WEBVTT - Wizz Air CEO Jozsef Varadi Talks Engine Issues

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>It is well documented that Boeing is having problems with

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<v Speaker 2>its seven three seven Max. However, there's another issue which

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<v Speaker 2>has been hitting this industry very hard as well, and

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<v Speaker 2>that affects airbus aircraft. Not all airbus aircraft, some airbus aircraft,

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<v Speaker 2>and it concerns the RTX Pratt and Whitney geared turbofan engine. Now,

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<v Speaker 2>if you buy an A three twenty today, you are

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<v Speaker 2>given two engine options. You can either buy the CFM

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<v Speaker 2>which easy Jet bought, or you can buy the jet

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<v Speaker 2>engine that comes from RTX. And that latter engine has

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<v Speaker 2>been having major problems which has been hitting our next

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<v Speaker 2>guest very very hard, and that is Joseph Variety. He

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<v Speaker 2>is the CEO of with Air. His engines are RTX

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<v Speaker 2>engines and they're having a major impact on his ability

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<v Speaker 2>to provide capacity to the market. Josephs with us this morning.

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<v Speaker 2>You've got numbers out this morning. Topline looks pretty much

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<v Speaker 2>in line with expectations. New income. You've beaten there. But

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<v Speaker 2>this is a this isn't a carrier. The moment is,

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<v Speaker 2>in some ways in survival mode, is you try and

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<v Speaker 2>manage to do this problem which Withney engine issue. How

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<v Speaker 2>hard is it hitting you right now? When is the

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<v Speaker 2>peak of this problem going to manifest itself? And when

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<v Speaker 2>are you going to start preparing for the kind of

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<v Speaker 2>the growth phase when all the engines are back.

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<v Speaker 3>No, absolutely, I mean this is a significant issue we

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<v Speaker 3>have been dealing we can be a continue to deal

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<v Speaker 3>with in the next few years. So this is not

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<v Speaker 3>something you can resolve overnight. Good news, we are going

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<v Speaker 3>to receive the first engine with no problems, clean up

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<v Speaker 3>all of these issues as of next months, and from

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<v Speaker 3>that on this situation we start improving. So we are

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<v Speaker 3>probably peaking on the problem as we speak. By the

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<v Speaker 3>time we're going to be completing the worst cycle of inspections,

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<v Speaker 3>it's another two years to go off the speaking, but

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<v Speaker 3>now we will start seeing some improvements. So this issue

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<v Speaker 3>has been dragging us over the last six to twelve months,

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<v Speaker 3>but now we are starting to sign up recovery and

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<v Speaker 3>I think we're going to get better going from here.

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<v Speaker 4>Okay, how many engines you've got out now?

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<v Speaker 2>Now when you get them all back, how much extra

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<v Speaker 2>capacity you're going to have? What are you going to

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<v Speaker 2>do with that capacity? We need to start thinking about

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<v Speaker 2>next year and what you're going to do with the business.

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<v Speaker 4>Then yeah, maybe the best way to look at this.

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<v Speaker 3>Today we are a two hundred aircraft airline two hundred

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<v Speaker 3>and nine. Precisely three years now from now, we're going

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<v Speaker 3>to be more than a three hundred aircraft. Some of

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<v Speaker 3>our aircraft are grounded as we speak. We have forty

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<v Speaker 3>seven aircraft on ground right now. Those will be recovered

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<v Speaker 3>completely within the course of the next two years or so,

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<v Speaker 3>so we will be back into gross overround twenty five

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<v Speaker 3>to thirty percent of year after this year. So it's

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<v Speaker 3>going to be a bit of a roller coaster. So

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<v Speaker 3>right now we are flat on capacity. We are protecting it,

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<v Speaker 3>but in the next two years you're going to be

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<v Speaker 3>seeing growth in excess of twenty twenty five.

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<v Speaker 5>Percent years A good morning. Have you been losing market

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<v Speaker 5>share there in some places as a results of this

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<v Speaker 5>and are you so? Are you confident that you can

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<v Speaker 5>get some of that back with the capacity plan that

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<v Speaker 5>you describe.

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<v Speaker 3>I think I just said it that effectively we are

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<v Speaker 3>protected by or the supply chain issues because we are

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<v Speaker 3>unable to run at the moment, but no one else

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<v Speaker 3>is able to run because they all have their own problem.

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<v Speaker 3>So I think it's a rather like statusco in the market.

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<v Speaker 3>So we are not losing market share, we are protecting capacity.

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<v Speaker 3>We are flying exactly the same number of seats this

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<v Speaker 3>year as last year.

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<v Speaker 4>So we that regard we are fine.

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<v Speaker 3>But most importantly, you know now we need to look

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<v Speaker 3>at the future because growth is coming. We need to

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<v Speaker 3>start setting ourselves off for that from a market standpoint,

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<v Speaker 3>detre between pilots and kevin crew to make sure that

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<v Speaker 3>we're going to be able to deliver it.

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<v Speaker 5>What can you tell us about pricing. We spoke to

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<v Speaker 5>the easy Jet boss recently and he was saying it's

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<v Speaker 5>too soon really to say too much about the pricing

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<v Speaker 5>outlook for the summer. What are you seeing.

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<v Speaker 3>Yeah, First of all, we are seeing a very robust

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<v Speaker 3>market out there. We are operating across geographies, investing Europe,

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<v Speaker 3>in Centralistian Europe, in the Middle East, and we are

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<v Speaker 3>seeing a very consistent picture. The consumer is fine, demand

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<v Speaker 3>is fine, the market is fine.

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<v Speaker 4>There are no issues. Now.

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<v Speaker 3>The problems some of the allies have that they overcharge

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<v Speaker 3>the consumer last year and they cannot just keep doing

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<v Speaker 3>it every year. So of course that is a plateau

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<v Speaker 3>to it. But we said, is in the cost business.

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<v Speaker 3>We are very much focused on unit costs to make

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<v Speaker 3>sure that we are actually loading our cost of operations.

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<v Speaker 3>We are in the business of commodities, in commodities lowest

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<v Speaker 3>cost previous.

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<v Speaker 4>This is what we are focused.

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<v Speaker 3>On, and we are very happy with the pricing environment

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<v Speaker 3>we are seeing out there.

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<v Speaker 1>Tell us a little bit about some of the kind

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<v Speaker 1>of black swan events that we're watching, which Jet has

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<v Speaker 1>to been operating in Israel, for example, if that conflict escalates,

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<v Speaker 1>are you prepared to gain or deploy or get that

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<v Speaker 1>market share back in other parts of the world.

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<v Speaker 3>I think we are prepared for everything. By now, I

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<v Speaker 3>mean going through the last three to four years. One

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<v Speaker 3>of the things we certainly have learned how to deal

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<v Speaker 3>with blackstone events because we have had a lot of them.

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<v Speaker 3>With regard to reshuffling capacity and that is a conflict

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<v Speaker 3>or there is, you know, any big issues affecting the business,

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<v Speaker 3>we have learned how to do that. We are a

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<v Speaker 3>very flexible organization. Simply what you do is that you

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<v Speaker 3>play according to market. You play according to the situation.

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<v Speaker 3>So if you are contained with regard to flying, you

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<v Speaker 3>just move capacity over to somebody else. Let's not forget

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<v Speaker 3>that we have a huge network footprint. By now, we

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<v Speaker 3>are operating a two hundred countries. We have options to

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<v Speaker 3>go for when we have to do that.

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<v Speaker 1>Talk to us a little bit as well about labor

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<v Speaker 1>issues that seems to come up every summer, in terms

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<v Speaker 1>of capacity at airports, in terms of negotiations with fight

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<v Speaker 1>attendant pilots, et cetera. Your visibility on the labor story.

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<v Speaker 4>Again, we are we are good.

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<v Speaker 3>I mean, let's not forget that we are structurally a

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<v Speaker 3>growth business.

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<v Speaker 4>We are growing the company.

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<v Speaker 3>As a result of that, we continue to create carrier

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<v Speaker 3>opportunities for our people. You may be a pilot, you

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<v Speaker 3>may be cabinettendant, you may be in a manicheri role.

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<v Speaker 3>So people come to work for this on the one hand,

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<v Speaker 3>for the spirit of the business, but also for the

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<v Speaker 3>carrier opportunities that growth continues to create. So we are

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<v Speaker 3>very attractive to the market. We actually never had labor

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<v Speaker 3>issues ourselves. We have been dealing with lavery issues of others.

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<v Speaker 3>Us in the situation is a lot better this year

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<v Speaker 3>than what it was last year.

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<v Speaker 2>Why are supply chain issues still hitting this industry as

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<v Speaker 2>hard as they are? How long are they going to last.

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<v Speaker 2>You talk to the OEMs US and bye. They still

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<v Speaker 2>talk about their supply chains. They still talk about problems

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<v Speaker 2>where years in the pandemic they haven't resolved it. How

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<v Speaker 2>long is it going to hit this issue? How long

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<v Speaker 2>can we expect capacity problems? How long can we expect

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<v Speaker 2>that to impact fares personally?

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<v Speaker 3>I think supply chain issues will affect the operations of

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<v Speaker 3>the industry over the next three to five years. Again,

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<v Speaker 3>this is not something you can fix overnight. And if

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<v Speaker 3>you look at the root causes of these supply chain issues,

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<v Speaker 3>I think they are two forward. One, the whole industry

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<v Speaker 3>has been structurally growing a lot more than it was expected.

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<v Speaker 3>And two COVID was such a big hit and such

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<v Speaker 3>a setback for the whole setup that the industry is

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<v Speaker 3>theory covering from that in terms of getting labored back

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<v Speaker 3>into work, get focused on some of the issues which

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<v Speaker 3>you let go during the COVID times. And this is

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<v Speaker 3>a very robust industry. It takes time to move again.

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<v Speaker 3>I think it's years still out.

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<v Speaker 4>There, all right.

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<v Speaker 1>Joseph Varady, the CEO of wizare joining us this morning

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<v Speaker 1>on SAT talking about a variety of issues from a

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<v Speaker 1>supply chain story to the labor story. We thank you

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<v Speaker 1>so much for joining the program.