Malev Hungarian Airlines

Finnair to increase focus on Asia as JV partner takes over short-haul operation

Finnair has entered into discussions with potential partners to form a joint venture which would take over part of its unprofitable short-haul operation. The new JV would be a major component of a restructuring and could allow Finnair to increase its presence in the Nordic region under a lower and more competitive cost base. Finnair is seeking to use the new joint venture to open new bases in the region in line with its Nordic Champion strategy but has embarked on a restructuring of its own mainline operation to become competitive and restore profitability.

By establishing the JV, Finnair hopes to reduce costs on its regional network and free up capital to invest in further expanding its Asian network. The Europe-Asia market has been the major focus for Finnair in recent years with the carrier exploiting its geographic advantage to offer convenient connections to a growing number of Asian cities.

In announcing its 2011 results and revised strategy on 09-Feb-2012, Finnair CEO Mika Vehviläinen explained that "the potential joint venture would expand our home base to cover the entire Nordic region" and would "support our Asian strategy through increased feeder traffic for our Asian destinations and better presence in key cities throughout the Nordic region". Mr Vehviläinen said the arrangement is unlikely to include network carriers and should not require any equity tie-up.

An agreement is aimed to be signed in mid-2012, with the new joint venture operation expected to commence in 1H2013. Finland’s Government, which owns a 55.8% stake in Finnair, has said it may consider selling its stake to enable the company to form a joint venture in Europe.

After Malev's grounding, Hungary could become large LCC market with Wizz Air and Ryanair moving in

Low-cost carriers, in particular Wizz Air and Ryanair, stand to benefit the most from the 03-Feb-2012 suspension of services at Hungarian flag carrier Malev. Budapest-based Wizz Air was already the second largest carrier in the Hungarian market and has now become the country’s largest carrier. Ryanair, which only late last month unveiled plans to resume service to Budapest, will become within a few months the second largest carrier in Hungary in the post-Malev era.

Lufthansa, as the largest remaining legacy carrier in the Hungarian market, is also poised to benefit from Malev’s grounding. Malev had accounted for a 47% share of capacity (seats) in its home market. Most of this share will be absorbed by LCCs although total traffic at Budapest Liszt Ferenc International Airport, which is owned by a private consortium led by Germany’s Hochtief, will likely decrease as its status as a transit hub is lost. Malev had been pushing to raise Budapest’s profile as an international hub, focusing on east-west connections. Malev's collapse saw oneworld overnight drop from the leading alliance in Hungary to the third largest after Star Alliance and SkyTeam.

Hungary’s Malev closes in on profitability

Hungarian Government-owned flag carrier Malev has seen a significant improvement in its financial situation over the last several months as it looks to a potential re-privatisation in 2012.

Restructuring work began at Malev in Feb-2010, when the Government renationalised the highly unprofitable carrier, and as reported in June was approaching conclusion, with aims be back in the black in 2012. Malev chief commercial officer Otto Gergye told CAPA last week that Malev’s financial performance has improved significantly over the last three months and “we’re definitely on the right track”.

Europe's fringe carriers look for partners to overcome financial crisis; Cyprus Airways latest

Airlines on Europe's southern and eastern periphery are becoming more precariously positioned, but are looking for for partners to help overcome the growing financial crisis. Cyprus Airways is the latest such carrier, and reported a widening in first half losses in the six months to 30-Jun-2011, as lower top-line revenue fell and higher fuel costs squeezed the airline in the period. Cyprus Airways is also turning to implementing a raft of measures aimed at stemming operating losses.