Aggressive cost focus drives growth at Wizz Air

Wizz Air Holdings issued its audited results for the full year ended 31 March on Thursday, reporting a 24% increase in total revenue to €1.95bn.

The FTSE 250 low cost carrier said ticket revenue was ahead 23.7% to €1.13bn, while ancillary revenue grew 24.4% to €816m, representing 42% of total revenue.

Net profit was ahead 22.1% at a record €275m when compared to 2017’s underlying profit, with the company’s net profit margin standing at 14.1% as the airline delivered 25% passenger growth and load factors 1.3 percentage points higher at 91.3%.

Total cash at the end of March was €1.14bn, of which €980m was free cash.

Wizz Air also highlighted the reception of investment-grade credit ratings from both Moody's at Baa3, and Fitch at BBB.

On the operational front, Wizz Air said it made “significant investment” to drive its costs lower during the year, with over 35% of seats now served by the more cost effective A321ceo aircraft with the addition of 10 brand new aircraft.

The fleet was expanded to 93 aircraft, with a mix of 67 A320ceos and 26 A321ceos.

Its average aircraft age was 4.6 years, as the carrier remained one of the youngest and most cost efficient fleets of any major European airline.

Wizz Air ordered 146 additional Airbus A320neo family aircraft during the period, securing a pipeline of latest-technology, ultra-cost efficient aircraft deliveries until 2026.

It also launched the Wizz Pilot Academy, and started the construction of a brand new pilot and cabin crew training facility in Budapest, which the board said would support growth in a cost efficient way.

“The 2018 financial year was another year of investment and driving efficiencies in Wizz Air's operations as we continue to our mission to become Europe's undisputed airline cost leader,” said chief executive József Váradi.

“This relentless focus on cost means we continue to stimulate the market through the lowest fares, resulting in record passenger numbers of almost 30 million up 25% year on year.”

Váradi said that a backdrop of high economic growth rates across Central and Eastern Europe, and the opportunities created by Wizz Air's ultra-low fares, underpinned the business.

“Our cost focus, market leading position in CEE, pipeline of truly game changing Airbus A320neo family technology and balance sheet strength, as reflected in our recently awarded investment grade credit ratings, are the strongest of foundations for Wizz Air to continue to drive profitable growth and achieve one of the best profit margins of all European airlines, ensuring Wizz Air remains one of the most exciting airline businesses in the world.”

The board remained “very optimistic” for the coming 12 months, Váradi added.

“Higher fuel prices are supporting a stronger fare environment and we expect these macro conditions to provide Wizz Air with market share opportunities as weaker carriers withdraw unprofitable capacity.

“Our ability to drive cost advantage further and offer lower fares across our ever expanding network will lead to an expected 20% increase in passenger numbers to 36 million in FY 2019.”

The company recorded a solid start to the 2019 financial year, with Váradi saying the RASK forecast was broadly flat in the first quarter year-on-year - a “good performance” given the absence of Easter traffic which fell into the last financial year.

“Although still at an early stage of the financial year, the group net profit is expected to be in a range of between €310m and €340m in FY 2019.

“As usual, this guidance is dependent on the revenue performance for the all-important summer period as well as the second half of FY 2019, a period for which the company, like most airlines, currently has limited visibility.”