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Wizz Air’s losses worsen as cost increases outpace recovery in passenger travel

Wizz Air’s losses widen as passenger traffic recovery is outpaced by rising costs – but the low-cost carrier sees a ‘record’ summer ahead

  • The Hungarian low-cost airline recorded a reported annual loss of 642.5 million euros
  • Both Wizz Air’s passenger and ancillary revenue increased by approximately 125% over the past year
  • Increasing fuel prices and capacities caused the company to experience an enormous increase in costs

Losses at Wizz Air soared even further last year as fuel, staff and airport costs offset a strong upturn in air travel.

The Hungarian low-cost airline posted a reported loss of 642.5 million euros in the 12 months to the end of March, up 11.5 percent from the same period last year.

Total revenue more than doubled to €1.66 billion as the rollout of Covid-19 vaccines prompted more Europeans to travel abroad, leading to a roughly 125 percent increase in passenger and ancillary sales.

Losses: Wizz Air posted a reported loss of 642.5 million euros for the 12 months to the end of March, up 11.5 percent from the corresponding period last year

However, total operating costs rose by around €1bn, with much of the increase coming from increases in oil prices and passenger capacity, resulting in the company spending an additional £300m on fuel.

Costs were further exacerbated by the hiring of new staff and a EUR 291 million increase in airport, handling and en route charges in response to growth in seat capacity and passenger traffic.

Wizz Air’s performance was also impacted by Covid-19 restrictions, particularly early in the financial year when most countries were still under national lockdowns.

These included temporary bans on overseas travel to some countries, and vaccination and quarantine requirements for passengers.

Additional dampeners on ticket sales were the presence of the Omicron variant over the Christmas and New Year period and uncertainty about future travel rules, making many people more reluctant to book flights.

The London-listed company warned it would post another operating loss in the first quarter of this year, although it expects to fly 30 percent more capacity than the same period three years ago.

Optimism:

Optimism: “We are ready to offer our largest summer flight program ever and the fastest growth in the industry,” said CEO Joszef Varadi

But it forecasts record demand for its flights during the summer peak season, driven by rising wages, near-full employment and increased household savings rates in key markets.

Wizz Air Holdings shares closed down 9.5 percent on Wednesday at £24.99, meaning their value is down over 36 percent over the past six months.

CEO Joszef Varadi said: “We are ready to offer our largest summer flight program to date and the fastest growth in the industry, made possible by more than 6,000 colleagues across the company.”

Varadi added that the deepening cost-of-living crisis should continue to benefit low-cost airlines as more travelers seek cheaper vacations.

However, inflation will also drive fare increases, with Wizz Air targeting a “high single-digit” increase in the second quarter, which runs between July and September.

AJ Bell investment director Russ Mold warned that this could discourage some people from making trips, as does the increasing prevalence of long queues, flight delays and airport cancellations caused by staff shortages across the aviation sector.

He said: “More people have less money in their pockets each month after paying the bills, so they may not be able to afford to travel.

“Add in air traffic control disruptions and you have a chaotic backdrop, meaning airlines could be in for a third straight summer.”

Wizz Air’s release of full-year results comes as the Heathrow Airport chief predicted it would take the aviation sector between 12 and 18 months to fully restore capacity to pre-pandemic volumes.

John Holland-Kaye told the Financial Times that the UK government should relax background check rules for new employees to deal with the disruption currently occurring at UK airports.

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Wizz Air’s losses worsen as cost increases outpace recovery in passenger travel

Source link Wizz Air’s losses worsen as cost increases outpace recovery in passenger travel

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