Government to increase bid for Budapest airport with questionable financial return

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The Hungarian government is persisting in its takeover bid for Liszt Ferenc airport in Budapest. It appears that they have recently increased their offer once again and offered a considerable amount of 1.6 billion HUF (4.36 billion euros) for the airfield. While the Orbán administration calculates a short payback period, this is highly questionable due to the infrastructure circumstances and trends in the global economy.

This is already the third offer the government has recently made for the airport. Initially, about a year ago, the government offered 3 billion euros, which rose to 4 billion euros in mid-October, both ultimately rejected by the owners of the Budapest airport.

Prime Minister Viktor Orbán last week said the deal could be broken “at any time”.

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In fact, the latest € 4.36 billion takeover bid is already comparable to the amount of funding Hungary receives from Brussels in a year for development and convergence.

According to the pro-Fidesz business daily Világgazdaság (VG), in addition to the Hungarian state, a consortium comprising the Indotek group (led by government ally businessman Dániel Jellinek) and state oil company MOL are said to be in the running. Either they would buy it in that configuration or the state alone would buy it, but neither of those scenarios has been confirmed yet. In the first case, the Hungarian state would have a minimum participation of 51%.

At present, in addition to AviAlliance (owned by a Canadian fund) which owns 55.4% of the shares, the subsidiary of the sovereign wealth fund (GIC) of Singapore, Malton, and a pension fund in Quebec, Canada, are the owners. from Liszt Ferenc airport.

In 2005, when Budapest Airport was privatized, the British BAA paid 1.9 billion euros (464.5 billion HUF at the time) for shares and concession rights for 75 years, making one of the most expensive airport purchases in the world. according to the reports of the time.

Made

While it was the liberal left-wing Gyurcsány administration that sold the majority, the remaining 25% was eventually traded by Orbán and the Fidesz government in 2011.

The intentions of Fidesz circles to take over the airport have long been known in Hungary, which has led to several statements made in recent years, ranging from low-key offers to simple criticism and threats.

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The government will make a fair offer, the IT minister said. If rejected, he would be keen to restore majority state ownership, Palkovics explained, adding that they were aiming for a negotiated deal.

According to 24.huAccording to information from, the government calculates that air traffic would return to pre-covid levels by 2023, with some 20 million passengers in five years after a rapid ramp-up, a return on investment of 15 years.

Questionable return

It is important to note that Hungary’s public debt is close to 2010 levels (the end of the economic crisis that started in 2008) and is expected to remain high next year as well, while neither this year’s budget nor next year’s one doesn’t include a potential deal and such a gigantic expense.

Experts, called upon by 24.hu, also insist that this is a very ambitious plan, as many developments and investments would be required, such as a brand new terminal to meet the growing traffic, but also new car parks, hotels and development freight.

Moreover, in a long analysis, G7 compares the price of the airport to similar ones, concluding that it would be a very expensive deal. For example, the market value of Zurich airport is similar to this offer, but the Swiss airport faces double traffic over Budapest. While the market value of the newly renovated Vienna Airport, which is also much busier than BUD Airport, only accounts for around 55% of this supply.

The return is also a subject of debate, and the economic investigation site draws up several different scenarios. Even the most optimistic is significantly higher than the government’s calculations, but a pessimist who calculates with income between 2015 and 2019 puts a potential return at around 100 years. The document underlines that if the government calculates with the increase in traffic and therefore the increase in income, it also depends on a number of factors (green policies, development of related infrastructure and extension of the airport to be carried out by the (s) new owner (s) etc.) and makes the business risky.

G7 further points out that a large part of the assets acquired by the government led by Fidesz have recently been placed under the ownership or supervision of businessmen allied with Fidesz (or foundations run by them), speculating that this This is perhaps the reason why Orbán would have preferred to break the agreement before the elections.

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featured image illustration via MTI / Gergely Botár / kormany.hu

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