Hungarian flag-carrier Malev expects to post an operating profit of €8-12 million ($10.3-15.5 million) next year, provided the oil price averages between $90 and $110 a barrel. But Malev chief executive Peter Leonov believes the airline will perform better, if further declines occur.
Fuel price surges have prevented loss-making Malev from breaking even as scheduled under its company-wide "Remake" restructuring plan, which was launched in 2007 after private investors acquired the carrier from the state.
Last year, the freshly-privatised company managed to halve its operating losses and was bent on returning to the black in 2008 for the first time in six years. "From January through to July, we would have turned an operating profit of €35 million, but spiralling fuel costs wiped it out and pushed us back into the red," says Leonov, who forecasts losses of up to €20 million for 2008. "Still, it will be an improvement over last year. This means our turnaround strategy works."
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The company's to-do list includes around 500 initiatives, centred on cutting costs and boosting revenues. Its workforce has reduced in two rounds by 520 to 1,600 staff with 400 more jobs to be cut by 2009. Further economies and revenue growth should come from bringing the route network and fleet in line with shifting market demand.
"Our focus is on capturing traffic to and from the growing markets of Eastern Europe," says Leonov. "We want to provide a convenient gateway to the rest of Europe, where we serve key destinations with at least two daily frequencies. Hence our hub-and-spoke route system hinging on Budapest's vantage location and a decision to have a two-type mainline fleet."
While retaining 17 Boeing 737s, Malev will operate four new fuel-efficient Bombardier Q400s, due for delivery in 2012. It has an option to acquire four more. In the interim, it should also receive four refurbished Q400s and phase out two Boeing 767s, along with two Bombardier CRJ200s and five Fokker 70s.
Leonov says the new owners have already made a €40 million capital injection to overhaul Malev. But he adds: "With the 'Remake' programme in full swing, we're on track to recoup this investment within 12 to 18 months."
For more information on Malev's plans to acquire Bombardier Q400 turboprops, go to: flightglobal.com/malev
Source: Airline Business
