"The costs of Hungary's national airline Malév must be reduced by 7% in 1.5-2 years, newly appointed chief executive Péter Leonov said on Tuesday. He aims to make the loss-making airline profitable by the end of 2008.Malév replaced its CEO Lloyd Paxton last Friday. The Briton was in office for only two months.
In an interview with Russia's Komersant Leonov pledged to continue Paxton's programme with focus on cost cutting and revenue increase, but noted his own ideas would also be incorporated. He said spending would be tamed at virtually every area at Malév. Leonov said the airline has good external and internal reserves.
Russian analysts believe the switch in the position of CEO indicates that the owners, the Abramovich brothers, wish to increase their control over the company to the maximum and Leonov, known as majority owner Boris Abramovich's right-hand man, is a perfect choice for achieving this. Leonov is not only is versed in local rules and customs, but he is also one of the founders of AirBridge, which won the privatisation tender for Malév.
Russian media speculates that Leonov wants to drag out Malév from the mud primarily with the help of AirUnion, which comprises five Russian airlines. They also called attention to the fact that the Hungarian airline has already launched a route to Yekaterinburg. Leonov said they were not planning to add more flights to the existing four, as they are currently looking for good transfer opportunities towards Siberia, the Far East and possibly China. There will be more flights on this route if they find the right transfer destination, which means no sooner than the summer of 2008.
Malév's capital has just been raised by EUR 18 million, and AirBridge had also pledged in its winning bid to inject a total of some EUR 30 m (HUF 7.5 bn) capital into the company. The EUR 18 m was one part of that. Kommersant speculates that the remaining EUR 12 m will arrive by the end of this year.
Trust Bank analyst Yevgeny Sago said the “not too large sum" could be used to optimise Malév network of destinations, stressing that passenger numbers could be increased considerably with more focus on Russian travellers. In order to achieve this, he added, favourable transfer opportunities should be established for AirUnion and CrossAir flights.
Analysts cited by Russian papers believe the change of CEO could have a negative impact on Malév, saying that bailing out the airline would take good management rather than money, implying that a frequent replacement of the top brass was not a good choice.
Olga Trapeznikova, spokeswoman for AirUnion, confirmed that Paxton left the company for personal reasons and that his departure was a surprise for everyone.
Malév posted an operating loss of HUF 10.8 billion in 2006, up HUF 3.7 bn from a year earlier, and its pre-tax loss amounted to HUF 11.9 bn, according to the consolidated annual report."
Source:
Portfolio Online Financial Journal
19.09.2007