Wizz Air has burst out of the pandemic with eye popping growth. The discounter, fueled by the arrival of dozens of new Airbus jets, has grabbed share in London and Italy, and pushed east with new bases in the Middle East.
“London Gatwick slot acquisitions, the opening of Wizz Air Abu Dhabi, and the expansion in Italy are probably the most important investments we have made,” Wizz CEO József Váradi said in June of the Hungarian airline’s post-pandemic strategy.
This year, Wizz will be near six-fold larger in terms of seats at Gatwick than it was in 2019, according to Cirium Diio schedules. It will be 2.5-times larger in Italy — an “investible” market as Váradi described it early in the pandemic — and Abu Dhabi has gone from nothing for the airline to a base with nine aircraft and more on the way.
That expansion, however, is about to come to a screeching halt. Wizz is hard hit by the issues affecting Pratt & Whitney geared turbofan engines on its fleet of Airbus A320neo-family aircraft. Beginning in January, the airline expects having at least 45 aircraft grounded — that’s 45 planes in a fleet of just over 200 aircraft.
That grounding, plus the suspension of flights to Israel and other industry supply-side constraints, means Wizz expects capacity in the fiscal year ending in March 2025 to be at a “similar level” — in other words, flat — as this fiscal year.
Flat capacity growth. Compare that to the roughly 27% year-over-year increase Wizz plans this fiscal year that ends in March, Cirium Diio data show.
Lack of growth has big implications for a discounter like Wizz. Low-growth airlines typically see higher unit costs as they lack the new needed capacity to offset cost inflation. This is not necessarily a problem for an airline that can drive up airfares, and unit revenues, for example by pushing leisure travelers into more premium products. Wizz, however, is not a premium airline and has built its business on high growth and low costs.
And, speaking of expenses, Wizz’s unit costs excluding fuel were up 17% in the six months ending in September compared to the same period in 2019, and that was with a 63% capacity increase. Compared to last year, unit costs excluding fuel were down 1% on a 27% capacity increase.
Wizz does expect compensation from Pratt-parent RTX for the aircraft grounding. It did not disclose how much compensation will be paid.
In addition, Wizz expects unit revenue benefits from lower growth. Just how much they increase is dependent on what other airlines do and on travel demand.
Both Ryanair and the Lufthansa Group have forecast a strong unit revenue outlook due to the capacity discipline forced on many European carriers, including Wizz. Lufthansa is also affected by the Pratt engine issues and anticipates grounding 20 of its A320neo-family aircraft next year.
Wizz will partially offset the aircraft groundings with new deliveries from Airbus and extending leases on older planes. Wizz expects 36 A321neo deliveries during the year ending in March, and plans to extend leases on 13 older A320s. And, in its 2025 fiscal year, it anticipates taking 43 A321neos, including its first two A321XLRs, from Airbus and removing seven older A320s.
In the six months ending in September, Wizz posted a €523 million ($560 million) operating profit and 17.1% operating margin. Unit revenues increased 9.6% year-over-year.
Wizz plans to grow capacity by roughly 20% year-over-year in the six months ending in March. That’s down roughly 10 percentage points due to the Pratt engine issues. Net profit for the full fiscal year that ends in March is forecast at €350-400 million.
Airlines Sector Stock Index Performance Year-to-Date
What am I looking at? The performance of cruise and tours sector stocks within the ST200. The index includes companies publicly traded across global markets including network carriers, low-cost carriers, and other related companies.
The Skift Travel 200 (ST200) combines the financial performance of nearly 200 travel companies worth more than a trillion dollars into a single number. See more airlines sector financial performance.