Wizz Air Cuts Profit Forecast As Fuel Bill Soars
Wizz Air has cut its full-year profit forecast by as much as 21%, blaming an €80 million euro hit from higher fuel prices. However, the fast-growing carrier, which mainly serves passengers in centr...
Wizz Air has cut its full-year profit forecast by as much as 21%, blaming an €80 million euro hit from higher fuel prices.
However, the fast-growing carrier, which mainly serves passengers in central and eastern Europe, said it was better placed to cope with rising fuel prices than many rivals. It pointed to its ultra-low cost model and expansion plans based on the arrival of new, more fuel-efficient planes next year.
"I don't think that the high fuel price environment is necessarily a structurally bad thing for Wizz Air," CEO Jozsef Varadi told Reuters in an interview.
"It helps the market consolidate and makes the stronger airlines even stronger."
Jet fuel price are around 23 percent higher than a year ago.
That helped to push Cyprus-based Cobalt Air and Denmark-based Primera Air out of business in October.
Larger airlines have also suffered. Ryanair cut its profit forecast in October, while easyJet has said the outlook for revenues per seat for the six months to March is negative.
Reining In Costs And Reducing Capacity
In the short term, Wizz said it would mitigate higher fuel prices by reining in costs and reducing second-half capacity growth to 14% from a previously planned 18%, helping to boost ticket prices.
"While the pull-back in the full-year guidance is disappointing, second-half guidance is in line and the strong pricing momentum is impressive," Goodbody analyst Mark Simpson said.
A Buying Opportunity
Further ahead, Wizz is due to receive its first A321neo in early 2019 and by the end of its next financial year will operate 12 of the bigger jets that burn 16% less fuel.
RBC said the weakness in Wizz's share price - it has lost a third of its value in the year to date against 15% falls at Ryanair and easyJet - was a buying opportunity.
"Wizz shares could double by 2021 - so worth wading into a short-term adverse momentum current," analyst Damian Brewer said.
Wizz forecast net profit for the 12 months to March 31, 2019, would come in between €270 million and €300 million, compared with previous guidance of €310 million - €340 million.