Britain's BAA gets majority stake in Budapest Airport

Britain's BAA group sealed a deal on Sunday to buy a majority stake in Budapest Airport, Hungary's main international hub, after placing the highest bid of 464.53 billion forints (US$2.15 billion) in the country's largest privatization yet.

Under the sale, BAA acquires the government's 75-percent-minus-one share stake in Budapest Airport and the right to operate it for 75 years.

"It's the biggest privatization in Hungary's history and it's the biggest acquisition in BAA's history, too," BAA chief executive officer Mike Clasper said at the signing ceremony in Budapest.

The deal will be completed on Friday when BAA assumes the management of the airport.

BAA, which operates several hubs including London's Heathrow, Gatwick and Stansted airports, beat two German rivals, Fraport and Hochtief, in the privatization deal.

Budapest Airport is one of Central Europe's fastest-growing hubs, with traffic growing to 6.96 million passengers from January to October this year, a 27 percent increase compared with the same period last year, according to airport statistics.

Low-cost airlines, which have taken the airport by storm since Hungary's accession to the EU in May last year, flew more than 200,000 passengers in and out of Budapest in October, a 46.2 percent increase on the previous year.

BAA said that it hopes to raise passenger numbers to 20 million by 2020.

The group also plans to invest 261 million euros (US$313 million) over the next six years as part of its efforts to attract new airlines, add new destinations and streamline developing operations at Budapest Airport.

The cash-strapped Hungarian government has said the sale of the airport operator was needed to attract capital necessary for further development of the hub.

The fresh injection of cash into government coffers comes at a time when the country is struggling with persistently high public deficits, which analysts say could force Hungary to postpone its 2010 target date for adopting the euro.

The Hungarian government in September upwardly revised its public-deficit forecast for this year from 3.6 percent of GDP to 6.1 percent.

Under EU rules, the Hungarian government would have to reduce its public deficit to 3.0 percent of GDP or less by 2008 before it could join the European single currency two years later.

Finance Minister Janos Veres said at the press conference the government would not reduce its public debt forecast because of the revenue boost.

The privatization follows a legal battle in which a Budapest court in September invalidated an earlier deal, ruling that a majority of airport employees who protested the sale had not been properly consulted.

The privatization was re-launched in October after the government said it had consulted airport labor unions, though it conceded no accord had been reached.

The unions held a two-hour strike last Friday, threatening further work stoppages unless management met their demand for double-digit salary hikes and addressed their concerns regarding possible job cuts following the sale.

The Hungarian government is nearing the end of its privatization process, almost 16 years after the country's transition from communism to a market-based democracy.