Balkan and Malev face sale

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The Bulgarian Government is on the verge of selling a controlling stake in its national carrier, Balkan Bulgarian. The buyer is a locally based consortium, calling itself Balkan Air, made up of management, local financiers and a US institutional investor.

The original offer is understood to be a straight cash purchase of the state's 75% stake for around $450 million. But the consortium has been forced to include guarantees over debt, jobs and investment for the carrier. Balkan Air was originally set up by the airline's management but an unidentified US institutional investor has since bought a majority 75% stake.

Advisors to the Bulgarian Government say that the terms of the sale are more or less agreed and could be signed by November. The only variable is how long the government will take to mull over its final decision.

If successful, it is thought that Balkan Air will begin to break up the airline, spinning off unprofitable units. The consortium's head, Ivan Sokolov, adds that the business plan includes a revamp of the network, as well as an extensive fleet renewal programme.

Meanwhile, Hungarian flag carrier Malev is to undergo a managerial reshuffle in a bid to rejuvenate its stalled privatisation plans. President Andras Derzsi and chief executive Sandor Szathmary are set to leave their posts with more change expected shortly.

The reshuffle comes just months after Hungary's new government put all privatisations on hold pending an investigation into sell-offs under its predecessor. This was unfortunate timing for Malev as it was on the brink of signing a major alliance deal with British Airways.

Although BA says it is still interested in the alliance, the deal will have to wait for a review by the new Malev board according to a source within the APV, the state holding company which owns 64% of the Hungarian carrier.

Malev confirms that discussions have taken place with the Star Alliance and the Qualiflyer group, but stresses that BA is still the preferred partner. Talks with the UK airline are continuing.

Malev reveals that flight operations for the year are likely to "be somewhere around break-even".