Unless travel restrictions are permanently lifted in the whole of Europe, Wizz Air is expecting a net income loss for its current FY21/22. The Central and East European ultra-low-cost carrier is seeing some recovery, but only ten to fifteen percent of its markets are currently unrestricted. Yet, Wizz Air is “cautiously bullish” about the recovery.
For FY20/21, Wizz Air recorded a €576 million net loss compared to a €281.1 million profit last year. EBITDA was a negative €182.8 million versus a positive €719.8 million.
Revenues were down by 73.2 percent to €739 million. Interestingly, 94 percent of revenues were generated through digital platforms like the app. Total ancillary revenues were down by 67 percent to €412.6 million, but per passenger, they were up by €9.2. This trend was also seen by Ryanair. The number of passengers carried was just 10.2 million, down 74.6 percent compared to last year as the recovery went slower than expected earlier.
The carrier, partly owned by Indigo Partners, ended the financial year with €1.617 billion in liquidity, of which €346.8 million in cash deposits. Wizz Air also benefitted from €500 million raised through Eurobonds and £300 million in Covid Corporate Financing Facility from the UK government that will have to be repaid by February 2022. There is no need to raise additional liquidity. Total liabilities stand at €3.8 billion, up from 3.1 billion.
The airline has followed a strict financial discipline cost reduction scheme that saw it adapt capacity from eighty percent last summer to just twenty percent in the autumn period. Cash burn was €24 million per month in the final January-March quarter or €61 million on average for the full year.
Wizz Air reduced costs by 50.3 percent, reduced roles by nineteen percent, and cut salaries by on average fourteen percent.
The airline took a €93.6 million charge on fuel hedging and US dollar costs and has discontinued its hedging policy since September.
Q2 capacity may exceed 2019 levels
The airline currently operates at just thirty percent capacity. During the coming summer quarter (Q2), available seat kilometers may reach 75 percent and may exceed that of 2019 levels only to drop later in the year. Full capacity is not expected until FY22/23 but this entirely depends on the level of vaccinations, new variants, and hence travel restrictions.
CEO Jozsef Varadi stressed that Wizz Air will only ramp up capacity and reopen routes when they are cash positive: “We will not fly empty planes as some other airlines have done.” Non-EU destinations remain more restricted and Wizz expects even more restrictions in the coming months. Hence Varadi’s remark that Wizz Air is “cautiously bullish” about recovery.
The carrier claims to have grown its market share in the CEE region from 39.6 to 45.9 percent, thanks to opening eighteen additional bases to bring the total number to 43 and 255 new routes. New were St. Petersburg, Lviv, Bacau, Larnaca, Sarajevo, Tirana, and Burgas.
Wizz Air also opened ten new bases in Western Europe. In the UK, London Gatwick and Doncaster and soon Cardiff are important bases with four aircraft based in order to compete with its main rivals Ryanair and easyjet. They are also fierce competitors in Italy, where Wizz opened bases at Milan Malpensa, Rome Fiumicino, Catania, and Palermo and has based seventeen aircraft. In a strategic review, Italy and the UK are now the key markets in Western Europe, although its presence at Gatwick depends on the availability of slots there. It has based one aircraft at LGW right now but hopes to add a few more soon.
Varadi isn’t worried about a restart of the new Alitalia as most of Wizz’ aircraft are based at airports that aren’t served by the new airline.
Wizz to leave Norwegian domestic market
The carrier entered the Norwegian market last year and based four aircraft in Oslo, hoping to capture market share left when Norwegian drastically reduced operations and even stopped flying. This hasn’t worked out as planned. In today’s webcast, Varadi confirmed that Wizz has made the strategic decision to leave the Norwegian domestic market again and redirect investments to Italy. It will only serve the country on its international network. “The choice was made to invest in Italy over Norway. It doesn’t mean we are leaving the Norwegian market, but we aren’t basing operations there. It will still be an important country”, Varadi said. Two aircraft continue to be based at Dortmund.
Wizz Air Abu Dhabi finally took off in January, but the airline hasn’t disclosed results for the entity.
Wizz’ latest fleet plan includes 30 fewer deliveries compared to the previous schedule. (Wizz)
Fleet renewal continues but at slower pace
Wizz Air continued its fleet expansion and took delivery of six Airbus A320neo’s and fourteen A321neo’s while four A320ceo’s left the fleet. The fleet grew by sixteen aircraft to 137. This FY21/22, this will grow to 148 as 27 A321neo’s will join, with 33 planned for FY22/23 and another thirty for FY23/24. This will also see the arrival of six A321LRs. The current fleet plan sees 268 aircraft in FY26/27 compared to 298 reported last year, but more flexibility is not ruled out.
This schedule is different as Wizz has renegotiated its backlog with Airbus. This has resulted in a reduction of pre-delivery payments (PDP) from €298.2 million in FY19/20 to €33.8 million in FY20/21. Compared to the previous plan, Wizz Air will take fewer deliveries in FY21/22 (-2), FY22/23 (-3), FY23/24 (-8), FY24/25 (-14), FY25/26 (-24), and FY26/27 (-27).