Wizz Air is constantly opening new bases. CEO József Varadi talks about opportunities through Covid-19, expansion in Germany, unions and Lufthansa's slots.
Lufthansa has to give away slots in Frankfurt and Munich. Is Wizz Air interested?
József Váradi*: Lufthansa is required to give up four aircraft worth of slots in Munich and four aircraft worth of slots in Frankfurt. That represents two percent of their capacity there. That’s kind of ridiculous. They give up two percent of their capacity and get nine billion euros. That does not feel like a fair trade. As far as we are concerned, we would look at all these opportunities. But we are paying close attention to costs and also to whether we can continue to grow at a certain airport. Frankfurt and Munich are very expensive airports, so I don’t think we are very interested.
So far you have operated German airports from Eastern Europe. Now you are setting up a base in Dortmund and saying that that would not be more expensive for you than in Warsaw or Budapest. Please explain that.
For airlines like Lufthansa or Air France, labour costs make up a large part of the total costs. Certainly 30 percent. With us it is only 10 percent or even less. We are more sensitive to other factors such as density of seating or the airport related operating costs. Dortmund is a very efficient airport with lean costs and one of the fastes turnaround times in our entire network. This compensates the higher personnel costs in Germany. The big question mark in Dortmund in the future is the runway. If it is extended by moving the landing threshold, it will open up new opportunities for us. Then we can bring in the Airbus A321 Neo, which is a lower cost operation than the A320 Neo.
So you can also open other bases in Germany.
Yes, if other airports can offer something similar to Dortmund, why not.
Do you have any specific plans?
We have a lot of possibilities at the moment. Covid-19 has not only put the airlines under pressure, but also the airports. Many airports are begging us for our capacity. We look at all these opportunities, but I don’t want to speculate at the moment.
New base announcements are predominantly Covid-19 driven.
You have recently opened other bases in Europe, including Milan, Bacău, Lanarca and St. Petersburg. Were these plans in place before the crisis or are you taking advantage of the opportunity?
We are currently trimming our pre-Covid-19 network by about 20 percent. On the other hand, we are rebuilding the network with the capacity that will be added by new aircraft, for example. And this new network includes new bases. These new base announcements are predominantly Covid-19 driven, so we are taking the opportunity of the situation.
You are also about to launch Wizz Air Abu Dhabi. That’s a lot of investment in an uncertain time.
Other airlines with high operating costs currently are keeping their aircraft on the ground. We are very efficient when we fly. So it’s worth to take the risk and make investments in new markets.
Will you become head of Wizz Air Abu Dhabi?
I’m the Chairman of the Board. But there is a managing director for Wizz Air Abu Dhabi.
Do you expect more airline failures in Europe in the near future?
There are three categories of airlines. On the one hand, there’s Lufthansa, Air France-KLM and Co., who are being bailed out by their governments at any cost. Then there are low-cost carriers like us or Ryanair, which are surviving the crisis with their own liquidity. But those who do not belong to either group will have a hard time. It think we will see a number bankruptcies. It is not yet visible, because most of the industry is not operating at the moment. But when an airline starts operating again, it drives up costs, while demand and revenues remain low at the beginning. This will be the stress test over the next six to twelve months.
Three years from now Wizz Air will be 50 percent larger
You will also have to dismiss about 1000 employees.
We are not immune to the crisis either. In April we had only three percent of our capacity in the air, in May seven percent and in June 20 to 25 percent. So we have to lay off employees as short term measures. But as of 2021 we will grow the business again, we will have a larger fleet. So we will need and hire pilots and cabin crews again. By comparison, Lufthansa says it will take them three years to get back to the level of 2019. Three years from now Wizz Air will be 50 percent larger than what we are today. That is our opportunity.
Even with the base in Germany, you want to keep out the unions?
Yes, we have been keeping out unions everywhere. Unions are killing the business. That’s also one of the problems with Lufthansa. If the unions try to catch us and to kill us, we simply close the base and move on. That’s the beauty of being an airline with the diversity and flexibility we have in our network: We can simply move our aircraft to another place.
*József Váradi (54) has a degree in economics. He began his career at the consumer goods giant Procter & Gamble, where he was head of sales for Central and Eastern Europe. In 2001 he became head of the former national airline Malev, and two years later he founded Wizz Air together with partners. Since then he has been managing the low-cost airline as Chairman of the Board.