Wizz Air warns of Q1 loss as costs outpace summer demand

Low-cost airline Wizz Air said it expected to make a first-quarter loss despite strong summer demand as it deployed extra resources to minimise disruption due to staff shortages and supply chain issues.

The airline reported a loss of €642.5m for the year to March 31, compared with a loss of €576m a year earlier. Core losses were almost at break even at €19m, compared to a €182.8m loss a year earlier.

Planned capacity growth for the first two quarters of the current fiscal year is more than 30% and 40% respectively.

Total revenue more than doubled to €1.66bn as the rollout of Covid-19 vaccines encouraged more Europeans to take foreign holidays, leading to passenger and ancillary sales both jumping by about 125%.

However, overall operating expenses soared by around €1bn, most of which came from the soaring oil price and passenger capacity, which led to fuel costs rising 87% to €649m.

Costs were further aggravated by the hiring of new staff, and a €291m hike in airport, handling and en-route charges in response to seat capacity and passenger volumes growth.

The industry has seen widespread chaos in recent weeks as bookings have surged, leaving short-staffed airlines unable to cope resulting in hundreds of flight cancellations.

"The industry is witnessing supply-chain issues across airports, including in our network. Shortages of staff in air traffic control, security and other parts of the supply-chain are impacting airlines, our employees and our customers directly," said Wizz chief executive József Varadi.

"We are deploying extra resources to minimise disruptions and urge all other stakeholders to do the same, having customers' best interests always in mind."

Varadi said that the sector remained exposed to externalities such as air traffic control disruption and continuing operational issues within the airports sector, "adding to a volatile macro environment". As a result it was pulling full-year financial guidance.

AJ Bell investment director Russ Mould said Varadi "can't escape the fact the airline industry is on the verge of a meltdown thanks to a lack of staff in airports".

'There is no way of glossing over the issue that a growing number of people are likely to be ditching plans to fly this summer as they don't want the hassle of flight delays, cancellations and long queues."

'There is also the issue that air fares are going up and more people have less money in their pocket each month after paying the bills, so they might not be able to afford to travel. Add in disruption with air traffic control and you've got a chaotic backdrop which means airlines could experience a third consecutive summer of misery.'