“Even if current crisis in the aviation industry affects us, other airlines will be in a much worse situation,” Jozsef Varadi says in an interview for Index. The Wizz Air’s CEO expects a wave of bankruptcies in Europe.
In an interview for Hungarian portal Index, Varadi said he expects the crisis caused by coronavirus to last for the next half a year, but he’s also convinced that Wizz Air would survive it.
The good news is that when crisis started, we had € 1.5 billion. According to industry studies, Wiz Air is one of the strongest airlines in the world in terms of liquidity and solvency. So when the crisis really hits, it will hurt others much more than us. If we wouldn’t fly a single flight, we could still finance ourselves for about three years. Many of our competitors have only 1-2 months of liquidity, many are already trying to get loans or negotiating with governments for financial aid, otherwise they will not be able to survive. And even if they get that help, their plans will change dramatically because the money will need to be repaid. We expect that weaker airlines will disappear or continue to weaken, while stronger ones will be able to run into significantly better market positions after the crisis.
Wizz Air does not intend to ask Hungarian government for public assistance:
We do not think about state aid. But it’s interesting what will happen to those who do. On the one hand, that money usually has to be repaid, these companies will not be able to develop as much as before, because they’ll need to make structural changes. On the other hand, there is also the legal side of such aid.
When asked about airlines that will have the most trouble, he mentions Norwegian, Alitalia and… Lufthansa.
Several airlines have serious liquidity problems, the credit market has crashed, so they won’t be able to raise money there. If someone wants to borrow today, it costs considerably more than two months ago. On the other hand, banks aren’t sure if they should even lend money to airlines at this point. This is a basic problem, but it is currently difficult to predict what will happen to these companies.
How did it happen that is Wizz Air sitting on such amount of cash?
We have always lived by “cash is king” principle, leaving a big reserve. The aviation industry is susceptible to numerous shock situations, just to mention epidemics, conflict in Ukraine or the current crisis. We may call it Wizz Air’s management philosophy, but I think this industry should operate with significantly more cash than would normally seem reasonable. On one hand, it makes us more resilient in times of crisis or even in a weaker economic environment. On the other hand, we can act immediately if a strategic opportunity opens up.