Thursday, January 25, 2018

Wizz Air CFO: Booming market keeps struggling carriers alive

Wizz Air’s Central and Eastern European backyard will continue to provide strong growth for the LCC, but market strength is providing a lifeline for some airlines that should no longer still be in business, CFO Iain Wetherall said Jan. 24.

Some nations in the region, such as Hungary and Macedonia, no longer have national airlines.

Budapest-based Wizz is in the middle of a major growth spurt, with its fleet anticipated to grow from the current 80-plus to “pushing 300” by 2026, Wetherall said. It has 246 Airbus A320neo family aircraft on order.

Speaking at the 20th Annual Global Airfinance Conference in Dublin, Ireland, Wetherall said the Central and Eastern Europe region is regarded by some industry players as a niche market. However, the market contains 250-300 million people and is growing at a rate of more than 10% annually.

The only problem is that it means “there’s still some hiding places” for airlines that would otherwise have disappeared.

Wetherall said costs are “absolutely paramount” in 99% of short-haul European journeys: “There’s 1% [of passengers] looking for bigger beds, or nicer wine or higher service standards.”

Wizz’s biggest challenge is managing growth: “When you’re increasing passenger numbers 25% year-on-year ... there’s quite significant pressure on the operating side of the business.”

The airline is able to compete with major LCCs such as Ryanair, and legacy carriers such as Lufthansa and Swiss, because its cost base is one of the lowest in Europe and aims to become the lowest in a few years.

The LCC's investment in newer, larger aircraft is one of the factors driving savings, he said. A new Airbus 321neo is about 20% more cost-efficient than an A320ceo.

In the future, further cost savings will emerge as a result of Wizz’s rapid growth, which will allow the carrier to strike better deals when procuring leased aircraft. This has not been the case in the past: “As a young airline, you’re rather at the mercy of the lessor community,” he said.

(Alan Dron - ATWOnline News)

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