Wizz Air aims to catch Ryanair on costs over next year or so

By Victoria Bryan

DUBLIN (Reuters) - Wizz Air (WIZZ.L) expects to replace Ryanair (RYA.I) as the airline with the lowest costs in Europe over the next year or so, the chief executive of the eastern European low-cost carrier told Reuters on Monday.

Jozsef Varadi said its rival's costs were creeping up as it flies to more primary airports and invests in customer service.

"Our costs keep coming down, their costs creep up, so I think in the course of the next year or so, the lines will cross," he said on the sidelines of the Airline Economics conference in Dublin on Monday.

Varadi was relaxed about Ryanair's plans to open up a base in Timisoara airport, Romania, from November.

"Ryanair has been in central and eastern Europe for seven years," he said, adding he thought there was plenty of space in the eastern European market for them both. "Competing with Ryanair just makes us more formidable as a competing force."

As part of its growth plans, Wizz Air floated in London last year and has ordered 110 A321neo (AIR.PA) aircraft, with revamped engines, which will be delivered from 2019. The carrier will also take delivery of over 40 A321ceo aircraft, between now and mid-2018.

"With regard to the ceo aircraft we would finance on the basis of sale and leaseback, but with the neo we would take a more diverse view of financing," Varadi said.

He said lease rates had fallen significantly for the ceo and that leasing was a good way to ensure the financier, not the airline, carried the risk of the aircraft value falling while the manufacturer Airbus transitions from the ceo to the neo.

"But this is two, three years down the line so we have time to take a view on what we want to do," he said, referring to financing for the neos.

(Reporting by Victoria Bryan; editing by Susan Thomas)