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Wizz Air CEO Confident About Post-Crisis Outlook
The dramatic drop in demand and the restrictions on international travel caused by the COVID-19 pandemic are devastating the finances of most airlines around the world. Carriers in the U.S. are receiving billions of dollars in grants and loans, Norwegian Airlines, Virgin Australia and South African Airlines are facing bankruptcy and other airlines like Alitalia are being re-nationalized.
While aviation analysts are wondering how the new reality emerging in the post-pandemic world will affect the profitability and the survival itself for low-cost carriers, since discretionary spending is likely to be considerably reduced by the impending economic depression, Jozsef Varadi, CEO of European ultra-low-cost carrier Wizz Air, feels very confident that his company not only will be able to survive the crisis but will also be able to take advantage of new opportunities created by the emergency.
During a webinar hosted by Aviationweek last Wednesday, the Hungarian businessman confirmed that his company has been performing repatriation flights all over the world during the last month as well as cargo services to deliver essential medical equipment.
“We became an intercontinental airline and a cargo airline: definitely something I wasn’t expected, but it’s good we had this opportunity in this period,” Varadi said.
The Wizzair group includes the Budapest-based Wizz Air and the British subsidiary Wizz Air U.K. based at London Luton Airport. The carrier is also planning to launch a U.A.E. subsidiary in Abu Dhabi that was supposed to commence operations by the end of 2020. Varadi has confirmed that plans for the Abu Dhabi operations have not been canceled due to the COVID-19 pandemic, on the contrary, they are being ramped up more quickly with the launch date being brought forward “in order to take advantage of commercial opportunities in those markets,” Varadi said.
After receiving a 300 million British pound relief payment from the U.K. Government for its Luton-based subsidiary, Varadi has affirmed that Wizz Air airlines have enough cash to survive up to 18 months without any revenue and is planning to take delivery of 20 new aircraft in the next 30 months.
“Despite receiving pressures from the market to distribute profits to our shareholders, we have preferred to strengthens our cash position during the past few years and this choice is delivering for us now,” Varadi explained.
“We are the lowest-cost producer in the industry, therefore we are the most resilient. This crisis will present us with opportunities. At the beginning of May, we will have only 10 percent of the fleet operating and we expect to ramp up to 30 percent by the end of next month. We discussed whether it was convenient to keep flying during the past weeks, and we made the strategic decision that it is a lot easier to restore operations quickly once the markets reopen if we keep flying even just a few routes. We believe it will be possible to return to 75 percent of our January schedule within 2-3 months,” Varadi said.
The carrier will reshuffle some capacity in order to respond to changes in demand and take advantage of possible opportunities in new markets such as the U.A.E.
During the pandemic emergency, Wizz Air has completely automated the flight change and flight refund procedures, with passengers being able to manage their bookings entirely through their website. The company has also managed to avoid refunding almost three-quarters of the passenger who were booked on canceled flights by offering a 20 percent bonus to travelers willing to renounce their right to a refund in exchange for a credit voucher.
“It is our belief that when travel connectivity is restored, younger people will return to the air sooner than older passengers,” explained Varadi. “The first customers to fly again will be leisure travelers, that will be stimulated by our low fares, and then business flyers will follow. During a recession, it is quite normal for businesses to limit discretionary spending and that includes travel, so we are expecting a slower recovery for that segment.”
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