Co-founder of Wizz Air, the largest low-cost airline in Central and Eastern Europe, the general manager, József Váradi (photo), spoke, in an interview granted to GdS, about the solutions that the commercial aviation industry can apply for to deal with the multiple problems they face and announced what plans Wizz Air has for Craiova airport. Váradi announced new flights starting next year and said Wizz Air would try to keep ticket prices unchanged despite inflationary pressure. József Váradi: We visit each of our bases, we meet with airport managements. We started with Iasi, then Bacău, now in Craiova, then we go to Bucharest, Cluj, Sibiu and Timisoara. These meetings are very important for us, because we try to encourage our teams, we try to understand what problems they face and try to solve them. I believe that this process is very important and unites us. It is a direct dialogue within the company. For me it is an opportunity to meet my people and an opportunity for them to ask any kind of question. In Craiova we have about 70-75 employees.
GdS: What impression did the employees in Craiova make on you?
JV: They are very good, very involved and interested in the development of the company in Craiova and they feel very responsible for the community in the city. Next week, the second aircraft will arrive in Craiova. They are very intelligent people. It is very interesting to observe. If I look at the current management of the company, I see many Romanians within Wizz Air who are advancing in their careers, and most of them come from the flight attendants, and now occupy top management positions. We are lucky in Romania, because they are very intelligent, dedicated and hardworking people and it is clear that they will become the top managers of tomorrow.
GdS: What plans do you have for airports in Romania?
JV: Romania is one of our success stories. Romania held up very well during the COVID pandemic, despite the inherent problems, but overall, Romania was one of the most resilient countries, surpassing Western Europe. That is why, from the summer we will bring strong growth to the market, we are very active in terms of employment, we create jobs, we create local activities. We thus contribute to the development of the local economy, especially in regions with an airport, such as Craiova, which integrates coherently into the national ecosystem. Currently, Wizz Air represents 43% of commercial air traffic in Romania, so we can say that we are the engine of aviation development in Romania and we will continue to develop and create new jobs.
GdS: Why do you think Romanian airports have been so resilient compared to those in Western Europe?
JV: Everything comes down to the consumer, but we managed to bring value to the market. Your consumers have seen a lot in life, and this made them less afraid of events, that is, they got over them much more easily than those from Western Europe who are used to a certain lifestyle and were not affected by shocks in life. Given Romania's history and evolution, you had to deal with certain problems, so you are stronger in the face of these problems. And we, Wizz Air, have contributed and brought an efficient infrastructure of low prices, so that people can travel, and this is highly appreciated in the country. In our history after the Second World War we have been affected by many problems, and consequently the good result is that we have become resistant.
GdS: Now about Craiova. Wizz has been operating here for several years. Are you satisfied with the activity here?
JV: I am very happy about the activity here compared to the whole activity in Romania. We have 29 aircraft in the country and only 12 are based in Bucharest. Romania is a strong regional market for us, and Craiova, Cluj, Bacau, Iasi or Sibiu are doing very well. And to be honest, this is how I think the aviation sector will develop. There is this growth of regional airports, people want to find the nearest airport and travel from one place to another. We are very motivated by the high demand for the development of this infrastructure and we want to make sure that the network develops and we launch routes that are demanded by the market. From this point of view, Craiova has done well, and the best example is that we are doubling our capacity in Craiova, we are bringing another aircraft in a week and we want to expand our activity here in Craiova.
GdS: Do you intend to open new routes from Craiova in the near future?
JV: We run a business, a company that continues to launch new routes. During the pandemic, at the company level we launched over 400 new routes out of the total of 1100 we have. We will continue to do this. I don't want to speculate, we are very motivated to look for route opportunities in the West, but there is great demand for the East as well. We opened an airline in Abu Dhabi. We are seeing increased demand towards the Middle East, in the Gulf region. We will see how we can best connect the two markets. We will concentrate our investments in the coming years in Europe, but we are also constantly turning our attention to destinations in the East, especially the United Arab Emirates. GdS: In Craiova we have Ford. They asked the authorities for infrastructure. What expectations do you have from the authorities to invest more here?
JV: If you look at regional airports around the world, they tend to become the engine of economic development, and that creates a halo effect. Airports are developing, airlines are also developing. And that leads to the construction of road infrastructure, which leads to the continuation of economic activity in the region. If I were a local authority, I would focus on developing the airport, to make it attractive for airlines. As far as we are concerned, I think that in Craiova we have a fairly good infrastructure. We need operating capacity, we need sufficient terminal capacity and we need it at a very low low-cost price, because we are a low-cost company. Because if we have low operating costs, then the price is also low and we can thus stimulate development. We are in a circle. So, my advice would be for the airport to be very intelligently equipped, and for each operation to have low costs, so that we are encouraged to operate more, to invest more in the market. And then things come naturally. Many investors could benefit from the development of the airport infrastructure and increase the flight capacity. And you don't have to invest everything in collateral activities, because that's what the market will do, and people will make smart investments. So I think the turning point is for the airport and the company that operates the airport to make sure that that happens, that the airport is designed to provide the right activities, and that will attract the airlines and everybody will benefit from that. this thing.
GdS: Craiova airport is in continuous development. But I want to ask you something else. What is more important for a company like Wizz Air: the development of the airport itself or the economic environment in the city or region? Is it enough that the airport management develops the airport or do you need economic growth in the area first? JV: I think both are intertwined. The first would be the investment in the airport. There must be a suitable airport. And our activity will trigger other activities. Access to infrastructure is a key element in any investment decision, so you have to create the infrastructure. We are infrastructure providers. So you have the airport, then there's Wizz Air creating connecting infrastructure in the region. Just looking out the window you have to think about what other activities could stimulate the airport environment. For example, airlines need maintenance, and then we look to see if there are hangars where this maintenance can be done on our planes. We are a pan-European company, so we are open to looking at the market to see what is available, how we can access the maintenance hangars and we could consider Craiova. If Craiova intends to build these hangars, we would also be interested. And that means bringing in aircraft for the necessary maintenance and we would create adjacent industry, such as mechanics, engineers to be employed here and that would stimulate development in the region. GdS: Ticket prices. How has the pandemic affected Wizz Air from this point of view? JV: We see inflation rising in the world and we will see a lot of inflationary pressure on labor and goods, and inflation will affect our lives, including the aviation industry. The question is: what can we, Wizz Air, do to offset this pressure and create attraction on the market that differentiates us from the competition? And we also have the answer, because we are one of the few profile companies in the world that invested in technology during the pandemic. We purchased 45 new aircraft. Today we have a new fleet of aircraft, a larger fleet. Investments are fundamental to create a competitive advantage in a market that relies on older aircraft with high maintenance costs. This is one of the ways to counteract the inflationary pressure. Yes, I am telling you that you will see pressure on the airlines to increase the price of tickets and you will see Wizz Air keeping the same prices. And, if we get favorable commercial contracts with the airports or other partners, we might even be ready to lower the prices. But it is clear that we are doing better. GdS: Do you think prices will increase in the next period? JV: It depends on the market. Inflation will affect prices, but our goal is to keep prices as low as possible. GdS: Do you have information that airport management in Europe intends to increase airport taxes? JV: If it is an airport in a big city, which has a monopoly, it is tempting. If it is a regional airport in competition with other regional airports, I think it will take efficiency measures before increasing taxes, because that will not lead to an increase in traffic. Inflation affects all areas, it will not stop at aviation or consumers, it will hit practically the entire value chain of the economy. We are an efficient company that tries to compensate for macroeconomic and inflationary pressures and we act competitively. The best way to run a business is to do it according to market principles. GdS: Another company will come to Craiova. I'm not asking if you're afraid of competition, but how you think you can stay number one? JV: Competition is very good for the market, for consumers and it is also good for us because it keeps us alert. We have been in competition with everyone for a very long time. The businesses we do are not given to us, but we earn them through work, by taking risks. Any competition in Craiova is welcome. This will make us more focused on the market. We are looking for even more opportunities than before and will do everything to stay competitive. GdS: One more time. Do you think prices will rise in the next period? JV: In general, I think they will probably increase, but I can't give an exact answer. I am an economist, and the basic rule in economics is that price depends on supply and demand. If there is too much supply, prices may not rise, but industry profitability will fall. I expect that, in the short term, a few months, the prices will not increase, but will maintain or even decrease. After the summer passes, it is likely that prices will increase, but again, our goal is to maintain prices as much as we can. GdS: How do you think the industry will come out after the pandemic and after the war in Ukraine? Do you think there is a miracle solution to fix things? JV: If I look at this industry, I think what we're doing is right, no matter how we look at it. We are a low-cost carrier that tries to offer services at lower costs than the competition, so we want to be the undisputed leader of the low-cost industry. And what does low-cost mean, actually? 1. That you produce at lower prices, so you are much cheaper than the rest of the market. 2. We are the most liquid business at the same time. So when the industry suffers a shock it's like being in the woods with other people and you meet the bear. You don't have to run faster than the bear, you have to run faster than the others. So we will run faster than others in the industry. Yes, it might be painful for us, but it will be even more painful for others because they have higher costs, so they will run out of money faster than us. If we look around the world, there are only four airlines that have kept their investment credit rate. We are one of them. All the others have failed, which proves that if you have the right business model and you have the right cost ratio, that creates an appropriate degree of liquidity. And that makes you stronger in competition with others. GdS: So what you're saying is that a company has to focus on competition regardless of market crises JV: Of course. And I would go further and say that every crisis is an opportunity, and the bigger the crisis, the more opportunities I see for us. Look at the aviation industry during COVID. GdS: It just collapsed JV: Yes, but it is expected to recover 95% of capacity this summer compared to 2019. We will have 140% of capacity compared to 2019. Look at that difference. We grow by 40%, and the industry decreases by 10%. This is the competitive advantage, this is the opportunity that COVID has created for us. GdS: How badly is the industry affected by the war in Ukraine? JV: In the short term it is affected, in the long term it is not. GdS: Give us good news for next year. Will you introduce new routes from Craiova? JV: Absolute. Wizz Air is more and more attractive on the market, that's why, from next year, we will bring new capacities, we will open new routes, which we keep secret, for now, but which we will reveal at the right time. Craiova must expect Wizz Air to bring innovation, new routes, and new travel opportunities.