WIZZ AIR HOLDINGS PLC – RESULTS FOR THE SIX MONTHS TO 30 SEPTEMBER 2018
RECORD PROFITS ON 20% PASSENGER GROWTH IN H1
SIGNIFICANTLY INCREASING UNIT REVENUE IN H2
FY NET PROFIT GUIDANCE LOWERED TO €270M – €300M DUE TO HIGHER FUEL PRICES AND SUMMER DISRUPTIONS
Geneva, 7 November 2018: Wizz Air Holdings Plc (“Wizz Air” or “the Company”), the largest low-cost airline in Central and Eastern Europe (“CEE”), today issues unaudited results for the six months to 30 September 2018 (“first half” or “H1”) for the Company as a whole, and separately for its airline (“Airline”) and tour operator (“Wizz Tours”) business units.
|Six months to 30 September||2018||2017||Change|
|Passengers carried (million)||18.8||15.6||+20.0%|
|Revenue (€ million)||1,379.1||1,149.4||+20.0%|
|EBITDAR (€ million)||505.5||492.2||+2.7%|
|EBITDAR margin (%)||36.7||42.8||(6.2)ppt|
|Profit for the period (€ million)||292.2||288.6||+1.2%|
|Profit margin for the period (%)||21.2||25.1||(3.9)ppt|
|Ex-fuel CASK (€ cent)||2.25||2.22||+1.1%|
|CASK (€ cent)||3.33||3.13||+6.4%|
|RASK (€ cent)||4.27||4.27||0.0%|
|Cash and cash equivalents (€ million)||1,156.8||1,029.8||+12.3%|
|Load factor (%)||93.6||92.8||+0.8ppts|
József Váradi, Wizz Air Chief Executive said:
“Wizz Air’s unique combination of an industry-leading cost base and number one position in the growing CEE market makes us a structural winner. The arrival of game-changing, well-priced A321 NEO aircraft into our fleet in the fourth quarter, financed at very attractive levels, will enable Wizz Air to increase its cost advantage even further. We are delivering on our mission to be the undisputed cost leader among European LCCs, with market leading growth rates and one of the highest profit margins in the industry.
Our ultra-low cost business model provides a significant competitive advantage in an environment of higher fuel prices. As Wizz Air continues to drive its cost base even lower and profitably stimulate traffic, this advantage allows us to capture an even greater share of our market and extend our reach. We anticipate the capacity rationalisation resulting from this increased pressure on our competitors will result in a better yield environment.
On the back of the rising fuel price in the first half the Company has trimmed second half capacity growth to 14% (previously 18%) and as a result second half yields are responding well, tracking 7% higher than last year with load factors also higher.
The operating environment in the first half was particularly challenging for all European airlines with unprecedented disruptions caused by ATC strikes, slot constraints as well as heavily congested airports. These conditions also coincided with the Company’s ramp up of our new UK airline, Wizz Air UK, and an extensive delivery program of 17 aircraft in 17 weeks. Our operations are now back on track with October and November KPIs ahead of last year.
We are starting to enjoy further cost improvements from our investment grade credit rated balance sheet with over €1.1 billion of free cash and the Company has recently signed letters of intent to finance 10 A321 NEO aircraft at rates significantly better than the Company’s previous best deals.
The encouraging revenue environment, robust demand and an improved operational performance combined with our relentless focus on costs will enable the Company to offset approximately half of the fuel headwind which is estimated at around €80 million for the full year and disruption costs. As a result our full year net profit guidance is lowered to a range of between €270m and €300m”.
STRONG YIELD OUTLOOK IN H2
Unit revenues per ASK in the second half are currently tracking +7% higher than last year with load factors higher by 1ppt. Unit revenues per seat (RpS) are tracking 8% higher than last year. This strong revenue performance is down to disciplined capacity management, robust demand across the Company’s diversified network, the yoy effect of a change in the Company’s carry-on bag policy taken in October 2017 and the introduction of a new carry-on bag policy on 1 November 2018. The Company will grow ASKs by 14% in the second half (Q3: 15%; Q4: 13%).
IMPROVING OPERATIONAL ENVIRONMENT
The Company has seen a significant improvement in the operating environment since the end of the summer period. On-time performance has recovered to 83% in October, which is 21ppts better than the low point of 62% in July. The first half of the financial year was particularly challenging with the Company having to cancel 251 flights. The Company has taken steps to address this level of disruptions and is seeing an improved performance with only 11 flights cancelled so far in the third quarter. The Company incurred an unusually high level of passenger disruption costs of €16.8 million in the first half compared to €8.6m in the previous year. Disruption costs normalised from the end of August in line with the improved operating performance.
FY20 EARLY COMMENTARY
Wizz Air is set to deliver another year of profitable growth in FY20 adding around 15% of additional seat to its markets. Our unit costs will start to enjoy the significant benefits of the A321 NEO aircraft and we will be operating 12 A321 NEO aircraft by the end of the financial year. These larger and well-priced aircraft operate game-changing technology that burn at least 16% less fuel compared to our existing technology and will deliver 20% lower unit costs when compared to the A320 CEO aircraft. The investment grade strength of the Wizz Air’s balance sheet will deliver additional cost savings through lower ownership costs. The Company has recently signed letters of intent to finance 10 A321 NEO aircraft at significantly better rates than the Company’s previous best deals. The Company has 256 NEO aircraft on order to be delivered over the next eight years, these deliveries when combined with an intensive programme of returning older CEO aircraft back to lessors means that the Company will very soon operate one of the most fuel efficient fleets in the world.
RECORD H1 PROFIT AND STRONG BALANCE SHEET
- Total revenue increased 20.0% to €1,379.1 million:
- Ticket revenues increased 25.3% to €858.6 million.
- Ancillary revenues grew 12.1% to €520.5 million.
- Profit for the period was a record €292.2 million in H1, a yoy increase of 1.2%.
- Profit for the second quarter was a record €242.3 million, yoy increase of 5.1%
- Higher fuel prices has created an estimated €80 million cost headwind for the full year of which half is expected to be offset through cost and capacity discipline.
- The lack of Easter traffic in FY19 is estimated at €20 million for the full year.
- The closure of Wizz Tours will have a €5m negative impact on full year net profit.
- Total cash at the end of September 2018 was €1,336.3 million, of which €1,156.9 million was free cash.
AIRLINE AND WIZZ TOURS
The segmented reporting details the H1 KPI performance of the Airline and Wizz Tours business units separately:
- Unit revenues were unchanged at 4.27 Euro cents per available seat kilometre (ASK).
- Total unit costs increased by 6.4% to 3.33 Euro cents per ASK.
- Ex-fuel unit costs increased by 1.1% to 2.25 Euro cents per ASK.
- Fuel unit costs increased by 19.0% to 1.09 Euro cents per ASK.
- Wizz Tours:
- Wizz Tours will cease operations from 31 December 2018.
- First half package holiday revenues were €11.4 million and the net loss was €2 million.
- A similar level of loss will be recorded also in the second half, driven primarily by one-off closure costs.
LEADING POSITION IN CENTRAL AND EASTERN EUROPE
- Passengers carried increased 20.0% to 18.8 million, securing Wizz Air’s position as CEE’s leading low cost carrier.
- Wizz Air started 91 new routes in H1 and now offers more than 600 routes to 44 countries from 25 bases.
- Network has expanded to include two new countries of Austria and Estonia.
- Fleet has continued to grow with six new Airbus A321 and five new Airbus A320 aircraft added during H1 taking the fleet to 104 aircraft, a mix of 72 A320s and 32 A321s.
- Average aircraft age of 4.6 years, one of the youngest fleets of any major European airline.
- Wizz Discount Club membership increased by 20% to over 1.2 million at the end of H1.
BUSINESS DEVELOPMENTS AND INNOVATION
- Wizz Air has signed letters of intent to finance 10 A321 NEO deliveries at approximately 30% better rates than previous deals.
- SITA WorldTracer® service was introduced to speed up repatriating mishandled bags to passengers.
- The Wizz Air Pilot Academy programme was rolled out in Hungary; this follows the very successful launches of the programme in Poland, Bulgaria and Romania earlier in the year.
FULL YEAR FY19 GUIDANCE
The stronger yield environment, along with the Company’s ever disciplined attitude to costs, will enable Wizz Air to offset approximately half of the estimated €80 million full year fuel headwind and disruption costs. As a result the Company’s full year net profits guidance is revised lower to a range of between €270m and €300m.
The table below sets out the components of the Company’s full year outlook.
|2019 financial year||Comment|
|Capacity growth (ASKs)||+ 17%||Previously +18%|
|Average stage length||Moderate increase||–|
|Load factor||+ 1 ppt||–|
|Fuel CASK||+ 22%||Fuel price of $710, €/$ of 1.14|
|Ex-fuel CASK||– 1%||–|
|Total CASK||+ 6%||Previously + 3%|
|RASK||+ 3.5%||Previously + 3%|
|Tax rate||3%||Previously 6%|
|Net profit||€270-300 million||Previously €310-340 million|