EXECUTIVE SUMMARY:

This report is the outcome of a consultancy assignment contracted  to the author  by the senior leadership of   Wizz Air PLC,  a  European Low Cost airline( LCA). The brief given : ‘Wizz wants to be the no 1 airline in Europe”. Thus this report is essentially in the domain of strategy.  The current position (strategic) of the Company is assessed in relation to the industry( Low Cost Airline industry in Europe). The aspirational position( No1 among European LCAs) is mapped in the strategic space. The gap between the current and aspirational position( the strategic gap) is assessed. Various strategic alternatives to close the strategic gap considered are discussed  and evaluated.  Finally  a few  strategies are recommended and implementation strategies outlined.

Methodology:  The information and data for the analysis has been drawn   by extensive  research  in the aviation space, economy, socio- political environment,  annual reports of Wizz Air and  other competitors ,brainstorming sessions, and  focus group discussions. Tools like SWOT analysis, Balanced score card , value chain analysis have been used under a  the Internal Reporting Framework has been used.

Introduction :

Wizz Air is a low Cost  airliner   mostly  operating  in Central and East Europe(CEE)- Poland, Romania, Bulgaria, Hungary, Check R, Slovakia and  11 such others. It was established  in 2003.   became operational in 2004  and is one of the fastest growing  airline( being 4^th in terms of capacity growth) in world,  with  capacity increase  18.9% in the year 2015-2016, to become 50 th largest airline in terms of capacity, carrying 23.8 million passengers in 2016. It has constantly added new routes and bases . As of now it operates in 500 routes from 28 bases and connects 141 destinations in 42 countries. It has continuously added to its fleet of air crafts . It has around 79aircrafts of  A320 A family. In terms of market share, it is a leader in geographical segment it operates  ie- Central and east Europe, where it has reported market share of 39.08% Financially it has done well , earning profits on a regular basis.It reported a net profit of € 225.3Million at a net profitability margin of 14.3% in year 2017.

Business Environment : The  Business environment for the European positive industry has been very promising after deregulation of the European commercial market in the nineties. No of paasengers carried by the industry is around 900 million per year and is growing 5% annually. The number of airports served are  over 400  and . The demand for travel across Europe has been ever increasing. The low oil prices and consequent low fares have helped spur the demand. The environment favours the low cost airlines and the share of the LCAs in passenger traffic is 38% . This is more than double the figure of 17% in Year 2015

Current strategy : The Wizz’ strategy is to be ultra-low cost air service provider. In trying to be attain cost leadership. It does so by increasing operational efficiencies. It[s average load factor is high  at 90.1% and aircraft utilisation is 12.5Hrs per day.It aggressively hedges on fuel prices  to keep fuel costs low. All these measures contributed to reducing the total air line unit cost  at € 3.75 per ASK.( available Seat kilometre). It is a niche player operating in a small geographical area- the CEE. It has achieved volume growth by increasing its network ( routes) in this area.

Competitor Analysis: Ryanair is the leader in the aviation industry in Europe in terms of passenger carried as well as by market capitalisation( value of the company). It is also a low cost  carrier. Its average fare charged per passenger is as  low as €40.5, which makes its break even load factor high at 73%. Nevertheless it’s able to be cost leader by being  operationally highly efficient with a passenger load factor of 94% and aircraft utilisation rate of 9.33 hrs.per day. It has increased its network in Europe as well as in specific markets across Europe( eg Israel). It is not averse to growth via joint ventures and acquisitions. Acquisition of Aer Lingus,  proposed offer for  Alitalia  takeover and investments in China are prime examples.

It is evident that both Wizz Air  and leader – Ryan Air are competing on the same variable Cost Leadershp. Table 1. gives a comparison of underlying variables which drive the strategy.

The low cost strategy requires a high operating efficieny in which the operating costs are the lowest. A comparison of  ratio operating costs /operational revenues of the two airlines are given below 

This shows that Wizz Air is able to match the leader Ryanair in many aspects of operational efficiency. However it looses out in  the items of airport handling charges and air craft rentals.  This indicates that Ryanair is able to keep these over heads  down  because of  higher volume of passengers carried  and favourable lease agreements

A comparison of .fare wars of different air lines in Europe  can also be gauged from the graph. Fig .1

Figure 1 shows the airlines carrying capacity versus  fare per kilometre charged.

From Fig.1 it is clear that Wizz Air and Ryanair are charging the  same fare per km but Ryan has almost 6 times greater capacity than Wizz Air.

The other comparisons are as follows;

Thus though the cost advantage of Ryan air is negligible , it has competitive advantage having a much greater coverage of operations and higher volume of passenger traffic.  Though the fare charged per Km is almost same for both airlines, it is possible that public perception is  Ryanair is cheaper compared to Wizz air as the share of revenue  from fares is higher at 73% for Ryan air and only 58% for Wizz air.

Thus the wide gap in competitive advantage that lies between the the No1 eurpean airliner and the aspirant for the No.1 position is in size – size of operations, size of area of routes and coverage, and larger capacity.

Situational analysis:

As part of the process of strategic mapping a SWOT analysis of  WiZZ air is made on the framework of internal reporting.

The internal reporting framework considers the processes of the organisation lead to changes in capital. Capital is  a collective concept – aggregate of all the resources used by the organisation as well as the relationship with all its stake holders which goes into create value both to the organisation as well as to the stakeholders. Value is said to be created when there is  a positve change/ transformation in the capital and value is said to be destroyed when such change is negative.  The framework categorises capital into six types-1) financial, manufactured, intellectual, human, social and relationship.

As WizzAir aspires to be the no1 in Europe, an assessment of each of components of capital in the lines of SWOT analysis. 

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