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Hainan Air makes bid for Malev airline
By Cao Desheng (Hainan Air makes bid for Hungary's Malev airline)
Updated: 2004-08-14 00:35
China's Hainan Airlines (HNA) is considering making a bid for the loss-making
Hungarian national airline Malev.
HNA hopes to have an opportunity to help rebuild Malev and the two sides are
negotiating on related issues, HNA President Chen Feng told a joint press
conference with Malev's President Laszlo Sandor in Haikou, the capital of South
China's Hainan Province.
"Malev boasts an abundant flight network and professional air staff and the
favourable geological position of Budapest will contribute to a promising
aviation market," Chen said.
Late last month, the Hungarian Government announced plans to sell its 99.95
per cent stake in the ailing State-owned airline and hoped to close the
transaction this year.
HNA will complete a feasibility report on reorganizing the stock ownership of
the Hungarian airline based on a prudent financial analysis of the company, Chen
said.
HNA has consulted Morgan Stanley and some renowned law firms about the issue
and the rebuilding programme will be made in accordance with the law of Hungary
and international practice, he added.
Sandor appreciated HNA's interest in Malev, saying his company is looking
forward to HNA's participation.
Sandor said the Hungarian Government will announce the bid in late September
and the data room for potential investors will be open between early September
and early October.
Any potential buyer, a single company or a consortium, would have to increase
Malev's capital and guarantee the repayment of Malev's debts, which add up to
36.2 billion forints (US$180.3 million), Sandor said.
Most of the debt, 33 billion forints (US$170 million), is currently
guaranteed by the State.
Meanwhile, the Hungarian Government has asked investors to retain the
existing name of the airline and keep the national flag of Hungary for the
company, Sandor said.
Besides HNA, Air France-KLM and Austrian Airlines are also interested in the
bid, Reuters reported.
Malev will select a satisfactory partner from interested candidates in line
with their economic power, Sandor said.
If the HNA's bid for Malev is successful, it will become the first airline in
the country to invest in a foreign aviation company.
The move would give Hainan Airlines -- the fourth largest carrier in China in
which Hungarian-born financier George Soros holds a 14.8 per cent stake -- a hub
in one of Europe's most popular tourist destinations and a gateway to the
European continent, experts say.
The central government encourages domestic companies to invest in their
foreign counterparts by share-holding or merging for better allocation of their
resources, and HNA is going in that direction, said Lin Yueqin, an economic
researcher with the Chinese Academy of Social Sciences.
It is a wise choice for HNA to earn a share of the aviation market in
European countries, he said.
However, Lin said, the cross-border merging is complicated and the success
rate is only around 10 to 20 per cent, so HNA will have to face a great
challenge in financial risk, capital operation and management.
"HNA must improve the awareness to evade risk by investigating the overall
conditions of its co-operative partner -- including financial status, legal
affairs and company staff -- and having a prudent prediction about the potential
market," he said.
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