European low-cost airline Wizz Air has flown through the trickiest quarter in aviation history. Despite having the majority of its fleet grounded, the airline finished the quarter with record profits and a huge pile of cash. It also likely had some delighted customers, as an automated refund processing system allowed it to ‘wizz’ through customer requests and keep its passengers happy.
Wizzing through the tricky quarter
Yesterday, Hungarian low-cost airline Wizz Air had a surprisingly good results call. Amid all the disruption of COVID, Wizz achieved record profits and finished the quarter with a staggering €1.5bn ($1.68bn) of cash in the bank.
During the call, CEO József Varadi commented on what he calls a “fair and reasonable stance on refunding passengers.” Wizz, along with all other EU airlines, is required to refund passengers within seven days. However, as we’ve seen since the start of the crisis, this isn’t always what happens in practice.
A study by UK consumer watchdog Which? showed that only 5% of Ryanair passengers were refunded within the legal window. In fact, eight in 10 were still waiting for their money back two months since the airline stopped flying. And they aren’t alone in this situation.
easyJet too had a large backlog of refunds to process, with 63% still waiting. One in four British Airways customers and one in five Jet2 passengers were in similar situations.
While Wizz wasn’t included in the survey, the airline is likely doing a little better than its competitors. The reason for this? Very early on in the COVID crisis, Wizz Air invested in automating refund processing.
Automatic refund processing
At one point, Ryanair had suspended refund processing, blaming it on a lack of staff. Other airlines too have cited the issue of a reduced workforce and people trying to process refunds from home. But the Wizz team found a way around this. Varadi explained,
“Should a passenger choose to get cash refund, that’s guaranteed within 30 days … we have automated the whole process of refunds. So this is no longer at the discretion of the company nor it is not subject to workforce constraints, like it is the case in many other airlines. This is a totally automated process. We made a significant investment here. But I think that gives a much fairer approach to the customer.”
While airlines were hoping to get a pass on issuing cash refunds during COVID, the EU has so far stuck to its guns. This puts airlines in a tricky situation, where they’re expected to hand back money while they have none coming in. Wizz Air, however, has an ingenious way to encourage passengers to take a voucher. Varadi said,
“We encourage people to rebook or take a voucher, and should they take a voucher we up the value of their fare by 20%. We offer a pretty good deal. And roughly, what we are seeing today is one-third of the passengers rebook, one-third take credits and one-third request a refund.”
It’s an interesting way of encouraging the voucher option, and has no doubt contributed to the incredible liquidity results at Wizz this quarter.
Low financial risk
Executive Vice President and Group Chief Financial Officer Jourik Hooghe added some color on how the refund backlog is progressing. He said,
“We have refunded around €40 million today. In line with what József said earlier, given that most of the refunds, actually more than two-thirds go to either rebooking or to Wizz Credits. But with that, we’re actually through the very large majority of our refunds.
“We have like €10 million to €15 million to go. So we’re fully caught up with that. We think this is really important to restore confidence with our passengers.”
With the bulk of the COVID-related refunds already done, and done in good time, Wizz is doing a great job at not only lowering its future financial risk, but also keeping its customers happy.
Did you have a canceled Wizz Air flight? Were you able to get a refund or credit in good time? Let us know in the comments about your experience.