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.

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