Wizz warns of return to losses, despite first profit since start of pandemic

Wizz Air warned on Thursday it would be plunged back into losses this winter, just as it announced its first quarterly profit since the start of the pandemic.

The airline said it would have to cut ticket prices to encourage people to fly this winter, which was likely to force it back into the red after reporting an operating profit of €57m in the three months to the end of September.

It is a blow for the London-listed airline, coming shortly after passenger numbers had returned to near normal levels during the busiest weeks over the summer.

Despite joining a small band of European airlines that have returned to profit over the summer, including Ryanair and Lufthansa, chief executive József Váradi warned of a difficult winter ahead.

He said he expected to lower prices to “stimulate demand” for flying. Taken alongside volatile fuel and currency prices, this was expected to push the airline back to an operating loss of €200m in the current quarter. Losses could continue into early next year.

Rival Ryanair also cut its earnings forecast this week and said it would need to use lower prices to help support demand.

Varadi is marshalling Wizz through the crisis with an aggressive expansion plan, and has been opening new bases and taking on aircraft in a challenge to Ryanair’s dominance of the low-cost European skies.

“We are still in an investment mode, and that creates some degree of inefficiency because we are not yet fully operational at full capacity . . . obviously we are leaving money on the table from an operational perspective,” Varadi told the Financial Times.

“It is a bit of short term pain for long term gain. But we believe all these issues we are facing in the short term are temporary in nature,” he added.

Earlier this year, Wizz made an unsuccessful bid to buy UK carrier easyJet, which would have given it instant access to flight paths across western Europe at a stroke, and Varadi has been offered a £100m bonus if he can rapidly grow the airline.

Wizz has pledged to grow from its current fleet of about 150 aircraft to 500 by the end of the decade.

The results fell short of analysts’ expectations, but shares were unaffected, trading sideways on Thursday morning. They have risen 35 per cent over the past 12 months to trade above their pre-pandemic levels.

“In our view, the trade-off of higher costs today versus higher earnings in the future is worth making,” said Alex Irving, an aviation analyst at Bernstein.

Wizz posted a net loss of €120.9m for the six months to the end of September, half the amount it lost in the previous year. The airline reported a profit of €371.5m in the equivalent period in 2019.

Wizz carried 12.5m passengers in this six month period — its fiscal first half, with nearly 10m of them over the final three months of the period.

Revenue rose 87 per cent to €880m, with its planes 75 per cent full. This is an improvement on last year, but still well short of the more than 95 per cent load factor achieved in 2019.