Wizz Air passengers as they got off a flight in Greece last week. Wizz is one of just a few carriers that are still taking delivery of aircraft.
Photo: Nicolas Economou/Zuma PressFor many of the world’s big airlines, the coronavirus pandemic is an existential threat. For Wizz Air Holdings PLC, a European budget carrier, it is an opportunity.
On a map behind his desk, founder and Chief Executive József Váradi has marked with red pins airports across the Continent that he is targeting for expansion. Since the pandemic started grounding flights, the Budapest-based airline has announced plans to open eight new bases, including in Milan and Dortmund, Germany, in the next eight weeks. That is expected to amount to 100 new routes.
While the global aviation industry isn’t forecasting a return to 2019 demand until 2023, Mr. Váradi predicts his airline by then will be 50% bigger than it was before the crisis. In the U.S., low-cost Allegiant Travel Co., which mostly flies from smaller cities to sunny vacation destinations, said it could snap up jets at bargain prices as bigger rivals retrench and sell aircraft.
“Our phone rings daily with deals,” Allegiant CEO Maurice Gallagher Jr. wrote in a letter to shareholders late last month. “I expect we will thrive in this changed environment.”
In times of crisis, low-cost discount carriers often benefit, while the bigger, network carriers—with typically fatter organizations and higher costs—are forced to retrench. That is happening again, but on steroids, both because of the scale of today’s crisis and the unusual way demand for tickets is starting to return as lockdowns loosen.
Business travel, a cash cow for the world’s biggest, full-service carriers, is showing no signs of resuming any time soon. Companies and executives, at least for now, have learned to do without. “Business travelers, who provide the bulk of our revenue, have not yet returned in significant numbers,” Delta Air Lines Inc. wrote in a letter to employees last week.
International travel, another strong suit for legacy carriers, is also at a standstill, thanks largely to conflicting travel restrictions around the world designed to keep the pandemic in check across borders.
Wizz Air CEO József Váradi predicts many of his one-time rivals won’t return to the skies.
Photo: simon dawson/ReutersAs economies emerge from deep freeze, though, some leisure travel is returning. That is partly because of pent-up demand among fliers eager to get away again. Many who managed to keep their jobs, but didn’t have anything to spend money on during lockdowns, find themselves with more disposable income.
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That is benefiting some low-cost carriers, who tend to cater to the leisure market. Budget carriers, with their lower cost structures, can often move more quickly into markets from which others are retrenching, said Alex Irving, a London-based analyst at Bernstein. The crisis is also an opportunity for discounters to renegotiate with suppliers, including airports and aircraft lessors.
“It’s really about being able to capitalize on those strategic opportunities,” Mr. Irving said. “We’ve seen market exits, and we’re seeing airlines cut capacity.”
The industry, even for discounters, is still vulnerable. A surge of new cases in many parts of the U.S., where airlines had been banking on a travel rebound, has already threatened to derail any nascent recovery.
United Airlines Holdings Inc. told employees Monday that reservations started to slide at its Newark, N.J., hub when New York, New Jersey and Connecticut imposed quarantine requirements on travelers from hot spots last month. Frontier Airlines, a U.S. discounter, told employees this week that its bookings have taken a hit, and that it is evaluating what schedule reductions it will need to make as a result.
For now, though, some carriers are moving to take advantage. After early stay-at-home orders expired in May, Southwest Airlines Co., America’s biggest domestic airline, launched a fare sale and a marketing push to get passengers back in its planes. It is planning to fly at least 65% of its schedule in July, up from about 50% in June, and expects to steadily ramp up through the remainder of the year.
Andrew Watterson, chief revenue officer at Southwest, said in an interview in June that the airline has added flights, believing that some customers were itching to get out and had money to burn after months of forced savings. The airline declined to comment on any fresh trends in the wake of virus resurgence in places such as Texas.
Allegiant Airlines CEO Maurice Gallagher said his airline could snap up jets at bargain prices.
Photo: Scott Keeler/Tampa Bay Times/Zuma PressWizz Air’s Mr. Váradi predicts many of his one-time rivals won’t return to the skies.
“It’s one thing to stop the operation of an airline, it’s another to restart,” he said. “We will see who can fly again and for how long they can sustain it.”
In addition to its new bases, Wizz Air has doubled the number of aircraft it plans to operate under a new subsidiary in Abu Dhabi where the incumbent, Etihad Airways, is pulling back.
The airline is one of just a handful of carriers that are still taking delivery of aircraft. Since the crisis, Wizz has taken three new jets and expects to bring on a further 20 in the next 12 months. Its total fleet will be 141 aircraft by next summer.
The airline is also in talks with plane maker Airbus SE over options to more quickly expand its fleet, Mr. Váradi said. He said, though, that he will only agree to terms that are fiscally responsible, while also measuring any risk of a second wave of the virus. So far, much of Europe has been spared the sort of sharp increases in Covid-19 cases that parts of the U.S. are suffering.
In addition to negotiations with Airbus, Wizz has been renegotiating its contracts with suppliers to get better terms. He points to a shift from legacy carriers to budget airlines during the previous big crisis, after the financial turmoil in 2008.
This time, he said, “it’s probably going to be a bigger shift, because of the magnitude of changes.”
Write to Benjamin Katz at ben.katz@wsj.com and Alison Sider at alison.sider@wsj.com
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