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Wizz Air warns of more losses this year! Here’s what I’d do now

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·2-min read
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The Wizz Air (LSE:WIZZ) share price has fallen again on Wednesday after the airline released its latest trading update. The FTSE 250 share has dropped 1% in midweek trading, trimming share price gains during the past 12 months to 32%.

Hopes of a strong bounceback for the aviators from 2021 have steadily lost altitude in recent months. And today Wizz Air has underlined the difficulties facing the industry as it warned that financial 2022 “will continue to be a transition year.”

According to chief executive József Váradi: “We are cautiously optimistic about the recovery of the business, which has started later than what we would have liked as Covid-19 restrictions have remained in place longer than anticipated.” He added that “unless we see an accelerated and permanent lifting of restrictions,” the company expects to remain loss-making in the 12 months to March 2022.

A “difficult” time to forecast

Váradi noted that “[while] the recovery pattern continues to be difficult to forecast,” he added that “the trends are encouraging and we are ready as ever.” Wizz Air said it expected to fly at around 30% of capacity in the current quarter, and that it plans to resume all cash-generative routes as soon as government rules permit.

While Wizz Air said it could record another net loss in financial 2022, it added that “we see a strong trading environment” for the following year. The UK share expects to run at full capacity in the next fiscal year.

A Wizz Air plane takes off
A Wizz Air plane takes off

Growth strategy continues

Wizz Air saw revenues plummet 73% during the 12 months to March, it said, to €739m. Passenger numbers crumbled by more than three quarters year-on-year in the period as the pandemic grounded its planes. The Hungarian airline carried just 10.2m passengers in fiscal 2021.

As a result, the UK airline swung to a €566.5m pre-tax loss from a €294.1m profit in the previous year. However, tough trading conditions didn’t derail Wizz Air’s ambitious growth plans. The company expanded the number of flight operating bases from 25 to 43. It also expanded its fleet from 121 planes to 137.

Wizz Air also saw the amount of cash on its books swell 8% year-on-year. It had total cash of €1.62bn as of the end of March.

What Im doing about Wizz Air

Clearly, Wizz Air faces a great deal of uncertainty going forward, as today’s forecasts prove. But as a long-term investor, I think buying the airline could be a very savvy move. The low-cost travel segment still has plenty of room for growth, a theme which the company plans to exploit to the fullest through aggressive expansion.

What’s more, Wizz Air has plenty of liquidity to help see it through the current industry downturn. I think this emerging-market-focussed business could prove a shrewd long-term UK share to buy.

In fact, I’m thinking of adding it to my Stocks and Shares ISA today.

The post Wizz Air warns of more losses this year! Here’s what I’d do now appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2021