Wizz Air’s losses worsen as cost rises outpace recovery in passenger travel

Losses at Wizz Air climbed even higher last year due to surging fuel, staff and airport costs offsetting a strong rebound in airline travel.

The Hungarian low-cost air carrier posted a reported loss of €642.5million in the 12 months to the end of March, an 11.5 per cent rise on the equivalent period the previous year.

Total revenue more than doubled to €1.66billion 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 per cent.

However, overall operating expenses soared by around €1billion, with much of the increase coming from rises in oil prices and passenger capacity, which led to the company spending an extra £300million on fuel.

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

Wizz Air’s performance was also stunted by Covid-19 restrictions, particularly during the start of the financial year when most countries were still under national lockdowns.

These included temporary bans on overseas travel to some countries, as well as vaccination and quarantine requirements for passengers.

Additional dampeners on ticket sales were brought by the presence of the Omicron variant over the Christmas and New Year period, and uncertainty over future travel rules making many people more reluctant to book flights.

The London-listed company cautioned that it would make another operating loss in the first quarter of this year even though it expects to fly 30 per cent more capacity than in the same period three years ago.

But it forecasts record demand for its flights over the peak summer period, driven by rising salaries, close-to-full employment, and enhanced household savings ratios in major markets.

Wizz Air Holdings shares closed trading 9.5 per cent down at £24.99 on Wednesday, meaning their value has declined by over 36 per cent in the past six months. 

Chief executive Joszef Varadi said: ‘We stand ready to deliver our largest ever summer flying programme and the fastest growth in the industry, enabled by more than 6,000 colleagues across the business.’

Varadi added that the worsening cost-of-living crisis should further benefit budget airlines as more travellers seek cheaper holidays. 

Yet inflation will also lead to fare rises, with Wizz Air planning a hike in the ‘upper single digits’ in the second quarter, which runs between July and September.

AJ Bell investment director Russ Mould warned that this might deter some people from taking trips, as could the growing prevalence of long queues, flight delays and cancellations at airports caused by staff shortages across the aviation sector. 

He said: ‘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.’

Wizz Air’s publication of its full-year results comes as the boss of Heathrow Airport predicted that the aviation sector would take between 12 and 18 months to see capacity fully rebound to pre-pandemic volumes.

John Holland-Kaye told the Financial Times that the UK Government should ease the rules regarding background checks for new employees to help deal with the disruptions currently happening at British airports.