Wizz Air witnessed an 88 per cent drop in pre-tax profits at the end of 2018 but has insisted it’s on track to meet its annual guidance.
The budget airline suffered a drop in pre-tax profit to just €1.7m for the three months to the end of 2018, down from €14m over the same period in 2017.
Revenue climbed 21.2 per cent over the quarter to hit €512.7m while Wizz also carried 1m more passengers, seeing 8.1m book seats on its flights.
Wizz Air upped its cashflow by 12 per cent to hold €1.1bn.
Shares ticked down by 3.5 per cent in early morning trading.
Why it’s interesting
A 25 per cent rise in operating costs to €512.7m hit Wizz’s profits this qyarter, chiefly down to a 22 per cent increase in fuel costs.
Despite the profit plummet Wizz is sticking to its full year profit guidance of between €270m and €300m.
However, chief executive Jozsef Varadi warned that hitting guidance depends on sales in March – which will be affected by Easter coming after Wizz’s financial year ends in April.
Uncertainty around Brexit will also be a pressure on profits, he said.
But Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service, said that rising passenger numbers would limit any turbulence felt by shareholders.
“Self-styled ultra-low cost airline Wizz Air is seeing passenger numbers take off as it positions itself as the leading carrier to central and eastern Europe,” she said.
“Today, with its British flying stripes achieved in the last quarter, confirming its place as a UK airline and the success of its Discount Club clearly aimed at today’s super-cost conscious fliers seeing a 25 per cent rise in uptake, the airline says it remains on track to meet full-year net profits of between €270 million and €300 million.
“And that’s in spite of higher fuel prices and uncertainty around Brexit and this year’s late Easter, which falls after the financial year-end.”
What Wizz Air said
Chief executive Jozsef Varadi said:
“The company maintains its net profit guidance range of between €270m and €300m for the full year, where we will be within this range will depend on the extent of March yield pressures which will be affected year-on-year given Easter falls after the financial year-end in April and external factors such as Brexit uncertainty.
“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.
“The roll out 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 €1.1bn of free cash makes Wizz Air a structural winner in the European airline industry.”