When you’re haunted by the voices you want to silence
Or, they may say: you end up reaping what you had sowed. It is what Wizz Air, the Hungarian low-cost carrier, is currently facing. And we are very sure it is just the beginning. The beginning of getting some justice for our pilots or crew-members, who were cruelly abandoned mainly because they had refused to be blindly obedient to such a ‘benevolent’ company.
We have recently found out that the Wizz management team is due to answer some specific concerns raised by a group of 14 investors, who condemn Wizz Air’s constant practices to forbid their employees to form and join trade unions. The investor group raised their concerns, by calling on the company “to publicly and formally recognise employees’ rights to form and join unions; and commit to non-discrimination on the basis of union membership” in a letter seen by Reuters. Some of them even threatened to sell their holdings – of over $ 23 billion – if the Budapest-based firm would not soon address these issues.
We noticed that the Wizz Air management team has its own ways of growing the business. Yet, we had noticed that most of the time, their focus is on profit while completely ignoring ‘workers’ fundamental rights. As if people don’t count. At all.
‘Well, Mr Varadi, we want to make sure you understand that people count for us,’ declares the ETF General Secretary, Livia Spera.
She continues: ‘Workers are not just figures at some end of the month statistics. They are human beings trying to make a decent living, keeping your company alive day after day. But they don’t have just obligations; they also have rights, and a right to protect these rights through unionisation. But even when you disregard the law – trying to hide or cover your actions against the workers under the emergency situation due to the pandemic – know that ETF, as the largest representatives of aviation workers in Europe, is still here. And we will do whatever it takes to make sure you don’t continue the abuses, and we will keep on fighting to protect the transport workers’ rights. Spreading fear may generate some complete obedience for some time. But it will not be forever. The voices of those you are trying to silence will be heard again. That is our promise not just for you, but for any other companies, who forget that a business is based on people and all business must operate to fully respect the rights of those working for growing the business!’
A short, documented history
Wizz Air has long been a household name in much of Central and Eastern Europe. The Hungarian carrier has thrived on the failure of some others. Malev Hungarian Airlines and LOT Polish Airlines are just the best-known names, but the list goes on and it seems Wizz Air intends to capitalize on the failure of many others.
The carrier prides itself on its cheap and rapidly expanding business plan, which has placed it as the third largest low-cost airline in Europe. The company has now switched its focus from the Central and Eastern Europe to Western Europe, opening a raft of bases in the UK, Italy and Norway in the midst of the worst crisis the aviation industry has ever seen.
But while it seems that Wizz Air is riding high, the way it and its leadership operates is starting to reveal a more complicated reality.
Expansion at all costs
The expansion on the back of the failure of others has been the modus operandi of Wizz for many years.
As an infant airline, it expanded quickly, opening bases in Poland and Romania in 2008, Slovakia in 2013, Bosnia-Herzegovina in 2015, as well as Georgia, Moldova, and Bulgaria all in 2016. But early on, the airline capitalized on the failure of the CEO’s previous airline, Malev which went into administration in 2012. This pushed Wizz to become the national carrier’s de facto replacement and overnight it became the largest airline in Hungary. Then, as it does now, Wizz has sought to expand rapidly and three years later, in 2017 it launched a British division, Wizz Air UK. The division launched just as Monarch entered administration, and the airline rapidly picked up its cheap leftover slots in London Luton airport, which has since become its largest UK base.
But this expansionism comes with a hefty price tag, and great expectations. No, it has nothing to do with passengers’ expectations. These are of little value to Wizz, it’s all about rounding up some accounts. Or better to say it from the very beginning: just one account. On 2nd July 2021, during one of the worst summers in aviation history, shareholders in Wizz promised a bonus of £100 million to Wizz Air CEO, Josef Varady under one condition: he should continue to rapidly grow the Hungarian low-cost carrier.
The sense of optimism was clear with this commitment, and the confidence of shareholders in Varady’s leadership was solid. But the lessons Wizz Air has learned as a vulture airline are still being used today. On the eve of the expected demise of Norwegian Air, it opened bases in Norway in October 2020. Now, as Alitalia is finally gone, and in its place a smaller version of it, ITA has arrived, Wizz takes another gamble in Italy opening and expanding bases across the country. Yet, according to Italian aviation authority ENAC, it is struggling to run the flights. During the summer of 2021, Wizz Air launched a major recruitment campaign in Romania and Italy to plug the gap as it was in desperate need of crew. But months on, this seems to continue to be a problem. Varady himself has now been involved, visiting bases in Poland and speaking with staff about their issues in a thinly veiled attempt to seem worried about their issues. But as pointed out by the European Transport Workers’ Federation (ETF), the reality is that these jobs are simply not attractive enough. In an industry with little sense of stability, they are offering temporary working contracts, without basic workers rights, no life or health insurance and no social dialogue. While employers everywhere are struggling to get people back to work, it is fair to say Wizz is not making a strong argument for it, and because of this the staff shortages continue.
Don’t jump too soon!
While at first, Europe braced for an epic post-COVID-19 low-cost carrier battle between Wizz Air and Ryanair, the reality seems to have come up a little short, at least for now. Wizz Air’s adventures into Norway have not quite turned out as planned.
The company intended to tap into the highly lucrative Norwegian domestic market off the back of an expected failure of Norwegian Air, and as the expected only low-cost carrier operating in the domestic market. But as Ryanair realized in the winter of 2016, business models really matter in Norway. The model Wizz Air choose to operate in Norway, exploiting its Polish workers by paying them miserable salaries and sending them over to live in hotels for weeks on end, generated significant criticism from the Prime Minister of Norway, unions, and the general public. As time has shown us, rumors of the demise of Norwegian have indeed been greatly exaggerated and they continue to fly today. While Norwegian’s low-cost long-haul dream has been scuttled, state support from Norway has allowed Norwegian to live for another day and continue running its lucrative domestic operation much to the disappointment of Wizz Air who ended such operations less than a year after starting them.
Fool me once…
But look further South to another country with yet another lucrative domestic market, Italy, and you will find a similar story.
Italy has long been a focal point for foreign low-cost airlines, its largest airline is in fact an Irish one, but these airlines have become part in parcel of the Italian market, with extensive and mature networks across the country. But, as instructed by Brussels, one of the most troublesome airlines in Europe, Alitalia, has been forced to restructure. A smaller and more challenged airline (ITA) has taken its place, and this smaller operation has left gaps in the market, gaps which Wizz Air intends to fill. But the Italian dream has so far been a challenge. Wizz Air has struggled to hire staff and struggled to get enough aircraft to run its operation in Italy. So much so, on the 3rd of August 2021, it received a warning from the Italian national aviation authority ENAC over the large number of flights it has so far cancelled. The warning written in Italian, which also was leveled at Volotea, stated “The recall of ENAC to the companies involved is also aimed at verifying the availability of fleet and crews, with the aim of assessing the possible need for a downsizing of operations or limitations on services”. It goes on to add that the airline should “check in advance the adequate availability of human resources”.
Wizz Air might also underestimate the strength of the Italian unions. Back in the summer of 2018 when strikes were held across Europe by pilots and cabin crew of Ryanair, Italy was a stronghold of such resistance, and there is no doubt that workers will walk again if pushed. Today we see it in the case of ITA, where Italian workers have once again rallied to protest and defend their rights in the transfer between Alitalia and ITA. But like Ryanair, another low-cost company which believed that unions have no place and no purpose their business model, Wizz is likely to be left with no choice, and it is taking a huge risk by not preparing itself for inevitable unionization.
But like in Norway, we must ask ourselves: has Wizz Air went a bit too far in Italy? Certainly, it has invested heavily into the Italian market, and it is safe to assume it intends to capitalize on any leftovers ITA has left behind. But the demise of Alitalia may not be as monumental as people think. ITA’s expectations in terms of revenues are high: up to €3.3bn by 2025, and the bailout package, set by Brussels is clearly supporting the dream. Pictures of an Alitalia airplane with an “operated by ITA” sticker signal a not so dramatic shift, and without a doubt, the airline will remain a part of the Italian diaspora regardless of what it is called.
Naturally, Wizz Air’s expansion has come at a cost, both financial and operational. In addition to the closure of its Norwegian operation, in August 2021, it announced the closure of all operations in Germany, and the closure of its base in Riga. Aircraft and staff have (where possible) been transferred to other bases, likely to fill the void in Italy and elsewhere where there are major gaps in Wizz Air’s operations. But you don’t need to look far to spot a few more worrying signs that Wizz Air’s operation is starting to falter. In addition to the concerns raised by ENAC, the company has hired a number of third-party operators to operate flights that it simply does not have the crew or airplanes to run. To name a few, the Bulgarian operator ’Fly2Sky’ ran two thirds of its flights on behalf of Wizz Air in Italy and Maltese company, HiFly Malta, also had an aircraft on the books for Wizz during August 2021. Given the complex and sometimes secretive nature of this third party so called ‘ACMI’ market, it is likely there is a lot more happening behind the doors that we cannot see.
But clearly the optimism of shareholders and the reality on the ground do not correlate. Right now, if you are lucky enough for your flight to depart, there is no guarantee it will be on a Wizz aircraft with a Wizz crew. Such a situation does not bode well for the future of the airline, which is committing heavily in expanding its operations, but fails to see that expansion is not always the best solution, particularly when the market is at rock bottom. Perhaps it would be better for passengers, staff, shareholders, and the airline itself, if Wizz Air managers were to lose the ego, and face the reality that right now those in aviation must be patient as the industry rebuilds and responds accordingly. Taking such a risk is particularly detrimental to its passengers. As we seen with Monarch, Thomas Cook, Air Berlin, and many others over the years, the demise of an airline is rapid, harsh and brutal, particularly for those who have spent their money with those companies.
But not all shareholders share the same optimism of perpetual expansion through the pandemic. On 20th November 2021, Mr. Várady himself sold £2.1 million worth of shares in his own company, almost 3% of the entire airline. Simply Wall St. noted that Várady is not the only insider selling shares, and points to the fact that fellow senior manager Owain Jones also sold off shares, and crucially, no insider has bought shares in the past year in the company. To add insult to injury, Wizz’s major backer US firm Indigo Partners sold almost £8m in Wizz shares in March 2021 despite investing in over 200 new aircraft in November 2021, for its ultra-low-cost airlines brands, some of which will go to Wizz Air. To add to the long list of issues, it now is seeing a potential shareholder revolt with the recent letter from 14 shareholders demanding it allows workers to unionise. Unsurprisingly the market reacted accordingly, with Wizz Air shares losing 2.45% of their value overnight.
Wizz Air’s expansionist leap into the dark comes with considerable risk, and while it is early days, the risks in Norway, Germany and Latvia have not paid off. The signs are not positive, and most airlines who have rapidly expanded in the airline industry have historically failed to achieve the level which they aimed for. Around the track, there are several warning signs for Wizz; the insider sales, the lack of staff, a potential shareholder revolt, and the inability to maintain a consistent level of operation for a start. But it remains heavily invested in its expansionist ideology, particular in Italy. But if its Italian expansion goes the same way as Germany, Latvia and Norway, Wizz Air may follow the path of those it has capitalized upon and find itself in the ever-expanding airline graveyard.