WOOD Flash – Wizz Air: 2Q FY22 – near-term loss to widen, as ramp-up for summer 2022E accelerates

Wizz Air’s 2Q FY22 headline numbers were broadly in line. The company has published some profit guidance, which surprised on the downside, suggesting that the loss for the year could exceed EUR 400m, well above what we and the consensus have been pencilling in. In part, this is driven by the low vaccination levels in CEE and the fourth wave that many countries in the region are experiencing currently. However, the key driver is the aggressive ramp up ahead of next summer, with accompanying aircraft ownership and personnel costs increases, taking place against the backdrop of the still fairly limited utilisation of assets. Wizz Air has further increased the number of aircraft it expects to have ahead of summer 2022. The capacity could exceed the pre-pandemic level by around 50% next summer. We have been more conservative on the near-term outlook than the consensus, which has since moved in our direction. However, in view of the latest guidance, we need to increase our loss estimates for the year further. That said, we believe that Wizz Air has sufficient reserves to be able to afford the current investment into the network, the fleet and people, and we believe that these initiatives – while costly in the near term – should ensure that the airline emerges even stronger from the pandemic. Wizz could reach net profit of around EUR 500m in FY23E, and above this level in the coming years, well above the EUR 250-300m that Wizz has been earning in its most profitable years. As we flagged in our recent upgrade on the name, we cannot rule out further near-term volatility in the share price. However, on a 12M+ perspective, we believe the current levels present an attractive buying opportunity. We reiterate our positive view on the stock.