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Wizz Air warns of ‘challenging’ winter while gearing up for Covid recovery

Wizz Air is determined to generate a “head start” when Covid recovery emerges despite heading toward a challenging winter.

The Hungarian low cost carrier warned that “cash positive flying” could be minimal over the next few months.

The projection came as the airline reported a 97% collapse in first half profits from €607 million to just €17.3 million in the period to September 30.

Passenger numbers fell by 70% year-on-year from 22.1 million to 6.5 million and revenue was down by almost 72% to €471.2 million.

The carrier pledged to act to swiftly adjust capacity according to market conditions as demand is shaped by various travel restrictions across its network, compounding usual winter seasonality.

“Should current restrictions and lockdowns persist over winter, we believe that cash positive flying could be minimal,” Wizz Air said.

“We will continue to invest in the renewal of our fleet in order to further increase our competitive position and our edge on cost and sustainability.

“The protection of the company’s liquidity position is our top priority and we expect, despite the projection of a difficult winter for the industry, to end the full year at a solid liquidity position with an ability to respond to surging demand within weeks as a result of a strongly diversified network and a full integrity of its supply chain.”

A full grounding of the fleet would result in a monthly cash burn of €70 million until the end of March, including the cost of the operation, aircraft leases and cash payments linked to fuel hedges.

However, chief executive Jozsef Varadi claimed the airline “distinctly outperformed” the industry in the second quarter of the financial year.

He said: “We carried 5.8 million passengers at 66% load factor and 72% of our 2019 capacity against an ever-shifting backdrop of travel restrictions across all of our markets.

“Our ancillary revenues continue to increase on a per passenger basis, driven by a resilient performance of our core products.

“At the same time, our disciplined cost management allowed us to sustain our investment graded balance sheet with a total cash balance of €1.6 billion.”

Wizz Air announced 13 new bases and more than 260 routes involving 29 aircraft since the start of the financial year plus the creation of a new budget subsidiary in Abu Dhabi ready for take-off once restrictions allow. New Gatwick routes and expansion from Doncaster Sheffield airport were among the development plans.

“We continue to pursue opportunities as they arise and to create a unique competitive advantage for the future,” Varadi insisted.

“During the winter period, we expect conditions to be particularly challenging with ongoing travel restrictions due to Covid-19 as well as the seasonal drop in demand for travel.

“We will continue to focus on cost management and strive to maintain cash-positive flying with a disciplined approach towards capacity.

“Notwithstanding the challenges that lie ahead of us during the remainder of this fiscal year, we have laid the foundation for a swift recovery; in addition to expanding into new markets, we intend to retain all our current staff base and thereby generate a head start for when demand returns.

“We are confident we will emerge as a structural winner, enabling Wizz Air to grow profitably in the years to come.”

Jack Winchester, analyst at research firm Third Bridge said: “What we have seen is Wizz Air bet on putting as much capacity out there as possible, at the expense of load factors – in contrast to players like easyJet, and to a lesser extent Ryanair, which have kept the brake pedal down on capacity in order to keep load factors steady.

“These are two radically different approaches to dealing with demand destruction, and it will be interesting to see how they pan out in the weeks and months ahead.”

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