The Hungarian Airline Applying Multinational and Local Mindsets
With its first flight in 2004, Wizz Air celebrated 18 years of operations on the Hungarian aviation market this year. That’s a long time, even for a small company, but in a sector shaken by a pandemic, inflation, skyrocketing fuel prices, deepening economic recession, fierce competition, and sudden changes in taxation, Wizz Air has proved it is resilient. The Budapest Business Journal discussed the challenges with the low-cost carrier’s president Robert Carey.
BBJ: What makes Wizz Air competitive as a multinational company?
Robert Carey: There are several factors here. First, while Wizz Air is based in Hungary, if you look at it, employees come from all over Eastern and Western Europe and the world. Diversity of opinion is very important in making a strong multinational company because we need to serve the demands of many customers across many markets, so we have the perspective there. Second, we really try to make sure that we are operating as a local airline in a local market. In Romania, the local management team and the crew there are, for the most part, Romanian. In Italy, we have a lot of Italians. Lufthansa is a German company, no matter where you fly in the world. Wizz Air is a multinational company operating everywhere it serves, serving the local demand. And that is important because at the end of the day, the customers we are serving in each market come from that market. Third, if you look at the management team that József [Váradi, the company’s CEO] has brought in, if you look at the investment team, it comes from all over the world, and this is really important in bringing the diversity of opinion and thinking, different approaches. That challenges the way we operate and makes us operate at high levels. We bring in the best practices and challenge ourselves with what is working well elsewhere in the world that we can bring in.
BBJ: State-owned airlines are struggling, many have gone out of business. What is it that these companies are doing wrong?
RC: I think this comes down to one thing: customers are buying a commodity. When was the last time you chose a flight based on the food served on board? Never. No customer makes that decision. In short- and medium-haul travel, they look at price and schedule. Many times, the legacy carriers are very caught up in having a very high level of service on board; they say: “I need to be serving destinations that are strategic,” but may not make sense; “I need to have a business class on board because there is a segment of the population we need to serve,” and so on. So, they are not thinking from a shareholder mindset, which is: What is it that the customers actually want and, more importantly, what is it that the customers are actually going to pay for? I think that what Wizz brings is discipline and focus in making sure that we operate everything in the most efficient way possible. So, we have the most efficient aircraft, we operate high utilization of those planes during the day, and we use high utilization of the productivity of our people. That all keeps our costs low; ultimately, our customers want that, and many legacy carriers have forgotten that.
BBJ: We are currently in a very challenging economic situation that has probably not reached its end. How is Wizz Air coping with this toxic mix of challenges: inflation, rising interest rates, and everything else?
RC: It is a challenging economic environment, true. We have higher fuel costs, inflation. The one thing that is positive within the industry is that we have seen the impact of high fuel prices and recession before. Maybe not of this level and magnitude but unlike COVID, which was very new and unknown to us, this we have seen before. What you see happening in this environment is that customers look for the lowest cost alternative for their travel. They don’t want to pay a premium for a high-level class of service; they want to get the most economical solution. So that helps low-cost carriers. Two: as costs rise for everybody, this puts pressure on the higher-cost players. Because, again, if I get less of a margin and no one is paying a premium on high-class service, those with higher costs suffer more. They then pull high capacity out of the market, and that causes equilibrium to return. In that equation, every time we’ve seen it – 2001, 2008, 2013, every time we had a combination of some sort of economic downturn or high fuel costs – low-cost carriers are the ones that have won.
BBJ: Should customers expect higher prices because of the situation?
RC: I think, ultimately, yes. Anything you buy these days is more expensive, right? Airlines are not immune. The costs of air travel in the last 20-30 years have gone down, not up, so we are probably coming back to where they should be. That said, I think what we do is to try to keep these costs as low as possible. We have invested in the newest technology out there. Those aircraft are operating 20% cheaper than the commonly used technology because they have more efficient fuel burn and carry more passengers for the same fuel price. That allows that, even though the costs are higher, we can make sure that we can give the lowest price to our customers.
Robert Carey started his position as president at Wizz Air in June 2021. He has a bachelor of science degree in industrial engineering from Arizona State University as well as a master’s in business administration from Harvard Business School. He started his career in aviation 20 years ago with America West Airlines, followed by Delta Air Lines. Carey then spent more than a decade at McKinsey and Company, where he was a partner in the airline practice. He joined easyJet in 2017, where he was the chief commercial and customer officer.
This article was first published in the Budapest Business Journal print issue of July 15, 2022.
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