Is this just the beginning of a new economic depression? Wizz Air is cutting back its capacities by at least 20 pc because they calculate with significant losses in Q2 (April – June). The measure is unprecedented in the history of the company, but the CEO hopes that from July, they will be able to function again with full capacity.
According to Magyar Hang, Wizz Air’s commerce department is now working on creating a new framework for operation. The company already started to let people go in its headquarter: instead of the 46 leaders, only 38 work for them today. Furthermore, they cancelled their apprentice and university student programmes, suspended the recruitment of new workforce, abolished wage compensation, and
offer unpaid leave for many of their employees.
Regarding finances, Wizz Air is renegotiating the contracts with its suppliers and tries to prolong the payment deadlines. Moreover, they try to reschedule paying for new planes and supervise every expenditure.
The situation is painful, but thanks to the money the company has, they will be able to survive the depression, the CEO said. He added that
they calculate with a half-year-long crisis period
based on their prior experiences with, for example, the SARS virus.
In contrast, experts say that the discount flight company is in huge trouble. Their customers are the most sensitive on events such as an epidemic, and they simply disappeared from one month to the other. The business model of the company functions well if the number of passengers remains constant or it increases. But even a 20 pc fall can result in serious consequences. Therefore, they will probably have to postpone the extension of their fleet since many of their planes will remain on the ground in the following months.
Experts said that postponing the payments towards suppliers is a sign of crisis. Prolonging the deadlines
might have a catastrophic effect on the suppliers as well.
For example, one of their partners is the Malév Ground Handling that struggled with financial problems even before and lost a lot of customers already.
The period between April and June is the most important in the airline industry, so all flight companies are to face serious losses. Experts do not think that Wizz Air or their biggest rival, Ryanair, will collapse, but they believe that
they have to say goodbye for a while to their ambitious increase plans.
After Magyar Hang published its article, Wizz Air reacted in a statement saying that they do everything they can to preserve the quality of their service. They emphasised that they have significant cash reserves, so their operation is stable.
Source: Magyar Hang