On a July Monday, the runway at London Luton airport melted. Multiple flights were cancelled, including Wizz Air’s evening flight to Budapest. It then took two days for a replacement flight to come and pick up those 200 affected passengers. Does it really take two days for the airline to send an extra plane?
First of all, what happened was unfortunate. It’s the first time I’ve had the melting of a runway as a delay or cancellation reason. So, very unusual situation and obviously something we didn’t expect and I think is unheard of. The number one thing was we wanted to have confidence that we’d be able to operate the flight. So, Monday the flights were all canceled. Tuesday we were still working with Luton Airport to try and understand would the runway be up and running? Would there be any impact? Would we have anything? The last thing we want to do is rebook everybody onto a flight Tuesday, have them all show up at the airport and then we have to cancel again. That would not be ideal. So we said, look, let’s make sure we have the conditions in place to operate this flight. Then we had to get the crews together, the planes. We put it on Wednesday afternoon, because if we put it first thing Wednesday morning there’s a high chance many customers can’t make it. I understand from a customer perspective, two days is a long time. But we also wanted to make sure when we put it back in, we can make sure we could operate the flight.
During the first calendar quarter, you had 153 planes which is to rise to around 170.
We just took our 160th this week.
Congratulations. Does any of these serve as a backup plane?
Yeah, we have a number of backup planes that we keep in the system. And that’s part of what we have to do to be able to operate, these cover everything from melting runways to bad weather to unexpected maintenance. We have 40 bases around the network. We don’t have a spare plane in every city around the network. So when a delay happens we have to get the plane and the crew put into the right place to be able to operate.
Speaking of bad weather, one of our colleagues was involved when there was a storm in Paris, and the outbound flight from Budapest to Paris had to divert to Brussels. In that case, crew time was up for that day, so they couldn’t make it to Paris and then back to Budapest, but had to fly the plane empty from Brussels to Budapest. In these cases, is there no backup crew in one of your biggest bases to then take the plane to Paris and bring the customers home? It became a similar situation with an extra flight coming a couple of days later.
Look, we try, but especially in a situation like that where the plane is at the destination, not at the base, if the crew is out of time, it’s a very simple black and white rule: the crew has to stop flying. So our option is either we get the plane and the crew back to Budapest without the passengers, which is not ideal, obviously, for the passengers who are flying from Paris to Budapest, but it allows us to make sure we have the plane ready to go and have the crew in position for the next day, so we don’t have what we call follow on impact of cancellations delays. Otherwise the alternative is we fly the plane to Paris or leave it in Brussels. The next morning when the crew has available time, we fly them to pick up the passengers. But then the plane is now half a day late getting back to Budapest and we’ve had to likely potentially delay or cancel other flights as a result.
Whenever a delay happens, we notify the customers right away. We notify them that if they need to get accommodation or meals, we will reimburse the accommodation and meals. And we try to get them rebooked as soon as possible, or give them a refund, or give them 120% in Wizz credit. Disruption is clearly not ideal and we don’t like to impact the customers, but when it does happen, we do try to minimize the impact for the most number of customers possible.
We’ll discuss thosee notifications a little later, but first let me quote your CEO who has said in June that Wizz is “deploying resources to minimize disruptions”. What would those be?
We’ve taken a number of actions. We’ve pulled back the number of flights that we had in the schedule. That allows us to free up and have more crew available in the network to help support when disruptions or delays happen. We have more spare aircraft available in the network. We put more buffer into the schedule so that when there is a delay we can absorb it in what we’re doing. We reduced what we would call complex flying, basically patterns which are more complicated and have more risk in them. We put in extra checks on the planes, basically, everywhere we could in the system, we’ve tried to reinforce and add additional support so that we can do more on time and reduce the impact on customers.
Do you have a percentage on how many flights you had to pull?
From where we had at the beginning of June, we pulled about 5% of capacity out for July and August. As of June, we’re planning to operate at 135% growth over summer 2019. And right now we’re at about 130, 131%.
And these cancellations are usually happening before the 14 day mark. (Doing so, airlines are only obliged to refund the tickets – the author.)
Exactly, that’s the reason we did it then. If you cancel on the day of the flight, that’s a terrible outcome for everybody, right? Customers are disrupted, your rebooking options aren’t there, you’re stuck somewhere. So we said look, we know we’re going to need to put some more resilience and buffers into the system. Most of these customers got six, eight weeks of notification. That at least allows them to have time to come up with alternatives, etc., and make sure that they can get to their destinations with minimal impact.
I know it’s an industry practice to do that, to oversell a bit and overplan a bit and then cancel those flights that are the easiest to cancel, but is that not a bad message when the industry is relaunching after a crisis?
Yeah – we don’t actually do that. I mean, we will oversell some seats on flights, so we do a little bit of overbooking. In summer, we do basically zero, though, because everybody shows up for the flight. It’s actually a pretty advanced algorithm equation that looks at it and determines what is the likely number of passengers so that on any given flight, the chance of an actual passenger being denied is very low. But we don’t actually add extra flights in and then try to cancel out the last minute. I think as you said, it’s not a great outcome for the customer, it’s misleading to do that. This summer, trust me,
Going back to the notifications in London Luton, they were supposed to fly out of Monday and they wrote on forums that it was Wednesday morning when they got a text from the Hungarian Embassy saying that a flight is going to come that afternoon. Should that not come from the airline?
We put the flight back in on Tuesday evening late. We then sent out a communication to all the customers who had had flights canceled Monday and into Tuesday morning. We sent it to every passenger who had been impacted to Budapest or Debrecen, and said you’re welcome to rebook onto this flight. We also notified the Hungarian Embassy and Ambassador because we figured they would have connection to people and so they could also put the word out. So we did both avenues. If someone didn’t get the message from us, most likely it’s because we didn’t have the right contact information for them. They may have bought through a third party, which sometimes gives their phone number instead of the passenger’s phone number, and so then we can’t reach them. But every customer should have received a text from us saying this flight was coming back in and they could rebook, while it was the travel agents or external booking sites who had to notify customers who booked through them.
In these forums, passengers also write that obviously multiple airlines had to cancel flights on that day and Easyjet or TUI, for example, were collecting people with representatives and gathering them onto buses and sending them off to hotels, while everyone was trying to find the Wizz representative and there was none. Do you not have a representative on an airport where you’re the biggest operator?
We have obviously Wizz Air staff that are based in Luton. With that said, we use our ground handling partner over there, they should pull everyone together. We also notify the customer electronically. We recognize that not even in the best of situations – even if we do our best to pull all the customers together and put them onto buses, honestly, that’s a very long and slow process usually. And more times than not, customers find their own paths of booking a hotel, etc. That’s why we say we think actually the better solution in these cases is typically to give the customers a choice. Say, book your hotel, we’ll reimburse a hotel. If you need transport, we’ll reimburse a transport. We do typically have a customer representative on site, but we rely much more on the digital channels to get the message out to the customers, because that’s usually the most efficient and effective way to get the customer.
Think about many online companies that you use today. They have amongst the best customer experiences you can envision out there. Most of what our customer says is honestly, I don’t really want to interact with a person. You have one or two ground staff at an airport trying to deal with 240 people just on one flight. It’s not a very effective ratio and way to get the message out. It’s much more effective if you can put the power into the customers and just let them rebook it on their own and get it done. And then, you know, the customer can leave the airport right away, go to the hotel. They don’t have to wait to get organized to go to a specific hotel or wait for the bus to show up, which always takes time.
In this specific case, what do you think could have gone wrong? I mean, there’s a very long forum thread discussing how they can’t reach anyone online, and that all the hotels are overbooked around Luton, but they don’t know if they should stay until the morning for a flight they don’t know would happen or not, or they should go back to downtown London, and all this is basically live streamed in a forum. Are they not reading their emails in the meanwhile? Or is it not in there native language, in this case, Hungarian?
All communication is on the language used during the booking. What I think went wrong, first of all, you had a runway that melted in the heat. As I said, I’ve never heard of that before and I think the scale of that caught us and caught everyone a bit off guard as to what it was going to mean. We probably should have taken action sooner. It did take us a while to basically say, right, flights are cancelled, we’re not going to be operating, let’s reset. I think then once you had the situation of the airport with customers, we need to look into it. And we’ll take it on to understand, did we notify customers promptly? Did we get the messages out as we should, and did we give them the options that they should have? I can’t say much beyond that, but let’s say we need to look into it and get better because our goal is not to leave customers stranded without information sitting in an airport for hours. Our goal is getting the information out about what’s happened to their flight and what is an unfortunate circumstance, and let them rebook and get them on their way as soon as possible.
The only thing I would say though is, it’s very easy to focus on kind of one day, one event that’s happened and I’m not trying to dismiss what happened that day because it was painful for every customer involved when you have all those flights canceled. But I think if you put it in perspective, we’re expecting to carry somewhere in the neighborhood of 32 million customers across the extended summer season, until the end of October. We’re carrying four or five million customers a month. And as with every summer, we’re going to have these days where you have huge events, be it a runway melting, be it a giant thunderstorm that happens, etc. It’s very unfortunate and I do feel very sympathetic for the customers who were impacted by the event. And I do understand we need to make sure and look at, did we deliver in the situation to make sure we gave the customers information. But I think in the whole, we are now operating with a much more reliable network than we had a month ago, we’ve put the resilience in on the whole getting the customers their information.
I’m going to quote again, and it’s again, it’s going to be Mr. Váradi. There was an internal speech that unions have leaked to papers in June, and in that, the CEO was asking the staff to “go the extra mile” instead of one-fifth of entire staffs on certain bases calling in sick beause they’re tired. Wizz Air’s reaction afterwards was that it’s not the pilots who are tired. Who’s tired?
Some days I’m tired, but well, look, I think first of all, the quote that was leaked and the video segment that was leaked was taken out of context. If you look at the full context of what Joseph was trying to say was, look, we have a challenging summer, it’s a very challenging operating environment. We’re facing delays, it’s not easy to operate. To be clear, we don’t want any crew ever operating when they feel fatigued or tired. That’s unsafe for passengers, it’s unsafe for us, and that’s not at all what we want. What we were trying to just say is, look, we put the changes in place to try and support the operation which we just talked about. That should allow the crew deliver for our customers because we do recognize it’s important. Think about most of these customers haven’t traveled for potentially three years with COVID to see family, to go on vacation. And the last thing you want is your flight is canceled or disrupted at the last minute. And so it was more a recognition to say we appreciate everything you’re doing and trying to deliver to our customers.
There’s a lot of talk and reports about how the airports and ground handlers themselves are understaffed this summer after the layoffs of the COVID-years. And even I keep getting Facebook ads from Wizz AIr that are hiring cabin crew, which I find nice by the way…
Don’t worry, I get the ads too.
How many more staff would you take if they were available?
We’re actually hired to the point we expected to be at this somewhere. As you said, airports are understaffed. You could look around right now and almost everything in the supply chain is understaffed. Airports, air traffic control, ground handling, security, you name it. We had a lot of foresight, in that last summer we had a lot of impact from lack of crew. We then took action in September, laid out the plan of what we were going to need to fly the fleet we had this summer. We laid out the crew hiring plan and we’ve been pretty much on that crew hiring plan. There’s been a couple months low, a couple months high since then. But right now, we’re in line with what we wanted from a crew perspective. The ads you’re getting and others are getting about hiring have more to do with the fact that we’re not done growing. So as we talked about, we just took our 160th plane right now. By next summer, we’re going to be at around 190, 195 aircraft. Obviously we’re going to need more crews. That’s why recruiting has become just an ongoing thing for us. It’s more of that than we need people to fill holes that we have right now. But if you want to apply, you’re welcome to apply.
I’m good, thank you. I mentioned the forum messages saying that they experienced the other airlines at Luton doing it the old-fashioned way, having the one or two reps on ground trying to collect all those hundreds of passengers together. Your previous role was with Easyjet, and among others, you were a Chief Customer Officer. So how, for example, Easyjet’s process is different in vis maior cases like tarmacs melting?
Well, I said I haven’t seen many tarmacs melting. But I think if you look at disruption, to be honest, I don’t think they’re all that better in what they’re doing. I think Easyjet’s process would have been a similar, typically, electronic notification of the customer. You would have, similar to us, some kind of ground staff support trying to get out there to move the customers and then trying to get customers into hotels. The thing you have to put in perspective in any one of these big events, if you think about Luton, we had 47 flights that evening cancelled at Luton. So you’re talking somewhere in the neighborhood of 10,000 passengers impacted, give or take. I’m sure you’ve been to Luton and I lived over by there for a while. Trying to get everyone moved into a situation to get buses, etc., to everybody just doesn’t happen. I take it as feedback. We need to look into how do we notify the customers? What did we get right and what did we get wrong? And I think that’s more what we need to fix is. It’s less about the electronic method of distribution or delivery. I know we don’t really have Amazon in Hungary, but if you look at it, Amazon is one of the most effective at dealing with disruption, whether it be returns, etc. And you never deal with a person. There’s no reason we can’t do the same. We may have not have executed well in this situation, but that’s what we have to get better more than changing to have endless number of reps descending on the airport trying to organize everyone around. I saw a similar number of complaints on Easyjet and others when I was there in these kind of mass shock disruptions that are unexpected.
Careful with Amazon though, they tend not to be the most loved employer.
Well, I’m not saying from an employer perspective I want to model Amazon. But my wife loves to shop on Amazon and overshops at times and then returns things. And the process is amazing: you click three times, print out a label and you’re done, you return the item. Why disruption for an airline has to be more complicated than that? I think there’s no reason, and I think that’s where we do need to get better at our execution to deliver to the customer.
We didn’t even really discuss airports so far. But generally, the old-fashioned understanding is of what happens when you buy an airplane ticket that you trust the whole system, the airports, the ground handlers, the airline to take you and your luggage…
From point A to point B.
Exactly to point B, and exactly, at least, on the day that you planned. Do you think this premise holds this summer?
As I said, there’s 32 million passengers we expect to carry this summer. I think for the overwhelming majority, that will hold. Maybe with some delays here and there which is not what we want. There is going to be part that’s disrupted and part that has been disrupted. And you mentioned airports, but I think honestly it sits with pretty much the entire value chain at this point. You can start from governments. The industry right now is basically at 90% overall of capacity versus 2019. We’re not even back to fully what we were in 2019, Wizz, I think, in fairness, Ryanair as well, we’ve been pretty clear and we’ve been following our plans pretty closely since last summer. Here’s how much we’re going to fly, and here’s how much we flew, we’re delivering against that. And we’ve been growing the load factors back up, everything. I think if you look many of the other carriers, they would put out a number of what they’re going to operate. And then as you said, reduce it down when they didn’t see the demand there or they were flying with much lower load factors. Now that changed, but I don’t think that should have been such a surprise for all the players in the industry. So why is the air traffic management system not staffed up to handle what we had at least in 2019: Why didn’t we take the time? We’ve had three years. We had issues back in 2019 with trying to fill the capacity. Why don’t we use this time to invest in operating some of the infrastructure, training new controllers to come in. Ground handlers knew this was coming. Security knew this was coming. You can look across the ecosystem and everybody had time to prepare for what was coming. It seems like everybody got completely caught off guard by this. And I’m not saying we’re perfect, we have things we have to fix too, but we have hired to exactly the plan we want to have. We had the crews in place to handle levels of disruption like we saw in 2019. But unfortunately, we’re seeing more. So yeah, it’s challenging to deliver your proposition, which is A to B when, as you said, it’s an ecosystem of players that have to deliver that together. But that’s where I think we’ve put the measures in place to kind of compensate for where we see the failings everywhere else, be it ground handling, airports, ATC, so that we can guarantee now to customers you can book with competence, and we’re going to take you from A to B, absolutely.
Speaking of the system, the airlines are fine, which we know from the fact that there’s an extra profit tax in Hungary, issued by the government.
Question is, what’s your definition of fine, right? But okay.
When this came out, you mentioned Ryanair, whose CEO, Michael O’Leary recommended Economics for Dummies to our economics minister. What’s a book you would recommend to him?
Good question. I don’t know if I’m going to go giving literate book recommendations to the economics minister. But I would say the whole concept as we’ve said, it’s kind of hard to believe. The premise of extra profit is that you have profit, let alone extra profit. And I think as an industry, we’re not back to being profitable yet. Everybody is just now starting to get back into comfortable levels of operation, and that’s just in the summer. We still have a whole winter to go through and that’s where airlines typically lose the bulk of their money.
If I was going to give a category of books, maybe I’d give a book on sustainability to the minister. Some other governments are doing similar type or have done similar type of taxes, but they’re doing it where they reward the players who have the most sustainable technology and are investing in providing a better, more sustainable product into the market and penalizing those with less efficient products. Out of our base here in Budapest, 40% of our planes are the A321 Neos now, which is the most efficient plane out there, even more than Michael’s 737 Maxes. Why not take advantage of that to reward and encourage those want to put in the good technology that uses less fuel, less emissions, less noise, and benefit everybody.?I think that would have been a win-win way to approach to this, rather than taxing “extra profit” when none of us have profit to even start with.
I don’t know about you, but I think that level of sophistication was not among the goals.
No, exactly, I think we all know the motive was to get the money fastest. But there could have been ways to do that probably while hitting some other goals at the same time. And you could get the same amount of money at the end of the day. You can see this in some airports. Look at Swedavia in Sweden, Heathrow, Geneva or Amsterdam. They’re all putting incentives in for this, and you see a real mix then where airlines are changing their behaviors to give more efficient technology into the airport.
You have a quarterly report out tomorrow. I’m not sure if we can discuss a lot of financial details, but the last one I saw had the ancillary revenue at 60% plus.
About 53%.
Are the trends generally like that? Just to put it in perspective – you make more money from extra services than on the basic flight fees.
Yeah, that trend is still the same. It’s part of our philosophy too, which is we want to get you the most affordable air travel to get we can possible. And we want you to pay for the services that you want to use and not for everything else. So our goal is to then try and keep ticket prices as low as we can. And yeah, then if you need to add on bags or seats or food or whatever you want to purchase along with it, we offer that to you, but that’s an extra add-on you can decide to do.
At least in financial circles, it has made rounds last year when a proposed bonus of £100M for the CEO came out. For that to happen, Wizz’s stock price should reach £120 from £48 last year. Right now it’s around £19, so that would now take a 6-fold growth in just 4 years. With the war, with the oil prices, with how the dollar and euro is moving and all that, is that still feasible?
It’s short term cha llenging. But if you look at the big picture, the interesting thing is, COVID was completely new for the industry. But economic downturn, high fuel prices – these are situations we have a lot of experience with. Look back at 2003-4, look back at 2008, look back at 2012-13. We’ve been through these kind of economic or high fuel price downturns before, and we follow a very similar pattern. Basically, customers start buying down, they become more cost conscious in these environments because everybody watches their money a little bit more closely. What that means is I’m not quite willing to pay my, let’s say 50 euros extra to fly Lufthansa and get a nice little chocolate on the flight, which as far as I can tell is the only difference I get when I fly with Lufthansa these days. I can pay a euro at the store and get my chocolate. I’m going to go for the more cost effective option for my flight. Those legacy airlines have to reduce their pricing to try and attract customers, which means they come close to our price. But we also can, and we’re more efficient at that price level and we have the cost level that makes our margins better. Ultimately, what happens is players pull out capacity and the prices reset into the market and enough to make it sustainable.
To look a bit further into the future as a wrap-up, you have an agreement in place with Airbus to “study hydrogen fuel together”. What does that mean?
We’re the greenest choice for flying in Europe today. We’re operating about 30% more carbon-efficiently than the rest of Europe. If all of European airlines operated with our fleet and efficient business model, emissions would go down by 34%. And we have a target to further decrease our CO2 emissions per passenger kilometer by 25% by 2030. We’ve been continuing to invest in the best technology that’s up to today, which is the A321 Neo. And the hydrogen partnership is continuing that. We want to work with Airbus to basically find what is the next best technology that can come into the market that’s even more sustainable. And yeah, if it’s gonna fit into our business model, so operating with solid passenger loads and can fly the bulk of our network, we’re going to be the one of the first ones that invests and flies the plane commercially. That’s why we want to partner with them to be the leader.
Those 2030 targets, are those per flight or for the whole fleet – I’m asking because your fleet is forecasted to vastly expand by then.
It’s per plane – per passenger, basically. It’s at 56-57 grams now per passenger kilometer. We want to get that down even further, to 43 grams by 2030. So on a per passenger basis we continue to be the most efficient airline operator out there.
