Issue 1, 2014. February-March

   

WIZZING ITS WAY TO EUROPE: A CASE STUDY

Łukasz Ponczek analysis the impact low budget airline Wizz Air, together with the Kutaisi Airport, has had on tourism and the airline industry in Georgia.

Łukasz Ponczek

On 27 September 2012, the then-President of Georgia, Mikheil Saakashvili; the Georgian Minister of Economy; the Prime Minister of Hungary; and the CEO of a major European airline gathered together to reopen the renovated Kutaisi airport. It was an impressive line-up of VIPs, considering Kutaisi is a minor airport that recently catered only to a handful of passengers. Prior to its renovation it only had an occasional flight visiting its tarmac. The new, shiny 4,500m2 terminal, capable of handling a significantly higher volume of passengers in comparison with the past, seemed somehow megalomaniac. However a new carrier, Wizz Air, a pioneer in low-cost flying in Eastern Europe, has promised growth in stature for the local airport. Almost a year and a half after the reopening of the airport there has been an increase in passenger numbers and activities at the airport.

Over the last couple of years, the Georgian aviation industry has been rapidly developing. In fact, over the last three years, the number of air passengers has doubled. Over the past few successful years, several important airlines have entered the Georgian market, serving, in particular, Tbilisi International Airport. However, it is Wizz Air that promises the most change in the airline industry, since its radically different business model offers an alternative to more traditional carriers.

Wizz Air started functioning in Georgia in September 2012 with a single flight between Kutaisi and Kyiv that operated just three times a week. It promised inexpensive fares and rapid growth of passenger numbers. Its fares are undeniably cheap, with prices starting as low as 60 lari during the low season. Indeed, Wizz Air's entrance in the market seems to be a success. A few months after its initial flight into Georgia, Wizz Air announced its intention to link Kutaisi with several cities in Poland and Ukraine. In addition, during the summer 2014 season, it will offer yet another two new routes, to Vilnius, and to Lviv, which is Wizz Air's fourth destination in Ukraine from Kutaisi. Its initial capacity of 558 passengers per week will increase to 4,650 passengers per week this summer, making Kutaisi the most rapidly developing airport in Georgia. It is likely that in 2014 the Kutaisi airport will overtake Batumi as the second biggest airport in Georgia in terms of passengers served.

How does Wizz Air's business model differ from that of traditional airlines? Its priority is to keep costs low. It implements this policy by flying into secondary airports that have lower landing fees or might even subsidize the airline to fly into that particular airport. It also focuses on point-to-point travel and therefore does not offer transfers. It operates a single type of aircraft, to save on maintenance. Finally, all additional services, like luggage or on-board meals, require an additional fee.

Prior to Wizz Air's market entrance, there were already two airlines implementing the low cost carrier business model: Pegasus Airlines and FlyDubai. But Wizz Air is an airline that has the capacity to truly revolutionize the market in Georgia, because, unlike the others in Georgia, it does not implement a hub model where all or most routes operate from one central base. Tbilisi already has a substantial international network of routes, which makes the impact of other airlines on the Georgian market fairly limited. In contrast, Wizz Air's reliance on secondary bases helps to build up alternative options and provide a larger network.

What are the potential benefits of the development of the Wizz Air network? First, it ensures an influx of tourists to previously inaccessible regions. This summer, five out of seven airports that Wizz Air will fly to previously did not have a connection with Georgia. Second, the increased activity in Kutaisi provided by Wizz Air will challenge the monopoly of TAV, the Turkish operator of the other two international airports in Georgia: Batumi and Tbilisi. Indeed, during the Kutaisi airport's opening ceremony, Saakashvili stressed that the Kutaisi airport is intended to challenge Tbilisi's airport monopoly. Third, it provides competition and an alternative to the other airlines in Georgia. Finally, it serves western Georgia, providing international transportation for Imeretians and easier access to tourist destinations like Vardzia and Mestia.

However, this success story is not without drawbacks. Georgia is a small market, and the aggressive development of Wizz Air's network might prevent other European low-cost carriers (LCCs), like EasyJet or RyanAir, from entering that market. Frequently, LCCs' rapid expansion prevents competitors from considering enteringa market and makesan airport dependent on the expansion-oriented LCC for passenger traffic. That is why a diverse growth of network is more desirable. Finally, Wizz Air provides links only to Eastern Europe; an expected network into the Western Europe or Asia is yet to be seen from Kutaisi.

The new terminal in Kutaisi airport is busy with passengers, with Wizz Air being the leading airline at the airport. The success of that airport brings Imereti closer to Europe and helps to develop the region economically. If Kutaisi and other Georgian airports continue to attract a variety of airlines with many diverse routes it will be on a path to achieving easy and affordable air transport.

Łukasz Ponczek is a M.A. graduate from University of Aberdeen (UK). He spend a year in Georgia with TLG program. Currently he works for an energy consultancy company in Poland.