16.9 C
Saturday, September 23, 2023
HomeEconomyWizz Air expects a return to profit after putting the fuel hedging...

Wizz Air expects a return to profit after putting the fuel hedging fiasco behind it


European low-cost airline Wizz Air expects to return to profit this year as the post-pandemic travel revival gains momentum and the group emerges from a series of setbacks.

The airline’s expectations of turning a profit in the year to March 2024 contrast sharply with the previous financial year, when it faced several issues, including a decision to abandon fuel hedges, which backfired as the war in Ukraine prices rose sharply.

Fuel price exposure was a substantial contributor to the carrier’s net loss for the year ended March 31 of €535 million. With extensive currency and fuel hedging in place, the Budapest-based group said on Thursday it expected net profit of between €350 million and €450 million for the current fiscal year.

Wizz Air has grown aggressively since it was founded nearly 20 years ago, becoming a competitor to Ryanair in the European low-cost market.

Referring to the lack of hedging, CEO József Váradi said that fuel costs in the first half of the last financial year were “entirely market driven” and that the market was “doing us no favour”.

He attributed the expected reversal from the loss of €535 million to the profit of €350 million to €450 million to three factors.

Váradi said he expected the roughly €1 billion improvement to generate cost savings of €400 million, another €200 million from better utilization of the airline’s fleet and crew and about €400 million from fuel and currency hedging.

“I am very confident in the airline’s financial performance as a result of all the operational changes and investments we have made,” said Váradi.

Like other low-cost airlines, Wizz is investing in the latest generation of fuel-efficient single-aisle aircraft. During the current fiscal year, it expects to receive 42 Airbus A321neo aircraft, with new, fuel-efficient engines. It plans to return 16 smaller A320s with older engines to lessors.

The company is targeting expansion into Gulf countries such as the United Arab Emirates and other parts of Asia, as well as growth in Western Europe.

Váradi said that, in light of supply problems at Airbus, it expected to receive about four fewer aircraft than originally planned during the fiscal year. However, he said the airline had “levers to play with” to resolve the issue, including extending the leases of aircraft in its existing fleet.

Shares of Wizz Air are up nearly 50 percent this year, erasing some of the steep decline that began in early 2021 as investors expect further improvements in the airline’s performance.

Following Russia’s full-scale invasion of Ukraine in February 2022, Wizz Air was forced to restructure the 10 percent of its services planned for airports in Ukraine or Russia.

For the 12 months to March 2023, Wizz Air revenues more than doubled to €3.9 billion as passenger demand recovered from the pandemic. On Thursday, the company said it expects to increase available seat capacity by about 30 percent in the current fiscal year.

“I think we are clearly seeing very strong demand for our services and products,” said Váradi.

Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

Latest stories