By Sarah Young
LONDON (Reuters) -Wizz Air said it was exiting its Abu Dhabi operation to focus on its main eastern European market, after almost two years of turmoil in the Middle East wiped out any chance of making a profit there.
Wizz, a low-cost carrier founded in Hungary for eastern European travellers, expanded first into western Europe, before opening a base in Abu Dhabi six years ago, and pinning its hopes for future growth on a major expansion into the Middle East.
But it abandoned those plans on Monday, blaming recent geopolitical instability for frequent airspace closures and disruptions, which have hit travel demand, and meaning there was no hope for recovery at the loss-making unit.
Wizz CEO József Váradi said returning to Wizz’s “bread and butter” of central and eastern Europe, where it competes with Europe’s biggest airline Ryanair, would boost profits.
“We have been underinvesting in this market over the last few years. Now we can go back to the full spirit of continuously exploiting the market,” he told Reuters.
“These are the markets that we know work.”
Shares in the London-listed airline rose 2.6% in mid-morning trade. The stock is down about 62% over the last two years, hit by issues with Pratt & Whitney GTF engines which led to the grounding of some aircraft.
Wizz has 280 aircraft on order from Airbus over the next five years, and Váradi said most of these would be deployed in central and eastern Europe, which accounts for about two-thirds of the airline’s business, while Britain, Italy and Austria are just under 30%, and Abu Dhabi had been about 5%.
He said there would be sufficient travel demand to sustain that size of fleet, whether Ukraine fully opens as a market once more, or not.
“I think it would be great to have Ukraine,” he said.
Even before the heightened tensions in the region, Váradi said Wizz’s low-cost model was struggling to work in Abu Dhabi because engines degrade faster in the hot, harsh environment, making its operations there less efficient.
Secondly, Wizz had not been granted the market access it had been promised to India and Pakistan when it first decided to open Abu Dhabi, limiting the growth potential.
Wizz, which had operated a joint venture with Abu Dhabi Developmental Holding company (ADQ), said it will stop local flights from there in September.
(Reporting by Sarah Young in London, additional reportiby by Yadarisa Shabong in Bengaluru. Editing by Mrigank Dhaniwala, Vijay Kishore, Jane Merriman and Susan Fenton)
