV published a joint statement in which they criticised the new Russian owner of the company for failing to observe the contents of the privatisation contract. The unions were also surprised that they were not informed directly of the company’s decision to withdraw from the collective agreement, but instead had to learn of this plan from the media. An official of the Hungarian Cabin Crew Association (Magyar Légiutaskísérők Egyesülete, Hunacca), Zsolt Lőrinczy, argued that the company management does not respect the wage agreement which was signed in 2006 and remains in force until 2009. According to the current agreement, flight attendants would receive a 15% wage rise in 2008; however, in 2007, MALÉV assessed that the average gross income of flight attendants was high enough at HUF 450,000 a month (€1,777) and therefore the agreement had to be amended.

The President of the Hungarian Airline Pilots Association (Magyar Közforgalmi Pilóták Egyesülete, Hunalpa), Péter Szentei, highlighted that the association would be willing to conclude an agreement with the employer on pilots’ weekly working hours and rest periods, as well as compensations. Mr Szentei added that the trade union sought to reach a compromise by accepting the employer’s request to increase pilots’ annual flight time from 750 to 850 hours.

Commentary

Since its decision to withdraw from the current collective agreement, MALÉV’s management had reiterated on several occasions its commitment to reaching a new agreement before the deadline. According to the management, MALÉV’s proposal for a new agreement is a key element in planning for the future of the airline and the management hopes to conclude negotiations soon. However, the trade unions do not seem to be as optimistic in this respect and expect tough negotiations.

Máté Komiljovics, Institute for Political Science, Hungarian Academy of Sciences