Wizz Air Sees Opportunity in Crisis With Italy, UK Expansions

Photo credit: Wizz Air is using the crisis to grow in Italy and the UK. Flickr / kitmasterbloke

Wizz Air is using the crisis to expand its network in a push that its CEO József Váradi sees as both strengthening the company and accelerating its recovery. During its 2021 fiscal year that ended in March, the Hungarian discounter opened or announced 18 new bases, including ones in Abu Dhabi, Cardiff and Milan, significantly expanding its footprint across Europe and the Middle East.

“It’s a much more diversified network than before,” said Váradi during Wizz’s fiscal year results call on Tuesday. “That gives us a significantly improved ability to manage headwinds from a situation like Covid.”

The expansion is straight out of budget carriers’ pandemic playbook. Around the world, these often smaller and more nimble airlines have used the suspensions and retrenchments of larger competitors to elbow into markets where they previously had a minimal or small presence. JetBlue Airways took advantage of this shift to open a new base in Los Angeles last year; Australian regional Rex Airlines added Boeing 737s and began flights on the country’s busiest routes following Virgin Australia’s restructuring; and Ryanair has opened eight new bases across Europe.

Wizz’s expansion comes even as capacity fell nearly 64 percent from 2020 to 2021. The airline posted a €576 million ($703 million) net loss during the fiscal year. Revenues fell 73 percent to €739 million and expenses 48 percent to €1.3 billion compared to its 2020 fiscal year. Passenger traffic was down nearly 75 percent year-over-year.

But these pandemic losses have not dampened Wizz’s appetite for growth. The airline added 14 Airbus A321neo jets to its fleet during its 2021 fiscal year for a total of 137 aircraft at the end of March. The new bases allow the airline to put these new jets — and the 248 A320neo-family aircraft it has on order — to work even as overall frequencies remain below pre-crisis levels.

Italy and the UK are two growth markets for Wizz. The airline is “going for Italy,” which Váradi called an “investible market.” The airline opened or unveiled plans to base 17 aircraft in the country at Bari, Catania, Milan Malpensa, Palermo and Rome Fiumcino during the past year. And despite lower traffic volumes due to pandemic travel restrictions, Váradi said the market reaction to the new services has been “very positive.”

Wizz’s investment comes amid significant changes in the Italian market. Beleaguered flag carrier Alitalia is in the midst of a government-led restructuring that will see it relaunched as Italia Trasporto Aereo (ITA) sometime later this year. The new carrier is expected to be smaller and more nimble than Alitalia by taking the airline’s strongest assets and leaving its debts.

“Our Italian expansion has nothing to do with what will happen to Alitalia,” said Váradi.

In the UK, Wizz continues to await a ruling on slots at London Gatwick where it plans to continue growing. The airline is also due to open a new base in Cardiff on June 17.

Not all of the carrier’s pandemic growth has been a success. A move into the Norwegian domestic market at the end of 2020 comes to an end later in June. Váradi described the closure of Wizz’s Oslo base and exit from domestic flying in the country as strictly a “financial decision” — implying that the opportunities in Italy are greater than those in Norway. Wizz will continue to serve points in Norway with flights to elsewhere in Europe.

Wizz did face a shrunken, but also financially strengthened, Norwegian Air, which emerged from its restructuring at the end of May. In addition, Norwegian startup Flyr plans to launch domestic flights from Oslo at the end of June. Flyr aims to serve eight destinations by the end of August.

Looking ahead, Wizz plans to operate just 30 percent of pre-crisis capacity in the first quarter of its 2022 fiscal year, or the April to June period. Flying is expected to resume quickly as Europe and other countries reopen with plans to fly its full 2019 capacity in the second quarter, and then grow above pre-crisis levels during the quarters thereafter. The airline is scheduled to take delivery of 27 A321neos during the fiscal year.

“Clearly we see a turn of the market, consumers coming back,” said Váradi. However, he noted that specific capacity guidance is difficult until there is more clarity on travel restrictions easing.