Hungary Faces USD$3.6 Bln Airport Bill

February 8, 2012

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Hungary could face a compensation bill for up to HUF800 billion forints (USD$3.62 billion) from Germany's Hochtief, operator of Budapest's international airport, following the collapse of flag carrier Malev.

Hochtief and four other investors bought a 75 percent stake in the airport in 2007 and now own all of it.

Government commissioner Gyula Budai said on Wednesday the bankruptcy of Malev, which accounted for 40 percent of annual turnover at the airport, triggered a compensation clause in Hochtief's operating contract.

"This is an existing contract, which puts such an obligation on the Hungarian state," Budai said. "This contract lives from the moment that Malev's liquidation started."

He said the contract placed financial commitments of nearly HUF800 billion forints on the government, including the airport's usage rights for 75 years and loans taken out by Hochtief for airport investment.

That would be the equivalent of nearly 1.5 times the government's 2012 budget deficit target in cash terms.

Asked whether Hochtief had already initiated a compensation claim, Budai declined comment.

Hochtief did not say whether it would raise compensation claims, but its head of communications Donatella Gasser said:

"In its White Paper of December 2011, the Hungarian government stated that in the event of a discontinuation of operations by Malev, claims by the airport partners could arise. Apart from this, we do not comment on contractual matters."

Malev ceased operating after its planes were held overseas for unpaid debts, leaving a gap in the market that low-cost competitors were quick to exploit.

Several budget carriers, including Ireland's Ryanair, Budapest-based Wizz Air and Germany's Air Berlin, announced an immediate increase in their flights from Budapest airport.

The Hungarian government warned in December that the loss of Malev could risk the operation of Budapest airport.

The Development Ministry said in December in a white paper the state could be required to pay about EUR€1.5 billion if the airline ceased flying, with "grave consequences for the maintenance of the budget deficit target."

(Reuters)