- Lags sector peers at 15 per cent hedged for fuel prices
- Plans in place to grow capacity by 40 per cent
Deep losses at Wizz Air (WIZZ) are expected to continue, with the budget airline predicting it will operate at a loss over the busy summer period, despite already seeing “strong bookings growth” and anticipating rises in average fares. The shares fell by nearly 10 per cent at the midpoint of trading on results day, cementing a near-halving in the low-cost carrier’s value in 2022.
Demand for international travel has rebounded over the last year. Wizz Air has nearly tripled passenger numbers to 27.1mn in the year to 31 March, from 10.2mn the previous year, and filled its planes at an improved load factor of 78.1 per cent.
The airline also plans to grow capacity by up to 40 per cent in the six months to September 2022, expanding into new markets in Malta and Saudi Arabia.
Chief executive József Váradi said he believes “we have now entered into an endemic phase of Covid-19 and have managed the trading impact from the war in Ukraine”, but airlines are now being hampered by well-publicised staff shortages at airports.
Wizz Air, which operates out of two of the worst-disrupted UK airports, London Gatwick and Luton, said it is “fully staffed” with pilots and cabin crew for a normal operating environment, and is using “buffer crews” in order to minimise flight cancellations.
The budget airline’s fortunes have diverged from rivals Ryanair (RYA) and easyJet (EZJ) in 2022, after it was exposed to spiralling fuel prices in February because of management’s no-hedge policy, having ceased dollar and jet fuel hedging in September 2020.
Wizz Air has partly rowed back on this, but still trails behind peers at 15 per cent hedged for the year to March 2023. This could represent a significant problem over the medium term if fuel prices remain at elevated levels, while staffing disruptions and higher living costs create a volatile trading environment. The FactSet consensus for FY 2023 sales stands at €3.22bn (£2.76bn). However, trading conditions remain challenging and a €362mn cash outflow is hardly encouraging given the debt overhang. Move to Hold.
Last IC View: Buy at 4,293p on 22 Dec 2021.
WIZZ AIR (WIZZ) | ||||
ORD PRICE: | 2,500p | MARKET VALUE: | £2.58bn | |
TOUCH: | 2,495-2,500p | 12-MONTH HIGH: | 5,478p | LOW: 2,250p |
DIVIDEND YIELD: | nil | PE RATIO: | na | |
NET ASSET VALUE: | 271ȼ | NET DEBT: | €2.75bn |
Year to 31 Mar | Turnover (€bn) | Pre-tax profit (€mn) | Earnings per share (ȼ) | Dividend per share (ȼ) |
2018 | 1.94 | 287 | 402 | nil |
2019 | 2.32 | 129 | 174 | nil |
2020 | 2.76 | 294 | 376 | nil |
2021 | 0.74 | -567 | -673 | nil |
2022 | 1.66 | -642 | -633 | nil |
% change | +124 | - | - | - |
Ex-div: | - | |||
Payment: | - | |||
£1=€1.17 |