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- Wizz Air Hungary Airlines Ltd.
BUD International Airport Building 221
- Main hub
- Budapest Ferenc Liszt International Airport
- Business model
- Low Cost Carrier
- Airline Group
- Part of Wizz Air Group
- Association Membership
Wizz Air is a low-cost carrier based mainly in Budapest but has hubs throughout Eastern Europe, including Budapest, Gdańsk, Katowice and Belgrade. Wizz Air Group includes two operating airlines: Wizz Air Hungary and Wizz Air Ukraine. The airline has seen rapid growth since its 2004 inception, and is Central Europe's largest LCC. Wizz Air operates on over 150 routes across Europe, using predominantly secondary airports, and the carrier is continuously looking at opportunities to expand its network of destinations and provide low-cost air transport to and from Central and Eastern Europe.
Location of Wizz Air main hub (Budapest Ferenc Liszt International Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Wizz Air fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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Wizz Air CEO Josef Varadi told a recent meeting of the Aviation Club in London that he ran a very disciplined airline. "We never grow for growth's sake", he said, explaining that the airline had clear financial targets and that growth was an output from this process.
Earlier this year, Wizz Air pulled out of a planned initial public offering (IPO) of its shares, which would have seen it floated on the London Stock Exchange. Investor appetite was dulled by geopolitical issues, a fuel price spike and profit warnings from other airlines, rather than any problems at the airline itself. Indeed, its most recent accounts show that it is now one of Europe's most profitable airlines, with significant cash reserves. An IPO could come back onto the agenda, but, Mr Varadi said, "we are not desperate".
Its results have not always been strong in the 10 years since its 2004 launch, but our analysis of its accounts suggests that it is now on a firm footing, supporting Mr Varadi's claim that "financial performance is at the core of the airline – we are not doing it for charity".
LOT Polish Airlines CEO Sebastian Mikosz said recently that profitability must be developed through passenger retention, expansion of its customer base and the introduction of new options for travel, services and comfort (Future Travel Experience, 20-Jun-2014). Its recent focus has been on the restructuring plan submitted last year to the European Union, involving cuts to capacity and costs.
LOT awaits final approval from the EU for its restructuring plan, which was required in connection with state aid provided by the Polish government in Dec-2012. The airline has said that it will not consider a second tranche of state aid before Sep-2014. It needs EU approval before it can decide its longer term future, including the possibility of seeking new investors, although it has reportedly started to develop a new five year strategic plan. Meanwhile, the privatisation process has gone very quiet.
Mr Mikosz is right to plan for the post restructuring world, but is faced with the need also to continue to make LOT's cost base more competitive against the LCCs that operate the majority of seats in the Polish market.
IATA's latest airline industry financial forecasts highlight the different performance of the different regions of the world. North America is the most profitable region, measured by its net margin (net profit as a percentage of revenues) and Africa the least profitable. Europe has the second lowest margin, but has gained a little on fourth ranked Asia Pacific. Latin America has improved the most since 2012 to rank second, just ahead of the Middle East.
North America has had a relatively good recovery, while Asia Pacific's margins have fallen from their 2010 peak. Even North America's net profit is only 4.3% of revenues, its best since the late 1990s, but still a very thin margin.
Analysis of the relationship between net profit margins and various explanatory factors appears to confirm that market concentration is a key one. Europe's perennial underperformance in airline margin terms – in spite of the region's wealth, high propensity for air travel and high load factors – owes much to the fragmented nature of the market. Nevertheless, a European deal that is truly transformational in terms of its market structure remains unlikely for now.
The Wizz Air Group has announced its intention to float on the London Stock Exchange. CAPA suggested this was under consideration in a report in Apr-2013 and the company has been mulling it over for years. The decision had no 'whiz' about it, but now may well be a suitable point in its history for a public listing.
The IPO prospectus is not yet available, but we have updated our analysis of the available data. This shows that Wizz Air has now established a firmer platform of profitability from which to attract investors and has consolidated its position as Europe's second lowest cost carrier.
One of its biggest challenges is that Europe's lowest cost airline, Ryanair, is also Wizz Air's closest competitor. Wizz Air's recent growth and profitability suggest that this has not deterred it and it has continued to focus on its niche in Central/Eastern Europe. An IPO will strengthen Wizz Air's under-capitalised balance sheet and expand its aircraft funding options. It will also further raise its profile and should add to its already strong focus on cost efficiency.
The United Arab Emirates’ newest airport, Dubai World Central (DWC), opened its passenger terminal on 27-Oct-2013 and its first commercial passengers. The operator was Wizz Air, the Eastern/Central European LCC, with a flight from Budapest. Wizz Air Group (which includes Wizz Air Ukraine) also launched Bucharest, Sofia and Kiev from DWC as the winter season commenced.
According to Wizz Air CEO József Váradi, Wizz Air expects to handle 250,000 passengers on services to DWC in the first year of operations. Based on the four routes launched this week, this would imply load factors averaging 95%. Although Wizz Air’s 2012 load factor was more than 85%, this seems very ambitious for new routes, even in the hyperbolic world of low-cost airlines. More likely, Wizz Air plans to add frequencies and/or routes through the year.
Either way, it demonstrates the carrier’s confidence in taking the narrowbody LCC model further than most on routes that look to be under-penetrated. Mr Váradi is even talking of adding flights to India from DWC.
Eastern European low-cost carrier group Wizz has unveiled plans to expand its Vilnius base in Lithuania and establish its third Ukrainian base in Lviv. The announcements follow other recent expansion announcements that will see Wizz expand its bases in Bulgaria and Macedonia.
In the Lithuanian capital Vilnius, Wizz Air will expand its fleet of A320s at the airport to three aircraft. The carrier will use the additional aircraft to launch three new routes and increase frequencies on five existing routes.
Meanwhile the group’s Ukrainian subsidiary Wizz Air Ukraine plans to base one A320 at Lviv from 30-Apr-2014. The aircraft will be used to launch five new routes from Lviv, which Wizz Air Ukraine now serves with three routes. The A320 to be based at Lviv Airport will be Wizz Air Ukraine’s fifth aircraft overall.