Hungary is facing a race against the clock to keep debt-stricken national airline Malev in business while it tries to secure a private investor after the carrier was placed under bankruptcy protection.
The government put Malev under protection from creditors on Monday after a European Commission ruling forced the loss-making carrier to repay millions of dollars worth of state aid received between 2007 and 2010, the equivalent of its total 2010 revenue.
Malev's chairman Janos Berenyi told a news conference on Tuesday that management was in talks but did not give any further details.
He said the management priority was to keep the airline afloat until the government secures a new investor to take over or draws up another solution.
"In this form we can certainly not continue, so we are aiming for a gapless transition," Berenyi said. "We hope we can last as long as possible while a new national airline is formed that can serve all the functions currently performed by Malev."
Berenyi said the situation was volatile as Malev's funding should last as long as a month under normal circumstances but cash could run out within days if partners lose confidence and start asking for advance payments or deposits.
"If we can avoid these things, we will be able to fly, but if we cannot, anything can happen," Berenyi said. "We are flying and I hope we will fly tomorrow and I hope our owners can support us in this."
After failed privatisation attempts, Hungary in 2010 bought back all but a 5 percent stake in the carrier, which employs 2,600 people. It posted a loss of HUF24.6 billion forints in 2010.
Berenyi said the government was discussing Malev's situation at a Tuesday meeting in a bid to secure an investor and maintain a momentum that saw Malev increase bookings and passenger numbers on its flights over the past six months.
"As to what form this solution will take, whether it will be formed on the ruins of the old (airline)... we are aiming for a gapless transition," Berenyi said, adding that Malev's flights were still running on schedule.
"It also depends on what a new partner wants, whether there is someone willing to take over this debt, in which case Malev could even continue in its current form, however, the main thing is that the state cannot provide us any more money."
He declined to go into details about the potential investor or investors. Berenyi said Malev's total outstanding debt stood at around HUF60 billion forints (USD$266.63 million).
The airline, which accounts for 40 percent of annual turnover at Budapest's international airport, has said it had managed to agree with ILFC on the continued lease of its fleet, which comprises 22 passenger aircraft.
Malev's management must draw up a liquidity management plan by the end of this week.