Wizz lowers profit outlook on economic, security concerns

Wizz Air Holdings Plc lowered its profit outlook for fiscal 2024 as aircraft engine issues limit growth, and concerns grow about the impact of a slowing economy and rising geopolitical tensions. 

The shares posted their biggest drop in a month, after Wizz trimmed the top end of its forecast by €50 million ($54 million). Net income this year will be in a range of €350-400 million, the company said in a statement Thursday, even as it reported record first-half profit.

An ongoing issue with geared turbofan engines supplied by manufacturer Pratt & Whitney will limit Wizz’s ability to expand in 2024, Chief Executive Officer Jozsef Varadi said.

“We are not going to grow the business 20% next year but we are not going to contract capacity,” Varadi said in an interview. “It is frustrating because it’s affecting our ability to operate,” he said on Bloomberg TV.

Wizz will need to ground a total of 45 of its Airbus narrowbody aircraft through the fiscal year ending in March because of the problem, which involves powder metal used in some engine parts. About 3,000 engines need to be removed from the global fleet for inspections and possible repairs, according to Pratt parent RTX Corp. The whole process will take 18 months, Varadi said.

“With fewer planes in the sky making money, numbers are likely to come down,” Bernstein analyst Alex Irving said in a note. 

First-half net income totaled €401 million, benefiting from strong summer demand, Wizz said. Revenue advanced 39% to €3.05 billion in the six months through September, as expansion in markets such as the Middle East took hold. 

The company said operational improvements had resulted in fewer flight cancellations and load factor improved to almost 93%.

Beyond engines, security is a growing concern. Wizz said it was suspending service to Israel through the end of this month. Other carriers, such as Ryanair Holdings Plc and Air France-KLM, have reported cancellations or softening demand in the Middle East. 

Varadi said the conflict has to settle down before Wizz continues flights to the region as passenger safety was paramount.

To contend with the engine issues, the company is extending leases on 13 older planes. It said it has secured compensation from the manufacturer.

Wizz will be able to maintain capacity through new aircraft deliveries and the lease extensions, Varadi said. “I think we will be fine.”

Bookings during the winter low season are “looking good,” Varadi said, adding that the low-cost carrier will benefit as consumers feel the pinch of a slowing economy. Spending power is under pressure “and that’s fine for us,” he said.

Wizz shares were down 5.7% as of 9:46 a.m. in London, after dropping as much as 9.1% intraday. Through Wednesday, the stock had declined 2.2% this year.