What’s Behind Wizz Air’s Rapid Expansion
Budget airline Wizz Air has expanded significantly since it was first established in 2003. This growth has been…
Budget airline Wizz Air has expanded significantly since it was first established in 2003. This growth has been steady, with the addition of more aircraft, more routes, and more bases. In 2021, at a time when market demand is just beginning to recover, what is driving the airline’s strategy of rapid expansion?
When it comes to managing an airline – or almost any business for that matter – the leaders at the top have broad decisions to make about the direction they want to take the company. Options may range from expansion to contraction, maintaining operations as they are, or going in some completely new direction. For Wizz Air, expansion has been its primary strategy- even at a time when the air travel market is struggling under unpredictable travel restrictions and lockdowns.
Coming from a strong financial position
During our July 15th webinar with Wizz Air Chief Operations Officer (COO) George Michalopolous, we asked about the airline adding capacity and adding bases at a time when the market was struggling.
To that inquiry, the airline executive first cited the airline’s “very strong financial position” and strong balance sheet when it first entered the pandemic. Michalopolous noted that the airline began the global health crisis with €1.6 billion in cash- a very strong financial position from which to expand operations. “[We had] the lowest unit cost in the industry. So this has allowed us to really expand during the pandemic,” he adds.
Indeed, having financial resources at a time when incoming revenue is all but a trickle makes up one big part of the equation.
Airports are keen
So other than having a strong cash position, what else is spurring Wizz’s expansion? Well, the global health crisis has created a golden opportunity for the airline when it comes to accessing new airports.
The COO elaborated on its strategy of growth, saying,
“Why are crises good times to expand? [Because] I think there’s a lot of suppliers- airports in particular, which are keen to work together. And there are more market opportunities- you are able to build market share quicker, become relevant in the market quicker…In times like this, airports are keen to attract new airlines which are growing, and we’re one of the only ones out there growing.”
Michalopolous points out that this ‘keenness’ from suppliers to work together stems from other airlines scaling back their operations, thereby creating opportunities for expansion. “So, yeah, crises, in general, are for those who can afford to [expand], and are really good opportunities for expansion.”
Wizz Air’s strategy makes sense. The carrier ran a lean operation before the crisis and was able to use its ‘savings’ to broaden its footprint in the market at a time of soft or non-existent competition. This should see the carrier make even bigger gains as the air travel market continues to recover.
What do you think of Wizz Air’s pandemic-era expansion? Is it a good strategy, or is the airline setting itself up for trouble if the market suddenly shifts in the wrong direction? Let us know what you think in the comments.