Wizz Air Plummets To Loss But Eyes Up Expansion On The Horizon

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“Wizz Air Holdings PLC (LON:WIZZ), the jaunty low-cost challenger couldn’t escape the gut-wrenching turbulence the pandemic has caused for the airline industry. It’s plummeted to a net loss of €576 million after rolling travel restrictions across Europe were imposed as infection rates peaked at different rates across the region. The airline’s revenue plunged by more than 73% to €739 million, as a loss of confidence among the travelling public also dented booking rates. Passenger numbers fell 75% to ten million.

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Wizz Air Hit By Travel Restrictions

High hopes that brighter skies were in sight for the airlines have been clouded by fresh strains of Covid emerging in parts of the world. It has meant that the lights have been stuck on amber for many travel destinations for longer than expected, throwing holiday plans into disarray. The Hungarian carrier flies routes mainly to and from Eastern European countries, which have been far from speedy in vaccine roll outs, although lighter travel restrictions compared to the UK do put it in a slightly more resilient position. It’s also been flexible in its reaction to ever changing rules, by nimbly ramping up to 80% capacity last summer before reducing back down to 20% only weeks later

However the company has warned it expects to see further losses next year unless restrictions are eased further soon.

Turbulence for the Hungary-based carrier should be cushioned by its cash balance of €1.6 billion having taken steps to shore up its finances. But it will need a sharp recovery in bookings to reduce its cash burn.

Expansion Risk

The airline has taken a risk in expanding while its rivals have battened up the hatches to try and seize opportunities for future growth. This is a risk when the recovery pattern appears too difficult to forecast. However, management appear confident that demand will bounce back when restrictions are lifted as the airline is expanding from 25 to 43 operating bases and increasing its fleet by 16 to 137 aircraft.

Some 50 routes have been added to the schedule, including the addition of Abu Dhabi. Expansion into the UAE is a key part of its plan with the airline aiming to replicate the success of its Wizz Air Hungary in the Middle East. It’s still bullish about its long-term ambition to make its service available for billions of people within a 5-hour flight radius. However, with current full capacity not expected to return until 2023, its lofty ambitions are for now a speck on the horizon.’’

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

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