Wizz Air: +7% in Q2 on 27% More Seats, H1 -67%

Wizz Air's first-half net profit fell 67% to €108.1m. The second quarter grew 7%, but on 27% more seats. CEO József Váradi said: "Fuel remains the main headwind, and our hedging, covering 82 percent of second-half requirements, is doing what it was designed to do." The outlook gives capacity, load factor, revenue, and cost guidance. It gives no profit figure. What the table above doesn't say is that the first quarter lost money, and how much of the remaining profit comes from one-off items. Behind the break: how fuel hit each quarter. What props up the operating profit. Why net profit fell more than operating profit. What the winter looks like. Figures are from Wizz's results release. Everything above is public. The analysis below is what AirInsight subscribers pay for. Wizz had two quarters. The release gives the first half and the second quarter. We derived the first quarter, per our math. Operating profit was a loss of €183.3m in 1Q, against a profit of €27.5m a year ago. The release blames an 8.1% fall in unit revenue after Middle East disruption. In 2Q, unit revenue rose 0.5%, and operating profit rose 8.8%. Fuel followed. It took 218% of new revenue in 1Q, per our math. In 2Q, it took 37%. For the half, it took 68%. By comparison, IAG's figure was 137% for 3Q, and SIA's was 88% for the half. Cathay's was 62%, and the US carriers ran 56% to 72%. The periods and hedge treatment differ. 1st GTF powered A321XLR for Wizz Other income was €197.4m. Three items sit inside it: sale and leaseback gains of €99.7m, supplier credits and compensation of €82.1m (likely from Pratt & Whitney), and insurance compensation of €10.6m. Together, that is €192.4m, or 73% of operating profit, per our math. A year ago, the first two came to €205.1m, or 47%. Without them, H1 operating profit would be about €72m, a 1.9% margin. A year ago, it was €234m, or 7.0%, per our math. The release says the breakdown "includes" these items, so the split is not exhaustive. Sale-and-leaseback gains are routine for Wizz. Operating profit fell €175m. Net profit fell €215m. Foreign exchange explains the difference. Wizz booked a €32.5m foreign exchange loss, against a €176.0m gain a year ago. That is a swing of €208.5m, per our math. The release blames the weaker euro on dollar-denominated leases. It says 90% of the $4.7bn liability is hedged. Derivatives helped by €91.4m, per our math. A lower tax charge (€26.5m against €127.1m) helped by €100.6m. Operating expenses rose 21.9%, while revenue rose 13.8%. Fuel cost per ASK rose 14.5%. Ex-fuel cost per ASK fell 0.3% to €3.07 cents. Maintenance rose 28.5%, on heavy checks and the CEO fleet phase-out. Depreciation rose 21.4%. Staff rose 9.2%. Revenue per passenger fell 9.9% to €82.5. Ancillary per passenger fell 9.0%. The average sector shortened 7.1%. October unit revenue rose about 5%. Ticket revenue per passenger rose 7% on 5% shorter sectors. For November and December, 70% and 40% of seats are sold. Unit revenue on hand matches last year at the same point on about 18% more capacity. Higher fares are offset by lower load factors. 3Q seats rise about 19%. Load factor is guided down to the low single digits. Fuel is 82% hedged for 2H at an $860 cap and 41% for F28 at $1,009. Leverage is 4.1x, against 3.7x a year ago. Wizz had 22 aircraft grounded for GTF inspections (hence our P&W comment above), down from 35. Dubai and Abu Dhabi flights remain postponed. How much of 2H operating profit rests on sale and leaseback gains? Why no profit guide? Why a €32.5m foreign exchange loss on a hedged lease book? When do Abu Dhabi and Dubai return? In 2Q, Wizz added 27% more seats and 9% more operating profit.

Wizz Air Q2 Up 7% as Seats Grow

The Half