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3.4.2013 Official
Journal
of
the
European
Union L
92/1
II
(Non-legislative acts)
DECISIONS
COMMISSION DECISION
of 9 January 2012
SA.30584 (C 38/10, ex NN 69/10) on the State aid implemented by Hungary in favour of Malév
Hungarian Airlines Zrt.
(notified under document C(2011) 9316)
(Only the Hungarian text is authentic)
(Text with EEA relevance)
(2013/150/EU)
THE COMMISSION OF THE EUROPEAN UNION,
flag carrier Malév Hungarian Airlines Zrt. (hereinafter:
"Malév"). AirBridge paid HUF 200 million
(EUR 740 000 ( 3 )) in exchange for the shares. The privati
Having regard to the Treaty on the Functioning of the European
sation agreement was notified to the Commission in
Union, and in particular the first subparagraph of Article 108(2)
accordance with Article 108(2) TFEU but subsequently
thereof,
withdrawn ( 4 ).
Having regard to the Agreement on the European Economic
Area, and in particular Article 62(1)(a) thereof,
(2) Following
the
new
owner's
financial
troubles,
Russian
Vnesheconohmbank (hereinafter: "VEB") gained a stake
of 49,5 % in AirBridge and became Malév's indirect
shareholder.
Having regard to the decision by which the Commission
decided to initiate the procedure laid down in Article 108(2)
TFEU ( 1 ), in respect of the aid C 38/10 (ex NN 69/10) ( 2 ),
(3) In
March
2010,
the
Commission
became
aware
through
Having called on interested parties to submit their comments
press reports about the Hungarian State's intention to re-
pursuant to the provisions cited above, and having regard to
nationalise Malév. By e-mail of 2 March 2010 the
their comments,
Hungarian authorities confirmed these press reports.
Whereas:
(4) By
e-mail
dated
10
March
2010,
the
Commission
received a complaint from Wizz Air, a Hungarian
based low-cost airline and a main competitor of Malév
I. BACKGROUND AND PROCEDURE
in Hungary. This complaint alleged illegal and incom
(1) After
several
unsuccessful
attempts
of
privatisation,
in
patible State aid to Malév by means of a number of
2007 the Hungarian State concluded a sale and
purchase agreement with AirBridge Zrt. (hereinafter: "Air
( 3 ) EUR figures in the present Decision are approximations provided
Bridge") concerning 99,95 % of the shares of its national
only as indications. All HUF figures (with the exception of the
EUR 76 million MFB loan and the EUR 32 million VEB guarantee,
which indeed are denominated in EUR, see paragraph (20)) are
( 1 ) With effect from 1 December 2009, Articles 87 and 88 of the EC
converted into EUR by using the exchange rate of 2 August
Treaty have become Articles 107 and 108, respectively, of the TFEU;
2011: 270 EUR/HUF. In 2011 the HUF was strongly fluctuating
the two sets of provisions are, in substance, identical. For the
between 260 and 300 EUR/HUF.
purposes of this Decision, references to Articles 107 and 108 of
( 4 ) The Hungarian authorities notified the Commission of the financing
the TFEU should be understood as references to Articles 87 and 88,
arrangements in relation to the privatisation of Malév by electronic
respectively, of the EC Treaty where appropriate.
notification dated 10 April 2008. This measure was registered under
( 2 ) Commission decision C(2010) 9671 final of 21 December 2010
reference N 190/2008. The Hungarian authorities withdrew the
(OJ C 156, 26.5.2011, p. 11).
measure on 12 November 2009.

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Official Journal of the European Union
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different measures. By letter of 29 March 2009, the
II. MALV AND THE MEASURES CONCERNED
Commission forwarded a non-confidential version of
the complaint to the Hungarian authorities together
II.1. The Company
with a request for additional information. Hungary
provided comments about the substance of this
(14) Malév
is
based
at Budapest Liszt Ferenc International Airport
complaint on 30 April 2010 providing answers to the
(hereinafter: "Budapest Airport") and currently operates a
issues raised therein.
fleet of 22 aircraft ( 6 ) to destinations in Europe and the
Middle East. In 2009, it transported 3,2 million passen
gers ( 7 ).
(5) At
a
meeting
on
5
May
2010,
the
Hungarian
authorities
indicated that they intended to restructure the airline.
They also indicated however that they did not yet
II.2. The period prior to the 2007 privatisation
know how far-reaching this restructuring would be.
(15) The
Hungarian
authorities
have
tried
to
privatise
Malév
on several occasions. In 1992, a 35 % stake in Malév was
sold to an Italian State-controlled consortium of Alitalia
(6)
A second complaint (of a competitor which did not agree
to the disclosure of its identity) dated 5 October 2010
and Simest. In 1997, Alitalia-Simest sold its stake to a
was received by the Commission and forwarded to the
consortium of two privately owned Hungarian banks
Hungarian authorities by letter of 21 October 2010. The
(OTP & MKB). In 1999, most of the shares in private
Hungarian authorities provided comments about the
ownership were re-purchased by the State resulting in a
substance of this complaint on 19 November 2010.
97 % state ownership.


(7) Further
requests
for
information
were
sent
to
the (16) Malév,
along
with
many
other
airlines
suffered
signifi
Hungarian authorities on 14 July 2010, 8 October
cantly from the downturn in the aviation market which
2010 and replies were received on 11 August 2010,
followed the events of September 2001 and became loss
16 August 2010, 5 October 2010, 3 November 2010,
making (see Table 1 below).
and 23 November 2010.
(17) It
was
against
this
background
that
the
State
decided
(8) Against
this
background,
on
21
December
2010
the
once again to privatise Malév in 2007.
Commission opened a formal investigation procedure
pursuant Article 108(2) TFEU (hereinafter: "the opening
decision") concerning various alleged State aid measures
implemented in favour of Malév.
II.3. The 2007 privatisation and Malév under private
control
II.3.1. Sale to AirBridge
(9) Hungary
submitted
its
comments
to
the
Commission's
opening decision on 24 February 2011.
(18) The
company
needed
to
be
recapitalised
and
the
State,
as
owner, was restricted in its ability to fund such
investment. Offers were solicited for Malév and in early
(10) The
opening
decision
was
published
in
the Official Journal
2007 it was decided that a special purpose vehicle named
of the European Union on 26 May 2011 ( 5 ). Comments
AirBridge had made the most attractive offer. AirBridge
were received from two interested parties: Wizz Air on
offered an attractive and allegedly commercially viable
26 June 2011 and a competitor requesting for its identity
business and restructuring plan.
not to be disclosed on 28 June 2011.
(19) Accordingly,
on
23
February
2007,
a
sale
and
purchase
(11) These
comments
were
transmitted
to
Hungary
by
letter
agreement providing for the sale of 99,95 % of the shares
of 6 July 2011. Hungary submitted comments to the
of Malév to AirBridge was concluded. AirBridge was
third party observations on 5 September 2011.
owned 49 % by Boris Abramovich ( 8 ), a Russian busi
nessman, who held a majority stake in a number of
Russian airlines (KrasAir, and the AirUnion alliance of
(12) Following the opening decision, two meetings took place
Russian airlines) and 51 % by Hungarian individuals.
in Brussels between the Commission services and the
AirBridge was therefore expected to bring industrial
Hungarian authorities: on 10 June 2011 and 19 October
know-how and leadership to Malév, along with
2011 respectively.
business and restructuring plans.
( 6 ) http://www.malev.com/companyinformation/introduction/malev-
(13) The
Commission
requested
further
information
from
the
company-profile
Hungarian authorities on 26 September 2011, to which
( 7 ) According to its website, "more than 3 million revenue passengers
Hungary replied by letter of 25 October 2011.
flew with Malév in 2010".
( 8 ) This 49 % stake in AirBridge was pledged by Mr Abramovich to
VEB, the Russian State-owned "Bank of Foreign Economic Activity",
( 5 ) See footnote 2.
as a security for a loan from VEB to AirBridge.

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Union L
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(20) The
most
significant
parts
of
this
agreement
were:
(22) Malév's
financial
position
continued
to
deteriorate
and,
after 4 months, it lacked the necessary liquidity to make
royalty payments for the use of the Malév brand name.
(a) AirBridge bought 99,95 % of the shares in Malév for
HUF 200 million (EUR 740 000). By 31 December
2008 at the latest, AirBridge was obliged to provide
funding (
(23) According
to
Hungary,
payments
for
the
B767
aircraft

9 ) in the amount of EUR 50 million.
leased from MAVA have not been "stopped" once Malév
had decided to suspend long haul routes as Malév is
"recognising" those debts and there is merely a delay in
(b) A loan granted in 2003 to Malév by the 100 % state-
payment on which interest is paid.
owned Hungarian Development Bank (Magyar
Fejlesztési Bank, hereinafter "MFB") amounting to
EUR 76 million was taken off Malév's balance sheet
and transferred to a 100 % State-owned special
(24) In the second half of 2008, the global financial crisis
purpose vehicle Malév Asset Management Company
began to impact on Malév as well as on its Russian
(Malév Vagyonkezel Kft., hereinafter "MAVA").
partners. Several of Mr Abramovich's airlines went
bankrupt. AirBridge found itself no longer able to
finance Malév and defaulted on its loan reimbursement
This 2003 MFB loan was a EUR denominated, 100 %
to VEB. As the 49 % shareholding in AirBridge was
State guaranteed loan, with an interest rate of
pledged to VEB, VEB took over those shares. VEB
3-month IBOR + 0,5 %. The original expiry of the
indicated that it was willing to continue to finance
loan was 2013, the principle to be repaid in one
Malév, but as a bank not as an owner.
instalment at the end of the maturity. With the
transfer of the principle and interest to MAVA, the
loan's maturity was also extended until 2017.
II.3.2. Sale of Malév Ground Handling
(25) As previously
stated, Malév's financial situation had
According to the Hungarian authorities, assets worth
further deteriorated in early 2009. Its shareholders
EUR 76 million were transferred to MAVA along
therefore approached the State Holding Company
with the loan. These assets comprised the Malév
(Magyar Nemzeti Vagyonkezel Zrt., hereinafter "MNV")
trademark, a kerosene pipeline and one B767
with the proposal to sell to MNV Malév Ground
aircraft. Were Malév to be profitable, it would also
Handling, Malév's 100 % subsidiary (hereinafter: "Malév
have to pay 25 % of after tax profits to MAVA.
GH").
AirBridge also provided a bank guarantee to MAVA
from VEB to cover the reimbursement of the loan up
to EUR 32 million.
(26) According
to
Hungary,
Malév
GH
was
at
the
time
and
continues to be a financially sound undertaking.
(c) Malév would also pay MAVA the sum of
EUR 200 000 per year as a license fee for the use
of the name "Malév" and logo. AirBridge was obliged
to keep using the brand name and to ensure the
(27) A
preliminary
purchase
agreement
was
signed
in
January
operation of the company as an airline until
2009 (and amended in February) providing for advance
31 December 2017, the new expiry date of the loan.
payments of HUF 4,3 billion (EUR 16 million). MNV
made advance payments to Malév in January and
February 2009. These advance payments were to be
(d) Malév would lease back the B767 aircraft – just trans
repaid within 2 working days if, after the due diligence,
ferred to MAVA (see point b above) – from MAVA
MNV decided not to proceed with the signing of the final
from 1 January 2008 to 31 December 2017 (
sale and purchase agreement. This potential repayment

10 ).
obligation was secured by collateral agreements. In July
2009, MNV eventually decided to abort the transaction
and the repayment of the purchase price became due.
(21) A
new
management
was
appointed
and
a
number
of
cost
saving and revenue generating measures were put in
place. These included the discontinuation of long haul
operations and staff cuts. According to Hungary,
(28) The
advance
payment
was
never
reimbursed
to
MNV.
however, as these measures coincided with a massive
Interest due on advance payments was never paid to
increase in fuel prices they had no overall effect on the
MNV ( 11 ).
company's profitability.
( 11 ) Instead, the repayment claim against Malév was later settled in the
( 9 ) More precisely, capital in the amount of EUR 20 million plus
framework of the debt/equity swap arrangement of February 2010
EUR 30 million in the form of capital, subordinated loan or loan.
mentioned below, i.e. one year after the advance payments were
( 10 ) For a fee made up of a "one time fee" of EUR 110 000, an "annual
made to Malév. The principal amount plus interest was then
fee" of EUR 1,1 million and Malév paying for all related main
determined by an auditor to amount to HUF 4 664 604 041
tenance and operational costs.
(EUR 17 million).

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II.3.3. Tax deferral
(29) Between January 2007 and March 2010, the Hungarian Tax and Financial Control Administration
(Adó- és Pénzügyi Ellenrzési Hivatal, hereinafter: "APEH") permitted Malév to defer or reschedule
payments for different types of taxes and social security obligations. APEH failed to enforce the
overdue debt as from July 2008 and even granted the rescheduling of further amounts subsequently.
In March 2010, Malév's tax and social security debt (principal and interest for late payment) totalled
HUF 13,7 billion (EUR 51 million). With regard to the entire Malév Group, this figure is HUF 16,8
billion (EUR 62 million). On 11 March 2010, the remaining balance of Malév's current account with
APEH was settled making use of part of the cash obtained through the February 2010 increase of
capital mentioned further below.
II.4. The 2010 renationalisation and Malév under public control
II.4.1. Reasons leading to the renationalisation of Malév
(30) In 2010 it was not possible to find private investors to take over Malév from AirBridge /VEB as main
shareholder. In particular, VEB did not have the intention to finance the airline as a strategic investor.
The airline's financial performance continued to be weak, as shown in Table 1 below.
Table 1
Malév's performance indicators 2003-2010 (HUF billion)
2003 2004 2005 2006 2007 2008 2009 2010
EBITDA
(4,4) (1,8) (4,9) (8,8) (10,6) (8,3) (15,5) (19,1)
profit/(loss)
EBIT
(9,4) (6,8) (9,4) (12,5) (14,7) (10,8) (17,9) (20,6)
profit/(loss)
Net result
(13,5) (4,9) (1,3) (10,9) 0,7 (14,5) (24,8) (24,6)
profit/(loss)
Source: Information provided by the Hungarian authorities and Malév's 2010 financial accounts
(31) Rather
than
liquidation,
the
Hungarian
authorities
decided
to
negotiate
with
VEB
and
AirBridge
so
as
to try to improve the commercial position of Malév in the medium to long term.
II.4.2. February 2010 capital increase: debt-to-equity swap and fresh capital
(32) On 26 February 2010, VEB, AirBridge, MNV, Malév and the Hungarian government agreed to a
capital increase of HUF 25,4 billion (EUR 94 million), partly realised by injecting fresh capital of HUF
20,7 billion (EUR 77 million) and partly through a debt to equity swap of the advanced payment for
Malév GH (see section II.3.2 above) plus interest charged thereon, a total of HUF 4,7 billion (EUR 17
million). AirBridge also swapped HUF 1,5 billion (EUR 5,4 million) into equity. As a consequence, the
claims against Malév disappeared and the former creditors became owners of part of the company.
(33) Before the increase, the existing registered capital in Malév was reduced to almost zero to absorb part
of the accumulated losses and to reflect the fact that the existing shares in Malév had become
worthless. The registered capital of Malév was then increased by issuing new shares in the
nominal amount of HUF 0,01 each. The development on Malév's equity situation is shown in
Figure 1 below.
(34) The
HUF
20,7
billion
(EUR
77
million)
contributed
by
MNV
in
cash
enabled
Malév
to
reimburse
all
outstanding tax obligations (see paragraph (29) above) and to temporarily stabilise its operation.
(35) After the capital increase, the State became a 94,6 % shareholder of Malév and AirBridge/VEB was
diluted.

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Union L
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Figure 1
Development of Malév's equity situation
II.4.3. May – August 2010: Shareholder's loans and
II.4.4. September 2010: A further capital increase and share
conversion into equity
holder loan
(36) Between
May
and
August
2010
the
Hungarian
State
(41) On
24
September
2010,
MNV
also
increased
the
capital
provided Malév with a number of "shareholder loans"
of Malév by injecting a further HUF 5,3 billion (EUR 19,3
through MNV totalling HUF 9,2 billion (EUR 34 million).
million) of cash into the company. MNV's (i.e. the State's)
stake in Malév has thereby increased to 96,5 %
(37) The first of these loans in May 2010 was in the amount
of HUF 2,16 billion (EUR 7,9 million). It was described
as a three-year shareholder's loan at an interest rate of
(42) On
the
same
date,
the
State
granted
Malév
a
further
9,97 %. Repayment was by means of a single payment at
shareholder loan in the amount of HUF 5,7 billion
the end of the maturity period and the security was a lien
(EUR 20,8 million) with a duration of 3 years at an
on the shares of Malév GH.
interest rate of 9,97 %. The first interest payment is
due 6 months from the date of disbursement while the
repayment of principle is by means of a lump sum at
maturity. The guarantees on this loan are a registered lien
(38) The
second
of
these
loans
in
June
2010
amounting
to
of
HUF 1,34 billion (EUR 4,9 million) was again a three-
on the HA-LNA CRJ aircraft with an asset value of
year shareholder's loan at an interest rate of 9,97 %,
around HUF 1,8 billion and a lien established on inter
repayment was again by means of a single payment at
national and Hungarian IATA-organised agent traffic
revenue.
the end of the maturity period and the security was a lien
on the shares of Malév GH.
III. SUMMARY OF THE MEASURES UNDER
(39) In
August
2010,
a
third
shareholder's
loan
in
the
amount
INVESTIGATION
of HUF 5,7 (EUR 20,8 million) was granted. This was
again a three-year shareholder's loan at an interest rate
(43) In
the
opening
decision
the
Commission
thus
questioned
of 9,97 %, repayable by means a single payment at the
whether the measures below constitute State aid in the
end of the maturity period. In this case the security was a
meaning of 107(1) TFEU.
lien on an aircraft (HA-LNA - a CRJ jet).
(40) On
24
September,
these
three
loans
which
totalled
HUF
— Measure 1: The taking over on 31 December 2007
9,2 billion (EUR 33,6 million) along with the interest
by the state-owned MALV MAVA of a loan granted
owed thereon (making a total amount of HUF 9,4
to Malév by MFB, a 100 % state-owned development
billion or EUR 34,3 million) was converted from debt
bank, in 2003, amounting to EUR 76 million along
to equity in Malév in and the underlying guarantees
with some Malév assets. The maturity of the loan will
were released.
be prolonged until 2017.

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— Measure 2: The provision of a HUF 4,3 billion "cash
with the Internal Market in the light of the exceptions
facility" for one year in the context of a planned
enshrined in the TFEU and, in particular, with the
(subsequently failed) purchase by MNV of Malév's
Community Guidelines on State Aid for Rescuing And
GH subsidiary, which according to the Hungarian
Restructuring Firms in Difficulty ( 12 ) (hereinafter: "Rescue
authorities was a financially sound undertaking.
and restructuring Guidelines").
Despite the non-realisation of the deal, this
advanced payment of the purchase price has not
been repaid.
IV. COMMENTS FROM HUNGARY
(45) In
its
reply
to
the
opening
decision
Hungary
repeated
the
— Measure 3: The deferral of different tax and social
facts described above and explained further the reasons
security payments due between January 2007 and
which led to the difficulties of the airlines. Hungary also
March 2010. In March 2010, Malév's tax and social
confirmed that Malév qualified as a company in "per
contribution debt amounted to HUF 13,7 billion.
manent" difficulty in the meaning of the Rescue and
restructuring Guidelines at least since the second half
of 2006.
— Measure 4: In February 2010, a capital increase by
MNV of HUF 25,4 billion partly realised by injecting
fresh capital of HUF 20,7 billion (EUR 77 million)
(46) Prior to the opening of the formal investigation, the
and partly through a debt to equity swap of the
Hungarian authorities argued, in a nutshell, that all
advanced payment for GH (see measure 2) plus
measures comply with the Market Economy Investor
interest, a total of HUF 4,7 billion. (AirBridge also
(hereinafter: "MEIP") and the Market Economy Creditor
swapped HUF 1,5 billion into equity.)
Principle (hereinafter: "MECP").
— Measure 5: From May to August 2010, three share
holder loans totalling HUF 9,2 billion granted to
(47) In relation to the measures accompanying the sale of
Malév by MNV. All three HUF-loans bore an
Malév to AirBridge, the Hungarian authorities claimed
interest rate of 9,97 %, with repayment of the
that these measures are market conform because of the
principal as a lump sum at the end of maturity (all
collateral put in place to secure the taking over of the
tranches 3 years). The first two tranches amounting
loan by MAVA. As to the abortive sale of Malév GH they
to a total of HUF 3,5 billion (EUR 13 million) were
argued that no advantage was conferred on Malév as the
secured by the subsidiary Malév GH and the third
late reimbursement of the sales price was correctly collat
tranche of HUF 5,7 billion (EUR 21 million) by an
eralised and that interest on the sales price had been
aircraft (HA-LNA, a CRJ jet).
calculated. With regard to the tax deferral they argue
that there was collateral in place for these amounts,
that all applicable interest charges and penalties had
been applied and furthermore that such deferrals are
— Measure 6: In September 2010, the conversion of
general measures. Concerning the renationalisation of
these shareholder loans (along with the interest
Malév, the Hungarian authorities state that they could
owed thereon) from debt to equity in the amount
have enforced their claims against Malév leading to the
of HUF 9,4 billion.
bankruptcy and liquidation of the company. If they had
done this they are of the opinion that they would have
recovered only a small part of their claims (other than a
part covered by the VEB guarantee mentioned in
— Measure 7: In September 2010, a further capital
paragraph (20) above). Moreover, they would have
increase in the amount of HUF 5,3 billion in cash.
faced significant negative consequences for the national
The State's stake increased to 96,5 %.
economy ( 13 ).
— Measure 8: In September 2010, a further shareholder
(48) In
relation
to
the
shareholder
loans
and
their
subsequent
loan in the amount of HUF 5,7 billion, with an
transformation into equity in Malév the State is of the
interest rate of 9,97 %, with redemption of the
view that these conferred no advantage on Malév as at all
principal as a lump sum at the end of maturity.
times these loans were fully secured against assets, that
The loan was secured by the HA-LNA CRJ aircraft
market conform interest rates applied and that on trans
referred to above and a lien established on inter
formation into equity full account was taken of all
national and Hungarian IATA-organised agent traffic
interest due.
revenue.
( 12 ) Community guidelines on State aid for rescuing and restructuring
firms in difficulty, OJ C 244 of 1.10.2004, p. 2.
(
(44) In
the
opening
decision
the
Commission
also
questioned

13 ) Such as loss of employment, an impact on Malév's suppliers, falling
traffic volumes at Budapest Airport, a reduced inflow of tourists
whether these measures, insofar they constitute State aid
and negative effects on the general attractiveness of Hungary as an
in the meaning of Article 107(1) TFEU, are compatible
investment location.

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(49) The
Hungarian
authorities did not present any new
company. As to measure 1, Hungary took the view
elements after the opening decision. In fact, Hungary's
that the value of the assets in question corresponded to
reaction to the opening decision does neither contain
the value of the loan. As to measure 3, Hungary stated
new elements in support of the non-aid character of
that the Hungarian tax authorities treated Malév as any
the measures nor information substantiating the compati
other tax payer in a similar situation.
bility of the implemented measures with the internal
market, in particular with the Rescue and restructuring
Guidelines.
VII. PRESENCE OF AID IN THE MEANING OF
ARTICLE 107(1) TFEU
VII.1. General
V. COMMENTS FROM INTERESTED PARTIES
(56) In order to ascertain whether the measures under
(50) Two
competitors
submitted
comments
(see
paragraph
scrutiny constitute State aid, the Commission has to
(10) above), both supporting the Commission's investi
assess whether they fulfil the cumulative conditions of
gation:
Article 107(1) TFEU. This provision states that "[s]ave
as otherwise provided in the Treaties, any aid granted
by Member State or through State resources in any
form whatsoever which distorts or threatens to distort
(51) The
competitor
requesting
for
its
identity
not
to
be
competition by favouring certain undertakings or the
disclosed alleged that some private investors were
production of certain goods shall, in so far as it affects
interested in acquiring a controlling stake in Malév
trade between Member States, be incompatible with the
which demonstrates that there were viable options
internal market".
available for Hungary as an alternative to the 2010

renationalisation of Malév.
(57) In
the
light
of
this
provision,
the
Commission
will
assess
whether the contested measures in favour of Malév
(52) Wizz
Air
evaluated
the
aggregated
market
value
of
the
constitute State aid.
assets which had been transferred to MAVA along with
the MFB loan (measure 1), including the Malév
trademark, a kerosene pipeline and one B767 aircraft,
(58) With
regard
to
the
cumulative
criteria
of
State
aid,
in
the
as not more than EUR 27 million which is substantially
current case, affectation of trade and distortion of
lower than the amount of the loan. Therefore, Wizz Air
competition are indisputable and were not even
concluded that this transaction was not done on an arm's
debated by the Hungarian authorities. Malév is in
length basis and conferred a significant advantage to
competition with other European Union airlines, in
Malév.
particular since the entry into force of the third stage
of liberalisation of air transport ("third package") on
1 January 1993 ( 14 ).The measures in question enabled
Malév to continue operating so it did not have to face,
(53) As
to
the
tax
deferral
(measure
3),
Wizz
Air
alleged
that
as other competitors, the consequences normally deriving
under Hungarian law a private undertaking in a financial
from its poor financial results.
situation similar to that of Malév could neither auto
matically nor as a matter of exception be granted a
similar tax deferral such as the one at hand.
(59) As regards State resources and imputability of the
measures, this has not been disputed by Hungary
either. APEH is the Hungarian Tax Authority and as
VI. HUNGARY'S COMMENTS TO THE OBSERVATIONS
such clearly imputable to the State. MNV is the State
OF INTERESTED PARTIES
Holding Company. Its duties are set out in the most
important framework rules of the State Assets Act.
(54) After
an
extension
of
deadline
to
reply,
Hungary
reacted
MNV executes the government's and the competent
on these comments on 5 September 2011. Hungary
minister's decisions. With regard to MAVA, it is also
maintains its position that the past measures are
100 % State-owned (via MNV) and – as the Hungarian
justified by the Market Economy Investor Principle test
authorities explain – represents an "emanation of the
(see paragraph 59 below) and therefore do not constitute
Hungarian State".
State aid. According to Hungary, the existence of public
policy objectives does not affect the non-aid character of
the measures.
(60) Concerning
selectivity,
with
the
exception
of
measure
3
(the tax deferral) this was not disputed by Hungary. The
measures were to favour a single company, Malév.
(55) Hungary
stated
that
there
were
no
viable
options
and
that only the renationalisation permitted the Hungarian
( 14 ) The "third package" included the introduction of harmonised
authorities to regain full operational control over Malév,
requirements for an operating licence for EU airlines (Regulation
allowing the national flag carrier to actually implement
(EEC) No 2407/92), the open access for all EU airlines with such an
operating licence to all routes within the EU (Regulation (EEC)
the restructuring procedure that it had pursued since
No 2408/92) and the full freedom with regard to fares and rates
2007 in order to ensure commercial success of the
was also introduced (Regulation (EEC) No 2409/92).

---

L 92/8
EN
Official Journal of the European Union
3.4.2013
(61) Whether
an
economic
advantage
in
favour
of
Malév
is
that the Commission wishes to explore is whether the
present in the measures under scrutiny will be assessed
undertaking received 'an economic advantage which it would
hereunder.
not have obtained under normal market conditions' ( 20 ).
(62) Hereto,
the
Commission
notes
that
according
to
well-
established principles of Community law, if additional
(66) The
Commission
also
notes
that
according
to
established
capital is made available to an 'undertaking' on
case law, the MEIP is also applicable to loans. When
conditions better than normal market conditions this
applied to the grant of a loan, this principle invites the
could fall within the remit of Article 107(1) TFEU as it
question whether a private investor would have granted
would result in 'favouring' the particular undertaking
the loan to the beneficiary on the terms on which it was
within the meaning of this Article. In order to
actually granted ( 21 ).
determine whether such advantage is granted, the
Commission applies the 'Market Economy Investor Prin
ciple'. According to this principle, where, in similar
circumstances, 'a private investor operating in normal
VII.2. Assessment of the totality of measures
market conditions of a market economy of a comparable size
to that of the bodies operating in the public sector could have
(67) As
already
set
out
in
the
opening
decision,
the BP
been prompted to make the capital contribution in question',
Chemicals judgement ( 22 ) is relevant for the assessment
no State Aid would be involved. The Commission must
of the case at hand. In fact, the Commission considers
therefore assess 'whether a private investor would have entered
that the measures are not autonomous and are linked
into the transaction in question on the same terms' ( 15 ). The
through their chronology, the financial situation of
attitude of the hypothetical private investor is that of a
Malév and their finality as they all aim at keeping the
prudent investor ( 16 ) whose goal of profit maximisation is
airline afloat and solving its liquidity needs and under
tempered with caution about the level of risk acceptable
capitalisation due to its losses. In fact, Hungary also
for a given rate of return. ( 17 )
argues in its comments to the opening decision that
the different steps of the "process" are "inseparable"
and all measures were intended to pursue one objective,
namely to ensure the airline's operation by finding a
(63) According to the jurisprudence of the European Courts,
although the conduct of a private investor with which
strategical investor.
the intervention of the public investor pursuing
economic policy aims must be compared need not be
the conduct of an ordinary investor laying out capital
with a view to realizing a profit in the relatively short
(68) From the submissions of Hungary it has become clear
term, it must at least be the conduct of a private holding
that the measures implemented by Hungary in favour of
company or a private group of undertakings pursuing a
Malév are motivated by public policy considerations and
structural policy - whether general or sectoral - and
not based on consideration about the future profitability
guided by prospects of profitability in the longer
of the company. Hungary underlined at several occasions
term ( 18 ).
the failure of the privatisation and Malév's importance for
the national economy. It was acknowledged that, when
undertaking the measures, the State took into
consideration the "airline's role for the national infra
(64) Moreover, '… [T]he comparison between the conduct of
structure, labour market and the suppliers' interest".
public and private investors must be made by reference to the
The Hungarian authorities also highlighted that there is
attitude which a private investor would have had at the time of
no private investor which would be willing to take over
the transaction in question, having regard to the available
the airline in its current form. Therefore, the Commission
information and foreseeable developments at that time' ( 19 ).
has to assume that no private investor would have acted
like the Hungarian government in similar circumstances
when undertaking the measures. Hereto, the Commission
(65) The
Commission's
analysis
and
assessment
must
include
also recalls that in the Boch judgement the Court
'all factors that are relevant to the transaction at issue and its
indicated that “the test is, in particular, whether in similar
context'. This will include the financial situation of the
circumstances a private shareholder, having regard to the fore
beneficiary undertaking and the relevant market. Based
seeability of obtaining a return and leaving aside all social,
on the abovementioned considerations, the main issue
regional policy and sectoral consideration would have subscribed
the capital in question” ( 23 ).
( 15 ) Judgment in Joined Cases T-228/99 and T-233/99 Westdeutsche
Landesbank GZ v Commission [2003] ECR II-435 et seq, paragraph
( 20 ) Joined cases T-228/99 and T-233/99, already cited in footnote 15,
245.
paragraph 251.
( 16 ) Case C-482/99 France v. Commission [2002] ECR I-4397,
( 21 ) Case T-16/96 Cityflyer Express Ltd v Commission, already cited in
paragraph 71.
footnote 19, paragraphs 45 and 46.
( 17 ) Joined cases T-228/99 and T-233/99, already cited in footnote 15,
( 22 ) T-11/95, BP Chemicals, Judgement of 15.9.1998, paragraph 170;
paragraph 255.
Joined Cases T-415/05, T-416/05 and T-423/05 Olympic,
( 18 ) Case C-305/89 Italy v Commission [1991] ECR I-1603,
Judgment of 13.9.2010, paragraph 385.
paragraph 20.
( 23 ) Case C-40/85 Belgium v Commission (Boch) [1986] ECR 2321, at
( 19 ) Joined Cases T-228/99 and T-233/99, already cited in footnote 15,
para 13. See also Joined cases T-129/95, T-2/96 and T-97/96, Neue
paragraph 246. See also, Case T-16/96, Cityflyer Express vs.
Maxhütte Stahlwerke GmbH v Commission [1999] ECR II-17, at para
Commission, [1998] ECR II-757, paragraph 76.
132.

---

EN
3.4.2013 Official
Journal
of
the
European
Union L
92/9
(69) In the light of Malév's bad financial results over a long
(74) Hungary's argument that the financial obligations
time period (see Table 1 and points (103)-(104) below)
undertaken by Malév and AirBridge were sufficient to
and the Hungarian authorities claim that the airline has
cover MAVA's costs, is not acceptable to demonstrate
been in a permanent difficulty at least since 2006, a
that the transaction is market conform, as no private
return acceptable to a private investor could have be
market actor would have had the incentive to act in
expected only if the company had undergone a drastic
the same way. With regard to the collaterals offered,
restructuring. However, neither Hungary nor Malév ever
these were to enable MAVA to repay the debt at the
demonstrated that such a restructuring plan was at the
end of the maturity of the loan, i.e. in 2017 ( 26 ). No
basis of any of the measures under examination.
private investor would have undertaken such risk, i.e.
to take over assets of an uncertain future value against
a certain payment obligation.
(70) On the basis of the above the Commission considers that
measures 1-8 taken together do not comply with the
MEIP. This assessment is further confirmed by an indi
(75) Although
the
Hungarian
authorities
have
provided
fairly
vidual analysis of each measure.
comprehensible evaluations ( 27 ) for the B767 aircraft ( 28 )
and the kerosene pipeline ( 29 ), the evaluation provided
(discounted cash-flow method) for the Malév brand
(EUR 56 million) seems to be circular and highly
dependent on the airline performance so that its result
VII.3. Assessment of measures 1-8 individually
cannot be taken as the objective value of the Malév
brand, especially considering the airline's state and
VII.3.1. Measure 1
performance. Given the fact that the State was aware
(71) According to Hungary, MAVA's activities are limited to a
of the probability that Malév would be not able to
one-time function, i.e. holding certain assets formerly
fulfil its royalty payment obligations, the discounted
owned by Malév and acting as a "conduit for certain
cash-flow method should have resulted in a value as
payments between Malév and MFB". MAVA is created
low as zero. Under this specific contractual structure,
only for this very purpose.
the value of the brand cannot thus be accepted as
sufficient collateral.
(72) With
regard
to
debt
amounting
to
EUR
76
million
trans
ferred to MAVA, this originates in a 2003 loan
(76) The
contracting
parties
must
have
been
aware
that
Malév,
agreement between Malév and MFB. The loan was to
as a firm in difficulties already in 2007, was not real
be repaid in one single instalment at the end of the
istically able to fulfil its royalty payment obligation suffi
maturity and covered by a State guarantee. This 2003
ciently. In fact, in the aftermath of this transaction,
loan was included in the list of existing aid measures of
MAVA's "costs" (i.e. the interest payment to MFB)
the Accession Treaty
(
could not be covered by Malév's royalty payments for

24 ). However, in the 2007
agreement the loan's maturity was prolonged until
the trademark. MAVA has never taken any steps to
2017. Therefore, as of 2007, the measure cannot be
enforce the outstanding payments.
regarded as an existing aid measure anymore. Indeed,
the prolongation of an aid measure constitutes a new
aid scheme as set out in Article 4(2)(b) of Commission
Regulation (EC) No 794/2004 ( 25 ).
(77) With
regard
to
the
EUR
32
million
VEB
guarantee,
this
was intended to cover not only the principal but also the
regular interest payments MAVA has towards MFB.
(73) The
investigation
has
shown
that
this
transaction
(i.e.
prolongation of the maturity of the debt, creation of
MAVA, transfer of the debt to MAVA, transfer of the
(78) Against
this
background
and
given
the
fact
that
no
assets to MAVA and the lease back agreements) solely
adequate equivalent was transferred to MAVA, taking
aimed at restructuring Malév's debt. Hungary admitted
off the debt from the company's balance sheet has to
itself that MAVA was never intended to make profit.
be regarded as an advantage in favour of Malév.
As a result of this transaction, the debt (together with
the assets) was taken off the Malév's balance sheet.
( 26 ) In particular, Malév was under the obligation to repurchase the
Malév brand in 2017 for EUR 76 million, from which then
( 24 ) List of existing aid measures referred to in point 1(b) of the Existing
MAVA would repay the MFB loan.
Aid Mechanism provided for in Chapter 3 of Annex IV of the
( 27 ) The evaluations for all three assets (the aircraft, the kerosene
Treaty of Accession of the Czech Republic, Estonia, Cyprus,
pipeline and the Malév brand) were prepared by American
Latvia, Lithuania, Hungary, Malta, Poland, Slovenia and Slovakia
Appraisal.
to the European Union.
( 28 ) Cost-based method, taking into account also the yearly "The
( 25 ) OJ L 140, 30.4.2004, p. 1. See also Case T-332/06, Alcoa Trasform
Aircraft Value Reference" magazine's information and an indicative
azioni v Commission, judgment of 25.3.2009, not yet published,
offer for the aircraft. (The indicative offer for the aircraft was
para. 132, and joined cases T-127/99, T-129/99 and T-148/99,
provided to American Appraisal based on Malév's information).
Diputación Foral de lava v Commission, [2002] ECR p. II-1275.
( 29 ) Cost-based method.

---

L 92/10
EN
Official Journal of the European Union
3.4.2013
VII.3.2. Measure 2
decisions the tax authority reasoned by the difficult
situation of Malév and the then envisaged restructuring.
(79) As regards the advance payment by MNV for the (later
failed) sale of GH, according to the expert evaluation
submitted by Hungary, GH had a net asset value of
HUF 1,6 billion and an estimated market value of HUF
3,5 billion in 2009. In fact in January 2009 MNV paid to
(85) As
from
July
2008,
however,
Malév
stopped
paying
its
Malév HUF 1,6 billion as advanced payment. This
tax and social security contributions and the interest
payment was secured by a pledge on HA-LNA, a CRJ
(with the exception of one partial payment in
jet (estimated market value HUF 1,8 billion). In
December 2008), and no steps were taken by tax
February 2009 the preliminary purchase agreement was
authority to recover this debt. Moreover, further
modified and MNV paid an additional HUF 2,7 billion
payments were rescheduled also after Malév did not
(total HUF 4,3 billion), and a second rank pledge was
comply with the rescheduling agreements. As from
registered on the same aircraft.
April 2009, the tax and social liabilities due as from
that moment (i.e. not the earlier already overdue
payments) were not even rescheduled anymore without
any concrete action taken by the APEH to enforce any of
(80) In their comments to the opening decision, the
the debt.
Hungarian authorities admit that the advance payment
was in fact undertaken in order to ensure Malév's
liquidity during the negotiation phase of the re-national
isation.
(86) The Commission is of the view that no private creditor
would have behaved like the Hungarian State. Indeed, no
concrete steps were ever taken to enforce the debt as
(81) According
to
the
preliminary
purchase
agreement,
the
from July 2008. Moreover, the company's financial situ
repayment of this sum was immediately due (2
ation, despite some restructuring efforts continued to be
working days) in case the transaction failed. However,
very weak (see Table 1 above), and there was only little
no steps were undertaken by MNV to recover this debt
or no prospect at all that the company will return to
after MNV stepped back from the deal in July 2009. Ex-
profitability. In similar circumstances, a private creditor
post interest was only charged - but never paid - when the
would have pursued the enforcement of the agreement.
debt was swapped into equity in 2010. Malév thus had
Furthermore, after Malév failed to comply with the
this cash facility at its disposal free of charge.
rescheduling agreements, no private creditor would
have agreed to a further rescheduling.
(82) The Commission is of the view that the measure trans
ferred to Malév an advantage when the repayment of the
advance was not enforced after it became due in July
(87) Therefore, at latest as from July 2008, the non-
2009. Moreover, an advantage occurred even before, at
enforcement of tax and social contributions liability by
the moment when the preliminary purchase agreement
the tax authority and the further reschedulings trans
was modified in February 2009 and the advanced
ferred an advantage to Malév.
payment increased (above the evaluated market price of
the company) without being sufficiently collateralised.
VII.3.4. Measure 4
VII.3.3. Measure 3
(88) With
regard
to
the
February
2010
capital
increase,
by
(83) Concerning
the repeated granting of tax and social
which the State re-nationalised the airline in which it
liabilities obligations deferrals by the tax authority, the
had not held a stake since its privatisation, the most
Commission notes that on the basis of the submissions
striking fact is that while 99,95 % of Malév was sold
by Hungary it is clear that in the course of 2006-2007 a
for a price equivalent of ca. EUR 740 000 in 2007, in
deferral of payment was requested by Malév on 12
2010 the State de facto paid an equivalent of EUR 94
different occasions (concerning different payments). The
million to regain 94,6 % ownership (by means of the
tax authority granted deferrals every time. According to
capital increase: partly realised by injecting fresh capital
the relevant Hungarian legislation, the granting of such
of HUF 20,7 billion and partly through a debt-to-equity
deferrals is discretionary, and could have been refused.
swap of the advanced payment for GH of HUF 4,7
Therefore, the measure must be considered selective ( 30 ).
billion HUF)), i.e. 127 times the original sales price.
This behaviour of the State, especially in view of the
fact that in the meantime the airline accumulated
losses, continued to have negative equity and no
(84) Until
July
2008,
the
statutory
interest
was
charged
and
credible restructuring plan was present, is not market
paid by Malév according to the deferral schedules. In its
conform. In fact, the Hungarian authorities acknowledged
themselves that the company has been in "permanent
( 30 ) C-256/97 DM Transport, Judgement of 29.6.1999, paragraph 27;
difficulty" and no private investor was willing to
T-152/99 HAMSA, Judgement of 11.7.2002, paragraph 157.
purchase Malév early 2010.

---

EN
3.4.2013 Official
Journal
of
the
European
Union L
92/11
(89) While
the
capital
increase
amounted
to
HUF
25,4
billion
Participant to the Contribution
(i.e. this was the amount the Hungarian State paid to
capital increase
HUF billion Type of contribution
Share of
contribution
regain 94,6 % ownership of the airline), at the time of
the swap, Malév had a negative equity of HUF 41 billion
MNV 4,7 Debt-to-equity
18 %
(EUR 152 million), accumulated losses in the amount of
swap
HUF 51 billion (EUR 189 million) and total debt of HUF
AirBridge / VEB 1,4 Debt-to-equity
5 %
75 billion (EUR 278 million) ( 31 ). According to the 2010
swap
financial accounts, at the beginning of 2010 "the airline's
financing problems were serious, debt reached a dramatic
TOTAL 26,8 100
%
level, funding sources were practically not present. […]
Due to the absence of a strategic owner, no commercial
funding was available." Indeed, the airline has been loss-
making at least since 2003 without any realistic prospect
(92) On the basis of the above the Commission concludes
to return to viability, not even the private owner had
that under those circumstances the February 2010 re-
succeeded in turning around the company. Against this
nationalisation of Malév by means of the capital
background it was clear that the capital increase would
increase transferred an advantage to the company.
not be sufficient to return the company to viability and
that after the re-nationalisation Malév would need further
capital and liquidity in order merely to stay afloat.
VII.3.5. Measures 5-8
(93) Concerning the measures after the re-nationalisation, it is
(90) As
to
Hungary's
argument
that
the
State
was
better
off
apparent that the shareholder loans and capital injections
by nationalising the company than enforcing its claims
were intended to finance Malév's current operations and
against Malév the Commission notes the following. As
to avoid its imminent insolvency. The State thus
Hungary acknowledges, in case of bankruptcy, they
undertook these measures with the same objective:
would have recovered a very small portion of their
keeping Malév in business. Moreover, they are also
claims other than the one covered by the VEB guarantee.
closely linked by their chronology, as they took place
(In fact, Malév asset value was negative at the time of the
within very short time intervals (i.e. from May to
transaction.) By contrast, the Hungarian State decided to
September 2010). Consequently, the Commission is of
keep the airline alive by swapping its debt and injecting
the view that, according to BP Chemicals, these share
fresh money in the amount of HUF 20,7 billion (ca.
holder loans cannot be assessed under the market
EUR 77 million). No private would have undertaken
economy investor principle and in particular, by
this further financial burden in a similar situation,
applying the Reference Rate Communication (
especially without realistic chances to return the

32 ), as
they are all directly linked to measure 4 and hence
company to viability.
their State aid character cannot be assessed in isolation.
(91) The
Commission also notes that at the same time
Hungarian State increased Malév's capital, AirBridge (indi
rectly VEB) also swapped its debt amounting to HUF 1,4
(94) It is clear from the Hungarian submission that no private
actor was willing to finance Malév, its only funding
billion into equity. However, this amount is only 5 % of
sources were supplier credits and the liquidity provided
the new capital and, in addition the State, on the top of
by the State. At the time of granting the loans the State
the debt converted also contributed a substantial amount
could not seriously count on Malév meeting its interest
of fresh capital. In fact, the injection of fresh money
payment obligation and that it would redeem the loan.
made up for 77 % of the capital increase. Moreover,
Moreover, it is also questionable that any private creditor
given the bad financial conditions of Malév, the
would take the risk to grant a loan which has to be
perspective for AirBridge to obtain the payment of that
repaid in a lump sum at the end of the maturity to a
amount was very limited if not inexistent. Thus the
company in a comparable state like Malév (i.e. permanent
behaviour of the private party in this case is materially
difficulty). Finally, in view of the credit history of the
different from that of the Hungarian State and it cannot
company vis-à-vis the State (e.g. non reimbursement of
take as a point of reference to consider that the State
the advance payment for GH, repeated tax deferrals and
behaved as a private investor.
non-payments), the State and any other investor could
not realistically expect that Malév would meet its
obligations.
Table 2
The 2010 Capital increase
(95) On the other hand, even according to the Reference rate
Participant to the Contribution
capital increase
HUF billion Type of contribution
Share of
contribution
Communication the stipulated interest and collaterals
agreed would not be sufficient to rule out the presence
MNV 20,7 Fresh
capital 77
%
( 32 ) Communication from the Commission on the revision of the
method for setting the reference and discount rates, OJ C 14,
( 31 ) 2010 Financial accounts
19.1.2008, p. 6.

---

L 92/12
EN
Official Journal of the European Union
3.4.2013
of State aid. The stipulated interest rate was 9,97 %
(103) The Commission is of the view that Malév has been in
whereas the HUF reference rate at the time of the
permanent difficulty at least since 2006. In particular, it
granting amounted to 5,97 %. A mere 400 bps margin
has been loss-making at least since 2003 (see Table 1
over the HUF base rate is insufficient in view of Malév's
above) and already in 2006 its equity was negative
past performance and financial situation (a company
(Figure 1 above). In addition, the Hungarian authorities
continuously at the edge of bankruptcy). As regards the
confirmed the airline's permanent difficulties and that
collateralisation of the loans, the market value of GH
since the second half of 2006 it qualified for collective
(HUF 3,5 billion) in case of Malév's failure is ques
insolvency proceedings and thus fulfilled point 10(c) of
tionable, as Malév was the dominant partner of the
the Rescue and restructuring Guidelines. Consequently,
ground handling operation: in 2009 63 % of the
the only basis for compatibility would be the Rescue
income was generated by Malév. Therefore, at least in
and restructuring Guidelines.
the short term, its economic performance was
dependent on Malév's existence and its market value
would thus have decreased substantially in case Malév
went bankrupt.
(104) With regard to eligibility and the "one time, last time"
condition, the Commission notes that the measures
under scrutiny do not form a "restructuring continuum".
The airline changed owner twice in the relevant period
(96) In
the
absence
of
a
credible
restructuring
plan,
it
was
clear from the beginning that neither the loans nor the
(i.e. 2007-2010) as it was privatised and re-nationalised.
capital increase would allow turning around the
It was under continuous "restructuring" but without a
company which continued to be in a critical state with
coherent plan. In fact some cost reduction initiatives
zero market value. These measures thus are practically
(layoffs and route cuttings) were started after privatisation
equal to a straightforward grant, as the State had no
but the unit cost did not decrease enough. According to
perspective of recovering the "invested" funds.
the Hungarian authorities, a new "strategic orientation"

was elaborated in 2009, which was again revised by the
consultancy Roland Berger in the context of the re-
nationalisation. Therefore, the measures in questions are
(97) Therefore
the
Commission
considers
that
measures
5-8
different restructuring measures, in principle violating the
conferred an advantage to Malév.
"one time, last time" principle.
VII.4. Conclusion on the presence of State aid
(105) The Commission notes that, even if Malév were to be
(98) According to the foregoing assessment, all measures at
eligible for aid under the Rescue and restructuring
stake (measures 1-8) confer an advantage to Malév. This
Guidelines (i.e. the "one time, last time" condition were
advantage has been granted from State resources.
met, quad non), the requirements for compatible rescue
and restructuring aid would be not fulfilled, for the
reasons set out below.
(99) Moreover,
Malév
is
an
airline
company
and
as
such
qualifies as an undertaking. It competes with other
airlines which do not benefit from the same advantage.
(106) With regard to rescue aid, points 25(a)-(e) of the Rescue
Hence, the measures distort competition. Furthermore, it
and restructuring Guidelines are not fulfilled. In
is active in a sector (aviation) in which trade definitely
particular, the measures at hand are not restricted to
exists between Member States; the criterion of the affec
the minimum necessary, it is not demonstrated that
tation of trade within the Union is also fulfilled.
they are warranted on the grounds of serious social
difficulties and that they have no unduly adverse spill-
over effects on other Member States. Moreover, with the
(100) Finally, the measures are specific and selective in that
exception of measures 5 and 8, the majority of them
they favour only one undertaking (i.e. Malév).
were not granted in the form of loans or guarantees.
(101) On account of the arguments exposed above, the
(107) With regard to restructuring aid, none of the compati
Commission concludes that measures 1-8 fulfil the
bility conditions under the Rescue and restructuring
criteria enshrined in Article 107(1) TFEU. Under those
Guidelines is met.
circumstances, they have to be considered State aid in the
meaning of Article 107(1) TFEU.
(108) In particular, as regards points 34-35 of the Rescue and
VII.5. Compatibility of the Aid with the Internal
restructuring Guidelines, "restoration of long-term
Market
viability", the Hungarian authorities did not demonstrate
the viability prospects of the airline and did not submit a
(102) Articles 107(2) and 107(3) TFEU provide for exemptions
restructuring plan complying with the requirements set
to the general rule that State aid is incompatible with the
by points 36-37 of the Rescue and restructuring Guide
internal market as stated in Article 107(1).
lines.

---

EN
3.4.2013 Official
Journal
of
the
European
Union L
92/13
(109) In addition, concerning the requirement of "avoidance of
VIII.2. Aid element in the individual measures
undue distortion of competition" (points 38-42 of the
Rescue and restructuring Guidelines), the Commission
VIII.2.1. Measure 1
notes that no compensatory measures were implemented.
(115) The Commission acknowledges that "Malév" as the brand
of the Hungarian national carrier operating over decades
has a certain value on the aviation market. On the other
(110) Finally, as regards the condition of "aid limited to the
hand the Commission is of the view that under the
minimum" (points 43-45 of the Rescue and restructuring
specific contractual structure, the value of the brand as
Guidelines), no own contribution is present.
claimed by the Hungarian authorities cannot be accepted.
An objective value should have been based on an inde
pendent evaluation also taking into account Malév's
overall financial situation.
(111) In view of the foregoing, measures 1-8 implemented in
favour of Malév since 2007 are not compatible with the
Rescue and restructuring Guidelines. As the measures
were granted to a company in difficulty, no other basis
for compatibility is applicable. Therefore, the measures
(116) On the basis of the foregoing, the aid element of measure
are incompatible with the internal market.
1 is thus calculated as up to EUR 56 million, i.e. EUR 76
million minus the value of the kerosene pipeline and the
aircraft (amounting to EUR 20 million), minus the
objective value of the Malév brand ( 37 ). The exact aid
VIII. RECOVERY
element must be calculated by Hungary. Should
Hungary not present convincing arguments for an
VIII.1. General
objective value of the brand at the time of the conclusion
of the transaction on the transfer of the brand to MAVA,
(112) According to the TFEU and the Court of Justice's estab
the entire amount of EUR 56 million is considered as aid
lished case law, the Commission is competent to decide
element.
that the State concerned must abolish or alter aid ( 33 )
when it has found that it is incompatible with the
internal market. The Court has also consistently held
that the obligation of a State to abolish aid regarded
by the Commission as being incompatible with the
VIII.2.2. Measure 2
internal market is designed to re-establish the previously
existing situation (
(117) As set out above, the Commission is of the view that the

34 ). In this context, the Court has estab
lished that that objective is attained once the recipient
measure transferred to Malév an advantage when the
has repaid the amounts granted by way of unlawful aid,
repayment of the advance was not enforced after it
thus forfeiting the advantage which it had enjoyed over
became due. Moreover, an advantage occurred even
its competitors on the market, and the situation prior to
before, at least at the moment when the preliminary
the payment of the aid is restored (
purchase agreement was modified in February 2009

35 ).
and the advanced payment increased (above the
evaluated market price of the company).
(113) Following that case-law, Article 14 of Council Regulation
(EC) No 659/1999 ( 36 ) laid down that “where negative
decisions are taken in respect of unlawful aid, the
Commission shall decide that the Member State
(118) The Commission concludes that such a cash facilty
would not have been granted by any private operator.
concerned shall take all necessary measures to recover
In fact, no private market operator would have agreed to
the aid from the beneficiary.”
put these funds at Malév's disposal, in particular free of
charge and no steps whatever taken to recover them. In
fact, in their comments to the opening decision the
Hungarian authorities acknowledge themselves that the
(114) Thus, given that the measures at hand are to be
considered as unlawful and incompatible aid, the aid
advanced payment intended to secure Malév's survival
has to be recovered in order to re-establish the
(see paragraph (80) above). Therefore, the entire
situation that existed on the market prior to the
amount of the facility for the period it was at the
granting of the aid. Recovery shall be hence effected
disposal of the beneficiary is the aid element: between
from the time when the advantage occurred to the bene
February 2009 and July 2009 HUF 0,8 billion (the
ficiary, i.e. when the aid was put at the disposal of the
difference between the "overpayment" in respect of
beneficiary and shall bear recovery interest until effective
GH's market value) and between July 2009 and
recovery.
February 2010 HUF 4,3 billion (the entire amount of
the advanced payment). Recovery should thus take
account of the fact that the amount was swapped into
( 33 ) Case C-70/72 Commission v Germany [1973] ECR 813, point 13.
equity in February 2010 (see measure 4 below).
( 34 ) Joined Cases C-278/92, C-279/92 and C-280/92 Spain v Commission
[1994] ECR I-4103, point 75.
( 35 ) Case C-75/97 Belgium v Commission [1999] ECR I-3671, points
( 37 ) As concluded in paragraph (75) above, the Hungarian authorities
64-65.
did not substantiate the value of the Malév brand which can be as
( 36 ) OJ L 83, 27.3.1999, p. 1.
low as zero.

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L 92/14
EN
Official Journal of the European Union
3.4.2013
VIII.2.3. Measure 3
VIII.2.8. Measure 8
(119) Concerning the deferral and non-enforcement of tax and
(125) For the reasons set out above in paragraphs (120) above,
social contribution, the Commission considers that, all
the Commission considers that total amount of the loan
overdue Malév debt from July 2008 to March 2010
is comparable to a straightforward grant and hence the
towards APEH constituted State aid. Moreover, all
entire amount of HUF 5,7 billion is the aid element
rescheduled amount after this date (July 2008) amount
starting September 2010.
entirely to State aid as well. Indeed, nothing suggests that
a private creditor would have granted those deferrals and
reschedulings. Recovery should take account of the fact
that the overdue amounts were paid back in March
IX. CONCLUSION
2010.
(126) On the basis of the foregoing, the Commission concludes
that measures 1-8 implemented by Hungary in favour of
VIII.2.4. Measure 4
Malév constitute State aid in the meaning of 107(1)

TFEU.
(120) With regard to the capital increase, the Commission
considers that, given Malév's financial state, the
apparent need for further support following the capital
increase, the lack of any realistic prospective to recoup
(127) In addition, the Commission concludes that measures
the "invested" funds, no private investor would have put
1-8 are incompatible with the internal market.
those funds at Malév's disposal. The injected capital of
HUF 25,4 billion plus the debt to equity swap of 4,7
billion HUF for the advanced payments for Malév GH is
the aid element.
(128) This incompatible aid must be recovered from Malév as
set out in section VIII.2 above in order to re-establish the
situation that existed on the market prior to the granting
of the aid. The exact total amount of recovery plus
VIII.2.5. Measure 5
recovery interest has to be computed by the Hungarian
(121) As to the loans totalling HUF 9,2 billion, the
authorities.
Commission considers that in view of the debt history
and situation of the airline at the moment of the granting
of those loans, the State had no reason whatsoever to
expect repayment and at the time of the granting of the
HAS ADOPTED THIS DECISION:
loan it was even doubtful whether Malév would be able
to pay the interest. In fact, the interest charged was not
paid but converted subsequently to equity.
Article 1
The following measures granted by Hungary to Malév
(122) Therefore the Commission considers that the loan can be
Hungarian Airlines Zrt. constitute State aid within the
compared to a straightforward grant and hence the aid
meaning of Article 107(1) TFEU:
element is the entire loan amount of HUF 9,2 billion for
the period it was at the disposal of the beneficiary, i.e.
between the granting of the tranches (May, June, July
2010 respectively) and the conversion of the loans into
(a) Measure 1: The taking over on 31 December 2007 by the
equity (September 2010). Due and not paid interest
state-owned MAVA of a loan granted to Malév by MFB, a
should be included in the aid element. Recovery should
100 % state-owned development bank, in 2003;
thus take account of the fact that the amount was
swapped into equity in September 2010 (see measure 6
below).
(b) Measure 2: The provision of a HUF 4,3 billion "cash facility"
for one year in the context of a planned (subsequently
VIII.2.6. Measure 6
failed) purchase by MNV of Malév's GH subsidiary;
(123) For the reasons set out above in paragraph (120) above,
the Commission considers that total amount of the
converted debt to capital can be considered as a straight
(c) Measure 3: All overdue tax and social security debt from
forward grant and hence the entire amount of HUF 9,4
July 2008 to March 2010 and the deferral of different tax
billion is the aid element starting September 2010.
and social security payments as from July 2008;
VIII.2.7. Measure 7
(d) Measure 4: In February 2010, a capital increase by MNV of
(124) For the reasons set out above in paragraph (120), the
HUF 25,4 billion (partly realised by injecting fresh capital of
Commission considers that the aid element is the injected
HUF 20,7 billion and partly through a debt-to-equity swap
capital of HUF 5,3 billion starting September 2010.
of the advanced payment for GH of HUF 4,7 billion HUF);

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EN
3.4.2013 Official
Journal
of
the
European
Union L
92/15
(e) Measure 5: From May to August 2010, three shareholder
2. Hungary
shall
ensure
that
this
Decision
is
implemented
loans totalling HUF 9,2 billion granted to Malév by MNV
within four months following the date of notification of this
plus interest due but not paid;
Decision.
(f) Measure 6: In September 2010, the conversion of the share
Article 5
holder loans (along with the interest owed thereon) referred
to in Article 1(e) from debt to equity in the amount of
1. Within two months following notification of this
HUF 9,4 billion;
Decision, Hungary shall submit the following information to
the Commission:
(g) Measure 7: In September 2010, a further capital increase in
the amount of HUF 5,3;
(a) the total amount (principal and recovery interests) to be
recovered from the beneficiary;
(h) Measure 8: In September 2010, a further shareholder loan
in the amount of HUF 5,7 billion, plus interest due but not
(b) a detailed description of the measures already taken and
paid.
planned to comply with this Decision;
Article 2
(c) documents demonstrating that the beneficiary has been
ordered to repay the aid.
The State aid measures referred to in Article 1 unlawfully
granted by Hungary in breach of Article 108(3) TFEU in
favour of Malév Hungarian Airlines Zrt. are incompatible with
2. Hungary
shall
keep
the
Commission
informed
of
the
the internal market.
progress of the national measures taken to implement this
Decision until recovery of the aid referred to in Article 2(3)
with interest has been completed. It shall immediately submit,
Article 3
on simple request by the Commission, information on the
measures already taken and planned to comply with this
1. Hungary
shall
recover
the
aid
referred
to
in
Article
1
from Decision. It shall also provide detailed information concerning
the beneficiary.
the amounts of aid and recovery interest already recovered from
the beneficiary.
2. The sums to be recovered shall bear interest from the date
on which they were put at the disposal of the beneficiary until
Article 6
their actual recovery.
This Decision is addressed to Hungary.
3. The
interest
shall
be
calculated
on
a
compound
basis
in
accordance with Chapter V of Regulation (EC) No 794/2004.
Done at Brussels, 9 January 2012.
Article 4
For the Commission
1. Recovery
of
the
aid
referred
to
in
Article
2(3)
shall
be
Joaquín ALMUNIA
immediate and effective.
Vice-President

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