25th Apr 2018 09:27
LONDON (Alliance News) - Moody's Investors Service on Wednesday issued a first-time Baa3 long-term issuer rating to budget airline Wizz Air Holdings PLC.
Moody's has assigned the rating a stable outlook.
Vice-President & Senior Credit Officer Jeanine Arnold said: "Wizz Air's Baa3 rating reflects its growing and dominant market position in central and eastern Europe.
"This is underpinned by the company's ultra-low-cost business model and strategy to stimulate growth by creating new and more frequent travellers, as well as capitalizing on stronger GDP growth relative to the rest of Europe."
Wizz Air, it said, had a 39% market share in the low-cost airline business in the region as of the end of March 2017.
Moody's expects its passenger numbers and thus revenue to keep growing compared to peers at a compound annual growth rate of around 20% to 2021, and it also believes adjusted earnings before interest and tax margins to remain "comparatively strong" at just under 20% over the next few years.
The ratings agency does, however, expect "sizeable" negative free cash flow to 2021 of over EUR700.0 million as it looks to boost its fleet, financing this more through cash and debt rather than its previous sale and lease back strategy.
Wizz Air is nevertheless committed to "financially prudent" policies, Moody's added, ensuring leverage does not exceed current levels. Liquidity is "excellent", with cash around 50% of revenue.
Factors leading to a possible upgrade include increased market share, its adjusted Ebit margin passing 23%, its leverage falling below 2.5x, and liquidity of at least EUR600.0 million. Deterioration in these factors provide potential downside pressure.
Wizz Air shares were down 1.4% on Wednesday at 3,280.00 pence each.
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