Riblet#41: Risk Exploitation

In times of dramatic disruption there are always winners and losers.  The current pandemic has catapulted Eric Yuan, CEO of Zoom, to the status of deca-billionaire, and whilst the value of Amazon – its market capitalisation – doubled between 2016 and 2018, it has nearly doubled again since then, principally in the last six months.  However, even in sectors that are particularly afflicted by the impacts of the virus, you can still find winners.  

The airline industry has been harshly impacted, thousands of workers have been laid off, and the impacts have stretched back into aircraft manufacture and its supply chain.  Nevertheless, it has also created opportunity. Labour costs have fallen through lay-offs of pilots, cabin crew and other staff, and airports are trying to attract business with cheap landing slots and discounts on other charges.  So if you have the cash and an operation that can work profitably even in these times, there is an opportunity to be exploited that will pay off handsomely when this pandemic is over.  

Wizz Air is a low-cost Hungarian airline with a reliable business in flying central and eastern Europeans who work in the West back home for frequent visits (made possible by being low cost).  Wizz Air is lucky in that its customer demographic is younger than most airlines, a demographic that is less fearful of the virus.  Seeing the opportunity, it is now snapping up those cheap landing slots and available already-trained crews, and expanding its operations.  It has set up ten new bases in the last three months, including Gatwick, and it is buying more planes as well.  The airline has done this by having a cash pile ready to be used in such situations, and a low operating cost (half that of Easyjet) without some of the poor customer service that some other discount airlines provide (you know who I mean, I am sure).  

By understanding the changes and the risks of the pandemic in detail, and how it is currently causing some organisations to wobble, opportunity can be found.  Opportunity which, if exploited, may provide a springboard to success in the post-pandemic world.  

Data Sources: The Economist magazine, ft.comwikipedia

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