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Malev Hungarian Airlines CEO Martin Gauss

"Malev should see an operating profit in 2012”

Luc Citrinot, eTN  Aug 04, 2010

Malev has embarked on a drastic restructuring process, as the Hungarian national carrier has been hit by the world financial crisis, with a recession in its home market, as well as harsh competition in Central Europe. Despite Central Europe's relatively small size and population, it still has a dozen airlines that are based in this part of the continent. Seven national carriers (Adria Airways, Croatia Airlines, CSA, JAT, LOT, Malev, and Tarom) fight to preserve their market shares with low-cost carriers such as Baltic Air (Latvia/Lithuania), Blue Air (Romania), Easyjet, Ryanair, and Wizzair (Hungary) to just name a few of them.

This summer, Malev still represents over 45 percent of all capacities and 50 percent of all frequencies at its home base at the Budapest Ferihegy airport, Central Europe’s third busiest gateway with over 8.1 million passengers annually. Malev was renationalized last February with the state detaining 95 percent of the shares and a Russian bank the remaining 5 percent. Last May, Malev AGM approved a three-year strategy to turn the airline around, but so far, a bail-out amount has still not been finalized. Meanwhile, Malev has been fine tuning its strategy to survive these challenging times. Martin Gauss, Malev CEO, gave to eTurboNews an interview regarding the progress the airline is making on its restructuring.

eTN: What are the most urgent issues that Malev must face to remain competitive?

MARTIN GAUSS: We have to be back to the basics and grow again from a leaner structure. We have the advantage to be a small airline in size, which helps us to take quick decisions, for example if we want to add or retrench flights and destinations. And we first rationalize our fleet to go down from 5 to 2 aircraft types. We now look carefully at our network to adjust capacities and frequencies to make our Budapest hub more efficient.

eTN: Have you seen the first signs yet of a return to a healthier situation?

GAUSS: We cut operating costs by about 4.7 billion Hungarian Forint [editor’s note: US$22 million] in the first half of 2010 by cutting staff numbers by 25 percent and reducing the number of flights by 16 percent. We close[d] many loss-making routes. We hope, however, our load factor [will] increase by 3.5 percentage points with passenger number[s] at 1.3 million, unchanged from last year. We now work on improving our yields, but it will be hard to come back to the level reached a few years ago due to high competition from low -fare airlines.

eTN: How do you make a difference with the low-cost competition?

GAUSS: Our strategy is to remain a premium carrier by the quality of services provided to passengers. Any traditional carrier must, for example, offer the right time and the right frequencies to most of its destinations. At Malev, we already boosted our frequencies to our major destinations in short- and medium-haul markets by offering between two and four daily flights. We identify a great potential between Western and Northern Europe and Eastern Europe and the Middle East. For example, we have excellent transfer traffic between Hamburg and Tel Aviv via Budapest. We could imagine that our transfer traffic could grow up to represent 50 percent of our traffic in Budapest.

eTN: How can your membership to Oneworld help you during this difficult time?

GAUSS: Closing routes can be balanced with partnerships with Oneworld members. As we withdrew from long-haul operations, we are hopeful that Oneworld members could step in. It will take a year to stabilize Malev. Then we will take concrete steps to build up Budapest as a more effective hub for Oneworld and discuss with our alliance partners to operate more direct routes connecting to each other.

eTN: What do you predict for Malev's future?

GAUSS: We should see a turn-around in 2012, and I expect that we should make again an operating profit of approximately €25 million by this time. We still need to see what the Hungarian government – our main shareholder - can do to provide financial assistance to us within legal frames fixed by the European Union, but the government understands the importance of having a national carrier.

"Malev should see an operating profit in 2012”
Martin Gauss, Malev CEO / Photo by Luc Citrinot

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