Airlines

Wizz Air, net profit plummets (-98%) in the quarter

The low-cost carrier revises its forecast for the end of the year downwards. Cost increases and falling fares weigh heavily

by Mara Monti

1 August 2024

2' min read

Key points

Downward revision of forecast
Share price drops more than 13%
The problems of the Airbus neo
Delays in delivery of new aircraft
Middle East Troubles
Effects of Ryanair's pricing policy

2' min read

A quarter to forget for low-cost airline Wizz Air, which suffered a 98% drop in net profit to EUR 1.2 million from EUR 61.1 million in the same period last year. Rising personnel costs, falling fares, and reduced capacity to ground 45 aircraft due to P&W engine problems weighed on the quarterly results of the carrier, which nevertheless kept turnover stable at EUR 1.3 billion (+2%), carrying 15.3 million passengers (+0.5%) in the period.

Downward revision of forecast

Wizz Air revised its year-end outlook downwards, forecasting a net profit of EUR 350 to 450 million compared to a previous forecast of EUR 500 to 600 million.

"We remain optimistic about the demand outlook, predicting that both airline tickets and ancillary items will increase year-on-year and the load factor will remain above 90 per cent," commented CEO József Váradi, who expects a return to normal by next fiscal year as Airbus' deliveries of new aircraft stabilise.

The stock lost over 13% on the stock market

On the stock market the share is down more than 13 per cent, the worst intraday performance since Covid, bringing the loss since the beginning of the year to 26 per cent. The share price performance dragged all European airlines down.

The problems of the Airbus neo

The results are weighed down by the grounding problems of the Airbus neo due to the Pratt & Whitney engines 45 aircraft under overhaul, which will rise to 47 in September. In order to avoid reducing capacity, the company is using wet-leased aircraft and aircraft-mounted spare engines, solutions that have a high cost of around EUR 39 million despite compensation received from P&W and Airbus of around EUR 91 million. "We must defend our network and market position,' explained the CEO during the call with analysts, 'we cannot retreat even if it costs us, but it will be a temporary situation.

Delays in delivery of new aircraft

In addition to the engine overhaul that has been going on for more than a year now, delays in the delivery of new aircraft by Airbus could also have an impact on Wizz's fleet plans over the next few years with 35 fewer aircraft starting in fiscal year 2026.

Difficulties in the Middle East

The quarter was also particularly heavy due to geopolitical tensions in the Middle East, where Wizz Air had recently opened a base in Abu Dhabi. The operation is not going as well as the company would have hoped: 'We are not increasing capacity in this area because despite the potentially interesting demand, geopolitical tensions are limiting its growth,' Varadi specified, adding that he remains focused on the core businees of Eastern Europe and on specific markets such as Great Britain, Italy and Austria. Specifically on Italy, in response to a question, he said he was 'not interested in the slots at Linate' which Ita and Lufthansa must divest for competitive reasons 'because they do not create the desired competition'.

Effects of Ryanair's pricing policy

On the aggressive policy on airline ticket prices adopted by competitors, particularly Ryanair, Varadi admitted that he was particularly affected on routes where there are overlaps between the two companies. In general, "we are in a phase where consumers are more cost-conscious and this can be seen in all market sectors".