Thousands of passengers were left stranded as Hungarian flag-carrier Malev ceased operating early today, after its planes were held overseas for unpaid debts.
Passengers were forced to make alternative travel arrangements after the early morning decision to ground the state-owned airline's entire fleet.
Prime minister Viktor Orban told Kossuth radio today that the decision was made after two aircraft were not allowed to take off from Dublin airport and Israel due to Malev's debts.
"It is painful. . . . We tried to keep Malev operational as long as possible, but we could no longer do it as we would have lost our aircrafts seized abroad . . . we had to stop," Mr Orban said.
The airline operated a daily service between Budapest and Dublin six days a week. Passengers arriving this morning were checked into the flight before being told it would not take off, and they would have to rebook with other airlines.
British airline Easyjet is offering a rescue deal for passengers stranded in the wake of the collapse, who need to return home. The company is offering a €60 fare for a limited time to those passengers.
Meanwhile, Ryanair today said it would open a base in Budapest in two weeks' time, bringing four aircraft and 31 new routes to Budapest airport in the wake of the closure.
Hungary's national airline had been placed under extraordinary protection from creditors and a receiver was appointed by the government earlier this week.The airline, which was founded in 1946, is now the second collapse this week, following the closure of Spanair.
"What we fretted about the most and what we've done the most to avert has come to pass," chief executive Lorant Limburger said in a statement,
Malev said its suppliers had lost confidence and started to demand advance payment for their services, while the government could no longer provide cash injections for the company following a European Union ruling last month.
"This has accelerated the outflow of cash to such an extent, that by today the situation of the airline has become unsustainable," Malev said in a statement.
"The board, in order to minimise losses, has ordered a halt in operation of the Hungarian national airline."
All flights were grounded from 5am.
The stoppage comes after the airline was ordered by the European Commission last month to repay millions of dollars worth of state aid received between 2007 and 2010.
Malev, which accounts for 40 per cent of annual turnover at Budapest's international airport, has a leased fleet of 22 passenger aircraft. After failed privatisation attempts, Hungary in 2010 bought back all but a 5 per cent stake in the carrier, which employs around 2,600 people.
The government held a series of talks with Chinese carrier Hainan Airlines last year on a cooperation deal, but they came to nothing.
In a January 9th ruling, the EU Commission listed various forms of state financing for Malev between 2007 and 2010 that it said it would not have been able to obtain from the market on the terms granted by the Hungarian authorities.
EU competition regulators opened an in-depth investigation into Malev in December 2010.
The airline posted a loss of 24.6 billion Hungarian forints (€84 million) in 2010, but early this month forecast a significant improvement in operating results this year on the back of higher revenue and by filling more seats on its planes.
Mr Orban said despite the stoppage he believed the country needed a national airline if it could find investors willing to invest in it.
Agencies