Aviation sector needs 'self-help' approach to tighter quality controls, says Wizz Air CEO

Technological innovation will slow down due to higher scrutiny, Jozsef Varadi says

Wizz Air chief executive Jozsef Varadi said 'the Middle East, especially the Gulf will remain growth markets'. Reuters

Aircraft and engine manufacturers must focus on tightening quality controls internally, Wizz Air chief executive Jozsef Varadi said, following the incident of an Alaska Airlines Boeing 737 Max jet's cabin panel blowing off mid-air earlier this month.

While Wizz Air is an all-Airbus operator, Mr Varadi said greater scrutiny into quality processes will result in an industry-wide slowdown in production expansion and technological innovations.

“The problem is more around quality. Clearly, the regulator is taking a more scrutinising approach, [and] rightly so … and I think manufacturers of engines and aeroplanes will have to take a more self-help approach to enhance their internal quality control. This is the right step,” Mr Varadi told The National on Thursday.

What takes five years in the R&D cycle now may take 10 years in the future because of the higher level of scrutiny and standards

Jozsef Varadi

“What it means for the industry is that the expansion of manufacturing is going to slow down because of more scrutiny. I also think that technology innovation will slow down.

"What takes five years in the R&D [research and development] cycle now, may take 10 years in the future because of the higher level of scrutiny and standards,” he said.

“We will move slower but with better quality.”

A worker examines the cabin of a Boeing 737-9 Max operated by Alaska Airlines after a fuselage panel blew out forcing pilots to make an emergency landing. EPA

The US Federal Aviation Regulator on Wednesday halted any production expansion of the Boeing 737 Max until quality control issues are resolved. The US aviation regulator's order means that the plane maker can continue producing 737 Max jets at the current monthly rate, but it cannot increase that rate.

The FAA's decision disrupts Boeing's growth plans in a period of soaring demand for aircraft and heated competition with its European arch-rival Airbus amid an unrelenting boom in air travel.

Middle East plans

Wizz Air's boss on Thursday also outlined the low-cost carrier's plans for the Middle East.

The airline will restart some flights from European cities to Tel Aviv starting on March 1, after suspending operations to Israel following the start of the Gaza war in October.

It is returning only 20 per cent of its prewar capacity to the Israeli market with plans to operate three weekly flights each from Budapest, Bucharest, London, Krakow and Rome to Tel Aviv.

The decision to resume some flights to Israel comes after high levels of scrutiny into security and safety and a “much improved situation for flying”, but demand will restart from a relatively lower base, Mr Varadi said.

“It will be a skeleton network with skeleton frequencies, so we would have roughly 20 per cent of the previous capacity prior to the war and we think demand will gradually come back up and we will be adding capacity accordingly,” he said.

“The demand we're seeing is essentially Israelis flying in and out … we are not yet seeing demand for tourism.”

Demand is expected to build up gradually within six to nine months, he added.

Travel demand for the Middle East region is broadly unaffected by the Israel-Gaza war, with no impact seen in markets such as the UAE and Saudi Arabia, but the airline continues to monitor the situation, Mr Varadi said.

Dubai-based Emirates has suspended flights to Tel Aviv, while its sister airline flydubai operates four flights a day to Ben Gurion Airport but continues to monitor the situation closely and amend its schedule accordingly.

'Flat' capacity

Wizz Air is one of the airlines facing disruptions from grounding its Airbus narrow-body aircraft because of mandatory inspections of Pratt & Whitney’s geared turbofan engines. The engine maker said they were at risk due to a powder metal defect that could lead to the cracking of some engine components.

“We are expecting capacity to be largely flat in the next financial year and this is the guidance we're giving to the market,” Mr Varadi said.

However, there are some variations by market, with Wizz Air Abu Dhabi to grow capacity by 25 per cent in the next financial year to pursue growth opportunities, he said.

“We're very excited about the Abu Dhabi opportunities and we continue to push for growth in the market,” Mr Varadi said.

“The Middle East, especially the Gulf, will remain growth markets for Wizz Air.”

Wizz Air Abu Dhabi, a joint venture between Hungary's Wizz Air Holding and Abu Dhabi state holding company ADQ, in November operated its first flight from Abu Dhabi International Airport's new Terminal A.

The outlook

Wizz Air posted a net loss of €105.4 million ($115 million) in the third quarter, compared with €33.5 million in profit in the same period last year, it said on Thursday.

The airline's fiscal year ends in March 31.

This was mainly due to disruptions from grounding some aircraft and removing capacity from the Israeli market, Mr Varadi said.

However, the airline maintained its full-year net income guidance range of €350 million to €400 million, supported by positive trading, higher utilisation of operational fleet, one-off benefits from the engine maker cost compensation and credits from deferred sale and leaseback transactions materialising in the fourth quarter.

“I’d say that we’re back into solid profitability,” Mr Varadi said of the fiscal year.