Wizz Air cuts full-year guidance despite surge in Q3 profit

Central and Eastern Europe focused airline Wizz Air cut its underlying net profit guidance for the full year on Wednesday despite reporting a surge in third-quarter profit, on the back of lower fuel prices and severe weather conditions.

For the three months to the end of December, pre-tax profit jumped 104% from the same quarter a year ago to €33.1m as revenue rose 10% to $341.1m and the company carried 5.7m passengers, up 20% on 2015.

Ticket revenues increased 2.5% to €191.8m, while ancillary revenues grew 21% to €149.4m.

Wizz said that although the current financial year is looking like “a very good year” for the company and it remains excited about its prospects for the next financial year, lower fuel prices continue to feed through to lower airfares, a trend which looks set to continue well into 2017. In addition, the group’s operations this winter have been disrupted by unusually severe weather conditions in CEE.

As a result, Wizz has trimmed its guidance for net profit for the full year from €245-€255m to between €225 and €235m.

Chief executive József Váradi said: “Wizz Air remains on track to strengthen its position during 2017 financial year through continued growth in our core markets and expansion of our network. We expect to grow capacity in terms of ASKs at 20% for the current financial year which is at the higher end of our previous guidance of 18% - 20%. And the current environment of very low fares and increasing fuel prices presents excellent trading conditions for Wizz Air to continue securing its market leadership position while maintaining industry leading profitability.

“Our ultra-low cost model is being reinforced with a delivery stream of brand new A321 aircraft which deliver double digit cost savings compared to A320 aircraft. By March 2018 Wizz Air will be operating 26 A321 aircraft - representing a third of the airline's seat capacity - which will give us a clear cost advantage versus most of our rivals. This winning formula leaves Wizz Air well placed to continue to deliver significant growth and returns for our shareholders.”

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Wizz Air has not escaped the pricing squeeze engulfing the airline industry. Passenger numbers have surged more than 20%, but the by now familiar mathematics of falling ticket prices and stubbornly high costs per seat mean that the bottom line has suffered. Each passenger is simply less profitable than they were a year ago, leading management to reduce profits guidance for the full year."

At 1012 GMT,the shares were down 8.4% to 1,633p.