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WizzAir Q1 downdraft due ATC, high fuel price and rising staff cost

Europe’s 4th largest low-cost carrier underperformed against market consensus in Q1 (April-June).

Air traffic control (ATC) disruptions, high fuel price and rising staff cost

WizzAir was forced to cancel 145 flights, 426 percent increase on last year, while 306 flights were delayed more than three hours, 96 percent increase on last year, resulting in 2.2 million passengers effected by ATC disruptions. The on-time performance deteriorated 7.8 percent units to 74.4 percent. Compensation to passengers in accordance with EU261 regulation and other disruption costs amounted to 9.1 million euros, this was a 203 percent increase on last year.
The high oil price pushed fuel expenses up 32.1 percent, but WizzAir is 40 percent hedged the next 12 months though the hedge volume is in the lower end and resulting in fuel expenses will impact on costs.
Staff cost increased with 36.6 percent, mainly due to employing more staff to cater for the high growth. The increase in expenses resulted in unit costs/CASK inclusive fuel jumped 10.2 percent.

Reduced capacity growth in 2018

Due to the ATC problem, WizzAir will reduce its planned capacity growth from 20- to 18 percent in 2018.
During Q1 (April -June) the fleet increased to 102 aircraft whereof 71 are Airbus A320 and 31 are the larger Airbus 321.
WizzAir has on order more than 200 new Airbus A320 family aircraft.

Ancillary revenues over 40 percent

WizzAir is the leading low-cost carrier in Europe on ancillary revenues and in Q1 this represented 44 percent of total revenues. Ancillary revenues include extra baggage, seat selection, food and drinks on-board, hotel booking, transfers, parking and other services not included in the ticket price. Ancillary revenue per passenger was 25.6 euros which is an decrease of 8.6 percent on last year.

WizzAir Q1 (April-June) at a glance

Passengers transported 8.6 million +20 percent and the load factor was 92.1 percent +0.9 percent units.
Total passenger revenues €553.4 million +17.6 percent and split on ticket revenues €330.4 million +24.5 percent and ancillary revenues €223 million +9.3 percent.
Profit after tax ended on €50 million a reduction of 14 percent on last year.
Unit revenue/RASK €0.36 -1.4 percent and indicates more pressure on airfares.
Unit cost/CASK inclusive fuel €0.30 +10.2 percent and indicates cost on fuel is up.
Unit cost/CASK exclusive fuel €0.27 -1.1 percent and indicates costs exclusive fuel is down.

Outlook for the remaining financial year

Capacity growth reduced from 20- to 18 percent, due to ATC problem in European airspace. The cabin load factor is estimated to grow 1 percent unit.
Unit cost/CASK inclusive fuel is estimated to increase 15 percent, while unit cost/CASK exclusive fuel is estimated to decrease 1 percent. Profit after tax is unchanged and estimated to 310-340 million euros.