Wiz Air CEO József Váradi has warned that current cost pressures “could mean our fares – and those in the wider industry – move up if the cost environment changes”.
Fuel is one the biggest costs for airlines, making up roughly one third of operating expenses, according to analysts.
U.S. crude oil is now trading at about $ 72 a barrel and Brent crude LCOc1 topped $ 80 last week for the first time since late 2014.
Hungarian low-cost airline Wizz intends to make savings by switching to more fuel-efficient A321ceo aircraft.
Nearly 30 million passengers fly with Wizz and 35 per cent currently travel on these planes.
This figure will rise to 44 per cent by next April, says Váradi.
An industry-wide pilot shortage has also affected costs, contributing to a 31 per cent rise in staff costs. This makes up about eight per cent of the airline’s total cost base.
Maintenance spending has also escalated.
Váradi is confident in the airline’s future though, believing rivals will suffer before Wizz Air does.
“There’s a number of airlines which haven’t been able to make money in the good times and so they won’t be able to in the bad times,” he told The Telegraph. “That might be helpful for us.”
Wizz is expecting a 20 per cent increase in passenger numbers to 36 million in 2018-19.
“As the 2019 financial year begins, we remain very optimistic for the coming 12 months,” Váradi told Air Transport World.
“Higher fuel prices are supporting a stronger fare environment and we expect these macro conditions to provide Wizz Air with market share opportunities as weaker carriers withdraw unprofitable capacity.”
He also says the airline doesn’t have competition on 40 per cent of seat capacity. Consequently they can manage how many seats they offer on routes without losing market share.
This means they can more easily feed costs through to fares.
A dramatic rise in ancillary revenue at Wizz – such as baggage charges and food and drink – has boosted sales by nearly a quarter to €1.9bn (£1.6bn).
The boss believes rivals face increased competition from other airlines on more routes so would be unable to raise fares.
Other savings by Wizz Air include shutting bases where they only have one plane – for instance in Slovakia – and moving the aircraft to larger airports.
At the moment, Wizz has seven planes in Luton Airport – occupying nearly 40 per cent of the airport’s capacity.
It hopes to soon overtake existing rival EasyJet, the only other airline company to have more planes at Luton.
