Hungary's Malev airline ceases operations

BUDAPEST, Hungary — Hungary's national carrier ceased operations, grounded all its flights and stranded more than 7,000 passengers Friday, blaming what it called an "unsustainable" financial situation.

Malev, which had been selling tickets as late as Thursday, has debts of around 60 billion forints ($270 million) and has been unable to find new investors.

The state-owned airline, which was established the year after the end of World War II, stopped all its flights at 6 a.m. on Friday (0500 GMT, midnight Thursday EST). Malev is a member of the Oneworld airline alliance that also includes American Airlines and British Airways.

Managing Director Lorant Limburger said that in the past few days its partners suddenly lost trust in Malev and began demanding advance payments for their services.

"This accelerated the cash outflow to such an extent that by today the airline's situation has become unsustainable," Limburger said in a statement announcing the shutdown. "We apologize to all our passengers."

Earlier this week, Malev began operating under what amounted to bankruptcy protection, and a receiver was appointed by the government to oversee the airline.

Company officials said the stoppage immediately affected some 7,200 passengers — 3,500 in Hungary and over 3,700 abroad — who had been expecting to board Malev flights on Friday. Malev said it has contacted other airlines in search of help for the stranded travelers.

Malev's plight reflects difficulties being faced by several other European airlines in light of the debt crisis and a likely return to recession in the eurozone.

A spokesman for the International Air Transport Association (IATA), which represents some 240 major airlines, including Malev, is predicting a net loss for European carriers of $600 million this year, compared with an expected global net profit for airlines of $3.5 billion.

"There is a more pessimistic forecast if the eurozone crisis were to become a wider banking crisis," Chris Goater told The Associated Press.

A week ago, Spanish airline Spanair ceased operation because of lack of funds, canceling 220 flights and leaving 22,000 passengers stranded. Spanair, whose hub was Barcelona airport, employed around 2,000 people and used the services of about 1,200 ground staff.

And Air Berlin, Germany's largest airline after Lufthansa, said in December that Abu Dhabi-based Etihad Airways would become its biggest shareholder through an issue of new shares worth nearly €73 million ($96 million). Air Berlin has been suffering losses blamed on high fuel prices, a new German aviation tax and sagging demand for travel to northern Africa.