Wizz Air sees scope to prosper in tough European market

Low cost carrier Wizz Air said it believes it is better placed than rivals to navigate a challenging operating environment and higher fuel costs in the coming year after delivering solid annual results yesterday.
Wizz said profit would rise in the coming year and it expects opportunities to lift market share as competitors withdraw unprofitable capacity in the face of more costly fuel.
Wizz’s focus on eastern and central Europe means it is sheltered from some of the intense competition on popular Mediterranean routes which has dampened the pricing outlook for the likes of easyJet and Ryanair.
“We are the lowest cost producer and the highest margin airline in the industry. If the industry comes under pressure... then the lowest cost producer must prevail,” chief executive Jozsef Varadi told Reuters.
“If it’s painful then it’s going to be much less painful on us than anyone else,” added Varadi, the Hungarian co-founder of the Budapest-based airline.
Unit costs excluding fuel were 1% lower in the 12 months to March 31, though it said air traffic control and airport infrastructure issues were among the challenges it anticipated in the coming year.
It expects net profit in the range of €320-350mn in the current financial year, after posting full-year net profit in-line with forecasts at €292mn ($325mn). It had previously said net profit for 2018-19 would be in the upper half of its €270-300mn guidance.
RBC said that the outlook for the current year was below consensus estimates of €363mn but still implied healthy profit growth.
“We see a long-term chance to buy structurally well-positioned growth,” RBC analyst Damian Brewer said in a note.
“Wizz shares could pass £50 by 2022 — so beyond the short-term we see strong investment attractions.”
Wizz shares fell 3.4% to £31 after the results, but remain up 10% in 2019, outperforming Europe’s biggest airlines which are all down for the year.
Varadi said soccer fans used Wizz to help get to Baku, Azerbaijan, for the all-English Europa League final between London clubs Arsenal and Chelsea on Wednesday, a location criticised for its inaccessibility and poor logistics.
Fans used routes such London Luton to Kutaisi in neighbouring Georgia, as well as going to Baku via Budapest, Varadi said, though he said the airline could do more to cater for sports fans.
“This is something we’re going to be more focussed on going forward... we are looking at outbound UK demand much more than before, and we haven’t really reacted to events like this, but I think going forward we will,” he said.
“In central and eastern Europe, a sport event doesn’t rock the boat, but here in the UK it does.”