Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Wizz Air has shelved plans for an operating hub in Abu Dhabi to focus on its core markets in central and eastern Europe as the low-cost carrier looks to reduce costs after a difficult two years.
The London-listed airline blamed the decision to pull out of its Gulf state joint venture after six years on geopolitical conflicts in the region, the failure to secure rights to fly certain routes, as well as persistent engine issues. Wizz said it would stop local flights from September 1.
Shares in Wizz, which have fallen more than 50 per cent over the past 12 months as the carrier has grappled with problems with its engines, were up 1.7 per cent to £10.50 on Monday morning.
József Váradi, Wizz chief executive, said the decision to focus on the carrier’s central and eastern European operations and select markets in western Europe was “good for the business”.
“It gets rid of the underperforming bit of the business, creates capacity, management time and [allows us to] focus on really investing into the market where the business does well,” he told the Financial Times.
Wizz is working towards a long-term target to grow passenger capacity by 20 per cent a year and have 500 aircraft by around 2030, up from around 200 now.
During the pandemic, the airline outlined ambitious growth plans as it looked to challenge low-cost rival Ryanair’s supremacy in Europe.
Dubbed “the last great growth story in European aviation” by one investment bank, in 2021, Wizz Air tried to buy the UK’s easyJet, and offered Varadi a £100mn bonus if he could more than double the stock price.
But the retreat from the Middle East indicates how Wizz Air’s strategy has since shifted. It has now focused its strategy back on to central and eastern Europe, where the aviation market is less saturated than in most of western Europe.
Wizz has been under significant pressure to review its cost base following the release of full-year results in June that showed that profits had fallen more than 40 per cent while expenses soared. The airline said at the time that costs for maintenance, materials and repairs had jumped by almost 16 per cent, in part due to having to hire spare planes to fill gaps in its fleet.
The carrier on Monday said geopolitical tensions in the Middle East had led to repeated airspace closures around Abu Dhabi, impacting market demand. At the same time, the regulator in the Gulf state had not supported the carrier’s original plan to expand its services to fly to India and Pakistan.
Váradi said legacy carriers were being “privileged with regard to having access to the best markets”. The regulator in Abu Dhabi, he added, wanted to “preserve the privilege to [flag carrier] Etihad”.
“I think this is defeating the purpose of the whole industry . . . [which is] to create competition, to allow airlines to bring a wide range of offerings to the market,” he added.
At the same time, he said, Wizz had been heavily impacted by persistent problems with the GTF engines from Pratt & Whitney. The issues have limited Wizz Air’s growth plans since the RTX-owned engine maker began recalls of its engines for inspections in 2023, owing to concerns over contaminants in the powdered metal used to make its turbofan engines.
Váradi said the “hot and harsh environment” in the Middle East had also undermined the durability of the engines, adding that the problems were taking a lot longer to resolve.
“The engine degradation is three times faster than operating the same engine in an environment like Europe,” he said.
