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Wizz Air profits dented by fuel costs while full-year guidance hinges on Brexit and Easter

The possible impact of Brexit and a later Easter this year will determine where Wizz Air'S profits fall within its guidance range for the year
Wizz Air
Wizz Air carried 8.1 million passengers in the third quarter, up 14.9% on a year ago

Wizz Air Holdings PLC (LON:WIZZ) maintained its guidance for the year despite higher fuel and staff costs leading to an 87.6% drop in net profit in the third quarter.

The budget airline said it continues to expect full-year net profit of €270mln and €300mln but where it ends up within this range depends on the extent of yield pressures in March arising from Brexit and Easter falling outside the financial year.

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

In the third quarter ended December 31, net profit fell to €1.7mln from €14mln a year ago as total operating costs increased by 25.6% to €512.7mln.

Fuel and staff costs jump

Fuel costs jumped 39.9% to €166.2mln and staff costs shot up 40.6% to €50.5mln due to new hires to support capacity growth and the start-up of Wizz UK as well as a 14% rise in pilot salaries.

“Our industry-leading aircraft utilisation (block hours per aircraft per day), which helps drive our unit costs lower, was negatively impacted by the capacity adjustments in the quarter, but with the recent fall in fuel prices we will be increasing our utilisation levels back to the high levels from the start of the fiscal year 2020,” said chief executive József Váradi.

The carrier also took a €5.9mln disruption charge for 79 flight cancellations, although this was much lower than the 226 flights it had to cancel last year.

Revenues grow on rise in passenger numbers 

Revenue gained 21.2% to €512.7mln as the number of passengers carried rose 14.9% to 8.1 million passengers, boosted by a 17% increase available seat miles.

Ticket sales rose 20.4% to €291.1mln while ancillary revenues increased 22.3% to €221.5mln, supported by the introduction of a charge for carry-on luggage last November.

Revenue per available seat miles edged up 5.6% to 3.54 euro cents.

The load factor – the ratio of passengers to seats available – rose to 91.4% from 91.4%.

“Wizz Air remains well on track to deliver its mission to be the undisputed ultra-low-cost carrier in the industry as cost leadership positions the airline for disproportionate growth opportunities across Central and Eastern Europe and Western Europe, and makes us an increasingly formidable business under any market circumstances,” Váradi said.

“The rollout of our A321 NEO fleet will commence in the fourth quarter, which combined with our industry-leading unit cost, a highly valued employee base and an investment grade balance sheet with €1.1 billion of free cash make Wizz Air a structural winner in the European airline industry."

In morning trading, shares rose 2.6% to 3,132p. 

Investors want a tighter hand on costs, says analyst

Russ Mould, investment director at AJ Bell, said investors will be looking for a much tighter hand on costs going forward.

“And Wizz Air may also be hoping for more of a shake-out in the industry," he said.

"As more of its rivals go to the wall, so the competitive pressures it faces might ease slightly.”

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