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Plans by Wizz Air to give its chief executive an extra two years to unlock a £100mn bonus have triggered a backlash as the airline battles a depressed share price and the fallout of a regulatory reprimand for its handling of client claims.
Proxy advisers Institutional Shareholder Services and Pirc have recommended investors vote against a resolution put forward by the low-cost airline to give József Váradi until 2028 to win the one-off award if Wizz Air’s share price hits £120. Shares stood at £24 on the eve of the company’s AGM, which is on Wednesday.
Pirc, in a report, described the plans as “highly excessive”. ISS has also recommended shareholders reject the re-election of Barry Eccleston as chair of the board’s remuneration committee citing “material concerns” about Wizz’s practices.
The company had given Váradi until 2026 to hit the scheme’s target when it first unveiled it two years ago, when its share price was over £40. The price has since fallen, hobbled by Wizz’s unhedged exposure to the price of oil in the wake of Russia’s invasion of Ukraine, and questions over the durability of the current boom in air travel.
Wizz Air’s board is joining others including at some US-listed companies in adjusting management incentive plans to account for the coronavirus pandemic and more recently to inflation and energy disruptions. Some of these adjustments occurred despite poor stock performances.
The move to increase Váradi’s chances of hitting the payout comes as the airline is dealing with a reputational crisis in the UK for its handling of customer compensation in the wake of last year’s travel disruption.
The UK’s aviation regulator last week reprimanded the airline for its “unacceptable” handling of customer compensation claims in the wake of cancelled or delayed flights. The airline has apologised and agreed to revamp its processes.
ISS and Pirc have not only advised shareholders to vote against the company’s proposed amendments to the award, but also against its overall remuneration report and policy.
The airline said the changes to the bonus scheme were a response to “the impact of external events on Wizz Air’s growth plans over the past two years”, including the war in Ukraine and supply chain backlogs.
The airline added it had acted in recognition of “the need to adequately retain and incentivise the CEO”.
Wizz Air’s largest shareholder is US private equity firm Indigo Partners, which focuses on air transport and owns 24 per cent of the company. Indigo’s founder William Franke has been chair of Wizz Air for almost two decades.
Just under two-thirds of the votes at Wizz’s AGM in 2021 were cast in favour of the bonus scheme, with about a third voting against, despite criticism from shareholder advisory groups.
The vote was open only to a small proportion of investors because the airline was forced to water down the voting rights of investors from outside the European Economic Area, in order to comply with EU rules around airline ownership following Brexit.
The £100mn would be paid in shares over a four-year period. The pay scheme also contains environmental, social and governance targets which have not been extended, and still need to be hit by 2026.
But the environmental targets have been “adjusted” to reflect delivery delays in newer and more efficient planes, Wizz added.
The carrier has grown rapidly over the past five years, becoming one of the most significant companies in European aviation thanks to cheap fares made possible by an ultra-low cost business model.
The airline was one of the first in the world to recover to its pre-pandemic share price in late 2020, as investors backed its aggressive expansion plan. But the airline’s shares have halved since Russia’s full-scale invasion of Ukraine in 2022.