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Wizz Air – The wizz kid on the budget airline block

By Augustin Eden, Analyst

“Weaker airlines either integrate into a larger business or go out of business, but more efficient capacity, more efficient players will replace them,”  says Wizz Air CEO Jozsef Varadi. That was an interesting phrase. At first glance I thought it was a simple commentary on the life cycle of a business – small carriers being integrated into the big players with better small players coming in to replace the not so good small players that ‘sold out’ before them, with the whole world evolving as the process repeats itself in much the same way Darwin might have observed. State the obvious, mate!

But then I realised this was probably not the point he was trying to make. Wizz Air holds itself in particularly high esteem, it would seem.  Having aggressively muscled in on the action after Hungarian national airline Malev went under in 2012, the budget airline has all but ruled out mergers and acquisitions as a way forward, but with IAG seemingly constantly on the prowl and intense competition in Europe’s budget airline sector, how is Wizz Air planning its domination of the continent? If I were Jozsef Varadi, I would be looking for Wizz Air to get bought. Running an airline is too much like hard work. When you run an airline you become like Michael O’Leary.

But the answer to the question is, it’s not. What Wizz Air really wants is to buy time so that its share price can complete a bullish ascending triangle pattern and break out above a healthy 1500p, maximising the valuation of the company. Then it will put itself up for sale.

Ok, that last paragraph was a joke, although the technical observation is very real. Is now a good time to buy Wizz Air shares? Quite possibly, yes. Whether an intelligent CEO in Jozsef Varadi marches onwards with his ambitious and absolutely doable plans to fight the competition with the buzzwords ‘efficiency’ and ‘simplicity’ incorporated into an aggressive business armoury that has already proven itself in its home nation, or decides to cash out in a merger with a larger, hungrier conglomerate like IAG, Wizz Air shareholders are likely to benefit.

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