ABU DHABI/LONDON (Reuters) - Wizz Air (L:WIZZ) said on Thursday it planned to launch Wizz Air Abu Dhabi next year in its first expansion beyond Europe, as the low-cost airline seeks to grow by offering its budget prices on Middle East routes.
Budapest-based Wizz Air, one of the largest low-cost airlines in Central and Eastern Europe, said its new carrier aims to offer flights from Europe to the Middle East.
Wizz CEO Jozsef Varadi the new airline would be a major source of growth in the future, bringing tourists from its markets in Europe and Russia to Abu Dhabi and in the longer term, flying between the Middle East, the Indian subcontinent and Africa.
"The intention and the purpose of coming to Abu Dhabi is to stimulate the market place. Abu Dhabi is hugely underpenetrated with regard to low-cost flying," Varadi said in an interview.
London-listed Wizz Air said the new airline would have an initial capital requirement of about $50 million and would use Airbus A320neo, A321neo and A321XLR planes Wizz already has on order.
Wizz, which has operated flights from European cities to Dubai since 2013, will create the new airline through a joint venture in which Wizz will have 49% and state-owned Abu Dhabi Development Holding Company PJSC 51%. Varadi declined to give further financial details of either partners' investments.
Due to start flying in the second half of 2020, the new airline will face competition from Abu Dhabi's Etihad Airways' low-cost joint venture with Air Arabia (DU:AIRA), due to begin operations from the second quarter of 2020 out of Abu Dhabi.
But Varadi said Wizz would have the advantage as it would be cheaper. In Europe, Wizz vies with no-frills Ryanair (I:RYA) as an "ultra low-cost" carrier.
Barclays (LON:BARC) analysts said Wizz Air would have a cost base 30% lower than its nearest competitor in Abu Dhabi and that the new airline could grow to 50 aircraft in 8 to 10 years.
Wizz Air has 268 aircraft on order for delivery between now and 2026, including A320neos, A321neos plus some A321XLRs, which are longer range jets, the latter due to be delivered from 2023.
"We're going to be utilising the existing order for the initial growth of this airline but of course over time we'll look at ... whether we have the right capacity or should we be looking at expanding our order book but we are not there yet," Varadi said.
The joint venture structure allows the new airline to qualify as a national carrier of the UAE, giving it a UAE air operators certificate, Varadi said.
Shares in Wizz traded up 1% to 3,894 pence, valuing the company at about 2 billion pounds ($2.57 billion).