Wizz remains bullish on summer ticket yields

Wizz Air’s (WIZZ) first pre-tax profit in four years was a formality given the strong summer trading last year.

Capacity in the form of available seat kilometres (ASKs) increased by nearly a quarter and the airline increased passenger numbers by 21 per cent. Profitability was also improved by more efficient fleet utilisation and the fact that it operated fewer new (and therefore less profitable) routes.

Chief executive József Váradi argued that a post-pandemic surge in travel demand “has evolved into a longer-term trend in consumer behaviour”, and even though peers like Ryanair (IE:RYA) have flagged greater consumer price sensitivity in recent days, he expects higher ticket yields to be maintained.

It has been helped in this regard by constraints in capacity – be it engine maker Pratt & Whitney currently grounding around 50 of its planes (for which Wizz is being compensated) to check for problems with their GTF engines, or competitors like Ryanair not receiving new Boeing planes on time given the US company’s ongoing safety issues. 

Therefore, although Wizz is due to take delivery of a net 21 new planes this year, capacity is expected to be flat.

Guidance of a full-year net profit ranging from €500mn-€600mn was 10 per cent ahead of consensus, UBS analysts said. This lifted Wizz's shares by 6 per cent and at less than six times forecast earnings they will look like a bargain to some. We remain concerned about its longer term prospects, though, especially with around 70 new plane deliveries due next year and a balance sheet that remains weak. There are more attractive opportunities elsewhere in the sector. Sell.

Last IC View: Sell, 1,738p, 09 Nov 2023