Wizz Air ‘resilient’ after route cancellations wipe out profit
Wizz Air has insisted its decision to halt operations in Vienna and Abu Dhabi positioned the airline for “long term resilience,” despite causing net profit to drop by nearly 99 per cent.
The FTSE 250-listed airline said its slump in net profit from €214m to €1m was due to the “one-off headwinds” of these route cancellations, while operating profit slipped 17 per cent to €140m.
The budget airline is also battling the travel disruption caused by the Iran war, which caused it to cancel routes in the Middle East and Cyprus in March, though these flights have since been resumed.
Wizz Air pulled out of Abu Dhabi in July last year, in a bid to focus on its European market, before its operations in Vienna in September.
These decisions were made “to position the business for long-term resilience and competitiveness,” chief executive Józef Váradi said.
The budget airline said it took a €50m blow from the outbreak of war in Iran but its fixed-price fuel contracts insulated the firm from taking a bigger hit.
Though Wizz Air said it has seen off the worst effects of the Middle East conflict, it said the war is clouding its outlook for the coming financial year.
“We are not giving guidance for [the next financial year] at this time of the year given the lack of visibility across our trading seasons, uncertainty related to the ongoing conflict in Iran and the closure of the Strait of Hormuz,” the firm said.
Duncan Ferris, an investment writer at Freetrade, said the airline’s omission of a forward-looking outlook is “concerning”.
“Passenger growth and revenue are travelling in the right direction, but such slim profits on the back of €5.7bn revenue shows how little room for error Wizz Air has right now,” he said.
The airline had been pounced on by short sellers earlier this year, after the outbreak of the Iran war weighed on its share price.
Wizz Air’s seat capacity fell by 0.5 per cent to 90.7 per cent in the year to March, “largely” due to the effects of the Iran war, while passenger ticket revenue jumped by eight per cent to €3bn.
The airline saw revenue jump by eight per cent to £5.7bn, as net debt slipped by 0.3 per cent to £4.9bn.
Wizz Air operated 262 planes in the year to March, but plans to expand its fleet to 383 aircraft by 2033.
Váradi said the airline is heading in “the right direction – working well in a balanced environment as well as at times of volatility, which the industry experienced towards the end of the financial year due to the Middle East crisis”.
The Hungary-based airline was founded by Váradi in 2003 and is Europe’s third-largest budget carrier.
The firm has been listed on London’s stock exchange since 2015, when its float notched an initial value of £601m. Its shares jump 2.8 per cent on Thursday’s market open, to 994p.