Aviation hyenas, Malev bankruptcy and business efficiency

Posted on February 5, 2012

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This past week Malev, Hungary’s national carrier, ceased operations after 66 years of continuous service. The company had been plagued by debt, an ageing fleet and increased competition by low cost carriers. It had received a Government bailout, yet it could not turn its business around. A startling story, as it is the first European national flag carrier to simply halt flights, without being taken over by some other airline. Yes, Alitalia was close to getting there, but somehow, it always managed to find a last minute solution, even if it meant drastic changes.

However, this was expected. Somehow, Malev would cease to be, or would dramatically change. But what was surprising, and what impressed me was the quick reply from Malev’s low cost competitors, Wizzair and Ryanair.

Wizzair, the Central European low-cost carrier, has been eating away at Malev’s market share ever since it launched 6-7 years ago. However, as Malev grounded its flights, Wizzair instantly announced investments of about 80 Million Euro in its Budapest operations. Plus a rescue plan for the Malev passengers. And this reaction was the same day Malev grounded its fleet!!!

Ryanair,on the other end – the Global No. 1 Low cost carrier – was not operating in Budapest, but it was already planning to start Budapest operations this year. However, the moment Malev grounded its fleet, Ryanair instantly came with a press release saying it would set up a base in Budapest within two weeks. They would prepare all the work, relocate two planes, hire or temporarily move staff to provide these services, while also completing negotiations with the Budapest Airport Authority. Fantastic response time, plus incredible way to seize an immense opportunity – this is the best time to negotiate with an airport authority about low rates and facilities, as the airport just lost more than half of its business, so it is obviously desperate to replace that business.

 

As an aviation enthusiast, I am saddened by the disappearance of any airline, and even more so by the disappearance of malev – my first ever flight was on one of Malev’s Boeing 767 from Budapest to New York. However, as someone looking at the business of aviation, I am fascinated and excited by the incredible competition and quick response times of the new, private, business-oriented carriers. A great case for business, and a big red flag for any other countries that still run their flag carriers under the principles of an age long gone. A clear proof that companies need professional management, and not political appointees.

 

If you’re curious about the reactions, see the links below:

Ryanair’s press release

Wizzair press release about Budapest investment

Wizzair press release about options for Malev passengers

Malev website – the status quo