Wizz Air lifts outlook but shares lose altitude

Budget airline Wizz Air shares fell from record highs on Wednesday as an upgraded profit outlook barely kept pace with analyst expectations and failed to offset concerns over ticket pricing trends.

The shares fell 5.5 per cent, dropping from a record high in the previous session, but have more than doubled since February.

Wizz Air said its net profit guidance for 2018 was now for a range of between €265-280 million ($307-325 million). It had previously said that net profit would be at the upper end of a range of €250-270 million.

The Eastern Europe-focused carrier has withstood the pressures in the aviation sector better than many of its rivals.

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The industry has been in turmoil this year, with the likes of Monarch, Air Berlin and Alitalia entering administration following intense price competition in Europe due in part to budget operators such as Wizz.

Analysts at Barclays said that consensus forecast was already at the high end of this new range.

Moreover, Mark Irvine-Fortescue at Panmure Gordon said that unit revenue, measured in revenue per available seat kilometres (RASK), was a “tad disappointing”.

“Whilst we believe Wizz has the raw ingredients and market conditions to remain a structural winner, we struggle to justify a buy at current valuations and move to hold,” he said in a note.

Chief executive Jozsef Varadi told Reuters that the airline had kept a strong handle on costs, helping profit to beat expectations and leaving it well placed to prosper after Monarch and Air Berlin collapsed.

“We have been benefiting from their fall, in a way. We have been able to add capacity,” Varadi said.

Profit rose 24.6 per cent in the first half to a record €288.6 million. For European airlines like Wizz, the summer is the most profitable time of year.

The abrupt cessation of Monarch flights after it collapsed in early October has taken capacity out of the market, and Varadi said that Wizz was interested in acquiring the failed airline’s slots at London Luton.

The airline was able to rapidly grow capacity while maintaining margins at last year’s levels. It said the fare outlook was stable.

-Reuters