Wizz Air with significant loss

Wizz Air has pulled all the levers in its control but unsurprisingly this was not enough to prevent a significant loss for the year.

Article updated: 2 June 2021 8:30am Author: Richard Hunter

With the starting point being a 75% decline in passengers, revenues also plunged by 73% leading to an overall loss for the year of €576 million, as compared to a profit of €281 million the year before. The load factor averaged 64% for the year (previously 94%), although since the end of the reporting period there was a slight uptick to 66% in May.

At the same time, recovery from the pandemic and a return to some kind of normality in air travel has slipped behind expectations, due to the varying speeds of vaccination programmes across Europe and also the remaining travel restrictions. As such, the company does not expect to return to profit in the current year, anticipating just 30% capacity in the first quarter and, all things being equal, would then hope to regain profitability in the 2023 reporting period.

Yet there are some glimmers of hope among the despair which the pandemic has caused the airlines, and Wizz Air has been busy behind the scenes in preparation of the post-pandemic environment. Total operating expenses have declined by 50%, and despite an average monthly cash burn of €61 million, the figure for the fourth quarter was a manageable €84 million.

In addition, the brief respite of Summer 2020 enabled Wizz Air to demonstrate the benefits of its nimble business model, as it quickly ramped up to 80% of capacity for that limited period. At the same time, careful increases to both its fleet and its operating bases have arguably left the group in a better position to grow the business again when restrictions are lifted.

For the airlines as a whole, cash remains king in this environment. Wizz Air is adequately financed at present with cash of €1.6 billion and has strengthened its position through both fundraisings and access to government support.

Wizz Air remains at the mercy of factors outside of its control before it can return to profitability. At the same time, the actions it has taken have put strong foundations in place and a 42% increase in the share price over the last year, as compared to a hike of 31% for the wider FTSE250, is evidence that there has been investor support in the background. With the current outlook remaining cloudy, however, investor sentiment is rather more circumspect on prospects, with the market consensus of the shares currently stuck at a hold, albeit a strong one.

More from Richard Hunter: read more articles directly on the interactive investor website.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees.

Richard Hunter

Head of Markets, interactive investor

Richard has over 30 years of stockmarket experience and is one of the UK’s foremost commentators on market matters and a regular contributor for the BBC (BBC News Channel, Wake Up to Money and the Today Programme), CNBC and Bloomberg. Richard’s expert commentary also appears across the national and specialist press. He previously held senior positions at Hargreaves Lansdown and NatWest Stockbrokers.

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