Abu Dhabi Developmental Holding Company PJSC has announced signing a preliminary agreement with Wizz Air Holdings Plc to inaugurate an Abu Dhabi-based new low-cost airline.
According to Abu Dhabi government’s media office, flights are expected to be launched in H2 2020 to reach markets in Europe and other regions, through the fleet of Airbus A321neo.
Wizz Air 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 said 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 percent and state-owned Abu Dhabi Developmental Holding Company PJSC 51 percent.
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, which is 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.
Barclays analysts said Wizz Air would have a cost base 30 percent lower than its nearest competitor in Abu Dhabi and that the new airline could grow to 50 aircraft in eight to 10 years.
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 one percent to 3,894 pence, valuing the company at about two billion pounds ($2.57 billion).