Low-cost airline Wizz Air has delivered impressive full-year results with profits up 4.5%, while Ryanair and easyJet suffer. Bucking a recent trend of bad news to come out of the airline industry, Budapest based Wizz Air is now in a strong position to ride out what is looking like being a difficult 2019.
Dodging the doom and gloom being reported by some of Europe’s other budget airlines, the Hungarian carrier is predicting strong growth well into 2020. In comparison, Irish low-cost airline Ryanair saw its pre-tax earnings plummet 41% despite still posting an impressive $1.1 billion (948€).
In the UK, easyJet chief executive, Johan Lundgren cited Brexit as a reason for the airline’s downturn in profits, saying in the Guardian:
“For the second half we are seeing softness in both the UK and Europe, which we believe comes from macroeconomic uncertainty and many unanswered questions surrounding Brexit, which are together driving weaker customer demand.”
How is Wizz Air bucking the current trend?
While other budget airlines struggle to compete in an ever-changing environment of political uncertainties and rising fuel costs, Wizz Air remain strong. This strength is due to a couple of factors.
Firstly the airline consolidates its business around Central and Eastern Europe, predominantly in Hungary, Romania and Poland. This means that the uncertainty that hangs over Brexit is not a player in their business plan, despite having a hub at Luton Airport.
Secondly, they have no need to compete directly with the likes of Ryanair and easyJet. These low cost carriers rely more on holidaymakers and big-name destinations like Paris and Madrid for their main source of revenue.
Wizz Air, on the other hand, has no such reliance on famous holiday spots. in fact, the airline is quite happy to ferry people between destinations that are hard to pronounce, like Katowice and Cluj-Napoca, where they face little competition.
“We remain very optimistic about the current financial year. Higher fuel prices are supporting a stronger fare environment, and we expect these macro conditions to provide Wizz Air with market share opportunities as weaker carriers withdraw unprofitable capacity,” CEO József Váradi said to CNBC.
According to Yahoo Finance, an analyst with Barclays Bank confirmed Váradi’s optimism, saying: “Market conditions in the CEE continue to be seen as encouraging, with continued strong economic growth driving greater consumer spending power and a rising propensity to travel.”
In what could perhaps be described as trying to emulate Ryanair’s approach to revenue growth, Wizz Air is looking more to ancillary offerings rather than ticket prices to increase profits. Getting passengers to spend money while onboard the aircraft has been a firm strategy with Ryanair for many years, and has proven to be worth it.
Wizz Air is eyeing up Thomas Cook
By now, we are all familiar with the financial problems that tour operator Thomas Cook is having. Part of this in involved putting its airline up for sale in February, in an attempt to liquidise some assets.
Rumours are swirling that Wizz Air might be in the market for some of Thomas Cook’s aircraft, as well as its lucrative landing slots at Gatwick Airport.
So far, Wizz Air has not approached Thomas Cook with any offers. However, CEO József Váradi has suggested that the Hungarian airline might be interested in acquiring some of Thomas Cook’s assets.
While speaking with Bloomberg TV, Vára said, “Wizz isn’t interested in taking over the airline business of Thomas Cook Group Plc, but may be interested in some assets if they become available.”
Time will tell what they want and whether they are successful in securing it.