UAE and Oman investors backing plans to launch new Hungarian airline

Budapest-based carrier will be launched in August and will expand into the MidEast and Russia

Investors from Oman and the UAE have teamed up with three Hungarian businessmen to launch a new Budapest-based full-service airline to plug a market gap left by the collapse of flag carrier Malev last year.

Solyom (Falcon) Hungarian Airways expects to operate six planes by the end of September and grow its fleet to 25 aircraft by the end of 2014 and 50 by 2017, including 10 wide-body jets capable of long haul flights.

Solyom chief executive Jozsef Vago gave no details of its routes but forecast rapid expansion into the Middle East, North Africa and ex-Soviet states.

Vago confirmed to Reuters an industry investor from Oman and a financial investor from the United Arab Emirates committed to funding Solyom. He declined to name them.

Budget airlines including Wizz Air and Ryanair have picked up some of Malev's destinations from Budapest while others remain unserved.

Peter Morris, an aerospace expert at Ascend Aviation in London, said a new carrier would have a hard time filling planes against established competitors in both the full-service and the budget segments.

"You have to be prepared to lose money before you build up the load factor, particularly with business clients," he said. "Nobody wants to book their CEO on an airline that is not sure to be there next year."

Vago said Solyom was focused on filling the gap left by Malev.

"Low cost airlines will never be able to do that," he said.

Eastern European airlines have generated market attention of late. Korean Air bought a 44 percent stake in ailing Czech Airlines earlier this year, while Wizz Air has taken steps towards an initial public offering in London.

Poland's government has also sought to sell a majority stake in national airline LOT and the UAE's Etihad Airways is reportedly close to buying an equity stake in Serbia's flag carrier JAT.

Ascend Aviation's Morris said flying outside Europe's liberated skies carries extra risks as red tape can slow down global expansion.

He added that costs can be tricky as fuel and services cost the same for every airline while plane manufacturers and leasing companies charge untested upstarts a penalty on aircraft orders.

"The one thing going for Solyom is Malev's collapse," Morris said. "There is a bit of a market vacuum. But others filled most of that gap, so even that is a challenge."

Vago said the airline's novel business plan would make it profitable almost from the get-go but he gave no details.

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