Around a third of the current Wizz network is brand new to the airline this year. Much of its expansion into new markets has been in Western Europe, outside of its traditional home in the east of the continent. Ryanair boss Michael O’Leary believes that this is a mistake, saying that high costs and unionization will kill Wizz’s chance of success in the region.
Ryanair boss says Wizz is not a low-cost competitor
Throughout the pandemic, we’ve seen the balance shift between Europe’s three biggest low-cost airlines. Ryanair and Wizz have continued to move forward, opening new bases, new routes and adding new aircraft. Wizz, in particular, has been aggressive in its expansion, tapping into every visible bit of demand it can find.
easyJet, on the other hand, has taken a more pragmatic approach. It’s moved out of some of its historic markets, consolidating its presence at its favorite gateways. Numerous sale and leaseback deals alongside a bailout from the UK government have seen its debt significantly increase, something Ryanair boss O’Leary has said before will make it impossible for easyJet to remain a low-cost airline.
But what does he think about Wizz? Speaking at Eurocontrol’s Hardtalk session last week, O’Leary said that, no matter how much it tries, Wizz will never achieve the low cost base of Ryanair’s operations. Because of this, he doesn’t see it as a true low-cost competitor. He commented,
“[Varadi] has been spinning that whole line for the last eight years, that eventually by 2025 or maybe 2050, he’ll have a lower unit cost on some RASM, CHASM, indeterminant basis than Ryanair. He’s been adding A321s for the last two or three years and his cost per aircraft has been rising faster than Ryanair as we add our old, cheap NG aircraft.
“The new gamechanger aircraft will be considerably cheaper than his A321s. He’s still leasing all of his A321 … he has much higher airport costs than us. He has much higher aircraft costs than us. He does have a labor cost advantage with Eastern European employment practices.”
But with Wizz moving out of its traditional homelands of Eastern Europe and investing heavily in its presence in the west, has it lost this advantage now?
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The problem of unions
O’Leary believes that Wizz’s foray into the nations of Western Europe is a mistake. He believes that operating in this part of the continent is fundamentally different and is likely to throw up some challenges for Wizz that it’s not best placed to deal with. He said,
“As we’ve seen as he moves into Norway, for example, in recent weeks, not only has he run into opposition from the Norwegian unions the Norwegian Prime Minister, but when he tried to transfer in some Polish workers up there to open up the trunk line base, half of them failed the COVID test.
So I think he’s beginning to understand that operating in Western Europe, as Ryanair did in 2017 when we had to recognize unions, is considerably different.”
Before 2017, Ryanair was resolutely non-unionized. At the time, O’Leary was critical in his own unique way about unions and resisted working with them for many years. But, following strike after strike, the European airline finally had to cave in and accept the unions’ involvement.
Wizz, on the other hand, remains firmly non-unionized but has already come up against challenges on this front. Whereas workers in Eastern Europe tend not to worry about things like unions, here in the west, it tends to be the norm.
With Wizz expanding into the Norwegian domestic market, unions ordered a boycott of the carrier. Following some back and forth, the airline caved and allowed Norwegian workers to unionize, something that could come back to bite it in the future as it expands into other western nations.
Varadi ‘can’t afford’ Western Europe
O’Leary presented a typically colorful picture of the situation at Wizz. While alleging that the business model relies on a tax scam, he further said that he doesn’t think Wizz can afford to expand in Western Europe. He said,
“You will not get away in Western Europe, whether it’s in Norway or in Italy, with Wizz’s model, which is based on a tax avoidance scam of employing people through a Hungarian employer, but paying them in Switzerland. It is simply not going to survive any expansion in Western Europe.
“I think he will delay any expansion in Western Europe because he can’t afford it. And it will continue to expand in Dubai and Outer Siberia and Eastern China, trying to get as far away from Ryanair as he possibly can. Because every time he tries to compete with Ryanair he loses.”
Right now, around a third of Wizz’s network is brand new for this year. The crisis has seen it opening 13 new bases and 260 new routes, some of which have worked better than others. Its Abu Dhabi subsidiary has seen its launch pushed back to January, but it’s still on the cards. For Varadi and his team, Western Europe remains a key focus area for the coming years.
Do you think Wizz can survive in Western Europe? Let us know in the comments.