Wizz Air warns of more losses before recovery takes off

Budget airline Wizz Air (WIZZ.L) warned its fourth-quarter loss would likely top the 213.6 million euros ($241.2 million) third-quarter hit reported on Wednesday, before an expected recovery takes off fuelled by demand from Britain.

The Hungary-based carrier said the emergence of the Omicron coronavirus variant had hit sales in the latter part of its fiscal third quarter, and it expected to be impacted by ongoing travel uncertainty in January, February and part of March.

European airlines have been on a rollercoaster ride over the last year as governments dropped, and then sometimes reimposed, restrictions that increased both the cost and hassle of travel in a bid to contain waves of the pandemic.

CEO Jozsef Varadi told Reuters Wizz Air had cut costs and acquired new landing slots, meaning it was in a stronger position to compete with the likes of Ryanair (RYA.I) and easyJet (EZJ.L) once the long-expected recovery comes.

He said the airline had seen demand jump in Britain after the government announced an easing to restrictions on Monday. As a group, it expects to operate 50 per cent more capacity in August and September than the pre-pandemic 2019 summer.

“We are expecting a very strong recovery path of demand in the next few months,” he said.

Ryanair said earlier this month its confidence levels had undergone a “sea change” in recent weeks, as the perceived threat from Omicron eases and public attitudes to travel improve. EasyJet reports on Thursday.

Varadi noted, however, that input costs were rising, with fuel, wages and regulatory changes all adding pressure, meaning that fare prices would need to go up in the short term.

While Ryanair said it expected fares to rise due to lower available capacity, after airlines failed or shrank, Varadi said he expected there to be overcapacity in the next three to six months as rivals return to the market.

He said the question for 2022 would be which airline had the most efficient cost base to offer competitive prices while juggling higher input costs. Wizz Air had liquidity of 1.4 billion euros at the end of December.

Barclays said the update was in line with expectations but noted that solid passenger numbers came with weak pricing. Wizz Air’s shares were up 2.5 per cent in early trade.