How József Váradi Made Wizz Air Into One of Europe’s Biggest LCCs
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APEX Insight: József Váradi’s career in aviation took off on the back of Eastern Europe’s shifting political winds. After a brief stint at Malév Hungarian Airlines, he launched Wizz Air. Fifteen years later, it’s now the largest low-cost carrier in Central and Eastern Europe.
It was 11 p.m. on a July evening in 2001. József Váradi was bowling with colleagues when his phone rang. It was the chairman of the board of Malév Hungarian Airlines, Hungary’s former flag carrier. “Hey, we need to meet… We need to meet now,” he said. Having had a few drinks, Váradi hesitated. But the chairman insisted and so Váradi left his colleagues to meet him in a restaurant, somewhere in the center of Budapest.
“We had a board meeting today,” the chairman told Váradi at the restaurant. “The chief executive’s contract was not extended. We need a new CEO. So, do you want to take the position?” It was only recently that Váradi had become the airline’s chief commercial officer. He answered honestly: “I don’t know. I’m kind of half drunk. I’m not sure I’m really in a position to be making a decision.”
But by eight o’clock the next morning, Váradi had made a decision. As he told the audience during an interview at the World Travel Market (WTM) in 2014, he went to the chairman and said, “Of course I’m taking it.”
József Váradi was born in Debrecen, Hungary, in 1965. He graduated from the Budapest University of Economic Sciences in 1989, the same year Hungary’s communist state was dismantled, ushering in a new era of free-market liberal democracy. Shortly after, he joined Procter & Gamble (P&G), where he spent the first 10 years of his career. His entry into aviation came when he was headhunted for the role of chief commercial officer at Malév, which became defunct in 2012.
“I always felt that the airline business wasn’t as good as it should have been … I still cannot explain why I decided to get into this business. I came from a highly profitable, exciting, multinational business at P&G into something that was struggling day in and day out, making huge losses,” he explained in the WTM interview. “When you work for a huge multinational, 80 percent of the success is done at the point you show your business card. That is certainly different in the airline sector. You need to fight for your survival, you need to prove yourself, and I think that’s the personal challenge in what I did.”
“To succeed in the airline sector, you need to fight for your survival, you need to prove yourself, and I think that’s the personal challenge in what I did.”
In his brief time at Malév, the state-owned airline began replacing its aging fleet of Russian jets, Fokkers and classic Boeing aircraft. He also oversaw the introduction of Boeing 737s, in addition to a radical restructuring of the business and cost-cutting measures. When a new center-left coalition government came into power in 2002, it was time to leave. “The company was state-owned. The new regime had a different view on life and we said goodbye to each other.”
The following year, Hungarians went to the polls to vote in a referendum that would steer the nation’s course for decades. The country voted overwhelmingly (83.3 percent) in favor of joining the European Union. It meant Hungary would be a member of the world’s largest economic bloc and its citizens would be free to live and work anywhere in the EU. Spotting an opportunity, Váradi teamed up with five other people, and three months later registered an airline under the name Wizz Air.
The group had decided from the get-go to operate Wizz Air as a low-cost carrier (LCC). The airline had managed to secure financial backing from Indigo Partners, a US-based private equity firm that also holds stakes in other LCCs around the world. “We concluded very quickly that we would pursue the low-cost airline model,” he said in the WTM interview. Aware of what Ryanair and easyJet were doing in Europe, Váradi traveled to North America to get a perspective on what LCCs like WestJet, JetBlue and Southwest Airlines were doing on the other side of the Atlantic.
In a 2016 interview with Emerging Europe, Váradi explained that the idea for Wizz Air was predicated on two factors. The first was that in the early 2000s, flying was still a service offered to privileged people. “We believed that flying should be much more accessible. We thought we could reform travel by making it more affordable,” he said. The second was the EU’s eastward expansion, which opened new markets to fly to underserved central and eastern European destinations with growing economies. During the 2014 WTM interview, Váradi elaborated on why timing was crucial to launching Wizz Air: “I don’t think we could have done it before, because the regulatory environment was just not available for such initiatives, and we couldn’t have done it later, because competition would have taken over the market by that time.”
“We believed that flying should be much more accessible. We thought we could reform travel by making it more affordable.”
LOW-COST HIGH AMBITIONS
On May 19, 2004 – the month that Hungary, along with seven other central and eastern European countries joined the European Union – Wizz Air launched its first commercial flight, from Katowice International Airport in southern Poland, an airport Váradi described as being “literally in the middle of nowhere.” Given Váradi’s history with Malév, he said that Wizz Air chose to begin operations from Poland “in case the Hungarians would go against the initiative and potentially kill it.”
The other reason was he wanted travelers to view Wizz Air as a pan-European airline. In the past 15 years, the carrier has sustained double-digit growth in its passenger numbers and expects to increase its current fleet of 87 Airbus aircraft to 300 by 2027.
In Wizz Air’s first few years, its customers primarily consisted of eastern Europeans moving westward in search of better job prospects and higher salaries. The airline was competing against LCCs such as Bratislava-based SkyEurope and Warsaw-based Centralwings, both of which folded in 2009. Váradi says an obsession with keeping costs low also explains the airline’s success. “You have to be very focused and very good at executing your business model,” he explained in his interview with Emerging Europe. “The business model also has to be right for the market you operate in, and I think Wizz Air has got it right compared to the others.”
There are only two types of LCCs, Váradi observed during the 2014 WTM interview: “true” LCCs, which are fixated on cost-cutting and ancillary charges, and “lazy” LCCs, which allow full-service carrier expenses to creep into their business models. “Only Wizz Air and Ryanair are genuinely low-cost,” he said.
His stance has softened slightly since then. Last year, Wizz Air announced it would no longer charge for hand baggage. Speaking to Bloomberg TV in July last year, Váradi said Wizz Air often received negative feedback over the policy. “We’re falling in line with the rest of the industry. It will pose some operational challenges, obviously, but I think the industry has figured out how to do it. We encourage people to travel in an efficient way and we’re going to incentivize efficient travel.”
These days, Váradi divides Wizz Air’s customers into three groups: those traveling for study or work, leisure passengers and business travelers. He finds it interesting that the last segment is now a typical customer, “because people think that business travelers are inclined to fly more on [full-service] flights,” he told Globes, an Israeli business news publication, last September.
Váradi also anticipated consolidation among European carriers following the insolvency of Monarch Airlines, airberlin and Alitalia. He says the emergence of sub-brands such as KLM’s Transavia, Lufthansa’s Germanwings and Air France’s Joon is an example of this. “The reason why legacy airlines are moving in the low-cost direction is simple: The lower the operating costs are, the easier it is to show good results. From an efficiency, market cap and growth potential standpoint, Wizz Air is now reporting the best results in the industry,” he told Globes.
Váradi is clearly confident in his airline’s future. Last November, he announced his airline had placed a huge aircraft order for 146 Airbus A320neos at the Dubai Air Show. The order is worth $17.2 billion at list prices and is part of a 430-jet deal negotiated by Indigo Partners. Váradi said the order would be a game changer for Wizz Air. “Our ambition is to become the undisputed low-cost leader in Europe, and this order is a significant milestone.”
József Váradi: Chief Executive Officer, Wizz Air, was originally published in the 8.2 April/May issue of APEX Experience magazine.