ii view: Wizz Air passenger numbers grow

A share price which has outperformed Ryanair’s since pandemic lows last year. We assess prospects. 

Passenger number update

ii round-up:

Low-cost European airline Wizz Air (LSE:WIZZ) today announced that it had carried 3.58 million passengers over the month of August.

That’s 50% up from the pandemic hindered total of 2.38 million in August last year, although still below the 4 million passengers flown in the pre-pandemic month of August 2019. 

Wizz Air shares were little changed in UK trading having climbed by over 140% since pandemic market lows back in March 2020. Shares for rivals easyJet (LSE:EZJ) and Ryanair (LSE:RYA) are up by around 52% and 82% respectively over that same time.  

Wizz also announced four new routes commencing in December. The Budapest, Hungary headquartered Wizz Air flies to over 150 airports across more than 40 countries. 

The figures came on the same day that rival Ryanair announced passenger numbers of 11.1 million for August. Up from 7 million in August 2020. 

Wizz Air’s load factor of 84% proved similar to the 82% outlined by Ryanair. 

The Azores, Denmark, Finland, Lithuania and Switzerland have in recent days moved to England’s ‘green list’ of travel destinations. Croatia, Israel and Portuguese island Madeira are all at risk of moving to the amber list. 

Wizz’s full-year results to the end of March saw its outlining its expectation for another net loss for the current year to March 2022 given current travel restrictions. That follows a loss of €576 million in the pandemic marred year to March 2021. It plans to operate at full capacity come 2023. 

ii view:

Wizz Air operates a fleet of 143 Airbus A320 and A321 aircraft. The airline made its maiden flight in May 2004 flying from Katowice to London Luton. It is targeting a fleet of 500 aircraft by the end of the decade. Environmental credentials remain high on the board’s agenda, with management highlighting that it operates amongst the lowest CO2 emissions per passenger/km across all of its rival airlines. 

For investors, pandemic uncertainty remains ongoing. The spread of the Delta Covid variant, the varying pace of national vaccination programmes and the myriad of UK and European travel rules all make for a clouded outlook. Management’s recent decision to make Covid vaccinations compulsory for all its staff may also be seen as controversial by some. And a more than doubling in net debt over its last financial year to help keep its operations ticking over is also worth watching. 

On the upside, a recovery in passenger numbers continues to be seen. Management remains confident that it now has an even greater cost advantage over rivals. And the young age and fuel efficiency of its aircraft fleet provides high environmental credentials. In all, and with an estimated price to net asset value of 6.5 times comfortably above that of rivals Ryanair and easyJet at 3.9 and 1.9 times respectively, the shares are arguably up with events for now. 

Positives: 

• Bearing down on costs
• Positive environmental credentials

Negatives:

• Pandemic clouded outlook
• Elevated valuation

The average rating of stock market analysts:

‘Strong hold’