Change from Above: LCCs Bring More Than Just Cheap Airfare to Eastern Europe
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APEX Insight: Alongside Eastern and Central Europe’s political and economic reforms, another revolution has taken off. The deregulation of Europe’s airline industry, which began in 1987, has led to a wide range of low-cost carriers. Cheap airfare offered by the likes of easyJet, Ryanair and Wizz Air continue to facilitate a boom in commerce and an exchange of ideas that play a role in uniting the continent.
In 2004, eight Eastern and Central European countries became EU member states, marking a significant milestone in the process of reintegration of the continent just 15 years since the fall of the Berlin Wall. The airline industry has arguably contributed to the evaporation of Europe’s prolonged political and cultural divisions more than any other business sector.
Over the past decade, easyJet, Ryanair and Wizz Air have been at the forefront of an economic and social transformation remapping Europe, characterized by scores of inbound tourists jostling with outbound working migrants. However, the benefits of the region’s increased connectivity go beyond ticket paying passengers; it is estimated that every extra million passengers in the sky brings 3,000 jobs on the ground.
In the first five years since joining the EU, the number of tourists visiting Poland nearly doubled. Because low-cost carriers often use smaller airports with cheaper landing fees to cut costs, they have also played a vital role in developing tourism in smaller and less well-known cities in countries like Poland, Hungary and Czech Republic.
After Hungary’s flag carrier MALÉV folded in 2012, the Budapest-based Wizz Air swooped in to operate many of its more popular routes and become Eastern and Central Europe’s star performer. The airline, which saw a 23.2 percent increase in passenger numbers last year, uses a business model offering ultra low fares supplemented with some of the highest ancillary revenues in Europe. Wizz Air is also confident about sustained future growth, expecting profits of $237 million for 2016. While the airline currently operates a fleet of 61 aircraft, Wizz Air signed a deal with Airbus in the summer of 2015, committing to purchase 110 A321neo aircraft, the largest single order by any airline to date.
“Central and Eastern Europe is a market of over 300 million people, with growth expectations well ahead of Western European levels.” – József Váradi, CEO of Wizz Air
But how much more can low-cost carriers in Eastern Europe grow? Despite recent fears about the state of the world economy, Wizz Air’s CEO József Váradi doesn’t anticipate growth slowing down for his airline. In an interview with the Financial Times in January, he said, “Central and Eastern Europe is a market of over 300 million people, with growth expectations well ahead of Western European levels. The market needs more stimulation but disposable incomes are rising, and we are well-positioned to take advantage of that market opportunity.”
Read “Upping the Low-Cost Game,” from the March/April issue of APEX Experience magazine for more on the increasing competition among Europe’s low-cost carriers.