Low-cost carrier flies into stiff headwinds in trying to compete with Ukrainian competitors.
In 2008, Wizz Air Ukraine, daughter company of the Hungarian low-cost carrier, entered Ukraine with plans to expand and conquer the market.
Wizz Air started in July 2008 with four local flights, connecting Kyiv, Lviv, Simferopol and Odessa and planned to start flying to Zaporizhzhia and Kharkiv. Its rates started at around $15, which seemed like a breakthrough for the Ukrainian aviation market, where internal flights usually sell starting at $100 for one-way tickets.
/.../ According to the initial plan, by 2012 the airline’s projected fleet would consist of 14 Airbuses, which would require more than $1 billion investment.
However, as Wizz Air started flying, its strategy for Ukraine underwent radical change. First, the company canceled all of its local flights except to Simferopol in Crimea, a popular holiday destination. Instead, Wizz Air concentrated on flying internationally and, as of early 2011, its timetable consisted of more than 11 international destinations – from Norway’s Oslo to Turkey’s Antalia. Wizz Air’s grand plans to increase its fleet were also put on hold. Currently, the airline has only two aircraft. /.../
Starting on March 27, Wizz Air will become the first international airline to use Zhuliany [a much smaller secondary airport in Kiev requiring substantial modernization]. /.../
Wizz Air officials say that saving on airport expenses will allow the company to achieve better efficiency, add new destinations to its timetable and grow in size. They wouldn’t name the potential destinations, however, citing the numerous obstacles they face in Ukraine.
The Kyiv Post talked to John Stephenson, Wizz Air vice president, about the company’s risks and expectations involved in the move to Zhuliany, the destinations it would like to add to its timetable, and the obstacles the airline is facing.
KP: As I understand, you planned to change airports for quite a while. Why did it take so long and what are the risks that Wizz Air Ukraine will be facing?
JS: When we first met with the airport about a year ago, the level of navigation equipment in Zhuliany was not suitable for our operations./.../
As for the risks, there are always risks connected to operating out of a secondary airport, versus a primary one. For example, while in thick fog, Boryspil would be able to accept aircraft to land, while an airport like Zhuliany would ask it to divert.
KP: What are the cost efficiencies of moving to Zhuliany for Wizz Air?
JS: We expect to achieve a 10 percent reduction of airport charges as immediate savings. However, as we grow and our passenger traffic increases, we should reach the 20-25 percent reduction of airport charges.
Besides, we would be able to achieve extra efficiency by lowering down the turn time for our aircraft from current 50 minutes to 30 minutes, as we have in most of the other airports. Combined with shorter taxi time, it will basically give us an additional hour of flying per day free of charge.
KP: Perhaps this would allow you to fly more internally? Back in 2008, Wizz Air Ukraine planned to develop at least five local destinations and competing passengers using trains and buses seemed to be your primary target. Why hasn’t this strategy worked out?
JS: When you put a 180-seat Airbus on a domestic route on to a market, which is not large enough, this can have a very significant impact on this market, in terms of the fares that you can achieve, and impact it has on competing airlines. Therefore, we found that A320 was a bit too large for the domestic market. As the market grows, we will look at this issue again. /.../
KP: How has the fact that the Ukrainian aviation market is heavily monopolized by one player, an aviation alliance among Aerosvit, Dniproavia, Donbassaero, and, reportedly, Windrose, linked to Ukraine’s second richest person, Ihor Kolomoysky, affected your work in Ukraine?
JS: I would say that getting access to routes is our biggest issue in Ukraine. The routes that are operated by other carriers and because of the bilateral agreements, new carriers cannot come on to them. I wouldn’t say it’s related to the monopoly situation when four out of five carriers are run by one group.
I don’t believe that monopolization is necessarily the driver of our challenges in Ukraine; it is rather the lack of market openness. If there was greater openness, we could compete with that monopoly carrier more effectively. At the moment, we do not have the chance to do that.
As a result, we have to operate destinations that no one else is operating – like Katowice (Poland), Trevizo (Italy), and Luton (U.K.) – thus creating an entirely new market, as opposed to stealing the market from other carriers. But I would like to compete with Aerosvit and Ukraine International Airlines more, if route access was available.