Hungarian airline Wizz Air (WIZZ) proved its resilience as rising operating and fuel costs failed to knock profit guidance despite a sharp decline in profits over the quarter to 31 December.
The cost of fuel surged 21.6% over the period while other costs rose 4.3% reflecting one-off pilot salary hikes, causing profit to fall from €14m to €1.7m.
Guidance for net income for the year to 31 March is intact at €270m to €300m but where profits land depends on bookings in March, which may be affected by a later Easter and Brexit.
SURVIVAL OF THE FITTEST
It is currently survival of the fittest for the airline industry with some struggling more than others.
Budget airline Ryanair (RYA) recently served up a profit warning while rival EasyJet (EZJ) has fared better with rising sales and in-line profit guidance.
Reassuringly, Wizz Air has secured its UK route licence allowing it to continue flying from the UK to non-EU countries after Brexit regardless of the outcome of negotiations.
MORE BUMS ON SEATS
Around eight million passengers flew with Wizz Air, representing a 14.9% jump in the third quarter, helping sales to increase by 21.2% to €512.7m.
The airline also made more money from non-ticket sources such as on-board food, services and baggage fees with ancillary sales increasing 22.3% to €221.5m.
Ancillary sales are vital for future growth as low-cost operators are stuck in a price war to attract more passengers.
AJ Bell investment director Russ Mould says Wizz Air’s resilience is supported by a strong balance sheet and investment in cost-efficient aircraft like the A321 NEO, which will be rolled out in the next few months.
The graph below shows how much Wizz Air's fleet is expected to grow by 2027, according to broker Davy Research.
