Low-cost carrier Wizz Air has cut its full-year profit guidance by more than 10 per cent, blaming higher fuel and disruption costs, as it announced its first-half results.
The Hungary-based company, eastern Europe’s largest low-cost airline, lowered its full-year net profit guidance from between €310m and €340m to €270m and €300m.
Revenue for the first half of €1.38bn was in line with analysts’ forecasts while pre-tax profit fell 1.7 per cent to €295.5m.
However, investors and analysts were encouraged both by the airline trimming its winter capacity, which supports fares, and by its future deliveries of more cost-efficient aeroplanes. Wizz Air shares were up 8.4 per cent to £28.90 by close of trading.
Chief executive Jozsef Varadi said there would be a fuel headwind of about €80m for the full year, half of which the company could offset through “the encouraging revenue environment, robust demand and an improved operational performance combined with our relentless focus on costs”.
The remaining portion of the higher fuel costs meant profit guidance had to fall, he said.
However, Mr Varadi credited Wizz’s “capacity discipline” — it will trim second-half capacity growth from 18 per cent to 14 per cent — with supporting its full-year outlook in the face of the fuel rise. In this, it followed other airlines’ recent cuts to avoid flooding the market and depressing prices.
Revenue per available seat kilometre, a standard industry unit, was flat even as cost per ASK went up 1.1 per cent, or 6.4 per cent including fuel. The airline said revenue per ASK was up 7 per cent for the second half of the year.
Passenger numbers and revenue both increased by a fifth in the first half, but the higher revenue was offset by staff costs, which were up 36 per cent, and fuel costs that rose 43 per cent.
Alex Paterson, analyst at Investec, said: “The staff costs were higher because they took 17 [new] aircraft in 17 weeks and they needed to get people in and trained to fly them. Wizz is incredibly lean on costs, but they had to spend more because they had to make that happen and it really stretched them as an organisation.”
The company called the first half “particularly challenging” on an operational side, saying it had to cancel 251 flights and that on-time performance had fallen to 62 per cent in July, since recovering to 83 per cent in October. Passenger disruption costs rose from €8.6m to €16.8m year on year.
Mr Varadi blamed continent-wide operating challenges for “unprecedented disruptions caused by [air traffic control] strikes, slot constraints as well as heavily congested airports” but also conceded that the company’s rollout of its new UK subsidiary and delivery of new aircraft had contributed.
Wizz launched the subsidiary in part to prepare for different Brexit scenarios, and this week it received a UK route licence, which will allow it to fly between the UK and non-European Economic Area countries even in the event of a no-deal Brexit.
Wizz confirmed it was closing its tour operator business, Wizz Tours, which would have a full-year cost of €5m.
Get alerts on Wizz Air Hungary Ltd when a new story is published