Wizz Air profits dive in third quarter

Wizz Air reported a sharp drop in profits in the three months to end-December as the budget central and eastern Europe airline's faster sales growth was met with ever mounting costs.

Some 8.1m passengers were carried during the third quarter of the group's financial year, up 14.9% on the previous year, revenues climbed 21.2% to €512.7m. Ticket revenue rose 20.4% and ancillary sales by 22.3% and unit revenue per passenger up 7%.

Profit for the period sank almost 90% to €1.7m as operating expenses rose almost 26% to €512.7m, with the most notable increases being staff costs and fuel costs both up 40%.

Guidance for full-year net profit was, however, still maintained for between €270m and €300m.

Chief executive József Váradi highlighted the increase in load factor to 91% and after adjusting growth capacity to help offset higher fuel prices, Wizz saw a 6% increase in unit revenues per average seat kilometre in the quarter.

"Our industry leading aircraft utilization, which helps drive our unit costs lower, was negatively impacted by the capacity adjustments in the quarter, but with the recent fall in fuel prices we will be increasing our utilization levels back to the high levels from the start of [the next financial year]."

Where within the full-year profit guidance range Wizz will be "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".

Váradi added that the roll out of our Airbus A321 NEO fleet will begin in the fourth quarter.

There was €1.1bn of free cash on the balance sheet at the end of the quarter.

Broker Davy said the release was "largely as expected" with this quarter weaker by "less meaningful", though cost phasing had an effect and the important thing being that full-year net income guidance was maintained.

"Fuel and pricing continue to show a link, which is also encouraging, and we think that the company is well placed for a strong FY 2020 period," analysts said.