After 66 years in business, the Hungarian airline Malév ceased operations in February 2012. The airline was forced to close after the European Commission ordered it to repay €350 million of illegal government subsidies. The company was declared bankrupt, all but 540 of Malév’s 2,600 employees were laid off, and this triggered further redundancies at Budapest Airport Ltd and at the company’s suppliers. Trade unions say most of the former employees are still out of work.
Background
On 3 February 2012, after 66 years as Hungary’s national airline, Malév ceased operations with the loss of 2,060 jobs. The collapse of the company came after a European Commission decision ordering Malév to repay significant government subsidies of about €350 million. After two failed privatisation attempts, the airline was still 95% state-owned. It had a leased fleet of 22 passenger aircraft and employed around 2,600 people.
Reasons for the collapse
A number of different factors led to the bankruptcy of the airline. High operational costs, including low loading figures and increasing fuel prices and leasing rates, have been general problems for all civil aviation operations in a highly competitive market. At Malév, however, there have been other specific issues.
Since 1990 there have been several changes to Malév’s management structure, and this seems to have led to regular changes in strategy and a lack of a clear vision for the future. In the course of 22 years, the company had 16 different CEOs. The company had been unsuccessfully privatised twice, first in 1992 and then in 2007, and each time the state had to step in to keep the airline going.
Malév had not been profitable for a decade. Its debt was increasing year-on-year and in 2010 the airline owed €232 million.
Speaking on Hungarian State Radio on the day the airline ceased trading, Prime Minister Viktor Orbán said that the decision to close Malév was made after two planes were prevented from taking off. Local suppliers had lost confidence in the airline and had begun to demand advance payment for their services. Given the European Commission’s ruling that Malév should pay back millions of euros of state aid, the government was no longer able to step in to help.
Low-cost airlines jump in to fill gap
Low-cost airlines responded to the announcement immediately, offering new routes to passengers and jobs to some of the former Malév workers. Low-cost giant Ryanair announced that Budapest was to be a new base for five of its aircraft and that it was taking over 31 routes.
Michael O’Leary, CEO of Ryanair, said these new routes would create at least 2,000 new jobs in Budapest, including positions for pilots and cabin crew as well as ground personnel at Budapest Airport. József Váradi, CEO of Wizzair, promised to increase the capacity of Budapest Airport by opening new routes, and directly and indirectly creating around 700 jobs.
Layoffs at Budapest Airport
Shortly after the closure of Malév, Budapest Airport Ltd (BA) announced it was making 250 workers redundant. BA said the collapse of Malév meant it had lost 1.5 million passengers who would have had connecting flights in Budapest.
As a result of the estimated 20–25% cut to staffing numbers, BA set up a programme to try to help the dismissed employees to find new jobs as soon as possible. They were given training in writing a competitive CV and in preparing for a job interview – something many of the workers had never done before.
Trade unions remain pessimistic
Tamás Óvári, President of Hungarian Airlines Pilots’ Association (Hunalpa), said low-cost carriers would not create as many jobs as they had claimed because they already had their own employees. He said that, in his experience, global airlines were likely to fill vacancies for roles such as captains and commanders from other foreign bases as well as Hungary.
By the summer of 2012, around 20% of the 200 ex-Malév pilots had work contracts with different airlines. Only 10% of them had actually flown again, said Csaba Demeter, Vice-President of Hunalpa. Demeter added that the pilots’ prospects were not very promising. Most of them were over the age of 50, and new jobs often meant working away from Hungary.
Maria Tóth, President of Hungarian Air Cabin Crews Association (HUNACCA) said only 20 employees had managed to remain working as cabin crew, while between 20 and 30 former Malév cabin crew were waiting to hear about jobs with different airlines. She added that more and more former Malév employees had decided to leave the civil aviation sector and were looking for work elsewhere.
Commentary
A significant chapter in Hungary’s civil aviation history is over, but what the future holds for former employees is still unclear.
Many of the ex-Malév workers said the Hungarian airline had been their first and last workplace, and the company was like a family. For most of them, aged between 50 and 55 with highly specialised skills and competencies, it will not be easy to find new jobs, especially in other sectors. For some white collar employees with more generally useful professions and skills, such as those in finance or the law, it might be easier.
After the collapse of the company, there were talks about setting up a new national airline. However, the current state of the Hungarian economy means the country would simply not be able to afford it.
Máté Komiljovics, Solution4.org