Wizz Air CEO: 1/3 of all airlines won’t survive pandemic

“The problem is that not all airlines will survive this crisis. It’s going to be very financially stressful since airlines will earn hardly any revenue.”

By Tamar Tunik, Calcalist

Low-cost airline Wizz Air Holdings PLC CEO József Váradi entered the aviation industry in the wake of the September 11, 2001 attacks. Today, after surviving the global economic crisis of 2008, he is navigating the most turbulent skies the industry has ever known.

In an interview with Calcalist, Váradi explains why at least 1,000 airlines will not survive the coronavirus crisis, and how Wizz Air’s cash reserves will allow it to enter the vacuum left by the Covid-19 aviation industry victims.

You have recently renewed flights to Tel Aviv’s Ben Gurion Airport. Which routes do you expect to renew next? Which will be last in line?

We have a great history of 16 years, but we have much more than just 16 years ahead of us. Despite all the difficulties and the problems that the world is facing today, we think Wizz Air is one of the structural leaders in the airline sector and will emerge from this crisis a better and stronger company and airline.

Right now we are flying at about 10 percent of our total capacity. We are sensing a demand for our service in many ways in our system and also from talking to various parties who understand customer behavior, and look at the way people are searching for holidays, travel opportunities and the like. We think people want to travel, people want to fly again.

The problem, by and large, is not people’s intention to travel, but rather the restrictions put in place by governments, which makes things quite unpredictable. During good times, with no state restrictions, we operate in 45 countries. There are currently no two countries of those 45 that have imposed the same restrictions.

The whole process has become totally uncoordinated, it’s quite a mess and it makes it very hard for people to look past these issues, of how they can leave their country, how they can get into another country, and how their movements will be restricted. But we are determined that as soon as we’ll be able to start flying, we will.

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Do you think people are not afraid to fly? That they can’t wait to take a holiday, and it is the restrictions that are holding them back?

Yes, we know from our own surveys and from our measuring of demand that people still want to get something out of this summer. They want to go to the beach, they need air, they need space, they need sunshine. Also, many families are dispersed all over and people want to unite, they want to visit each other. I think these are the travel segments that will recover the fastest.

Wizz Air is conducting a small birthday promotion to mark it’s 16th birthday, discounting prices by 16 percent and we have registered huge demand. We are selling these promotional tickets at a rate of around 70 percent of a normal day prior to the coronavirus. It suggests that if the market is stimulated and airlines have good offers, people are eager to book a ticket and travel.

In the midst of a perfect storm, Wizz Air is launching new routes in Europe and Abu Dhabi, eyeing an expansion to Gatwick, and increasing its fleet size. All things considered, is this not risky?

We are aware that there will be a short term dent in demand resulting from coronavirus, and are trimming some of our capacity because of that, but we are not closing a single operating base and we are not closing a single route. We are just reducing the frequencies of certain routes.

We are also continuing to take on deliveries of new aircraft and between now and June 2021, we will be taking on 22 new deliveries, substantially growing our fleet and capacity, and that’s why we are launching new activities, new routes, and possibly new bases.

Abu Dhabi’s international airport is deploying state-of-the-art robot technology to ensure safe and hygienic travel during the Covid-19 crisis. Do you think other international airports will follow suit?

This is a decision an airport has to take, that a country has to take. Personally, I think life will settle down after the coronavirus, it’s just a big hype at the moment. Obviously there are issues, but there is also a lot of hysteria and overreaction. Time will tell how this gets settled, but the world has been affected by all sorts of epidemics, pandemics, and viruses before and I guess that it will be the same in the future. The difference is just in form and magnitude. This time around the magnitude is big, but I think it’s a part of life and we need to make sure that measures are put in place to protect travelers and keep passengers safe.

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Airports have to look after people’s health, and we on the airline’s side do the same. Wizz Air has launched quite a few measures to better protect people such as wearing masks, eliminating touchpoints, and more.

Last Friday, ahead of Memorial Day weekend in the U.S., about 349,000 passengers crossed the security checkpoints at airports across the country, the highest figure in two months, but 88 percent less than 2019’s Memorial Day weekend.

This summer, many American airlines have adopted a variety of precautions to minimize the danger of contagion, for example, passengers are asked to scan the boarding ticket themselves, rather than handing it over to the ground crew representative. Another step that companies are considering is eliminating the option of booking certain seats to avoid overcrowding during flights.

You have said that removing a middle seat from aircraft will “kill” airlines in the long term. So I suppose you will be filling up your planes and won’t be taking any such precautions. Is this correct?

You know, personally, I don’t think this is a necessary measure for protecting the people. We think wearing masks is a bigger issue, and we actually made it obligatory for every crew member and every passenger who boards our aircraft to wear a mask, because it protects them from others, and protects others from them.

You need to know that the air quality aboard an aircraft is about the same quality as it is in an intensive care unit of a hospital. People always think that the air quality on a plane is very poor and hazardous. That’s a misperception. If you take a tram or a coach, the difference in air quality is huge, or when you go to a supermarket, you are multiple times more exposed.

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There has not been a single case, anywhere in the world, in which a patient was proven to have been infected while on an aircraft. Airlines have carried people who were infected, but they were infected prior to their journey. So, I think it’s very important to stress that even nowadays flying an aircraft is incredibly safe.

Will air tickets become more expensive due to the necessity for extra space between passengers and the lengthy process expected prior to boarding?

I actually think that air tickets will be cheaper. Since airlines will have to stimulate the market, they need to bring people back into the practice of flying. In order to do that, you have to motivate people. So, I think flying will be very cheap in the next six to 12 months. Airlines would rather sell cheap tickets than none at all.

The problem is that not all airlines will survive this crisis. It’s going to be very financially stressful since airlines will earn hardly any revenue, but still burn through the cost of operations. To restart operations and survive, you need a lot of cash, you need a lot of liquidity. Not every airline is in the position to do so. I mean they are barely holding on by not flying, and there have been several instances of government bailouts, but once you restart again it will be very stressful for the whole industry. Only the financially strong airlines will survive this.

So, what do you think the percentage of airlines that won’t survive will be?

Personally, I think between a third and a half of the airlines in the world may go bust. That’s a very big number. If you look at the world, there are more than 3,000 commercial airlines, I think easily a thousand or more can go bust in the next 12 months.