Photo credit: Wizz Air
They say one person’s trash is another person’s treasure, and that’s proving true in the operational issues facing European airlines this summer. Wizz Air is benefitting from the widespread schedule cuts with fuller planes and higher fares.
“The fare environment remains strong, with industry capacity reducing and consumer demand over summer strong,” the Hungarian discounter said in an investor update on July 11.
Wizz benefits from a route network that is focused on Eastern Europe where there have been fewer of the operational issues. Many of the challenges are at Europe’s largest hubs — Amsterdam, Frankfurt, and London for example — where Wizz has a smaller presence than many of its competitors. But this does not mean the airline is immune to the continent-wide bedlam; to “avoid cancellations and secure a more punctual operation to our customers,” Wizz has reduced its planned summer capacity by 5 points, to up 35 percent compared to 2019.
Wizz expects a “high-single digit” increase in unit revenues during the September quarter compared to the same period in 2019. This would be a nearly 20-point swing from the 10 percent year-over-three-years unit revenue decrease in the June quarter. Flights are forecast to be on average more than 90 percent full over the summer.
This is good news for the budget airline that posted a significant loss in its last fiscal year, which ended in March. It also suggests that the forecast in June by Wizz CEO Jozsef Varadi that summer airfares could be as much as 60 percent higher than they were in 2019 may yet prove too conservative.
Across Europe, airlines — even discounters — have struggled in the face of a storm of pandemic recovery operational challenges. Some carriers, like EasyJet, are themselves understaffed while many major airports face their own challenges hiring and retaining workers. Add to that labor actions and weather, and it’s a tough summer to be flying on the continent. British Airways, Brussels Airlines, EasyJet, Eurowings, KLM, Lufthansa, and Swiss are among the airlines that have cancelled flights as a result of the situation, while others, including SAS and Ryanair, face industrial actions.
Wizz appears to have partially loaded its cuts in schedules over the weekend of July 19, according to Cirium data. The carrier reduced available seat miles, or capacity, in the September quarter by 2.6 percent from the week before. Part of those reductions was the delay in restarting flights to Moldova, where Wizz suspended operations in February following Russia’s invasion of Ukraine, to September from July; flights to and from Chișinău were removed from July and August schedules. In addition, the airline suspended a select number of routes across its network during the summer months, including three from Dortmund, Germany.
The schedule changes, while presented through the lens of improving operations, will also support higher fares and fuller flights for Wizz. The downside, however, will be delaying its target of returning to pre-pandemic levels of aircraft utilization, a fact that has quarter-after-quarter resulted in double-digit increases in unit costs excluding fuel for the carrier.
In the June quarter, ancillary revenues at Wizz increased 14 percent year-over-three-years to €34.20 ($34.44) per passenger, even while fares were down 12 percent. Unit costs excluding fuel were up 16 percent with much of the increase driven by lower aircraft utilization. Wizz also reported an unrealized €136 million foreign exchange loss in the quarter.