Issue No. 739
Will Wizz Air Dominate Europe?
Wizz Air, which five years ago had about 50 planes, now has close to 120. More importantly, with this phenomenal expansion has come just as phenomenal profitability, highlighted by three straight years — 2015, 2016, and 2017 — with operating margins between 16% and 17%. Last year’s figure dropped to 12%, pierced by some of the same arrows that hit Ryanair, including higher fuel and labor costs, severe air traffic control delays, bruises from the battle of Vienna, and startup costs linked to newly opened subsidiaries, in Wizz Air’s case a U.K. unit based at London Luton.
When 2018 was said and done, Ryanair was still the more profitable airline in terms of operating margin, beating Wizz 16% to 12%. During the first half of this year, however, the top of the leader board was all purple as Wizz bested its fellow ultra-LCC 8% to 1%. During the first quarter, in fact, Wizz joined IAG as the only two publicly traded European airlines to avoid losses. The two carriers led the way in Q2 as well. With IAG now stricken with pilot strikes at British Airways and sputtering demand at Vueling and Level, the 2019 profit crown is Wizz Air’s to lose.
Wizz Air’s success is really no mystery. Its business model mimics other successful ultra-LCCs around the world, including sister carriers Frontier and Volaris, both also backed by the U.S. investment firm Indigo Partners. Spirit developed under the ownership of Indigo as well. But more than any other carrier, Wizz Air mimics Ryanair itself, with its high-density seating, low-frequency schedules, heavy reliance on ancillary sales (40% of total revenues in Wizz Air’s case), direct distribution, point-to-point tickets only, and heavy use of outsourced labor, including some pilots subcontracted from third-party staffing firms.
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