Hungary's Wizz Air to focus on fares, not profit, in bid to gain on Ryanair

Earlier this week, Ryanair warned of a challenging winter season, due in large part to lingering Covid-related uncertainties
Hungary's Wizz Air to focus on fares, not profit, in bid to gain on Ryanair

Wizz Air is trying to gain on Ryanair with lower fares.

Hungarian low fares airline Wizz Air is prepared to slash passenger fares and sacrifice profit in a bid to challenge Ryanair’s superiority in Europe as air travel begins to recover ahead of next year's key summer season.

Wizz posted a €57m operating profit for the second quarter of its financial year, and a loss of just under €121m for the first half. That loss was down 50% year-on-year.

It expects to make a €200m loss for its third quarter, which runs to the end of December, with that trend potentially carrying over into its last fiscal quarter.

Wizz, already Europe’s third-biggest discounter, is staging an aggressive expansion as it seeks to narrow the gap to sector leader Ryanair. 

While the Budapest-based firm became the first major European carrier to return to pre-Covid capacity in August as demand boomed, it said the winter months will require keener pricing to spur sales.

“We are seeing the peak periods like Christmas looking very strong but in the off-peak periods we are going to be seeing some weaker demand.” chief executive Jozsef Varadi said.

Bookings should surge again from next spring, he said. "We are stimulating demand with pricing given the continued impact of Covid-19," Mr Varadi said.

Wizz will stimulate the market as necessary while remaining in “investment mode,” the CEO said.  The company has already taken 37 new aircraft since the start of the pandemic, opened 16 bases and added 300 routes.

Wizz’s strategy should position it to “capture attractive markets,” Bernstein analyst Alex Irving said. Earlier this week, Ryanair warned of a challenging winter season, due in large part to lingering Covid-related uncertainties. 

It reported a first-half net loss of €48m for the six months to the end of September and warned of full-year losses of between €100m and €200m.

“This outturn will be crucially dependent on the continued rollout of vaccines and no adverse Covid-19 developments,” it said when presenting its third-quarter results on Monday.

Nevertheless, Ryanair made its first quarterly profit since late 2019, operated more flights than its European rivals in the summer, has seen an improvement in second-half passenger levels and expects to be back to pre-Covid profit levels by March 2023. 

That said, it said the immediate forecast for prices and yields is “challenging” and the near-term outlook remains extremely uncertain.

At Wizz, meanwhile, Mr Varadi said that eastern Europe’s slow rate of coronavirus vaccinations is holding back bookings in the Hungarian carrier's biggest markets, though take-up levels are beginning to accelerate. 

The same countries were a boon for Wizz earlier in the year as looser travel restrictions and lower infection levels allowed a faster return to travel than further west.

-additional reporting Bloomberg

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