Covid-19 test costs may ‘eliminate’ lower end of market

Covid-19 tests will raise the cost of flying and may wipe out the lower end of the market, but budget carriers are still likely to be the beneficiaries.

That is according to Wizz Air chief executive Joszef Varadi who described the increasing requirements for passengers to pay for Covid tests pre-departure and on arrival as “a creeping cost item”.

The most widely recognised and most-sensitive PCR tests can cost €90-€135 (£80-£120), much more than the cost of a budget airline fare.

But Varadi said: “I don’t think PCR tests will always be £80. Tests will become commoditised and the costs will come down.

“It will add to the cost of travel. It may have an impact at the lower end of the market. It may eliminate the lower end of the market.

“But it will also lead to trading down by customers moving from higher cost airlines to lower cost. So even if the overall industry demand is somewhat depressed we should take more than our share.”

Speaking as Wizz Air announced a loss of almost €115 million for the three months to December, Varadi insisted the carrier’s “brand awareness” had benefited during the pandemic due to its “strong cash balance” and ability to refund customers for cancelled flights.

He said: “We are basically refund free. We refunded all customers. We are not building credit by holding money from customers. We don’t want to disappoint consumers. We are promptly refunding customers.”

Varadi added: “We ended 2020 with a very strong cash balance. Even if we don’t operate a single flight, we are good for two years.

“There are only four airlines in the world that have an investment grade rating and we are one of them so that puts us in a very strong position. We are one of the few airlines that continue to take aircraft deliveries.”

Wizz reported having €1.2 billion in liquidity at the end of December and Varadi said: “That does not include the €500 million bond we issued in January.”

He added: “We don’t want to touch this money, but given the uncertainties it is better to have more cash than less.

“We are running the business for cash, but once we see an easing of restrictions we will be expanding our network.

“We are the one airline of the three low-cost carriers in Europe expanding our market footprint. The other two are reducing their footprint.

“We are widening our competitive advantage.”

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