When it was announced  the Hungarian government was buying a stake in Malev airline, I wrote this column for the Budapest Times. This clearly falls into the ‘duh’ category. For those who don’t know, Malev ceased operations Friday, February 3. I would have posted this sooner but I was in Paris. No, I did not fly Malev and did not get stranded.

Pan Am couldn’t do it. Laker couldn’t do it. People’s Express couldn’t do it. Alitalia can’t do it. Air France, British Air, they can’t do it. Warren Buffet won’t even try to do it but the Hungarian government? They are going to do it. They are going to make money in the airline industry. Another Hungarian first is on the way.

The Hungarian taxpayer, and I am one of them, has recently bought shares in an airline. As taxpayers-come-shareholders, if we are going to invest in businesses, wouldn’t it be preferable to invest in businesses that show at least a marginal possibility of profitability?

Welcome aboard Malev Flight 666, new nonstop service to nowhere. We expect our flying time to nowhere to be four months. In preparation for take down, please fasten your seat belts and be sure your spine is in the upright position.

Is it national pride that motivated the tax-payer bailout? Certainly, Hungarians have much to be proud of. Owning an airline isn’t one of them. Look how many nations have shed their albatross airlines. Don’t get me wrong. I understand the allure. I, too, love the airline business. I launched airlines, re-launched airlines, tried to save airlines and even went out and earned a pilot’s license. It’s a seductive business. Ed Acker (Pan Am), said, “Once you get hooked on the airline business, it’s worse than dope.” And hooked he was. Twenty years ago, when a million US dollars was semi-serious money, Pan Am was losing one a day. Just on the European routes.

It is brutal to try to turn a profit on a regular basis in the airline industry. Warren Buffet, a person with a reasonably sound reputation when it comes to making money, said in his annual letter to shareholders in 2008, “Think airlines. Here, a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

However, the Hungarian Finance Ministry issued a statement saying, “The Hungarian state taking a majority stake [in Malev] will create the possibility for the company to operate in a financially stable way.”

Move over, Warren. Bureaucrats and politicians are stepping up to the plate.

How on earth is the Hungarian state going to “create the possibility for the company to operate in a financially stable way”?

Going in the red in the wild blue yonder.

That’s where we taxpayers-come-shareholders might come in handy. Since taxpayers have non-voting shares in the airline (except indirectly during political elections), we will be powerless to stop the airline from engaging in a taxpayer-funded price war in an attempt to put fighters like Wizz where Malev should be: in bankruptcy.

Who else do they intend to compete with if it is not discount carriers? As a member of One World, Malev does code sharing (and frequent flyer mile award credit sharing) with a handful of airlines. The only other European carriers are British Air and Finnair. Star Alliance, One World’s major competitor, does code and frequent flyer reward-sharing with the following European carriers: Adria (Slovenia) Blue 1 (Finland), Austrian Airlines, Brussels Airline, Croatia Airlines, LOT Polish Airlines, Lufthansa, Scandinavian Airlines, Swiss Air, TAP Portugal and Turkish Airlines. So if you are a European business traveller, (the ones who pay higher air fares), which network would you join to reap the benefits of frequent flying? And Malev, now in the control of politicians and bureaucrats, will be equipped to compete with Star Alliance? How?

If the Malev strategy is to get into a price war with discount carriers and drive the discount carriers out of Malev markets, you can be sure that more than the discount carriers would disappear. So would the discounts. Discount carriers build their business around economies, such as flying into airports charging less, if any, landing fees than places like Heathrow, Charles du Gaulle, Frankfurt…all the airports you have to fly if you have found yourself shackled to an international network. Of course, one good thing about flying empty is the reduced fuel costs.

The big question about re-nationalizing Malev is ‘why’? All you have to do is try to connect the financial dots. Good luck. Hungary sells Malev to a private consortium of Russian and Hungarian investors/oligarchs. As best I can read between the lines, the sale was made with the purchaser promising to pay for much of the national asset at some future time which it could not do and in fact, wanted/needed cash infusions. So now, the government raises the capital of Malev through cash and converted debt to take a 95% position in an asset that has proven only one thing: it is a money-loser. Those aren’t called assets. They are called liabilities. Interestingly, when the government was raising the capital in Malev, Wizz was partnering with passengers to raise money for Haiti. That’s ironic, isn’t it? A private enterprise doing something purely for the good of people (and I doubt there is a huge Hungarian population in Haiti) while Hungarian government goes about doing something that will do its people absolutely no good whatsoever.

I wonder if the current deal would pass the sniff test.

Hey. If you can’t trust a Russian oligarch, who can you trust?

Apparently, the government. Wizz, don’t fail us now.