Wizz Air scales back growth plans on engine woes, yields

Wizz Air Holdings Plc scaled back its growth plans citing engine issues as well as a desire to increase yields, even as it reported fiscal first-quarter results that beat estimates.

Wizz reduced its first half capacity growth to 25% compared with an earlier forecast of 30%, according to a statement. The reduction was partly due to newly identified issues with its Pratt & Whitney geared turbofan engines, as well as a desire to improve yields, it said.

The airline said last week that 12 out of 400 of its GTF engines required early removal for inspections after RTX Corp. disclosed an issue with the powder metal used in some parts of about 1,200 engines. Wizz said there were no signs the engine problems could negatively impact profitability.

Shares fell as much as 5.8% in London, and were 4.6% lower at 8:21 a.m.

Air-traffic control issues and engine problems were the two main challenges for Wizz moving forward, Chief Executive Officer Jozsef Varadi said on a media call. The engine woes were a bigger worry because the scale of the issue was unclear, with six planes initially due to be grounded, Varadi said. 

The Hungarian low-cost airline reported a €61.1 million ($66.9 million) net income in the three months ended June. That beat the €51.5 million average estimates of analysts, according to data compiled by Bloomberg. 

Wizz is the last of the major European low-cost carriers to report quarterly earnings, following EasyJet Plc and Ryanair Holdings Plc, which both beat estimates. Deutsche Lufthansa AG also reported strong demand this summer in earnings on Thursday, with capacity constraints driving higher fares. 

Despite the travel boom, some analysts have expressed concern over demand dropping in the winter against the backdrop of inflation and the cost-of-living crisis. Wizz also has to compete with other airlines to offer price-conscious consumers the best value for money on flights amid a cost-of-living crisis, Ruth Griffin, leisure partner at Gowling WLG, said in a statement.

Ryanair said it might reduce ticket prices toward the end of the year to ensure seats are filled, and lowered its full-year traffic prediction from 185 million to 183.5 million passengers.