Wizz Air (WIZZ) is experiencing turbulence as third quarter operating profit fell by 5.6% to €14.6m. Operating expenses increased by a greater amount than revenue growth. That news sends its shares down 2.1% to £35.
Full year net profit guidance is unchanged at a range of between €265m and €280m.
Operating expenses increased by 25.4% to €408.2m. Total revenue for the three months to 31 December 2017 grew by 24% to €422.9m.
Wizz Air achieved stronger growth in ticket sales (€241.7m, up 26.1%) than ancillary revenue (€181.1m, up 21.3%) which is money earned from everything excluding tickets.
Average ticket revenue per passenger in the quarterly period increased to €34.2 versus €33.7 a year earlier. Ancillary revenue fell by 2.1% to €25.4 after Wizz Air scrapped its paid-for cabin bag policy.
In Q3 2016, the airline benefited from a one-off exceptional income of €17.6m when it gained from hedging against the oil price and the dollar. That’s distorted the comparative figures in the latest quarterly results.
The absence of this one-off item in the Q3 2017 numbers is the main reason why it reports a 56% drop in pre-tax profit to €14.6m.
In the year to 31 March 2018, Wizz Air has hedged 65% of its fuel costs, leaving it exposed from rising prices for the remaining 35%.
‘Wizz has hedged less of its future fuel requirements than Ryanair and therefore needs to increase near-term yields by more to offset higher fuel costs,’ comments Investec analyst Alex Paterson.
