ii view: Wizz Air passenger growth stalls but shares rise

Passenger traffic update

ii round-up:

Low-cost airline Wizz Air Holdings (LSE:WIZZ) today detailed a slight fall in monthly passenger numbers after it was forced to ground some aircraft for engine replacements. 

April passenger numbers of 4.91 million was down from 4.92 million the same time last year. Wizz Air had to ground 45 Airbus jets following a recall of engines by manufacturer Pratt & Whitney.  

Shares in the FTSE 250 company rose 1% in UK trading having come into this latest news down by around a quarter over the last year. That’s similar to rival Deutsche Lufthansa AG (XETRA:LHA) and in contrast to a one-tenth gain for fellow low-cost operator easyJet (LSE:EZJ). The FTSE 250 index itself is up 3.5% over that time. 

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The Hungarian headquartered airline flies to over 190 airports in more than 50 countries. Its load factor for April - the percentage of available seating capacity filled with passengers - declined to 90.3% from 90.6% a year ago, hindered by differences in the timing of Easter. 

The group’s late April full-year trading statement flagged positive trading into the summer of 2024, with selling load factors and pricing trending higher year-on-year in the first two fiscal quarters.

The airline has now converted its entire Luton-based fleet to new generation Airbus A321neos a year earlier than planned, as it targets powering a tenth of its flights with sustainable aviation fuel by 2030. 

Full-year results to the end of March are scheduled for 23 May. 

ii view:

Starting operations in May 2004, Wizz Air today employs around 7,000 people. It operates a fleet of 207 Airbus A320 and A321 aircraft with the airline flying 62 million passengers in the financial year just ended in late March 2024 and up from 51 million in the previous fiscal year. Its many competitors include Jet2 Ordinary Shares (LSE:JET2) and flights operated by travel company TUI AG (LSE:TUI). 

For investors, heightened geopolitical tensions including potential for an escalation of military action in the Middle East should not be overlooked. Problems for industry suppliers such as Pratt & Whitney and Boeing have created operational challenges for airlines, consumer and corporate spending budgets remain pressured by high interest rates, while the many factors outside of management’s control such as the weather, air traffic control strikes, and the price of oil all warrant consideration. 

On the upside, the airline continues to focus heavily on its 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. 

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On balance, and with shares for transport operators regularly proving volatile, a good dose of caution remains sensible. Wizz Air has underperformed easyJet over the past year, although a consensus estimate of fair value above £26 per share implies room for possible upside if analysts are right. 

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