Airlines around the world are paralyzed by the Covid crisis. The Low-Cost Carrier (LCC) style is possibly one of the physically powerful highs and has been shown in the face of many past crises. I think it is very likely that the LCC will be the structural winners again, but if you look at the European market, the responses to the crisis of the 3 leaders in this segment are very different. Wizz Air’s ambition stands in contrast to the position of rivals Ryanair and easyJet. So what explains the difference in technique and is a justification?
Ryanair remains the largest and most successful LCC in Europe, operating more than 450 Boeing 737-800s, carrying 149 million passengers in its last fiscal year through the end of March 2020 and generating profits of 1 billion euros ($850 million).
As Europe entered the blockade, Ryanair anchored almost entirely from late March to July, when it began reintroducing about 40% of its overall capacity. Due to its size, it still robbed more than four million other people in July, but that 70% drop since 2019.
A slow increase was expected, reaching 70% of capacity last year in September, but Ryanair has been affected by a number of factors, meaning this will not be achieved. First, it is harmed by a strict quarantine regime in its country of origin, Ireland, a market to which it is highly exposed. It is also a major operator in France, Italy, Spain and Portugal, all markets that would normally peak during the summer months. However, spikes in viral infections have led to ad hoc and short-lived quarantine needs imposed on visitors returning from these countries across the UK. Given the IMPORTANCE of the United Kingdom as a home market, this has particularly reduced the demand and confidence of visitors in the reserve. As a result of these factors, Ryanair has announced that it will reduce its planned capacity by 20% in September and October.
Most sensible than that, Ryanair has fewer aircraft than it originally planned this summer, due to the ongoing grounding of the Boeing 737 Max. Approximately 60 of those aircraft have been delivered, but none were received. While in cases this is bizarrely advantageous, the overall immediate expansion and addition of new routes and bases for which Ryanair is known, do not happen lately.
None of this prevents Ryanair from trading with its more than 200 airports for greater conditions, with the risk or promise of moving capacity around the chessboard, in order to take advantage of new opportunities. For now, however, the slogan is contraction, not expansion, fewer passengers no more in the coming year.
As if the Covid crisis were not enough to cope, easyJet’s reaction was driven by both internal points and the effect of the virus itself. The airline is the largest LCC in Europe at the time, operating more than 300 Airbus A320 aircraft from the circle of its relatives and with 96 million passengers in the fiscal year that ended in September 2019. The proceeds were 427 million pounds ($559 million).
easyJet began its programme to resume flights in mid-June, with limited activity to only 10 of its aircraft, which basically serve the domestic markets of France and the United Kingdom. Since then, it has stepped up its business and hoped to succeed in 40% of its overall capacity through September, as it was particularly more cautious than Ryanair. It faces the same demanding market situations as its biggest competitor, meaning it may not succeed in its specific activity grades either.
Beyond that, however, he has experienced torrid months of shareholder relations that exert their own downward pressure on capabilities. EasyJet’s billionaire founder and largest shareholder, Stelios Haji Ioannou, has pushed the airline to stop its growth, which it says hurts profitability. You need to see the cancellation of existing orders from more than one hundred more Airbus aircraft.
If the company did not agree to all of its demands, it announced that it would reduce the number of aircraft in its existing fleet, additional divestments will be made when aircraft rentals expire. In the coming months, easyJet will have at least 30 fewer aircraft in its fleet, while deliveries of 24 aircraft will be postponed beyond 2025.
All this means that easyJet is not able to maintain the existing length and shape of its network, even if you were looking for and did not need to decrease your capacity in the face of the Covid crisis. You will need to cut off existing roads and bases for aircraft and crews. The closure of UK bases at Newcastle, London Stansted and Southend airports will take place in September. Its German base in Berlin will most likely be significantly reduced.
You might decide to look for new opportunities, but it would be best to sacrifice the existing business. Since a basic component of easyJet’s strategy is to reach number one and two positions at major limited-slot airports, it has many things to do simply by protecting those positions, while other airlines see an opportunity to identify and claim territory.
Like its rivals, Wizz Air has strong credentials, carries 40 million passengers and makes a profit of 281 million euros ($331 million) for the year through the end of March. His own reaction to the Covid crisis contrasts with his LCC rivals, with expansion being the slogan. But how does it work?
As the Covid crisis progressed, WizzAir soon relaunched its flight schedule ambitiously. It moved faster to higher levels of activity than its rivals, in July it operated almost 75% of the planned capacity and occupied 47% of its overall traffic.
A specific merit you enjoy is that the main ECO (Central and Eastern Europe) markets, which are at the heart of Wizz Air’s business, attract a huge number of VFR consumers (visiting friends and relatives) who want to do so regularly. This gives you some coverage (albeit far from being complete) of the uncertainties surrounding purely discretionary recreation.
Not only did it repair its capacity quickly, but a succession of new roads and bases was announced. In June in June, Wizz Air announced the creation of 4 new bases in Milan, Larnaca, Lviv and Tirana, all of which had short deadlines to start in July. In the UK, two new bases have been announced in Doncaster/Sheffield and London Gatwick Airport, either of which will be open in the autumn. Some two hundred new roads have been inaugurated.
At first glance, this might seem like a crazy expansion rate, but in my opinion, it’s defensible. First, the airline has res redistributed the existing capacity, 22 aircraft from the existing fleet have been moved to allow for these new opportunities. Second, for many of the new bases, the initial amount of capacity is conservative with only one or two aircraft assigned to start operations.
Wizz Air is also smaller than Ryanair or easyJet, so its expansion starts from a declining base. This is not to say that it is a small airline, its fleet already includes more than 120 Airbus circles of related aircraft. It has an order book that will take you to 275 aircraft until 2027. In addition, it intends to stick to these plans despite the Covid crisis. No cancellations or order deferrals.
It also changes the balance of its fleet to larger aircraft, moving from the 180-seat A320 to the A321 to 239-seat versions. This will increase the expansion of your capacity. The largest rate already accounts for approximately 50% of the fleet and will accumulate to almost 90% until 2027. Ryanair will continue to be well ahead of its own projected fleet expansion, however, Wizz Air’s length will increase relative to easyJet, due to the expansion of the latter. Restrictions.
It is clear that Wizz Air is moving further and further beyond its central territory of the EEC and is confident of clashing with its rivals in some of its most established recreational markets in Western Europe. This is a calculated risk, but with the advantages of a very low overall charge base and lower seat unit prices than its developing number of Airbus A321, the airline turns out to be well placed to meet all challenges. you are probably overly aware of the relief of easyJet’s ability in the coming years.
In a step that will diversify your risk, Wizz Air Abu Dhabi will begin operating this fall as a joint venture with your local partner Abu Dhabi Development Holding Company. The Gulf is no stranger to LCC airlines, many already operate effectively in the region. This presents a whole new set of operational situations and challenges, but also a whole new set of opportunities that, based on its track record, Wizz Air is capable of exploiting.
I am a graduate of York University and have over 37 years of experience in the airline industry, specializing in networking and profit management plans. I
I am a graduate of The University of York and have over 37 years of experience in the airline industry, specializing in networking and profit control plans. I have held checkpoints on several airlines, including British Caledonian, British Airways, KLMuk and Buzz. My delight covers all major airline business models. In 2003, I founded JLS Consulting, based in London, an air transport consulting firm that provides strategic data and advice to customers, adding airports, airlines and investors.
I offer independent trade and monetary observation on the sector for primary media and am a regular convention moderator and president at industry events, normally interviewing senior executives.