Summary
- Strong profits are expected for airlines in FY 23/24, but tough times are ahead in 2024 due to economic climate shifts.
- Wizz Air is anticipating net income aligning with previous guidance, driven by stronger ticket revenue.
- Costs are under control with lower unit costs, despite challenges like engine issues and geopolitical events.
Like a rising tide lifting all boats, last year’s extremely favorable economic climate is the primary reason airlines from New York to Singapore to Sydney and Budapest are announcing strong profits as their financial year draws to a close. However, almost without exception, they are also warning of tougher times in 2024 that will deliver flat or reduced profits over the next 12 months.
Profitability returns in F24
From its base in Hungary, low-cost carrier Wizz Air operates more than 900 routes to over 200 destinations in 54 countries. In the twelve months ended March 31, 2024 (F24), the airline carried 62 million passengers. Today, it released an unaudited post-close trading update for F24, forecasting that net income would align with previous earnings advice of €350-370 million ($375-406m).
Photo: Cristi Croitoru | Shutterstock
That income will come from forecasted total revenue of around €5 billion ($5.4b), driven by stronger ticket revenue and pricing, partially offset by softer ancillary revenue in the second half of F24. Wizz Air said the ancillary revenue drop came from network-related impacts from geopolitical events and resulting short window capacity redeployment.
Wow: Wizz Air Has Now Handled 6 Million Passengers At London Gatwick Airport
The news follows the announcement of a similar milestone at another of the carrier’s UK bases.
As this is an unaudited update, there are no specific numbers to scrutinize, but the airline said that full-year revenue per available seat kilometer (RASK) is expected to be mid-single-digit percent higher compared to last year, as per the previous guidance. Wizz Air CEO József Váradi said this year has seen a combination of the surge in passenger demand for air travel that began immediately after the pandemic.
“While Wizz Air benefitted from this sustained demand and reported record passenger numbers throughout the year, we also mitigated new challenges, including a further wave of geopolitical unrest, the Pratt & Whitney GTF engine recall and air traffic control disruptions. Despite this, traffic increased consistently throughout the year and Wizz Air returned to profitability in F24.”
Wizz Air Expects To Reduce Capacity By 10% Over Pratt & Whitney Engine Issues
The airline is reportedly seeking compensation from the engine manufacturer.
He added that the performance is a testament to the airline’s robust and agile operating model, which allows it to withstand pressures while simultaneously controlling costs and relentlessly focusing on growth. F24 operating expenses grew slower than flown capacity, and with higher utilization and on-time performance, unit costs were lower. Fuel cost per available seat kilometer (CASK), including the cost of carbon and hedging, is expected to be 23-24% lower than in F23.
Costs are under control
Ex-fuel CASK, including compensation from Pratt & Whitney (P&W) and gains from GTF spare engine financing in Q4, is also expected to be 7-8% lower year-on-year. On March 31, 2024, Wizz Air had 45 Airbus NEO aircraft grounded due to P&W geared turbofan engine issues, with 40 spare engines supporting the removal program.
Photo: Markus Mainka | Shutterstock
During F24, the carrier took delivery of 39 new Airbus A321neo aircraft, bringing the group’s total fleet to 206 aircraft at the end of March. Fleet data from Planespotters.net shows that about 62% of those aircraft are new-generation Airbus A320neo family aircraft, with all but a handful being the A321neo variant.
Looking ahead, Wizz Air expects a flat year-on-year (YoY) capacity growth for H1 F25 and full F25. It is trading positively into this summer, with selling load factors and pricing trending higher YoY in the first two fiscal quarters. Despite current trading dynamics and continuing capacity constraints in the wider market, Wizz Air expects to expand operating margins, increase operational cash, and reduce net debt in F25.
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