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Wizz Air acting like a national carrier

Started 11 years ago to provide rock-bottom ticket prices, the airline has added extras, for those who don’t mind paying more. It still offers cheap flights, and serves more destinations than anyone else flying from Hungary. Wizz Air is soaring, and according to the CEO, it is “Hungary’s de facto national carrier”.

A new, rebranded Wizz Air jet.

The biggest airline based in Hungary seems to be flying ever higher; in the fiscal year ending March 31, Wizz Air’s passenger numbers rose 18%, to 16.4 million, and its net profit rose 67%, to €146 million. Started as a cheap alternative airline based in Budapest, Wizz Air is still remarkably affordable. But since the 2012 demise of the former national carrier Malév Hungarian Airlines, Wizz also provides more service to Hungary than any other airline.

“Wizz Air is Hungary’s de facto national carrier. We fly the Hungarian flag. We offer the most airline seats to the Hungarian market. We offer the most destinations from Budapest and Debrecen – 47 right now and that number is rising constantly,” CEO József Váradi (pictured) told the Budapest Business Journal.

Indeed, the growth of Wizz Air means that evermore people are arriving in the city, providing a boon to everyone in the tourism business, including Budapest’s Liszt Ferenc Airport, which served a record 9,155,000 passengers last year.

The Wizz formula used to be based exclusively on being the cheapest service in the air. It is still usually the cheapest ticket in or out of Budapest, but it also allows its passengers to upgrade their services – whether its with priority boarding, through reserving seats, buying in-flight snacks or increasing the maximum size of their carry on bag.

“Our drive is to deliver a great service at the lowest possible cost. Consumers have a choice now, and may tailor their travel experience as they wish. If you are on a budget, you may just buy a seat at a low cost. If you want more amenities, you can add services to the base fare at very reasonable costs. People clearly like this proposition,” Váradi explained.

According to the CEO, air travel is becoming a “commodity more and more”, and what definitely puts Wizz Air among the market leaders is that the “lowest cost wins and Wizz Air is one of the lowest cost producers in the European airline industry”. However, he insists that low cost does not mean low quality. “With Wizz Air it is just the opposite; it is actually very high quality. We fly modern Airbus A320 aircraft, delivered brand new from the manufacturer, one of the youngest fleets in Europe, and we operate very efficiently with high on-time performance,” Váradi said. In celebrating its 11th anniversary this year, Wizz Air launched a rejuvenation and rebranding campaign, even changing the design of its planes. According to Váradi, the market is also changing.

“Eleven years ago, it was all about democratizing air travel, getting people into the franchise and at the time we said ‘now we can all fly’. Today is more about the opportunities air travel may bring to people, what you can do as a result of traveling. Therefore, we are saying ‘welcome to the world of opportunity’. This is our way of remaining relevant to the consumer,” he said.

Missing the big spenders

While Wizz Air may indeed be the country’s de facto carrier, some in the tourism industry, like Bálint Erdei, president of the Association of Hungarian Travel Agencies (MUISZ), say they miss the days when the state helped support Malév in offering passengers from many destinations the convenience of direct flights, even if those flights were more expensive. “It is really positive that there are many low-cost airlines, like Wizz Air, connecting European cities to Budapest, making Hungary a cheap, achievable destination. This also helps Hungarians in traveling around. This very fact indeed raises the number of tourists arriving to Hungary,” Erdei told the BBJ. “However, the country needs tourists who are willing to spend more in the country. Business tourism could also be beneficial for the country, which would require the existence of a national carrier. Since Malév was grounded, the lack of a national carrier can be felt in the market.”

Erdei maintained that a fancier airline would bring big spenders, who would be a boon to tourism here. “I believe more money should be spent on advertising the possibilities the country can offer in order to attract tourists who are willing to spend more in the country,” he said. “Currently we do not spend enough on popularizing the country, therefore we put our competitors into an advantageous position.”

Henry Kallan, who has just opened the five-star Aria Hotel Budapest (see page 14), said that the definite benefit of a true national carrier would be state subsidies to support more direct flights to Budapest. “There is no question that not having direct flights does not encourage people to come here,” said Kallan, who is based in New York City. Although Wizz Air has direct flights from many European capitals, it does not yet serve the United States.

“It is hard for Budapest to compete without having direct flights, having to change flights always makes it less pleasant – you could miss your flight at the connection, and it just takes longer,” Kallan said. “It would be easier if there was a national carrier, like there used to be with Malév. It makes it difficult for the luxury market. However, for people who can afford it and have the desire to come here, they will.”

Building capital

In fact the 2012 grounding of Malév, which held a monopoly on the best terminals at Budapest’s airport as well as certain routes, really helped Wizz Air grow, and Váradi promised that the number of destinations will continue to increase. To help fund further expansion, the company has listed itself on the London Stock Exchange, with shares trading since the beginning of this year.

“Now we can have access to capital should the development of the business require it. Being a London listed company gives us a much improved credit standing to benefit from lower-cost asset financing, and we have a lot of aircraft to be delivered,” Váradi said. “Also, our enhanced liquidity makes us a more formidable competing force. All these will benefit the consumers as we will be able to do more for less.”

For the future, Váradi said the path forward is clear. “We will continue to grow our business and offer more destinations, more services and products, and deliver all of that at the lowest possible cost. We will remain focused on the core disciplines of the ultra-low-cost business model,” he said. “We have 140 aircraft to be delivered in the next decade. That will create plenty of opportunities for those who want to get great value while traveling – and who doesn’t?”