Will Hungary’s Wizz Air survive the pandemic?

At first glance Wizz Air, Hungary’s low-cost carrier, may appear well-placed to be among those European airlines that survive the pandemic without filing for bankruptcy. In 2019, Wizz Air transported nearly 40 million passengers, making the Hungarian carrier the eighth largest airline or airline holding in Europe. At the start of the pandemic-related lockdowns in March, József Váradi, Wizz Air’s CEO, noted that the airline has no liquidity problems and is among the best placed in Europe, with 1.3 billion euros available in funds. By mid-April, however, 1,000 Wizz Air employees were temporarily laid-off (representing nearly a fifth of the total workforce), and operations fell by 97 percent compared to earlier this year. The airline’s losses now surpass 68 million euros. Those employees who were retained face a 14 percent wage cut for the remainder of 2020, while board members have accepted a 22 percent cut in their earnings. Despite Wizz Air’s healthy reserves at the start of this crisis and the confidence of its CEO, a closer look reveals an airline that may be in a more precarious position than initially thought.

Wizz Air flying over Budapest. Photo: Wizz Air.

The most recent blow to Wizz Air’s hopes of bouncing back relatively quickly from the near complete shut-down of commercial air travel is Britain’s proposal to quarantine all passengers arriving into the U.K. from abroad, except those from the Republic of Ireland, for a period of 14-days. Although a Hungarian carrier, Wizz Air’s operations are heavily based around London’s Luton airport, one of the airline’s main bases. In fact, while in early 2020 Wizz Air flew to 69 destinations from Budapest’s Liszt Ferenc Airport, London-Luton was not far behind, with 56 destinations. A mandatory quarantine for passengers arriving to the U.K. would seriously stall Wizz Air’s hopes for a gradual recovery and resumption of operations beginning this summer. It would also cast doubt over a key purpose of this airline, namely to connect Central and Eastern Europe to northwestern European destinations.

Wizz Air also faces the same existential crisis that all no-frills carriers are likely to experience. Physical distancing rules or even simply expectations from passengers, and added costs arising from protecting travellers from the risk of contracting COVID-19, are exceedingly difficult to manage for airlines that have built a businesses model of offering the cheapest tickets in exchange for filling their aircraft with as many passengers as possible, sometimes crammed together akin to sardines in a can. Some legacy carriers are already leaving the middle row seat empty on flights, but Wizz Air is doing no such thing. Whether a legacy carrier does this or a no-frills airline, the measure will necessitate an increase in ticket prices. If the airline industry becomes much leaner as it eventually arises from the pandemic, it may resemble the world before low cost carriers that made taking a trip, especially in Europe, no more expensive than an excursion within one’s region by bus or train. Hungarian consumers are especially price-conscious, and premium services at a higher price are a hard sell when cheaper options are available. If airlines like Wizz Air or Ryanair, both major players at Budapest Airport, are forced to increase ticket prices markedly, weekend getaways and leisure flights will likely become much less palatable for Hungarians, and other consumers too.

For an airline business model built, like fast food, on serving a high volume of customers, each of whom pay relatively little for their service or product, a much leaner world of commercial aviation, the high costs of implementing post-pandemic safety precautions and perhaps less of an appetite among Europeans to take quite so many trips by air, the consequences of this pandemic may lead to a veritable existential crisis.

Meanwhile Wizz Air, known for expanding aggressively in Europe and even the Middle East, is all but certain to put those dreams on hold. Currently, the carrier has 121 aircraft in service and 263 on order from Airbus — more orders than any other airline in Europe. This represented the aspirations of a very different pre-pandemic world. Wizz Air has a plan to expand operations significantly in Ukraine, with a new $100 million base at Lviv Airport set to open July 1st. At the same time, capacity across the board for the coming months has been cut by more than one-third — and that’s before the looming prospect of a British quarantine of international passengers.

Mr. Váradi believes that passengers, especially younger generations, are itching to return to flying. “One of the trends we are sensing is young people want to be back in the air quite quickly,” he said. But will those passengers feel safe if, unlike airlines in much of North America, Wizz Air refuses to block middle seats and has a far less stringent policy on physical distancing? Will a lockdown that has extended more than two months, will news on the positive environmental impact of this unprecedented decline in economic activity and a sudden change in routine, as well as deeply recessionary times not lead youth to reconsider their values and consumer choices? None of us have solid answers to those questions, but it’s clear that this pandemic and the unprecedented shut-down has upended air travel, and is likely to have transformed it for many years to come.

7 Comments

  1. First of all, anyone who feels safer by leaving a few seats empty on a plane can only be described as a moron. Evidently there is no shortage of that category in our society. Few people still think for themselves these days.

    Second, airlines may go bankrupt, hundreds of thousands of airline employees may permanently lose their jobs, but we should rejoice because this should help reduce Greta’s anxiety. Perhaps she will finally go back to school.

    • Hungarian Free Press says:

      This is not about anyone rejoicing. It is, however, partially about the fact that the preponderance of ultra cheap flights in Europe has led to a huge increase in air travel. While thirty years ago, an average middle-class family might save up for a year or two before taking a leisure flight, today tens of thousands of Britons travelling to Budapest for stag weekends or people zooming across the continent for $50 is the new norm. It’s possible that we’ll go back to something similar to the era before low cost airlines. Budapest’s tourism industry will take a hit, but many people have mixed feelings about having their home towns essentially overrun by massive crowds of visitors looking for cheap entertainment. And yes, having fewer of these discount flights would help the environment.

      • Your response is much appreciated. Although I would have appreciated even more a contribution to the previous conversation in regards to Gyorgy Lazar’s perverse whitewash of the brutal, nasty attack on Hungarians in Transylvania and in fact on Hungarians everywhere given that his rhetoric cast Hungarian language itself as evil. You do realize that you bear responsibility for providing author with a platform for these repeated attacks on ethnic hungarians living as a minority due to historical circumstances, who really don’t need any more hate from anyone else, given that they already have enough locally.

        As far as the airlines are concerned, you have a point. But often there is another side to the equation. Airlines employ people, pay taxes. Closer to your home bombardier produces smaller planes for regional travel. How about the people they employ and the taxes company pays?

        • Don Kichote says:

          „… who really don’t need any more hate from anyone else, given that they already have enough locally.“ and this writes Joe … don’t you want to move from Canada to Hungary maybe your hatred is needed there.

  2. Excellent analogy HFP.
    The middle seat ought to stay empty for now. For whatever how long it will be requested to lower chances of picking up germs from a fellow traveler.
    And yes, the abused sky ought to breathe for a little longer from its polluted, over crossed airlines flying around.

  3. Stranded in Sopron says:

    “…. tens of thousands of Britons travelling to Budapest for stag weekends or people zooming across the continent for $50 is the new norm.”

    Er… I have just bought a ticket Dublin-Bp for beginning of September, Aer Lingus 40 euros. Obviously a question about whether it will actually leave the runway or not (or indeed if there will be an Aer Lingus after the summer) but it is not too much to lose either way.

    Nobody will be going for long weekends in Bp or any of the other party destinations Wizz serve this year. Also its other main trade which is migrant workers from Hungary, Poland etc travelling to their workplaces in W Europe is going to be throttled.

    Airnb in Bp is also being decimated (to the delight of grannies who have had enough of British and other countrys’ louts vomiting over their lifts and stairs every weekend), prices in rental properties have also dropped by over 10% in less than a month. Good. Tourism in Budapest will recover, air travel generally will recover. It just won’t be the same as before, which is not necessarily a bad thing.

  4. György Lázár says:

    I agree with you… Forty years ago an average middle-class family wouldn’t dream to take a European vacation… airfares were prohibitively high. I’m old enough to remember Alfred Kahn and the deregulation of the airline industry.. I think now we are going to the opposite direction… more gov. regulation will be needed and tickets will cost more… significantly more. The discount model won’t work…

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