ii view: Wizz Air demand climbs but shares tumble

Passenger number update

ii round-up:

Low-cost airline Wizz Air Holdings (LSE:WIZZ) today announced it had flown 4.96 million passengers in December. That’s up from 4.18 million in December 2022 and comes as services returned to normal following the pandemic.

However, there were also plenty of cancelled services given wars involving both Israel and Ukraine. Wizz also extended its current cancellation of flights to Israel from January to March. 

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Shares in the FTSE 250 company fell by over 4% in UK trading having come into this latest news up around 16% in 2023. That compares to a gain of 57% for rival easyJet (LSE:EZJ and 4.4% for the FTSE 250 index. 

Wizz Air previously cancelled flights to Russia, Ukraine and neighbouring Moldova, although it has restarted services to the latter. The Hungarian headquartered airline flies to over 190 airports in more than 50 countries. Israel had represented around 5-6% of its total passenger capacity.   

Passenger numbers for 2023 climbed 32% to 60.3 million compared to 45.6 million in 2022. Its Abu-Dhabi operation enjoyed a record 2023, doubling the number of flights to 15,000 and carrying more than three million passengers across a fleet of 12 aircraft. 

Recent additional investment into Poland provided for a 12th aircraft at its Warsaw Chopin base. It recently celebrated its 100 millionth passenger in Poland. 

Third-quarter results are scheduled for 25 January. 

ii view:

Starting operations in May 2004, Wizz Air today employs around 7,000 people. It operates a fleet of 195 Airbus A320 and A321 aircraft, with passenger ticket sales over its last full financial year to the end of March accounting for 52% of revenues. The balance came from ancillary sales. 

For investors, an escalation of Israel’s conflict to the wider Middle East warrants consideration, with Iran recently sending a navy ship to the Red Sea in response to US actions against Iranian backed Houthi forces. Increased security costs for its Middle Eastern operations may weigh on profits. Both consumer and corporate spending budgets remain pressured from heightened borrowing costs, while the many factors outside of management’s control such as the weather, air traffic control strikes, and the price of oil should not be forgotten.  

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More favourably, the young age and fuel efficiency of its fleet provide Wizz Air with high environmental credentials. Actions to hedge against volatile fuel and currency moves have previously been taken, while an expansion of its aircraft numbers and its route network are ongoing. 

In all, and with shares in transport operators regularly proving volatile, a good degree of caution remains sensible. That said, the consensus analyst estimate of fair value at over £26 per share is likely to keep more risk tolerant investors interested.  

Positives: 

• Focus on costs
• Positive environmental credentials

Negatives:

• Operations hit by conflicts
• Many factors outside of management’s control 

The average rating of stock market analysts:

Strong hold