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1 17 MAY 2016 How Did Wizz Air Become Central and Eastern MSC INTERNATIONAL BUSINESS & POLITICS MASTER’S THESIS 17 MAY 2016 How did Wizz Air become Central and Eastern Europe's top airline? MILEN PETROV PAGES: 75 CHARACTERS: 151,406 SUPERVISOR: MICHAEL MOL COPENHAGEN BUSINESS SCHOOL 2016 1 Table of Contents Abstract ......................................................................................................................................................... 4 1 Introduction ................................................................................................................................................ 5 1.1 Issue ......................................................................................................................................................... 5 1.2 Relevance................................................................................................................................................. 6 1.3 Research Question ................................................................................................................................... 7 1.4 Structure .................................................................................................................................................. 9 2 Background Data ...................................................................................................................................... 10 2.1 Wizz Air .................................................................................................................................................. 10 2.1.1 Wizz Air’s Timeline.............................................................................................................................. 11 2.1.2 Brief Introduction to Wizz Air’s Strategy ............................................................................................ 13 2.2 The Central and Eastern European Airline Industry .............................................................................. 14 2.3 Central and Eastern Europe – The Greater Regional Context ............................................................... 18 3 Literature Review ..................................................................................................................................... 20 3.1 Company Strategies, Resources and Capabilities .................................................................................. 22 3.1.1 Strategic Positioning – Generic Strategies.......................................................................................... 22 3.1.2 Regional Concentration ...................................................................................................................... 26 3.1.3 The Resource-Based View .................................................................................................................. 28 3.1.4 Dynamic Capabilities .......................................................................................................................... 29 3.2 The Commercial Airline industry in Central and Eastern Europe .......................................................... 29 3.2.1 Porter’s Five Forces as a Framework for Analysis .............................................................................. 29 3.3 The Greater Regional Context ............................................................................................................... 34 3.3.1 The Pest Framework ........................................................................................................................... 35 3.4 Theoretical Interplay ............................................................................................................................. 37 4 Methods and Heuristics ............................................................................................................................ 38 4.1 Data Gathering ...................................................................................................................................... 38 4.2 Data Analysis ......................................................................................................................................... 40 4.3 Number of Cases ................................................................................................................................... 41 4.4 Types of Explanation.............................................................................................................................. 42 5 Analysis ..................................................................................................................................................... 43 5.1 Wizz Air’s Strategy and Strengths .......................................................................................................... 44 5.1.1 Wizz Air as a Low-Cost Airline ............................................................................................................ 44 5.1.2 Wizz Air as a Regional Low-cost Airline .............................................................................................. 48 5.1.3 Wizz Air’s Internal Success Factors ..................................................................................................... 51 2 5.2 The Airline Industry in Central and Eastern Europe .............................................................................. 52 5.2.1 Threat of Entry in the CEE Airline Industry ......................................................................................... 53 5.2.2 Incumbent Rivalry in the CEE Airline Industry .................................................................................... 54 5.2.3 Substitutes to the CEE Airline Industry ............................................................................................... 56 5.2.4 Buyer Power in the CEE Airline Industry ............................................................................................ 56 5.2.5 Supplier Power in the CEE Airline Industry ......................................................................................... 58 5.2.6 Wizz Air’s Success Factors in the CEE Airline Industry........................................................................ 59 5.3 The Regional Context and Wizz Air ........................................................................................................ 60 5.3.1 Political ............................................................................................................................................... 60 5.3.2 Economic ............................................................................................................................................ 61 5.3.3 Social ................................................................................................................................................... 63 5.3.4 Technology ......................................................................................................................................... 64 5.3.5 Wizz Air’s Success Factors in the Regional Context ............................................................................ 65 6 Conclusion ................................................................................................................................................ 65 6.1 How did Wizz Air become Central and Eastern Europe's top airline? ................................................... 65 6.2 Main Limitations & Further Research .................................................................................................... 67 Appendix 1. Selected Growth Data between 2011-2015 ............................................................................ 68 Appendix 2. Wizz Air Destination Map ........................................................................................................ 69 Appendix 3. Wizz Air Cost Structure ............................................................................................................ 70 Bibliography ................................................................................................................................................. 71 3 Abstract Largely anonymous since its first flight in 2004, Wizz Air is now becoming one of the major companies in the European commercial aviation market. The rise of the Hungarian budget airline has primarily happened outside the immediate spotlight until 2015, when the company appeared onto the stage by going public on the London stock exchange and placing an order of over 100 new Airbus aircraft. Wizz Air is now Central and Eastern Europe’s largest airline in terms of number of passengers and one of the few European airlines who are putting up remarkable results year after year. The success of Wizz Air’s story is evident, the road to achieving it however is not. This leads to the aim of this paper; namely identifying; how did Wizz Air become Central and Eastern Europe's top airline? This question has been answered by gathering data from publicly available documents covering aspects such as the status of various operating costs, company characteristics, strategy choices, industry developments, greater contextual changes etc. and putting them through a number of theories and frameworks. The theoretical background has been chosen in order to include both internal firm factors as well as external factors present in the industry as well as the greater regional environment. While other companies in the airline industry, primarily other carriers from the eastern half of the continent as well as other budget
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