Wizzair CEO Jozsef Varadi; CAPA Masterclass 6-May-2020
Wizzair's Jozsef Varadi appeared as CAPA's Masterclass subject on 6-May-2020.
During the 6-May-2020 CAPA Masterclass with Mr Varadi, and a presentation by Hugh Aitken, VP, Commercial, Skyscanner, over 150 questions were received from nearly 3,000 registered viewers.
Unfortunately, time only allowed for a relative few questions to be answered online during the Masterclass.
We felt the unanswered questions contained a wealth of information, as well as providing a broad view of the key issues which are top of mind for the industry professionals who were online for the Masterclass. They are a good representation of the key issues that will face airlines in the coming years.
We have included many of the questions below. Some have been lightly edited and consolidated as they covered similar ground, but we have also retained many near-duplicates as they were useful too as indicators of the consensus views on certain topics. We have also included short responses to one or two questions which were directed towards CAPA (shown in bold).
CAPA's next Masterclass will be held on 20-May-2020. More information shortly.
CAPA's next Masterclass will be held on 20-May-2020.
Questions asked online during the 6-May-2020 Masterclass with Jozsef Varadi, CEO of Wizz Air.
Also participating: Hugh Aitken, VP, Commercial, Skyscanner and, from CAPA, Jonathan Wober, Chief Economist and Peter Harbison, Chairman Emeritus
With one or two exceptions, we have not sought to answer these questions. We shall be happy to entertain views on the questions from any attendees at the Masterclass, as well as other readers.
To share your views on these questions, please address Marco Navarria
- Can partnerships and alliances between airlines (and others) be used to save the industry? Should we think in a more cooperative model than ever to emerge from crisis?
- What should be the new destination mix for airlines on restart post corona virus - to sustain revenue wise?
- Are new interior aircraft cabin and seat configurations amid COVID 19 pandemic practical and financially feasible?
- Any digital solution in regards to Covid-19 to make people feel safe and start fly again?
- Wizz is a committed A321neo customer with capacity of 244 seats. But wouldn't the 150 seat A220-300 be a better fit for recovery in post-pandemic world?
- How do you foresee European Airlines (low cost included) will sell their seats? One seat yes one not? Meaning 50% of LF when it should be 100% when lucky you are?
- "What are the key challenges airlines are facing during the COVID19 pandemic?
- What are key considerations before and during the rebound? What happens at the point of rebound?
- What does the air travel industry look like after the pandemic?
- What are some of the key opportunities for IT Service providers in the Travel Industry amidst the pandemic?"
- The French Government is requiring Air France to forgo short-haul domestic flying as a condition for receiving billions of Euros in state aid. The European Commission has expressly endorsed this requirement. What do you think of this? Will other Member States follow France's lead? Will this distort competition in the European Common Aviation Area?
- I think that the air travel restrictions are one of the main indicators for short term forecasts; once they are lifted the GDP progression becomes the main driver as usual for the mid-long term ones. But how can we forecast the future air traffic demand if the GDP estimates are uncertain and the relationship between GDP and aviation has been changed?
- Are Insurers likely to carve out Covid-19 as a known risk thus depressing the recovery?
- Post This Covid war can you provide your thoughts on what we feel aviation will look like and seek support on,
- Smaller airlines and fleet (streamlined operations); Fewer airlines still operating. Smaller capacity of planes
- Essential travel will be available. Leisure travel may not be as big.
- Domestic travel will be stronger than international
- Cost of travel will change - 2 paradigms/ train of thoughts (Supply vs Demand)
- Cost of travel will go up (Supply < Demand)
- Cost will go down (Supply > Demand)
- Revenue will be challenging for airlines given economic impact. "
- For the upcoming recovery (whenever it occurs), would the A220-300 (150%2B seats) be a more efficient solution than the A321Neo with 240%2B seats?
- Shouldn't 'Intra-Schengen" or 'intra-EU' be used as European domestic traffic due to size of Europe?
- FOR CAPA: What is your forecast for reaching the 2019 capacity levels ? how long do you think to recover and reach 2019 levels?
(Note: In brief, we believe some domestic markets could rebound quickly, where they are "insulated" from foreign travellers. That is, in late 2020 and 2021. This may occur even to levels exceeding 2019, where the alternative of foreign travel for residents remains difficult. The big variables in that regard are (i) the impact and duration of "second waves"; (ii) what health/sanitary measures are necessary and/or imposed by government across the travel journey, as these will greatly affect the efficiency of operations.
Internationally, it is hard to see significant recovery to 2019 levels earlier than 2024/25. Factors here include: (i) international agreement on standards to apply - this will follow the sequence of bilateral first, followed by regional (including the EU) and, perhaps eventually, global; (ii) customer willingness to fly, including corporate duty of care issues; (iii) the level of competition and residual networks (ie supply will be sporadic and likely to favour point to point operations, mostly short haul and will become more expensive; and (iv) the state of the economy (ie demand is likely to be suppressed)
- Could the new Wizz Air strategy of operating to Abu Dhabi open further opportunities for the expansion of the airline in Western Europe?
- Does Wizz Air practice social distancing on board? Middle seat empty? Does 70% SLF consider this?
- How can you maintain social distancing on board at Wizz Air, with a 77% load factor?
- Jozsef, we have seen your expansion on leisure routes ex-UK in recent days from Luton to Greece, Morocco and Portugal. Do you have any more plans for new leisure capacity?
- Is there any data which shows airlines % of "wet" leased aircraft, which probably have been returned or decommissioned hence will impact on route availability when return resumes?
- Will Wizz Air target business travellers? Is this even part of the business model? Or are penny-pinching tourists the market to go for?
- Are social distancing measures on board aircraft and increased turn around times compatible with LCCs?
- What advice would you give to someone who is just about to embark on pilot training?
- Are social distancing measures on board and increased turn around times due to aircraft sanitising requirements now making the LCC model unsustainable ?
- Wizz Air are due to set up in Abu Dhabi and start operations from June onwards. How do you see the current situation impacting these start-up plans?
- What opportunities does Mr Varadi see across Europe as a consequence of covid?
- To Mr Váradi: How many planes Wizz plans to take from Airbus this year? Are there any issues with the lease contracts?
- WizzAir downsized by 1000 people! How you can comment it?
- Does Wizzair apply the middle seat empty rule while flying now? and did they pass through the cost of it to the fares ?
- Does Mr Vàradi believe that technology will be able to mitigate health concerns in the mid term, for example with "self cleaning features" and enhanced air filters?
- How does Wizz Air ensure that passengers can enter the destination country? Why do people fly with you and not with anybody else if they need to quarantine anyway?
- To Mr. Váradi: When did Wizz Air hedge the kerosene and on what price level? Some say that Wizz started flying only because the airline has an obligation to buy kerosene.
- Would Wizz Air start to exploit virtual interlining? As non-stop connectivity will suffer within Europe, it could result in significant travel demand for alternative connecting solutions.
- Could Mr Varadi please repeat the three groups of airlines he expects to form after coronavirus crisis?
- Question to Wizz Air - As new normal which involves additional setups like sanitisation of aircraft, staggered boarding etc would effect the turnaround time drastically, and from LCC perspective that and better utilisation has been a key to success. How do you intend to tackle these bottleneck issues which will be there for at least sometime to come?
- State Aid should be reserved for organisations that have a reasonable chance of making it through the crisis - this seems to be a feature with some such interventions?
- To M. Varadi / Wizz Ar : Excluding on fuel price (volatile), on which area of your airline significant cost containment can be achieved?
- In the current context will Wizz air be exploring the Abu Dhabi venture?
- What is Wizzair doing to regain trust from its customers and how does Wizzair CEO envision the coming months for his business? How many of its aircraft are grounded and does it plan to ground more aircraft?
- WIZZ entering the market in AUH is not a cheap market to operate in; with monopoly suppliers for ground and support services. How will that hurdle be overcome to ensure the low-cost base?
- If József feels so strongly about state support for airlines, were reports about Wizz confirming their eligibility for funding from the UK government’s Covid Corporate Financing Facility (CCFF) true? If true, is this simply a tactical signal to those that really needed the cash (like easyJet) and those that might apply later?
- Thank you for the interesting speech and presentation. Are they any specific measures to be placed by airlines/authorities to ensure passengers and crew members' safety? Therefore reassuring passengers?
- Question to Jozsef: What is your view on the JV between Etihad and Air Arabia which is about to launch another low cost airline from Abu Dhabi? Isn't it too small a market for 2 low cost carriers?
- Abu Dhabi: what value proposition would Wizair offer compared to the numerous operators, whether LCC or legacy, whether based in the Gulf or in the Subcontinent?
- Is A321neo LR in the core of Wizzair Abu Dhabi Project? Hundreds of millions of people are in a radius of 7 hr flight from Abu Dhabi. Is this new tech aircraft behind the real strategy?
- Do you think social distancing should be mandatory in the aircraft and how this will affect the yields of airlines and ticket prices?
- How do you see Skyscanner as a Global Change Agent to redefine the New Normal?
- Is the fuel hedging impacting Wizzair financial results?
- After the outbreak, will low-cost airlines lose their previous advantages due to changes in the way they travel? For example, the lower cabin density, the reduction of personal tourism passengers, business passengers are more willing to choose the legacy airlines with larger seat pitch.
- Question to Wizzair CEO: What will be the strategy of WizzAir after lockdown? will you be looking for new opportunities and new market or will you be trying to rebulid your markets ( airport ) traffic before Covid?
- For Mr Varadi: What are Wizz Air doing to stimulate demand in the short term?
- For Mr Varadi: can you tell us about your plans to enter new markets within Europe?
- Question to Wizzair CEO: Is sustainable flying still on the agenda of Wizzair, voluntary as well as CORSIA?
- Given the impact on aircraft utilisation a key feature of the LCC model, do you envisage entering LH?
- Customer behavior: in Northern Europe, there is a growing feeling of "shame of flying". Is Wizzair affected by this?
- What is your view of the strength and depth of the recession?
- Will Europe's LCC's start to feed the intercontinental hubs in a more structured way ?
- Q for Jozsef: Do you have any plan to connect Prague with Abu Dhabi?
- Jozsef, will large hubs such as Schiphol and Dubai shrink and will point to point win over hub and spoke longer term as people stay away from large melting pot airports?
- Do you view carbon emissions regulation as a threat and what scenarios are expected?
- Stelios claims a 250 aircraft fleet would be optimal for EJ, what is the optimal fleet size for Wizz?
- Is there potential for Wizzair to work with and feed a full service carrier in the advent of market/hub consolidation?
- Question to Peter - how do you see Australian aviation market since Virgin Australia is struggling and it going bust will leave Qantas in pretty much monopoly situation?
(Note: We see the prospect of a Qantas monopoly as being very remote. But the nature of the competition and its geographical coverage will become more apparent as the Virgin Australia's administration is completed. CAPA's Airline Capacity Model projects a recovery in domestic capacity to 60% of 2019 levels by end-2020.)
- How do you factor in the proposed limitation by some civil aviation regulators to keep the middle seat open? Does that not undermine the low-cost model and its reliance on density?
- What is your perspective on the many LCCs that India has today? How do you think it will play out for Indian aviation market?
- Although Wizzair is an agile and lean business organization, is the optimistic Wizzair's view of recovering within the next 12 months matched with the market and economic conditions where Wizzair operates? In other words being the airline industry profitability linked to GDP, what's the forecast impact of deflated GDPs to the Wizzair's capability to generate revenues
- As an epidemiologist, I can say Jozsef Varadi’s prognosis is sadly, completely disconnected from the epidemiological reality of this pandemic.
- Hello Jozsef: can you tell us precisely what do you think Wizz will bring to the Abu Dhabi market that Air Arabia, flydubai or Jazeera and others are not bringing already .... am still puzzled by this move and i wish you good luck though .... !!
- Hugh, are you seeing a switch of enquiries away from airlines that have received difficult press over the last month. Are point to point routes seeing high focus than via hubs ?
- What do you see are the implications of a second wave of COVID-19 on the industry? Many are predicting it will return in the winter.
- To Hugh: Do you expect airlines to continue their NDC journey, continuously investing in innovation to stay ahead of competition or do you think airlines will not have to cash to invest in such projects?
- With increasing consolidation of airline and travel businesses likely, do Skyscanner have any concern around the longer term future for the aggregator model? Might there be limited or single operators in each market, which sees those companies move away from listing their inventory through Skyscanner?
- Hi Joszef, during this covid-19 period, has Wizz Air implemented more time for passengers to check in and what is the social distancing applied onboard the planes? Alternate empty seats?
- Mr. Varadi, regarding the Middle-East venture, given the interest of the governments to protect their investments (Emirates/Ethihad), how do Wizz plan deal with this issue, should they see Wizz impacting their operations?
- Jozsef: Do you think that the mondialisation being now questioned for production of key/strategic assets like masks or pharmaceutics will also affect the airline industry ? Will it push governments to consider flag carriers as strategic assets and re-introduce taxpayer capital into them ?
- Hugh - you highlighted that buying patterns are changing - and you mentioned passengers taking up options on insurance - can you say how big an increase in purchases you have seen and any difference in domestic or international
- Does Wizzair see this crisis as an opportunity to strengthen its operations in the Balkan region (Croatia, Bosnia, Serbia etc) as we have seen slower development in that region over the years compared to other markets?
- Does Wizzair consider establishing cooperation with other airlines if demand does not come back as expected?
- WizzAir's business model is focused on VFR from Eastern Europe. Do you see more opportunities in Western Europe attracting classic tourist destinations - like to VIE - from more airports like DTM ?
- People carried 9/11 phobia for more than 1 year and people still remember Brussels bombing, are you still convinced people have short memories?
- Do you think the industry will need to be even more (environmentally) sustainable post COV-19?
- Congrats on the route opening to Abu Dhabi, does Wizz have any planning on long-haul routes to Asia?
- Q for Jozsef. Do you consider mitigation of risk associated with services provided to Wizz on all the outstations, where current suppliers may have operational issues. Obviously you are one of the first customers for them.
- Do you think that PSO could be some kind of support in this period for airline in Europe to keep non profit destination and how LCC as Wizz air look on this? - they use PSO from Budapest to Western BalkanS
- We have witnessed Wizzair's commitment to develop its operation in a very challenging conditions at Vienna. Will Wizzair continue to invest in this operation in such a strong and aggressive way?
- to Jonathan or Peter : How will Covid19 crisis delay or not any of the Brexit measures to be applied in the Aviation Industry?
- Hugh: is part of a sustainability initiative that highlights the CO2 efficiency of flights. Does the panel envisage environmental concerns about aviation disappearing as airlines fight for survival? If so, will that impact passenger demand as the industry recovers?
- Hugh, thanks for the somewhat optimistic booking outlook. If nothing else, the industry needs to look for lights rather than gloom to get out of this situation as healthy as possible. Jozsef, even though coming from the "other side" of the aviation industry... I tip my hat to your sharp analysis of the situation at hand and I do hope you are right in most of your predictions...
- Q to Hugh: Will coronavirus change the travellers’ habits in booking, meaning will travellers prefer more the classical agencies than online agencies? The reason is that they will prefer to deal with some actual, dedicated person than to more anonymous online agency.
- How do you think the crisis will impact the relationship between airlines and MROs (in particular independent ones)?
- How would airlines need to adapt in cases where governments allow flights between nations, but restrict the amount of passengers onboard, i.e. leaving the middle seat empty in a 3/3 configuration as on board the A320?
- If international / Intercontinental travel will be slower to recover (and potentially a lingering fear of being in crowded airports may effect a certain number of travellers) will this actually put more pressure on the hub and spoke model and lean more towards to the point to point model - to the advantage of LCC and potentially changing some mainline/regional carriers....
- Yes, the industry is heavily commoditised, but post COV19, I think people more concerned about "value" in the broadest sense!
- What limitations to inflight services do you see (Food, Duty Free, IFE) and where are the opportunities?
- Without alliances and partnerships, how can only one airline bring the international traveler to his/her destination?
Questions answered during the Masterclass
(please see the recording for answers given - Register here to access the session.)
- Can partnerships and alliances between airlines (and others) be used to save the industry? Should we think in a more cooperative model than ever to emerge from crisis?
- Has Skyscanner noticed any increase in flight intentions (people looking to book flights) for the last quarters of this year? Are there any signs of recovery?
- Hi Jozsef, great insight. Given the first mover advantage as the first LCC returning to the skies across Europe - do you see a range of new markets opening up for you over the next few months as your competitors reintroduce capacity too slowly or go out of business ? If so which ones will be of interest to you.
- How will relationship between an airline and an aircraft manufacturer change and what can they do to support the operators in the short, medium and long term?
- Hi Jozsef, thanks for a great talk. On the hypothetical scenario that restrictions remain until a vaccine is available and several airlines get government assistance, could this be the end of the LCC point-to-point model due to very low demand? Whould Wizz consider adapting it's model?
- How should we prepare for the next pandemic to avoid the lock down and its consequences?