Low-cost European carrier Wizz Air expects to return to profit this year as the post-pandemic rebound in travel gathers pace and the group puts a series of setbacks behind it.
The airline’s expectations of making a profit in the year to March 2024 contrast with the previous financial year, when it faced several problems, including a decision to abandon fuel hedges that backfired when the war in Ukraine sent prices up sharply.
The fuel price exposure was a substantial contributor to the carrier’s net loss for the year to March 31 of €535mn. With comprehensive currency and fuel hedges now in place, the Budapest-based group said on Thursday that it expected to report a net profit for the current financial year of between €350mn and €450mn.
Wizz Air has expanded aggressively since it was founded almost 20 years ago, making it a competitor to Ryanair in Europe’s low-cost market.
Referring to the lack of hedging, chief executive József Váradi said its fuel costs in the first half of its last financial year had been “totally down to the market” and that the market “was not paying a favour to us”.
He attributed the expected turnround from the €535mn loss to profits of €350mn to €450mn to three factors.
Váradi said that of the roughly €1bn improvement he expected cost efficiencies to generate €400mn, a further €200mn to come from better use of the airline’s fleet and crew and about €400mn from having fuel and currency hedges in place.
“I’m very confident in the performance of the airline financially as a result of all the operational changes and investments we’ve made,” Váradi said.
Like other low-cost airlines, Wizz is investing in the latest generation of single-aisle, fuel-efficient aircraft. During the current financial year, it is expecting to receive 42 Airbus A321neo aircraft, with new, fuel-efficient engines. It intends to hand back to lessors 16 smaller A320s with older engines.
The company is targeting expansion to Gulf states such as the United Arab Emirates and other parts of Asia, as well as growth in western Europe.
Váradi said that, in light of delivery problems at Airbus, it was expecting to receive about four fewer aircraft than originally intended during the financial year. However, he said, the airline had “levers to play with” to manage the issue, including extending the leases of aircraft in its existing fleet.
Wizz Air shares have soared almost 50 per cent this year, cutting some of the steep decline that began in early 2021, as investors anticipate further improvements in the carrier’s performance.
Following Russia’s full-scale invasion of Ukraine in February 2022, Wizz Air was forced to restructure the 10 per cent of its services that had been scheduled to serve airports in either Ukraine or Russia.
For the 12 months to March 2023, Wizz Air’s revenues more than doubled to €3.9bn as passenger demand recovered from the pandemic. On Thursday, the company said it expected to increase its available seat capacity by about 30 per cent in the current financial year.
“I think that we’re clearly seeing very strong demand for our services and products,” Váradi said.
Source: Financial Times