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Wizz Air shares take a dive as it downgrades full-year profit guidance on fuel prices and summer disruption

Despite positive first-half earnings, the budget airline lowered its net profits guidance for the full year to between €270mln and €300mln from between €310 and €340mln previously
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Underlying earnings for the first half were €505.5mln, up 2.7% year-on-year

Wizz Air Holdings PLC (LON:WIZZ) shares dived in early trading Wednesday after it downgraded its net profit guidance for the full year as higher oil prices and summer disruption bit into its earnings.

In its interim results, the budget airline reported underlying earnings (EBITDAR) for the period of €505.5mln, up 2.7% year-on-year while revenues climbed 20% to €1.38bn.

READ: easyJet and Wizz Air shares move up as both report passenger number growth, but easyJet load factor slips

Despite the uptick in earnings, the group saw its EBITDAR margins contract during the first half to 36.7% from 42.8% previously.

In terms of passengers, Wizz carried 18.8mln in the first half, up 20% on a year ago while its load factor increased to 93.6% from 92.8%.

Despite the positive figures, the airline said that headwinds caused by higher oil prices and disruption over the summer, which was marred by air traffic control strikes, meant it had lowered its net profits guidance for the full year to between €270mln and €300mln.

The group had previously forecast full-year profits of between €310 and €340mln.

József Váradi, chief executive of Wizz Air, said that an “encouraging revenue environment, robust demand and an improved operational performance” had allowed the company to offset around half of an €80mln fuel headwind and disruption costs, however, this wasn’t enough to prevent the downgrade.

He added that as a result of the rising fuel costs, the company had “trimmed” its second half capacity growth to 14% from 18% previously.

In a note to clients, analysts at City broker Liberum said the challenges faced by Wizz had been “well flagged by other airlines” although the moderation in capacity growth would “eventually improve the industry’s ability to offset higher fuel costs through higher unit revenues”.

Wizz Air shares were down 5.2% at 2,527p.

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