WOOD Flash – Wizz Air: 4Q FY21 – ready for take-off

Wizz Air closed its FY21 financial year with an impressive performance in terms of cash burn, which was reduced to EUR 28m per month in 4Q FY21, down from EUR 65m in the previous quarter. As long as the restrictions on flying remain in place, management believes that the FY22E financial year may also end in a loss – this is in line with our estimate, but could trigger some consensus downgrades, in our view. The visibility on the summer traffic remains limited, but Wizz Air retains the flexibility to scale-up on a short notice, and expects to be able to ramp up capacity to or slightly above the 2019 levels this summer, if the restrictions are eased and demand recovers. Management expects pressure on the yields during the summer – this is in line with both our and, we believe, the market consensus view. We include a detailed analysis of Wizz Air’s unit costs in this flash note, and a comparison with those of Ryanair. On a per-ASK basis, Wizz Air’s cost structure is on a par with Ryanair’s. As its re-fleeting into the A321neos continues, we believe it could surpass Rynair on the aggregate level, especially if the green taxes and carbon prices continue to push fuel costs higher. We note that Wizz Air is targeting a reduction to 43g CO2/RPK emissions by F30, versus its F20 baseline of 57.2g. Ryanair is aiming to cut its CO2 emissions by 10%, from 66g per passenger/km to 60g by 2030. In part, this is a function of Ryanair’s c.14% shorter stage length. That said, we also believe that this underscores the efficiency of Wizz Air’s fleet, with the A321neo the most efficient narrow-body aircraft on the market currently. On our FY23E, Wizz Air is trading at around 6x EV/EBITDA, at the current levels. We upgraded the stock to a BUY on 25 May, and we reiterate our positive view.