Yahoo Finance Wizz Air set for ‘smooth landing’ despite engine issues and Israel-Gaza disruption
Wizz Air is set for a smooth landing in its full-year results despite disruption stemming from conflict in the Middle East and supply chain issues with its Pratt and Whitney-manufactured engines.
The low-cost carrier is set to announce a return to profit on Thursday, with net income of between €350m and €370m (£318.2m), in line with market expectations.
Like rivals Easyjet and Ryanair, Wizz Air has benefitted from rising airfares and a surge in leisure demand over the last 18 months.
It carried a record 15.1m passengers in the final quarter to December, up 22 per cent year-on-year.
But the bumper demand was not enough to offset turbulence from supply chain disruption and the geopolitical developments in the Middle East, with Wizz ultimately swinging to a loss.
The war between Israel and Gaza has seen thousands of flights to the region cancelled since November, and chief József Váradi has warned of a “ripple effect” on demand in neighbouring countries.
At the same time, Váradi’s outfit was forced to cut capacity dramatically and ground aircraft as many of its GTF engines, built by Pratt and Whitney, were called in for inspection amid production hiccups. The capacity reduction brought annual profit guidance down to €450m (£387m) from €350m (£301m).
Shares in the airline have fallen 30 per cent in the last twelve months. However, despite the frustrations, analysts are confident that strong demand will keep Wizz Air on track in the long run.
“The GTF engine recall has been a headache necessitating engine inspections and the altering of schedules, although compensation paid out will have helped offset revenues lost due to the impact on capacity,” Susannah Streeter, head of money and markets at Hargreaves Lansdown, said.
“But strong demand for travel has offset the operational difficulties. The hike in ticket prices isn’t putting off holidaymakers, with consumers ringfencing budgets for trips abroad.
“As far as guidance for the coming year, the signs are that bookings remain robust. Recent data from Barclaycard for April showed that although overall retail spending dipped in the UK, transactions at travel agents soared 14.4 per cent while spend jumped by more than seven per cent, and similar trends will be playing out across Europe.”
She added: “Costs at Wizz Air have also been kept under control, with expenses growing more slowly helped by its good performance record and lower fuel costs and that’s also likely to be reflected in the full year numbers.’’
