Following years of clear intentions and background speculations, recently, the Hungarian government has openly stepped up once again and made it clear that they want to purchase Budapest Airport. While the ruling parties’ intentions seem more serious than ever, recent statements from the airport’s majority owners suggest that they want to keep Hungary’s biggest airfield in their portfolio.
At the moment, besides AviAlliance (owned by a Canadian fund) which has 55.4% of the ownership, Singapore’s sovereign wealth fund’s (GIC) subsidiary company, Malton, and a pension fund in Québec, Canada, are Liszt Ferenc airport’s owners.
The Hungarian state had sold the concession’s operation (the estimated value of the concession rights is estimated at EUR 1.6-1.9 billion) for 75 years back in 2005. While it was the left-liberal Gyurcsány government that sold the majority, the remaining 25% was eventually traded by Orbán and the Fidesz government in 2011.
A long-desired deal
The intentions of Fidesz circles to take over the airport have long been known in Hungary, leading to several statements made in the last years, ranging from quiet offers to straightforward criticism and threats. Conflicts began some three years ago, when government officials began to criticize the undoubtedly sub-par conditions of the airport (mainly the “basic boarding gates” serving low-budget flights that lacked seats, bathrooms, heating, and cooling). Later, the PMO Chief also threatened the company. “We made it clear to the owner that either they set out to develop, or it would be best to sell it, as what was going on there could have been banned by the authorities,” Gergely Gulyás said.
The airport, however, instead of backing off, began and has since concluded the developments. The new terminal solving the issue of the “basic boarding fates” was delivered last January, just before the pandemic reached Europe. In addition, further expansions, and the building of a third terminal have been recently announced, along with additional developments and face-lifts. The purchase intentions made it back on the agenda last October, when the government controversially blocked the airport from receiving a loan needed to manage difficulties caused by the coronavirus pandemic. The PMO chief himself commented at one of his press briefings, that “…the airport’s retrieval is a relevant goal.”
While earlier it was rumored that fast-emerging Orbán-ally billionaire, Lőrinc Mészáros, could be the buyer, back in November, Dániel Jellinek’s name was put in the forefront, a property dealer businessman similarly close to Fidesz circles. Jellinek, backed by some Hungarian and American investment groups, reportedly made an offer last year. In addition, oil company MOL’s chief Zsolt Hernádi’s name was also in circulation.
German airport investor and managing group of companies, AviAlliance, however, denied intentions to sell the airport, arguing that they still “…believe in the economic potential and long-term growth” of their investment.
After last year’s tribulations, in May, the IT Ministry announced to take part in Budapest Airport’s buying process once again. A little later, the airport issued a statement on last year’s tendencies, which is hard to interpret other than a reaction to the government’s intentions. In the statement, the airport confirmed stability and liquidity “despite unprecedented difficulties,” saying that the owners have ploughed the 2019 profits into crisis management, adding that the company financed its operation from its own resources and, to a lesser degree, from market-based resources. Budapest Airport also implemented developments to the tune of 81 million euros.
IT Minister Palkovics to lead talks
Reportedly, it is the Minister for Innovation and Technology who will be in charge of leading the talks. Following some controversial cases (SZFE – Theater and Film University, Science Academy, and the entire higher education’s restructuring) in which László Palkovics similarly acted as the Orbán government’s ruthless enforcer, the government’s aim to ‘settle’ the case is perhaps more serious than ever.
It would be optimal if the state could engage in the operation of the airport not only as a regulator, owner of development resources, or strategy maker, but also as its owner, Palkovics said recently. For this purpose, the government would make a fair offer to purchase the airport, and if rejected, it would like to restore the majority ownership of the state, he explained, adding that they are aiming for a negotiated deal.
While in 2019, the airport’s profits totaled HUF 30 billion (EUR 85 million), and preceding years were similarly fruitful, the operator of Budapest’s Liszt Ferenc International Airport closed its worst year on record in 2020. The company was 110 million euros in the red at the end of the year, with 118 million euros net revenue, down 65% from 2019.
Therefore, the government definitely expects the airport to be an easier shot to acquire as a result of the weakened state of the aviation industry caused by the pandemic. Palkovics’s statement also points in this direction. “For the current owner, this is an investment. If we look at how the situation and performance of aviation has changed over the past year due to the pandemic, it is currently a profitless investment. The virus can be expected to transform the structure of international aviation more permanently. If the re-establishment of the previously high passenger traffic takes more time, the profit-driven owner may want to deal with something else instead. For them, this is a business decision, but for us it is an important issue of economic and transport development and even of national strategy,” Palkovics said.
featured image via Zsolt Szigetváry/MTI