CEO of Wizz Air, Jozsef Varadi, said this week that his airline could survive for as long as two years without carrying a single passenger. It’s a far cry from what we hear elsewhere in the industry and is backed up by the lack of a bailout for Wizz, while other airlines receive billions.
Wizz is good to go for 24 months
When the coronavirus crisis hit, it quickly became apparent just how different the operating strategies of various airlines are. With aircraft grounded and passenger demand almost at zero, attention turned to how much cash our airlines had in the bank to weather the storm successfully.
A CAPA report in mid-March highlighted the airlines most likely to succeed on their own. At the bottom of the pile was Norwegian, with only enough liquidity to survive for 26 days without revenue. Lufthansa and SAS were also in poor shape, both evaluated to have just 51 days of survival in the bank.
Coming out on top were two of the biggest European low-cost carriers. Ryanair had 47% of its 2019 revenue in the bank, while Wizz came out top with 48%. CAPA said this was equivalent to 176 days of survival for Wizz, but its CEO believes it is far more than this.
Speaking in an interview for World Aviation Festival, CEO of Wizz Air Jozsef Varadi said the airline was good to go for two years. He said,
“We can survive without carrying a single passenger operating a single flight for 24 months. So if we are forced to be on the ground for two full years, we could still stay in business.
“[Now] we are operating at a minimum level of our network, at about 10%, and when we operate, we do it on a cash positive basis. So any bit of operation that we have in the system is generating cash for the company. But even without it, we’re good to go for two years.”
Wizz has been one of the few European airlines that has not reached out to its governments for funding to survive the crisis. Ryanair too has not pleaded poverty. That’s a stark contrast to the many airlines that are receiving millions, or sometimes billions, in bailouts from their states.
Wizz believes it will be back to full strength in a year
While times are tough for every airline in the industry, Varadi remains positive that Wizz will make a rapid recovery in the coming months. Where most airline CEOs are talking about two to three years before demand recovers, Varadi reckons his airline can make a comeback in just a year. He said,
“I have to caveat this with the fact that everything is subject to these [border] restrictions, but if you assume that within a year there are no restrictions and we’re able to stimulate the market, I think we’ll be back in the game at full strength within a year.”
So what makes Wizz so different from other airlines? Varadi believes it is not just the healthy bank balance with which his airline entered the crisis that sets it apart, but its unique business model and ability to innovate on the spot. He explained,
“The difference between us and most of the rest of the market is the theory that we are more resilient. We have the financial resources not only to survive but also to invest into new markets and new opportunities.
“At the same time, we are a focused short-haul point-to-point business, and I think that type of traffic flow will recover much quicker than the connecting long haul traffic. That will take a while to recover, so by design and by financial strengths we are much better positioned than the rest of the industry to recover.
“While it may take two to three years, we think we’re going to get back into it within a year.”
Wizz has already moved its aircraft from Dubai to Abu Dhabi to start laying the foundations for its new subsidiary, Wizz Air Abu Dhabi. Flights between its European hubs and the UAE are planned to resume within the next two weeks.
The airline has already said it is not looking to defer any aircraft deliveries. Varadi also reiterated that he would not close any bases. And in fact, over the past couple of days, we’ve been inundated with a barrage of new base opening announcements.
It seems that Wizz has got the recipe right to come out of COVID a very strong player in the European and Middle East markets.