November 7, 2018 / 7:16 AM / a month ago

Wizz Air cuts profit forecast as fuel bill soars

LONDON (Reuters) - Budget airline Wizz Air (WIZZ.L) cut its full-year profit forecast by as much as 21 percent on Wednesday, blaming an 80 million euro ($92 million) hit from higher fuel prices.

FILE PHOTO: A Wizz Air Airbus 321-231HA-LXJ aircraft taxis to runway at the Chopin International Airport in Warsaw, Poland January 8, 2018. Picture taken on January 8, 2018. REUTERS/Kacper Pempel/File Photo

However, the fast-growing carrier, which mainly serves passengers in central and eastern Europe, said it was better placed to cope with rising fuel prices than many rivals. It pointed to its ultra-low cost model and expansion plans based on the arrival of new, more fuel-efficient planes next year.

“I don’t think that the high fuel price environment is necessarily a structurally bad thing for Wizz Air,” CEO Jozsef Varadi told Reuters in an interview.

“It helps the market consolidate and makes the stronger airlines even stronger.”

Shares in Wizz, which said full-year results would also suffer a 10 million euro hit from air traffic control strikes and congested airports in the summer, were down 2.3 percent to 2,605 pence at 0815 GMT, paring an earlier drop of 8 percent.

Jet fuel price are around 23 percent higher than a year ago.

That helped to push Cyprus-based Cobalt Air and Denmark-based Primera Air out of business in October.

Larger airlines have also suffered. Ryanair (RYA.I) cut its profit forecast in October, while easyJet (EZJ.L) has said the outlook for revenues per seat for the six months to March is negative.

In the short term, Wizz said it would mitigate higher fuel prices by reining in costs and reducing second-half capacity growth to 14 percent from a previously planned 18 percent, helping to boost ticket prices.

“While the pull-back in the full-year guidance is disappointing, second-half guidance is in line and the strong pricing momentum is impressive,” Goodbody analyst Mark Simpson said.

Further ahead, Wizz is due to receive its first A321neo in early 2019 and by the end of its next financial year will operate 12 of the bigger jets that burn 16 percent less fuel.

RBC said the weakness in Wizz’s share price - it has lost a third of its value in the year to date against 15 percent falls at Ryanair and easyJet - was a buying opportunity.

“Wizz shares could double by 2021 - so worth wading into a short-term adverse momentum current,” analyst Damian Brewer said.

Wizz forecast net profit for the 12 months to March 31, 2019, would come in between 270 and 300 million euros, compared with previous guidance of 310-340 million euros.

($1 = 0.8711 euros)

Reporting by Sarah Young; Editing by Kate Holton and Mark Potter

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