beyondbrics

The scene: the back end of an otherwise swish Budapest hotel.

“Excuse my Hungarian press release: we are a low-cost airline, and we use low-cost translators,” said Michael O’Leary, as he squeezed past journalists handing out Ryanair’s latest routes and flight plans from Budapest at noon on Monday. Previously there had been confusion over the airline’s agreements with Budapest airport. O’Leary left no doubts.

Yet as this chapter drew to a close in the fast-flowing story of Budapest airport post-Malev, another was opening up. A government official said on Wednesday that Hungary could face a bill for up to Ft 1tn (€3.45bn) in compensation claims from Hochtief and other investors that own the airport operating company.

Hungary’s Development Ministry asserted that it could face compensation claims of up to a stagggering €3.5bn, or roughly 1.5 times the budget deficit target for 2012. The claims stem from the fact that under a previous government the Hungarian state had effectively assumed a full guarantee for the airport operations. Hochtief and four other investors bought a 75 per cent stake in Budapest airport in 2007 and now own all of it.

Germany’s Hochtief and its partners said on Thursday it would take some time to assess any claim and said they would help Hungary in efforts to resume Malev’s passenger operations, according to Reuters.

But the figure bandied around by the government is simply huge. Such a burden on the budget would surely hit Hungary’s shaky economy very hard – yet the currency has barely reacted.

In other words, the markets don’t believe it.

“Probably nobody really [reckons] that Hungary will have to pay this sum, because, to my understanding, it’s tied to the airport’s traffic. It’s a fact that traffic will decrease somewhat due to the collapse of Malev, but these new air companies are jumping for the possibility to find customers. They are [largely] going to fill the hole,” Adam Keszeg, an economist with Raiffeisen Bank in Budapest told beyondbrics.

For him, there will be no case to answer, at least nothing like the sums mentioned. But why should a government official say such potentially market shaking news?

Most likely to make political capital, to further blacken opposition Socialist politicians, notably Ferenc Gyurcsany, the former prime minister, who was in charge when the privatisation of the airport operator took place in 2005, says Keszeg.

“Either that, or they might be overstating the amounts to communicate they might buy back the operator – but I don’t give this much chance,” Keszeg said.

But back to the good news – at the very least for the 250 pilots, cabin crew and engineers made redundant by the demise of Malev – who Ryanair said it will recruit next week to man its new services. The first is due to begin on Friday February 17, with three new aircraft.

After concluding talks with both government and the authorities at Budapest Airport, the maverick chief executive of Ryanair said the Dublin-based budget carrier was rushing to add a fifth Boeing 737 to its new Budapest base from March – upping the total routes flown from the Hungarian capital to 32, with a revised target of 2.4m passengers to be carried this year.

“We’ve had record bookings since announcing the 31 new routes to Budapest last Friday. So successful has been the launch of our €9 fares last week that we are increasing the size of our base from four to five aircraft, we’ll add a 32nd route with flights to Tampere in Finland, with an additional 42 flights weekly to [other destinations such as] Brussels, Milan and Stockholm,” O’Leary told the press conference.

The expected 2.4m passengers will “make up much of the traffic” lost due to Malev’s closure, and help sustain 2,000 jobs in and around Budapest’s Liszt Ferenc airport, he said.

O’Leary was vocal in praising his company’s record, his own good looks, and disparaging rival budget carrier Wizz Air, which he slammed as “an unsustainable” operation that “has never made a profit.”

But the voluble Irishman curbed his tongue when quizzed about subsidies and incentives he may have won in negotiations to come to Hungary. Ryanair will fly to the modern glass-aluminium terminal 2 at Liszt Ferenc Airport – not the carefully restored, but much less modern and cheaper terminal 1 – the normal berth for budget carriers.

Was Ryanair getting a subsidy to operate from the smarter of the two terminals? He wouldn’t say, and though he admitted to receiving support “from the government and the tourist authority,” there were no further details.

“He wouldn’t tell his mother; he wouldn’t even tell his priest!” quipped his spokesperson afterwards.

However, O’Leary’s Hungarian press release did not impress the locals, who were clearly hoping his airline service will be of a higher standard.

“It’s not even child-like writing. It’s just bad. It looks like he’s used Google Translate, and not even bothered to get it checked,” said one native Hungarian speaker.

Related reading:
Ryanair and Budapest Airport: setting the record straight, beyondbrics
Ryanair vs Budapest: playing dirty? beyondbrics