ii view: Wizz Air passenger numbers soar but shares still fragile

Shares for this European airline are down by more than 50% year-to-date and, apart from the March 2020 Covid crash, haven't been this low since 2017. Buy, sell, or hold? 

Passenger number update

ii round-up:

Low-cost European airline Wizz Air (LSE:WIZZ) today announced that it had carried 4.34 million passengers over the month of June. 

That’s up 179% from June 2021 as Covid restrictions eased and airlines have ramped-up their flights or capacity. The airline also announced that it will be returning to a policy of jet fuel price hedging.

Wizz Air shares fell by around 2% in UK trading having come into this latest update down over 50% year-to-date. Shares for rival easyJet (LSE:EZJ) are down by a third during 2022 and British Airways owner International Consolidated Airlines (LSE:IAG) have retreated 20%, similar to the FTSE All World index. 

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Wizz Air flies to over 150 airports in over 40 countries, including many destinations across Central Europe. It previously halted flights to Russia, Ukraine and Moldova following Russia’s invasion of Ukraine.  

The low-cost airline also announced plans to launch new routes between Dammam in Saudi Arabia and Rome, and between Vienna and Abu Dhabi. It also detailed its intention, along with Airbus SE (EURONEXT:AIR), to explore the potential for hydrogen-powered aircraft operations. 

Wizz Air’s load factor came in at 86.1% for June, up from 64% in June last year. It recently reported a full-year loss to the end of March of €642.5 million.

First-quarter results to the end of June are scheduled for 27 July. 

ii view:

Wizz Air made its maiden flight in May 2004, flying from Katowice in Poland to Luton. Today it operates a fleet of 157 Airbus A320 and A321 aircraft. It is targeting a fleet of 500 aircraft by the end of the decade. 

For investors, an ongoing conflict in Ukraine and the suspension of operations to a series of airports across Ukraine, Russia and Moldova offer concern. The worry that the war could spread further across the region persists, while the West’s desire to avoid using Russian oil has helped push the price of Brent crude oil up around 40% year-to-date. A cost-of-living crisis for consumers and staff shortages across the industry impacting operations also warrant consideration.  

On the upside, a recovery in passenger numbers from the depths of the pandemic is being seen. The young age and fuel efficiency of its aircraft fleet provide it with high environmental credentials, while a move to a regular fuel price hedging policy is being made. In all, and when balancing high geopolitical tensions and raised costs against the desire among consumers to start travelling again, Wizz Air and airlines in general are reserved for investors with an appetite for greater risk.

• Strong focus on costs
• Positive environmental credentials

Negatives:

• Operations hit by Ukraine conflict
• Uncertain economic and geopolitical outlook

The average rating of stock market analysts:

Buy