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Malév cuts operational costs by HUF 20 billion in 2009

Direct News Source

06-Apr-2010 Despite Malév's net loss last year the company performed much better than its regional competitors and the airline spent HUF 20 billion less on operational expenditures in 2009.

The operational result was worse last year than in 2008 mainly because of reduced revenue, as was generally the case throughout the entire industry, while the major elements of the net loss derived from the cost of returning the Fokker aircraft and financial costs such as high interest rates. The anti-corruption audit - launched by CEO Martin Gauss - also brought to light unfavourable contracts from the past, which are presently under investigation and will lead to a further reduction in costs.

"Malév is performing better than other carriers in the region during the worst crisis the airline industry as ever experienced. While European competitors suffered an overall 7% decline in passengers Malév achieved an increase of 6%, making it one of the few airlines that could improve its figures in Europe. In the Central European region the national carriers suffered a far greater drop in yield than Malév: they generally recorded a more than 30% fall in income while the downturn in Malév revenues was less, actually 23%, in 2009," said CEO Martin Gauss referring to today's news about Malév losses.

He added: "This management was the first to really start cleaning up the disorder left by the former owner and management. The forensic audit I launched last year also identified a lot of issues and contracts unfavourable to Malév; the management has taken up these issues to clear out any possible corruption from the past."

In the course of last year Malév management cancelled several old, disadvantageous commercial contracts, closed expensive foreign offices, significantly reduced staffing numbers, wound up bureaucracy, simplified in-house administration and built up a transparent organization to control all kinds of expenditures.

Malév also performed well in Q1 of 2010, achieving its target figures in terms of both revenue and passenger numbers. The airline carried 60,000 more passengers, an increase of 11%, in the first 3 months, thus providing the airline with a stable market position.

Malév's net loss in 2009 was HUF 24.4 billion. This loss covers numerous mistaken decisions from the past. After more than a decade of utilization, the fleet of five Fokker 70 aircraft was grounded and returned to the owners. Over the years Malév did not build up reserves to finance the costs of redelivery and it did not plan for the costs of maintenance expenditures and investments made in these airplanes. The end result: a one-off bill of HUF 4.8 billion.

Unreliable past ownership relations are another factor which also greatly contributed to the losses. The lack of proper financing caused Malév to face worse trading conditions than competitors, it received fewer discounts and suffered from penalty interest with many suppliers and partners. On the other hand, the financing being provided was extremely expensive and further increased financial costs. All in all, in 2009 Malév paid HUF 4 billion in interest alone and total financial expenditures amounted to HUF 15.6 billion.