Wizz Air CEO sets two-year plan to revitalize airline amid setbacks

The head of Wizz Air Holdings Plc has given himself two years to turn around the low-cost airline and win back investors after a run of setbacks, including a humbling retreat from the Middle East.

Jozsef Varadi, who co-founded Wizz in 2003, aims to cement a recovery by mid-2027, he said, when the hangover effect from the failed Abu Dhabi initiative is through and extra shop visits for the geared turbofan engines powering Wizz's Airbus SE fleet should be complete.

"We need to see a drastic change of performance because by that time basically the GTF issue should be behind us," the 59-year-old chief executive officer said in an interview in London. "There is no worse scenario than being on the ground."

Shareholders will need to see sustained progress to become convinced, Varadi said. Shares of Hungary-based Wizz have fallen 4.6% this year, following a 35% swoon in 2024. They remain at about one-third levels reached in early 2020, before the Covid-19 pandemic.

To get there, Varadi is pulling back from risky initiatives that have contributed to the slump in the airline's stock price. Wizz is simplifying its route network "- hewing closely to the airline's home market in central and eastern Europe "- while the carrier works its way through the engine issues and the fallout from the Mideast push, which has temporarily stranded some planes in the United Arab Emirates.

The airline has faced several issues over the past couple of years that have thrown its operations into disarray, with the most severe being the metal coating flaws on the Pratt & Whitney engines. That defect forced Wizz to take dozens of its aircraft out of service for lengthy repairs, setting back the carrier's expansion strategy.

The Ukraine war and consequent airspace closure blocked growth to the east, while the fighting between Israel and Hamas have made it harder and more expensive to operate in that region.

Until recently, Varadi was bent on expansion in the Middle East. He established a base in Abu Dhabi with the intent to connect to India, Pakistan and beyond. But the plans fell through, and Wizz last month dissolved the base, cutting back its capacity in the region.

Asked whether Wizz's misfortunes were caused by bad luck or unfortunate choices, Varadi said that "maybe the truth is in between." The wars and engine issues were "largely unprecedented," and while Varadi stands by individual decisions Wizz made, in a broader sense, he said "maybe we should have re-calibrated our risk appetite."

Wizz wasn't aware of the Pratt engine issues "- exacerbated by hot, dusty conditions "- when it entered Abu Dhabi, said Alex Irving, an analyst at Bernstein. Varadi also couldn't have known about subsequent regulatory decisions in the UAE that choked off access to profitable markets.

Knowing those conditions, Varadi wouldn't have entered Abu Dhabi in the first place and exiting a region where it's not making money is "pretty sensible network management," Irving said.

Budget rivals Ryanair Holdings Plc, whose shares have gained nearly 40% this year, and EasyJet Plc present formidable barriers to the west, leaving Wizz to focus on what Varadi describes as the airline's "bread and butter" in central and eastern Europe.

Over the next five to six years, Varadi wants to increase Wizz's market share from 26% to 30% or higher in central and eastern Europe as the airline pushes regional airport expansion and travel takes off to areas like the Albanian coast and the Romanian Transylvania region. Wizz aims to double its capacity in this market over the same time frame, tracking faster GDP growth compared with the "burdensome" taxes and slower growth of western Europe, he said.

Ryanair has also been investing in the region, and competition between the two low-cost airlines is something Varadi called "a fact of life." Still, there's enough room for both to grow while legacy airlines fade, he said.

Varadi's turnaround roadmap is predicated on Wizz remaining independent. Buying another airline, being taken over or becoming partners with other market players is not on the cards because it would create too much complexity at a time when Wizz is going back to basics, the CEO said.

With the pullback from Abu Dhabi and other elements of Wizz's strategic regroup, the airline won't need anywhere near the 47 A321XLR extra long-range jets it has ordered.

Varadi now plans to take about a dozen of the XLRs, primarily on flights from the UK to destinations like Saudi Arabia. Wizz has rights to convert 24 of those to standard A321neos, and is negotiating with the planemaker on the remainder.

Wizz is also in talks with Airbus to stretch out deliveries through 2030 by about two years.

Since its arrival last year, the XLR has underperformed in terms of weight and range, Varadi said. For Wizz, the single-aisle jet is heavier to operate than expected which in turn costs more to run.

Still, the CEO remains confident Wizz will exit the turnaround with a stronger, more efficient airline and a more focused network. He expects some inefficiency on costs for some time until the engine issue is resolved, but he said it was still better than grounding a portion of the fleet.

"We are still standing," Varadi said. "It requires adjustments and corrections and actions, but I think we are taking them."