Wizz Air and Ryanair: are the rivals actually living in perfect harmony in Central and Eastern Europe?

As the Eastern European market continues to grow, much of the growth can be attributed to two of the biggest low-cost carriers (LCCs) in the region. Ryanair and Wizz Air dominate much of the market, but despite growing service, only overlap on a handful of routes. Both carriers have announced plenty of new services in the last 12 months, many of which serve Poland – the largest of the Eastern European air transport market with a third of all seats.

Low-cost carriers dominate the Eastern European market, according to the report ‘Eastern Europe – low-cost and loving it’ from industry intelligence provider OAG. February 2016 saw an increase of more than 300,000 seats in the region compared to February 2015. The five largest markets – Bulgaria, Czech Republic, Hungary, Poland and Romania – can attribute much of their growth to the new routes and additional capacity added by LCCs including Ryanair, Wizz Air and LOT, says the report.

Two thirds of all airline capacity within these five markets are accounted for by five airlines – Ryanair, Wizz Air, LOT Polish Airlines, easyJet and Lufthansa. Whilst LOT and Lufthansa have witnessed declines in their market share and easyJet’s position has remained unchanged, Ryanair and Wizz Air have enjoyed phenomenal growth. Hungarian carrier Wizz has grown the quickest; in 2006 they had just six percent of the market share which now stands at 34 percent. Undoubtedly, they have benefitted from the collapse of Malev Hungarian Airlines, which liquidated in 2012. Ryanair’s market share has grown from three percent to 26 percent in just ten years.

Since the country’s accession into the European Union (EU) in 2004, Poland’s air transport offer has been growing – and continues to do so. With a third of all seats, Poland is the largest Eastern European air transport market today, according to the OAG study.

Compared to February 2015, there were nine percent more seats in Poland, with capacity growing at an average rate of six percent per annum for ten years. In Poland, the biggest players unsurprisingly are Ryanair, LOT and Wizz Air with a 28 percent, 25 percent and 20 percent of the market respectively. In February, growth was recorded for all three at a rate of 14 percent, 12 percent and 25 percent each.

Germany, UK, Scandinavia and Italy are Poland’s major international markets. All have seen growth in 2016 and they account for three quarters of the extra 100,000 seats in the market for February, the schedule data shows.

Growth in Poland can be seen across the board. Gdansk Lech Wałęsa Airport only broke the one million passenger mark in 2006 and recorded 3,706,108 passengers served in 2015. This is a 12.7 percent increase compared to 2014.

Katowice International Airport recorded the best statistics in the history of the airport in 2015, which saw the airport handle more than three million passengers for the first time ever. Katowice Airport can boast the fourth biggest passenger flow in Poland, with a 13.8 percent increase in passenger numbers and an 11.5 percent increase in aircraft operations for 2015.

Lublin Airport may have only opened in 2012, but within 12 months passenger numbers had grown by a staggering 3226.9 percent. 2015 saw the airport handle 265,111 passengers, an increase of 41.3 percent compared to the previous calendar year.

John Paul II International Airport Kraków–Balice - the host of Routes Europe 2016 – is set to have a record breaking year. Kraków broke the four million passenger mark for 2015, an eleven percent increase compared to 2014. Passenger numbers for the start of this year are strong, with February 2016 being the best February in the history of the airport. 310,000 people were handled, a year-on-year increase of 19 percent. The greatest absolute increase for this month was attributed to KLM, easyJet and Ryanair. The three carried an additional 41,000 passengers in total in February 2016. For the first two months of the year, Kraków Airport handled 613,677 passengers – 17 percent more than were served in the same timeframe in 2015.

Ryanair launched new routes to both Lodz and Poznan in Poland from London Stansted, resulting in the LCC serving more Polish airports directly from London than any other airline, according to OAG. As part of the Irish carrier’s winter schedules within the UK and Ireland, new Eastern European routes have been announced across the board; Belfast will now be served from Kraków, and current capacity to the Polish city will increase from Manchester, and Luton will now be linked to Vilnius, Lithuania as well as increasing capacity on the existing Luton-Kaunas, Lithuania route.

Wizz Air’s position in Poland will continue to grow as they link more cities to the country. The Hungarian LCC has announced new routes connecting Katowice and Warsaw to Sardinia which will commence in June 2016. Warsaw can now be reached by Wizz Air from Bristol, Aberdeen and Porto – and they will base a sixth aircraft there. Wizz’s tenth anniversary of their Gdansk base was celebrated on March 1, 2016; the LCC now offers 30 routes to 13 countries from this base, with over 2 million seats on sale in 2016.

In terms of routes served in the top five Eastern European countries, there are only ten routes which overlap for both Wizz and Ryanair – a mere fraction of both carrier’s networks, the OAG report reveals. One of the city pairings both carriers serve in Poland is London to Lublin. Ryanair’s service flies from London Stansted whereas Wizz serves Luton. There were 14 percent more seats between Poland and the UK for February 2016, with Ryanair and Wizz Air adding capacity between the two countries. Over half of the capacity growth is to Stansted and Luton, as well as substantial growth to Bristol and Birmingham.

As the Eastern European market continues to grow, as does the market share for both Ryanair and Wizz Air, it would appear there is what could be described as a ‘no-compete’ policy between the two LCCs, despite Ryanair’s clear offensive into Central and Eastern European markets over the past 12 months. It cannot be coincidence that both Wizz and Ryanair are flourishing in the markets where national-based carriers are in a financially weak position, which makes it harder for them to compete with the significantly lower cost bases of LCCs.

Were it any other industry, two companies in such a complementary position such as Ryanair and Wizz Air would be exploring a merger, suggested OAG. In February 2016, Ryanair operated 7.7 million on 838 routes seats across Europe, and Wizz operated 1.6 million on 353 routes. If the two did merge, they would be almost twice as big as easyJet, their next biggest rival. Operating more than 1,100 routes and over 200 country pairs across Europe with a fleet of almost 400 aircraft would make it almost impossible for another airline to compete. 

Unless Wizz Air and Ryanair pursue different markets, it is unlikely they both will be able to continue with such a small degree of competition in the future. Wizz Air may be winning the seats in Romania, where it is the biggest low cost carrier, but with Ryanair launching a base in Timisoara this could be in jeopardy.

In its most recent trading update, Wizz Air reported a four-fold increase in net profit, pushing the LCC closer to becoming the lowest cost airline in Europe – an accolade currently enjoyed by Ryanair. The return of Ryanair to Romania will see the two carriers go head-to-head, and as they both pursue opportunities in new markets to fill aircraft, direct competition seems more likely.

Senior analyst, OAG, John Grant says: “Whilst the Eastern European market shows strong growth, there is still room to grow further. Ryanair and Wizz Air have consistently been penetrating the Eastern European market, squeezing competitors out of the way. Both airlines share a similar pattern of growth; if they were to ever combine, collectively, they would operate 13 percent of intra-European capacity taking the number one spot in five countries and number two spot in another five countries.”