As Covid plunged the airline industry into chaos in 2020, the boss of Wizz Air made an audacious move.
Sensing an opportunity for the European low-cost airline, József Váradi decided to expand – taking on new aircraft, scooping up take-off and landing slots and opening new bases – just as rivals were retrenching.
“I actually quite liked it,” Váradi remembers. “Yes, of course, we were not immune from the impact and our employees were affected, our consumers were affected, our operation was affected. But the strategic opportunity, I think, enlightened all of us that, you know, this is our time. The industry is moving backwards, we need to push forward.”
Váradi started his career in the “extraordinary, unprecedented opportunities” of the fall of communism in his native Hungary and spent 10 years working for US consumer goods company Procter & Gamble [P&G] before briefly running his country’s state airline.
The entrepreneurial spirit that ultimately led him to launch Wizz in 2004, with backing from US investors, was evident from a young age. Váradi excelled at maths at school, and remembers, aged about nine, selling the answers to the day’s tests to his classmates. “I bought my first soccer ball as a result, and I was so proud of it, because I don’t think the family could afford that. But I was able to buy it.”
As London-listed Wizz expanded during the pandemic, it was dubbed “the last great growth story in European aviation” by one investment bank. In 2021, with its share price rising, the company offered Váradi a £100 million (€116 million) bonus if he could more than double the stock price and challenge Ryanair’s supremacy in Europe.
Then, the problems started. Just as the rest of the industry was taking off again, Wizz was hit with multiple headwinds that combined to thwart its growth plans. “Too many black swans,” as Váradi puts it.
Unlike other airlines, Wizz decided not to hedge against swings in the price of oil before Russia’s full-scale invasion sent prices soaring, meaning the airline was exposed to rocketing fuel bills.
But the final, and biggest, of the “black swans” hit last year when Airbus engine supplier Pratt & Whitney began recalling planes for inspections, amid concerns over contaminants in the powdered metal used to make their turbofan engines. Again, Wizz Air was the worst-hit airline in Europe.
“Everything almost felt unprecedented, relative to what we had been going through before. And the real issue was that most of these matters actually were unique to us, unlike Covid that affected the entire industry,” reflects the chief executive.
Váradi, who is now a long way from securing that £100 million bonus, with Wizz’s share price languishing at about £20, compared with the £120 target, says the company’s management team has been put through a “very steep learning process” but has become more agile in responding to shocks.
“Crisis management became a constant in the company ... we used to be a very focused business, very focused management team ... but we became even more focused, almost laser focused on some of the issues... We really became micro-managers,” Váradi says.
Wizz’s leadership held daily calls seven days a week at the start of Ukraine crisis.
With the aircraft shortage expected to last two years, nearly as long as the pandemic disruption, Wizz has been forced to significantly slow its growth plans and rip up flight schedules, carefully choosing how to deploy its remaining aircraft to fulfil the routes that are most profitable and provide the strongest strategic advantages.
Some City analysts now doubt the growth plans are realistic, and Wizz’s troubles have been seized on by its rivals. Ryanair’s boss Michael O’Leary has written Wizz off as a challenger, and has taken to issuing press releases announcing “rescue fares” whenever the airline retreats from a route.
Váradi is still working to a long-term target to grow Wizz’s passenger capacity by 20 per cent a year and have 500 aircraft by 2030, and has not ruled out hitting his bonus target. (Helpfully, the board gave him another two years, until 2028, last year.)
The chief executive, who says he recently calculated he was “in the air almost the same amount of hours per year as an average pilot”, admits he regrets the decision to sack 20 per cent of its workforce during the pandemic and has not laid off any more staff during the recent crises.
He stresses he has learnt the value of “people, loyalty and experience” – a tricky balance in an industry known for trying to keep its staff costs low and avoid unionisation.
“I think [the redundancies] kind of dented the morale of the company. We looked at it as an economic issue, or a financial issue. And I don’t think we gave sufficient credit for the morale impact of it. So that’s clear early learning, we have not fallen into the trap again,” he says.
Wizz employs about 8,000 pilots, cabin crew and other staff, up from 4,000 in 2020-21. It is still hiring, although this has slowed since the engine troubles.
Váradi has almost 25 years of experience in the airline industry but still casts himself as an outsider who benefits from a mix of entrepreneurial zeal and commercial nous, forged through his time at P&G.
“It was an outstanding learning school. I still define myself as P&G, to be honest, and I’m still using most of my learning, most of the skills I picked up there in the business today.”
Váradi believes this background has given him an edge over executives who have spent their lives in the aviation industry. He does not mention anyone by name, but reading between the lines, under the Váradi school of management, most of his rivals are not perfectly suited to the job.
Chief executives who trained as pilots cannot make “objective decisions”, while engineers have been brought up in a “narrow, focused, deep-diving discipline” and do not have strategic experience. “Finance guys ... don’t have the entrepreneurial spirit, they tend to be conservative.”
Willie Walsh, the former boss of British Airways owner International Airlines Group; Lufthansa chief Carsten Spohr; current IAG boss Luis Gallego and O’Leary all fall into one of these categories. Váradi concedes “lots of people” will not share his views, but is adamant “you really need to put up a commercial guy”.
Váradi rarely discusses how his background in communist Hungary shaped him.
He was born into relative poverty after his father was ostracised from stable work after playing a role in the Hungarian uprising in 1956, which was crushed by Soviet troops in less than two weeks.
“Those 10 days probably cost him 30 years,” Váradi says. “He was put in jail, beaten up, he was prohibited from proper jobs.”
His mother worked in a factory, and Váradi won a scholarship to one of Hungary’s top universities, which he estimates was worth more than his parents’ salaries at the time.
He is clear he had a happy childhood with a supportive family, but believes he has been motivated by the opportunities his father missed out on because of government repression.
“He had a lot more potential than he was able to materialise given those circumstances, and maybe that kind of became a driver in me. I felt that I ought to do something for the blood, to prove that we are worth more than what he ended up with.” – Copyright The Financial Times Limited 2024
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