11th Jul 2022 18:12
(Alliance News) - Wizz Air Holdings PLC's trading update was not well received on Monday, with the budget airline warning of increased disruption over the summer.
Shares in Wizz Air closed down 3.7% in London on Monday at 1,790.50 pence each. The stock is down 62% so far in 2022.
"Despite its best efforts to aggressively grow its position in the low-cost airline market, Wizz Air's latest trading update doesn't paint a picture of a company flying high," AJ Bell investment analyst Danni Hewson said.
It expects a "material" profit in the second quarter but cautioned it will trim flight utilisation over the summer as with grapples with recent travel chaos.
The Budapest-based budget airline said it continued to ramp up its operations against a "challenging macro and operational backdrop" during the first quarter of the current financial year.
Hewson continued: "While aircraft capacity is up compared with the period just before the pandemic, the percentage of bums on available seats has fallen.
"Wizz Air's ticket fares were down in the quarter and there has been a big jump in fuel costs. All in all, the airline was loss-making in its first quarter, meaning the considerable effort put into making it a winner in the industry hasn't actually generated any extra money in its pocket."
For the first quarter to June 30, Wizz Air said it registered a EUR285 million operating loss but expects a "material" operational profit in the second quarter on strong summer demand.
Stockbroker Davy said the unrealized FX losses, the cost of disruptions and the lower utilisation in the quarter combined with the pricing environment, especially in April and May led to the sturdy loss.
During this period, available seat kilometres were 30% higher versus the same period in financial 2020, growing sequentially month-on-month as most Covid restrictions were lifted and as capacity reallocation related to the war in Ukraine started to take effect during the course of the quarter.
Revenue per available seat kilometre for the first quarter was down 10% from financial 2020, with net fares in line with financial 2020. However, the first-quarter load factor of 85%, down 9 percentage points, reflected the efforts of Wizz Air to "pass through higher input cost in its fares". In addition, ancillary revenue for the quarter was up 14% over financial 2020.
"Ever the optimist, Wizz Air sees a much better second quarter, predicting that ticket prices will be higher, more people will be travelling, and non-fuel costs will ease back. However, like many other airlines, Wizz Air is reducing its capacity this summer to ease pressures on airports," AJ Bell's Hewson added.
Wizz Air warned: "To be able to avoid cancellations and secure a more punctual operation to our customers, we have further improved the agility and resilience of our network including adjusting schedules where we have seen a higher occurrence of issues...In total for the peak summer period we expect to reduce utilization a further 5% versus the plan outlined at the full year results to reduce the impact of ongoing external disruptions."
Those "external disruptions" were on full show on Monday after Heathrow Airport ordered the cancellation of dozens of flights at short notice, affecting around 10,000 passengers.
Sixty-one flights were axed as the west London airport did not believe it could have handled the expected number of passengers.
Airlines have been asked not to rebook affected travellers on to alternative flights departing on Monday.
The cancellations are on top of previous schedule reductions already implemented by airlines.
Earlier on Monday, Heathrow warned it will ask carriers to cut more flights if it does not believe their actions will sufficiently reduce disruption.
The punctuality of arriving flights is "very low" and there have been "periods in recent weeks where service levels have not been acceptable", the airport admitted.
By Paul McGowan; [email protected]
Copyright 2022 Alliance News Limited. All Rights Reserved.
Related Shares:
Wizz Air