Wizz Air slashes earnings forecast due to surge in oil prices

Wizz Air (LON:WIZZ) was forced to slash its earning guidance in its first half (H1) results amid rising fuel prices and air-traffic controller strikes leading to unprecedented disruptions for European airlines.

The low-cost carrier saw net profit in H1 rise by 1.2% to €292.2 million and revenues jump 20% to €1.38 billion. But despite the uptick, the airline was forced to cut its full year earnings guidance to between €270 - €300 million, down from forecasts made earlier in the year of between €310 - €340 million.

‘On the back of the rising fuel price in the first half the company has trimmed second half capacity growth to 14% (previously 18%) and as a result second half yields are responding well, tracking 7% higher than last year with load factors also higher,’ Wizz Air CEO József Váradi said.

‘The operating environment in the first half was particularly challenging for all European airlines with unprecedented disruptions caused by ATC strikes, slot constraints as well as heavily congested airports,’ Váradi said.

‘These conditions also coincided with the Company’s ramp up of our new UK airline, Wizz Air UK, and an extensive delivery program of 17 aircraft in 17 weeks. Our operations are now back on track with October and November KPIs ahead of last year,’ he added.

Clearer skies ahead

The airline admitted that it has wrestled with a particularly challenging trading environment in H1 but said that it had begun to see a decent improvement in the operating landscape since the end of the summer period.

The first half of the year saw the low-cost carrier cancel 251 flights because of air-traffic controller strikes and adverse weather conditions.

Wizz Air incurred an unusually high level of passenger disruption costs of €16.8 million in the first half compared to €8.6 million in the previous year.

However, the company reiterated that it has taken steps to address the level of disruptions and has started to see an improvement in performance with only 11 flights cancelled in the third quarter.

‘Wizz Air’s unique combination of an industry-leading cost base and number one position in the growing CEE market makes us a structural winner,’ Váradi said. ‘The arrival of game-changing, well-priced A321 NEO aircraft into our fleet in the fourth quarter, financed at very attractive levels, will enable Wizz Air to increase its cost advantage even further.’

‘Our ultra-low cost business model provides a significant competitive advantage in an environment of higher fuel prices.’

‘As Wizz Air continues to drive its cost base even lower and profitably stimulate traffic, this advantage allows us to capture an even greater share of our market and extend our reach,’ he added.