Wizz Air warns of full-year losses as pandemic bites
Low-cost European airline remains ‘cautiously optimistic’ despite recovery starting later than expected
Wizz Air has warned it expects to lose money over the next year unless travel restrictions disappear rapidly in a sign of the threat to the aviation industry from the lingering effects of the pandemic.
The low-cost carrier on Wednesday said restrictions had stayed in place “longer than anticipated”. It expects to fly 30 per cent of its normal schedule between April and June.
Unless there is “an accelerated and permanent lifting of restrictions”, Wizz forecasts a net loss for the 12 months to the end of March next year. After that, chief executive Jozsef Varadi expects to return to profit and operate a full schedule.
“We are cautiously optimistic about the recovery of the business, which has started later than what we would have liked,” he said.
“The outcome [of this financial year] could be in a wide range depending on restrictions,” and it could even end up “a great” year if flying restarts quickly, he added.
Separately, Willie Walsh, director-general of the global airline body the International Air Transport Association, stepped up pressure on governments to ease travel restrictions, saying the industry will experience a “much better second half” of the year than the first six months.
He said he was confident international travel would return in the second half. There was plenty of scientific evidence now that “borders can be opened in a sensible way”, he added.
Walsh pointed to data from Britain’s NHS regarding international travellers arriving in the UK, which showed that just 2.2 per cent tested positive for Covid-19 among 365,895 tests carried out in February to May.
“These universal restrictions on people are no longer needed,” he said.
Excluding passengers arriving from countries on Britain’s higher-risk red list, the positive rate fell to 1.46 per cent, according to the data.
Iata, which teamed up with Airbus and Boeing to demonstrate potential methodologies to manage the risks of Covid-19, hopes members of the G7 will discuss the issue when they meet later this month.
Wizz’s forecasts are marginally gloomier than those of Ryanair, its fierce competitor in European low-cost travel, which expects to break even over the next 12 months.
Still, Varadi said there was clear pent-up demand for travel when restrictions are lifted.
“Consumers are very willing to come back and are coming back; the moment they can fly they are going to,” Varadi said. But he added that Europe’s “uncoordinated” reopening of its borders had left it very hard to predict how much flying would be possible over the coming months.
The Hungarian carrier reported a net loss of €482m in the 12 months to the end of March, after passenger numbers fell 75 per cent to 10m.
European airlines are hoping for restrictions to be lifted in time for a strong European summer, when they traditionally do most of their flying and earn the bulk of their revenue.
Wizz is better placed than most, with €1.6bn in cash at the end of March and a cash burn averaging €61m a month over the past year. The airline has one of the strongest balance sheets in the European industry.
The airline is expected to emerge as a long-term winner from the crisis, thanks to its low cost base and expansion into new regions over the past year as rivals have retreated.
Like Ryanair, Wizz has taken delivery of new aircraft during the pandemic, and both carriers hope that the more fuel-efficient aircraft will cement their cost advantage over other airlines.
“We have prepared the company to be an even more formidable player and to take advantage of the next phase of market opportunities that await post-pandemic. The investments we have made in our fleet and in our network over the past 12 months will soon yield results,” Varadi said.
Investors agree, with Wizz’s shares hitting all-time highs earlier this year even as the pandemic caused sweeping disruption across the industry.
Shares closed marginally lower at £48.73 on Wednesday, but have risen almost 40 per cent over the past year.