Wizz Route Development Strategy

Wizz is a European based international Airline based in Hungary. Although it majors in

serving Countries in central and estern Europe (CCE), the company has 191 airports in 54

countries globally. One of its underserved markets if the UAE, where it has a market share of

1.8%. the country ironically has one of the largest airline industry and therefore optimizing its

route to EAU would add value to Wizz, increase its profitability and sustainability.

The middle has one of the fastest growing demand for air travel underpinned by

favourable population and improving living standards. The United Arab Emirates, a country in

this region underwent remarkably fast travel and tourism recovery post-covid according to

according to the World Travel and Tourism Council (WTTC). Ironically, Wiz Air lags behind in

utilizing the potential in EAU airline market. Organizational performance report indicate that in

the financial year ending March 31st 2023, Wiz had a share of 1.8% the country ranking 5th in

utilization of its low-cost niche. This report analyses the route plane development strategy that

would help Wiz optimise benefits from EAU-CEE flights through a case study of the company’s

flights to two of its major cities, Dubai and Abu Dhabi.

Demand Forecast

The demand for air travel into the EAU is significantly high. World bnak statistics show that in

2020 the country receive 8.1 million international visitors. Other studies show that the country

received at least 289 thousand aircrafts in 2022, an increase of 33.6% from 2021. Out of the 289

thousand planes, at least 51.57 thousand landed in Abu Dhabi and 191.4 thousands in Dubai.

Additionally, Dubai has worm the Tripadviser’s (a global travel research and guidance group)

best international travel destination award for three consecutive years since 2021. Global

recognition as a top tourist destination makes the city a viable airline investment venture.
Additionally, the resulting high air travel into the country thus lead to high demand for aviation

services in the country. Narrowing down from the total tourism statistics to visits by Austrians to

the UAE also implies that there is a large market for Wiz Air to explore on CEE- UAE routes.

According research at least 447 000 people travel Austria to UAE annually. There is therefore a

large demand for Wiz serves covering the route to

In addition to high air traffic into UAE, Wiz prospective market in the nation also depends on

travel volumes from EAU to CEE destinations. According to mastercard economic institute Italy

is among the top ten destinations for Middle-east travellers. According to CEIC online data base,

Autria received a total of 156, 153 and monthly average of 13,013 visitors from UAE in the the

12 month period from Nov 2022 to Oct 2023. The number of Emirates vising Austria within this

period was 23.5% of the tourists the country received. The demand for air travel between EAU

and Austria is therefore two way.

Based on the travel demand analysis above the table below shows the estimated airline market

covering the route to and from UAE.

From Austria to UAE From UAE to Austria

Estimated total aircraft demand 447, 000 156, 153

(number of people traveling) Per

annum

Revenue and Competitor Analysis

Revenue Projections

Wiz air accounted for 1.8% of UAE airline market in 2022-2023. Although the company has

potential to grow this market share, this report will use that rate and minimum ticket prices

(Based on Wiz Air online ticket selling prices in Jan-Feb 2024) to make minimum annual
revenue. The table below shows these calculation estimating 50/50 market sharing between trips

to and from Dubai and Abu Dhabi.

Origin

Dubai Abu Dhabi Austria (Viena)

Dubai 2,401,380.00

Destination Abu £

Dhabi 281,610.00

£ £

Austria 758,903.58 75,890.36

Total Annual revenue 3,517,783.94

With the current market share, Wiz can earn at least 3.5 million pounds from its routes to

UAE. This study arrived at the projected revenue using the following assumption:

Market Share

This report used the 2023 Wiz market share of 1.8% in the UAE market assuming that the

company will not go below this point.

One way ticket prices

The reports assumed that the lowest tickets on Wiz website are the lowest revenue per trip. The

prices included 60 pounds for each trip from Viena and Dubai, 70 pounds per trip from Viena to

Abu Dhabi, and 54 pounds for trips from each of the two UAE cities to Austria.

Market Share proportions

The study also assumed that the two cities will share traffic equally so each city will have 758

people traveling to Austria and 223,500 traveling from Viena during the year. Using this
assumptions, two way trip between Austria and Abu Dhabi will generate a revenue of 357, 500

pounds and trips between Dubai and Austria will earn a revenue of 3, 160283 pounds.

The resulting revenue does not provide an accurate representation of potential route

productivity and thus this paper will provide an evaluation of the operation costs associated with

it before making its deductions.

Competitors Analysis

Wiz faces competition from several Middle East airline operating globally in the UAE

market. The country has two major airline, Etihad (based in Dubai) and Emirates (based In Abu

Dhabi). In 2023, both companies’ worn awards for being among the world’s top twenty airways,

since Emirate was in fourth position and Etihad position thirteen. Additionally, Emirates earned

an additional award for having the best economy category crafts. Rather than these two UAE

based airlines, Qatar airways is yet another Middle Eastern firm with significant market shares in

the UAE aviation industry. Notably, Qatar airways dominates the Middle East Airline industry.

Although the market in UAE is predominated by Middle Easter players, it is large and

competitive. Amidst this stiff competition, Wiz acquired a market share of 1.8% in 2022-2023.

Consequently, Wiz can grow its current market share with operational and marketing strategies

due to the large market.

Projected Operating Costs

Wiz Air has been applying new technology and optimize its operations. Key to the

resulting improvement is the company’s endeavour to deploy fuel optimizing strategies for lower

operation costs through direct flight management. The company has also invested in employee’s

key performance indicators, automated record keeping, and digital data analytics to become a
cost effective organization. With this strategy, Wizz will be able to offer quality and affordable

trips between UAE and Austria for enhanced stakeholder’s value.

According to 2023 performance, the company had high operation costs due to inflated

fuel prices. Consequently, Wizz increased its measure of flight optimization (ASK) by 76%.

ASK refers to Available Seat Killometres which is the total of scheduled passengers times

covered distance. By increasing its ASKs, Wizz will continue to reduce the cost associated with

each seat travel within a certain distance (Cost per ASK) thus becoming more effective

financially productive its operation. The company will continue to deploy this strategy as it

optimizes on EAU routes.

This study used the 2023 Wiz report to estimate operation costs allowing for 4.6%

inflation and -45.2% CASK decline. The company had a total of 4, 362, 500 operation costs in

2023 against a passenger revenue of 2, 024, 900 pounds in 2023. The annual operational cost

were therefore 215.44% of passenger ticket income. The costs composites are as in the table

below:

Description Cost in million

Salaries and wages 373.9

Fuel 1, 954.4

Marketing and distribution costs 91.5

Repair and maintenance Costs 237.0

Site, handling and en-route charges 963.2

Asset depreciation and amortization 601.1

Other operational charges 141.3

The estimated costs with 4.6% inflation and -45.2 ASKs is as follows:
 New Estimated
Proportion of
Description Cost in million Inflated cost cost (Less
total cost
change in ASK)

Salaries and wages 0.086 391.10 217.06

373.90
Fuel 217.156 2,044.30 1,134.59
1,954.40
Marketing and
0.021 95.71 53.12
distribution costs 91.50
Repair and maintenance
0.054 247.90 137.59
Costs 237.00
Site, handling and en-
0.221 1,007.51 559.17
route charges 963.20
Asset depreciation and
0.138 628.75 348.96
amortization 601.10
Other operational
0.032 147.80 82.03
charges 141.30
Total 2,532.50
4,362.40 217.71

To get the estimated cost for operating UAE flights, the following charts multiplies the

new cost by the estimated market share of 1.8%.

Estimated
New Estimated
costs for UAE
Description cost (Less
route
change in ASK)
operation
Salaries and wages
217.06 3,907,083.01
Fuel
1,134.59 20,422,580.98
Marketing and distribution costs
53.12 956,132.91
Repair and maintenance Costs
137.59 2,476,540.98
Site, handling and en-route
charges 559.17 10,064,996.93
Asset depreciation and
amortization 348.96 6,281,218.49
Other operational charges
82.03 1,476,520.00
 Total
2,532.50 45,585,073.30
Using 2023 cost proportion to estimate annual operation costs, this report found that

Wizz will have 45.6 million pound operation costs from UAE routes against a revenue of 3.5

million. This results suggest that the company will loss 42.3 million pounds from the route.

However, considering that Wiz made a loss of 535.1 pounds in 2022-2023, and intact oil prices,

it is important to consider factors that can make the company increase its market share and

increase net income.

PESTEL Analysis

PESTEL analysis involve external market evaluations relating to political, economic,

socio-cultural, technological, legal, and ecological aspects. It is important for Wizz to consider

this factors before deciding on the fate of its UEA routes because they have significant

implication on international trade. The framework will enable the company to anticipate and

prepare for opportunities and threats resulting from varying market environments. Additionally,

the analysis will help Wizz decision makers understand its prospects in regards to UAE routes

and consequently develop long-term strategies and policies for its route development.

Political Factors

The UAE is one of the founding nations of Middle East consisting of seven states. The

country is ruled by one president under a federal government and seven Emir’s. It is currently

politically stable with remarkable regional and global influence. Additionally, UAE has good

diplomatic relationships with other countries yielding effective international trade.

Specifically, Austria has a bilateral political relationship with UAE that can help Wizz

maximize its potential in the country. According to the UAE foreign affair’s ministry, the

country aims at strengthening its relations with Austria as strategy for raising its living standards.
Wiz must therefore take advantage of the predominant peace in EAU and the good political

interaction between the two countries to grow its market share.

Economic Factors

The UAE is undergoing remarkable economic growth due to its physical location

(presence of oil and natural gases), strong financial reserves and controlled government

spending. In 2022 the country had a GDP of $507,063, 968,000 and a per capita income of 53,

708. This was a significant increase from a GDP of $300,000,000,000 and 36,000 per capital

income in 2020. The increase in both GDP and income per household implies that consumable

income in the country is growing. Consequently, people in UAE have more money to spend on

travel providing viable opportunity for Wizz to grow its income.

Additionally, Austria also has a good economic interactions with the Emirates. According

to UAE mistry of foreign affairs, this relationship started in 1994 when Mubadala, an Abu Dhabi

based organization, purchased shares an Austrian multinational oil company and strengthen

when Mubadala increased the shares in 2019. The UAE is thus Austria’s largest economic

partner in the Middle East.

Socio-Cultural

The social environment in the UAE is favourable for the airline industry to grow. The

country has a large and diverse population with a high number of immigrants. The diverse

population increases the demand for air travel when visiting family and friends. Additionally,

the UAE has a strong hospitality culture that make it a favourable destination for international

visits. One unique characteristic of the social environment in this nation is that it has female only

hotel and accommodation facilities served by female staff making it a habitable travel attraction.
Consequently the country enjoys high in and out air travel traffic making it a potential growth

area for Wizz Airlines.

Ecological

The physical location of UAE makes it ideal for airline transit since it connects Europe

Africa and Asia. Additionally, the country has developed infrastructure that makes it comprising

of state of the art roads and airports. According to research, UAE is the most internationally

connected country in the Middle East implying it has the best air access to the globe. Its cities are

also among the most internationally connected cities in the world with Dubai topping the Middle

Eastern List AND Abu Dhabi being in the 4th position. The country also grew its connectivity by

13% between 2014 and 2019. This level of air connectivity and its growing trend presents an

opportunity growth for the airline industry in UAE make it more probable for Wizz Air to

flourish in its routes to Dubai and Abu Dhabi.

Technology

Technological development presents an opportunity growth for the global economy at

large with increased use of the internet, social media, and mobile phone applications. Research

shows that at least 80% of Emirate’s population uses social media platforms such as youtube and

Facebook. These tech-sarvy trends can help Wizz increase its market share and reduce sales and

marketing costs. The company can use social media platforms for cheap, non-recurrent market

costs through Facebook posts and YouTube videos.

Wizz has also been advancing its technology to reduce operation costs and improve its

efficiency. The company purchased 35 A321neo crafts in the year 2022-2023 and disposed

several airplanes with less techno-efficient features. The new model has a high travel range, and

agility, and carries more passengers than the A320ceo crafts that the company disposed.
Additionally, the company has adopted technologies making its admiration and logistic

procedures faster. Consequently, Wizz is technologically positioned to optize its UAE routes

although there is still room for advancement.

Legal

UAE has an open trade international policy that makes it a friendly trading ground. Its tariffs and

custom duties follow Gulf Cooperation Council without direct government interventions.

However, foreign investment in the country must deploy 51% local capital and employ local

staff. Wizz can therefore use the opportunity that free trade in the country presents and ensure

compliance with the direct foreign investment requirement.

Economic models Analysis: Demand: Supply Curve Equilibrium

The demand/supply curve is an economic model that compares the prices of goods and

services that buyers are willing and able buy, and suppliers and willing and able to deliver with

different price levels. The curve demonstrates the negative relationship between demand and

supply implying that as price increase, demand decreases and supply rises. This effects results

from the fact consumers and supplies seek maximum utility from consumption and sales.

Demand and Supply Curve

 120

100

80 The

model
60

40

20

0
10 20 30 40

demand supply
combines an upward sloping supply curve and a downward-sloping demand curve with one

intersection point. The point of contact between demand and supply on this model presents an

equilibrium price. This is the price that optimizes utility for both the consumer and the supply. Its

implication is that high demand causes increased prices which in turn lead to increased supply.

However, as supply goes up above demand, market surpluses cause suppliers to lower prices.

According to this model, there is high demand for air travel in the UAE. Consequently, in

the absence of enough supply, airlines can raise ticket prices to maximize return or new airlines

to join the market to increase supply. Wizz can therefore strategize to optimize the existing high

demand for its services in the UAE by deploying price and marketing tactics that will increase its

competitive advantage in the country.

Development Goals

The route development plan is a long-term strategy with various objects. Its first goal is

to establish Wizz Airline’s presence in EAU since it currently underserves the country. This will

allow the company to benefit from the large airline market in the country through by increasing
its customer base and brand awareness. The strategy also aims to increase the number of

passengers it carries from Austria to UAE and back by targeting tourists and business travelers

through classic and affordable travel solutions. Combing increase presence and customer base

will help Wizz increase its market share in the United Arab Emirates.

Wizz has current measure for optimizing Available Saet Kilometres and reducing its

subsequent operation costs. In 2013, this policies helped the company increase its ASK by 76%

significantly reduing CSK. The development plan will enhance the existing cost optimization

strategies by constantly evaluating their results and make necessary amendments. Achieving this

goal will help Wizz improve its financial performance and shareholders returns in the long-run.

The goals of this route development plan is to present a strategy for Wizz to grow its

market share in UAE market. According 2023 performance the country had 1.8% market share

in the country irrespective of its large and growing travel and tourism industry. In recognition of

the established Middle Eastern companies in the industry, Wizz projects to grow this rate

through intense social media advertisement and cost optimization to 25% in five years. This

increase will significantly change the direction of the company’s revenue and net income.

Consequently, this development strategy will grow Wizz Air’s net income for (535.1 Million

pounds in 2023) by 125% in 15 years. Its long-term objective aim to make the company

profitable and sustainable by growing its presence the UAE as the country’s travel industry

continue to grow.

Conclusion

Wizz has a significantly market share in the United Arabs Emirate, one of the fastest

growing airline market. In 2023 the company reported 1.8% market share in the country where it

operates flight to two major cities. Consequently Wizz Airways must adopt effective tactics and
strategies to change the current scenario. Although high fuel prices undermine the ability of the

firm to realise attractive net profits, the potential for growth promises incremental returns that

will salvage the company from suffering losses.