Revenue: Improved and stabilized on a unit basis, with a strong foundation for demand. Guidance Revision: Guidance reduced by approximately EUR100 million due to higher costs and unrealized FX loss. Unrealized FX Loss: EUR160 million loss due to a strengthening dollar. Passenger Count: Improvement noted, driven by better load factor. Ex-Fuel CASK: Increase due to inflationary pressures and inefficiencies from grounded aircraft. Net Profit (H1): EUR315 million, with a focus on EUR250 million to EUR300 million excluding FX impacts. Free Cash Flow: EUR189 million, with a positive operating cash flow of EUR91 million. Cash Balance: EUR1.6 billion at the end of the quarter. Fleet Growth: Expected to end the fiscal year with 227 aircraft, an increase of 21 aircraft year-on-year. Unit Costs: Reduced operating loss by more than 50%, with better EBITDA position. Lease Debt: Stable around 3.2 to 3.3, with improving leverage ratio. Pratt & Whitney GTF Issues: Continued impact with 40 aircraft grounded, affecting costs and operations.

Warning! GuruFocus has detected 5 Warning Signs with WZZAF.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Wizz Air Holdings PLC (WZZAF) has seen a stabilization and increase in revenue on a unit basis, providing a strong foundation for future demand. The company is regaining growth momentum with the supply of new aircraft, overcoming previous groundings. Wizz Air Holdings PLC (WZZAF) is benefiting from a more favorable competitive landscape as competitors face supply chain constraints. The company has adjusted its aircraft delivery schedule to better align with Airbus' delivery capabilities and its own grounded aircraft situation. Wizz Air Holdings PLC (WZZAF) is confident in customer demand, with strong revenue performance and a positive outlook for future growth.

Negative Points

Higher than expected costs, particularly in maintenance and depreciation, have forced Wizz Air Holdings PLC (WZZAF) to revise its guidance downward. The company is facing increased Eurocontrol charges, adding EUR60 million in adverse costs annually. Wizz Air Holdings PLC (WZZAF) is dealing with significant operational disruptions due to the Pratt & Whitney GTF engine issues, affecting both GTF and V2500 engines. The strengthening dollar has led to unrealized FX losses, impacting the company's financial results. Airports are becoming increasingly capacity constrained, leading to higher monopoly pricing and increased charges.

Q & A Highlights

Q: On FX, given the volatility, are you considering guiding excluding unrealized gains and losses altogether? A: Ian Malin, CFO, explained that while there's merit to excluding unrealized FX gains and losses, they aim to maintain consistency for this year. They focus on pre-FX numbers to track performance on controllable factors, acknowledging FX volatility.

Story Continues

Q: Can you quantify the tax credit expected in Q4 and provide a tax rate for FY26? A: Ian Malin noted that the tax credit is material and part of the guidance. For FY26, they expect to align with the global minimum tax rate of 15%.

Q: What gives you confidence that the Pratt & Whitney engine issue is behind you? A: Jozsef Varadi, CEO, stated that the cycle varies by airline. Wizz Air, being an early adopter of GTF engines, expects to resolve the issue by late 2027 or early 2028, based on their modeling and operational agreements with Pratt & Whitney.

Q: Are you planning to deploy capacity directly against Ryanair, or is it a byproduct of your growth strategy? A: Jozsef Varadi emphasized that Wizz Air's strategy is to stimulate new demand rather than directly compete with incumbents like Ryanair. They focus on capturing new market opportunities, particularly in Central and Eastern Europe.

Q: Regarding the fleet, are you receiving compensation from Airbus for delivery delays, and are you still planning on acquiring 47 XLRs? A: Jozsef Varadi confirmed that the renegotiation with Airbus includes delivery schedules, delay compensation, and pricing. They have not converted any XLR orders but have rescheduled them to ease pressure.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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