British Airways is facing stiff competition from rivals in its attempt to enlist Eastern European allies through equity transactions. Only a year ago, the UK flag carrier was clear favourite to conclude privatisation deals with Malev of Hungary and LOT Polish Airlines. Now, both companies say the conditions BA is seeking to impose have called the transactions into question, while better offers could be on the table from Lufthansa and Swissair.

Malev chief operating officer Ferenc Kovacs, speaking to Flight International at the International Air Transport Association meeting in Rio de Janeiro, says all three airlines are in the running, but BA's focus is disproportionately on the Budapest-London route, rather than developing Malev's network.

"They are looking just at Budapest-Heathrow, but that's too narrow," he says. "We need more than that. We want Budapest to be a hub, even if it's only a mini-hub. But that does not seem to fit in with their plans." Kovacs adds that Swissair is offering membership of Qualiflyer as an incentive, and this would fit in well with Malev's strengths in Eastern Europe.

Lufthansa could also make an attractive partner, given that the Hungarian carrier has destinations in Germany, he continues.

A BA link could also threaten the future of Malev's Boeing 767- operated long haul routes to Bangkok, Beijing, New York and Toronto. "We don't want to give up long haul, and we don't think people would prefer to fly from Budapest to London to Asia," Kovacs says.

Malev is expected to choose a preferred airline investor and to make a recommendation to its board by the end of the third quarter. To enable an equity sale to take place, the Hungarian Government, which has a 62% stake in the carrier, is planning to buy back a 35% share owned by two national banks. Budapest will retain a 25% plus one share of the airline, while 50% plus one must remain under Hungarian control.

LOT has also expressed disquiet over BA's approach, with general manager, the Americas, Krzysztof Ziebinski, indicating that Lufthansa and Swissair are in the frame for a 10% stake in the airline due to be sold off by the end of this year (Flight International, 2-8 June).

Ziebinski says: "BA are still very much in the running, but they are not now the only people we are talking to."

Source: Flight International