Wizz Air: rapid growth plan will need to reverse margin squeeze
By operating margin, Wizz Air has consistently been Europe's second most profitable airline company over the past four years. Its unit cost defines it as an ultra-LCC, alongside Ryanair, which is its biggest rival in its focus market of Central/Eastern Europe and is also Europe's highest margin airline.
As part of its strategy to lower its unit cost further, necessary to remain competitive in its tussle with Ryanair, Wizz Air is transforming its fleet from A320ceo domination to one that is dominated by A321neos. Unit costs should benefit both from the higher seat count per aircraft and from the improved fuel efficiency of the new generation aircraft.
However, this strategy also locks Wizz Air into continued rapid capacity growth; this will likely weigh on unit revenue and, possibly, its profit margin. Wizz Air achieved record profits in FY2018 (year to Mar-2018), but its operating margin has now suffered two years of modest decline. It expects further profit growth in FY2019, but this may again not match its capacity and revenue growth.
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