November 13, 2019 / 7:39 AM / a month ago

Wizz Air raises profit forecast, capacity outlook as rivals struggle

(Reuters) - Wizz Air (WIZZ.L) lifted the bottom end of its annual profit forecast and further raised its capacity growth outlook, as the budget airline flew more passengers and curbed costs in the first-half, while struggling rivals cut expansion plans.

FILE PHOTO: A Wizz Air Airbus 321-231 aircraft, registration number HA-LXT, is pictured at the London Luton Airport, Luton, Britain, April 11, 2019. REUTERS/Kacper Pempel/File Photo

Wizz, which mainly flies to central and eastern Europe, said on Wednesday net profit for the financial year 2020 would be between 335 million euros to 350 million euros (£288.50 million to £301.42 million). It had an earlier range of 320 million euros to 350 million euros.

Chief Executive Officer József Váradi said the airline was increasing its capacity growth rate to 22%, from 20% promised in July, while net profit for the six months ended Sept. 30 rose 87.1% to 371.5 million euros.

Fuel unit costs, however, increased 5.3% year-on-year.

Wizz, which competes with Lufthansa’s (LHAG.DE) Eurowings brand at European airports such as Vienna, is performing well in an industry plagued by weaker demand, rising fuel costs, competition, strikes, bankruptcies and the grounding of Boeing’s (BA.N) 737 MAX fleet.

British Airways parent IAG (ICAG.L) has warned that its full-year profit will be hit by a pilots’ strike at the UK carrier, while Lufthansa (LHAG.DE) is ready to go into arbitration to resolve a long-running staff dispute.

Ryanair (RYA.I) also expects further delays to its 737 MAX deliveries.

SMART AND CREATIVE

Váradi, however, said Wizz - powered by Airbus (AIR.PA) planes - had not really benefited from the groundings.

“Airlines were smart and created ways of replacing capacity in 85% of the cases,” he said.

Wizz’s central and eastern European focus has sheltered it from some of the fierce price competition that has dominated Western Europe’s aviation market in recent years.

“Despite rapidly rising fuel costs, Brexit uncertainty and chronic overcapacity in the sector, Wizz Air was still able to report record financial results for the first half of the year,” eToro analyst Adam Vettese, said.

“Wizz ... is leaving the rest of its low-cost rivals behind,” he said.

Shares in the Budapest-based company were, however, 2% down in a weaker wider market, with analysts saying most of the good news was already in the price after the stock hit a record high earlier this month.

Váradi said Wizz’s British subsidiary, created 18 months ago with a fleet of 10 aircraft to ensure full market access to Britain after Brexit, was performing well.

FILE PHOTO: A Wizz Air passenger airplane flies past a Waxing Crescent moon, Harpenden, Britain, September 16, 2018. REUTERS/Peter Cziborra

He added that Wizz, which operates 70 routes flying out of Britain, had seen a lot of inbound tourism to the country despite Brexit jitters, with Britons travelling to Hungary, Poland, Tel Aviv and Cyprus.

Wizz also got some of collapsed travel firm Thomas Cook’s airport slots, he said.

($1 = 0.9074 euros)

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Bernard Orr and Emelia Sithole-Matarise

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