Popular budget airline sees stocks tumble after admitting one in five planes grounded
Wizz Air is one of the most popular budget airlines for Brits jetting off on holiday, but the Hungarian firm has seen a 62 per cent drop in profits while 20 per cent of its planes are grounded
A popular budget airline, often chosen by British holidaymakers looking for cheap flights, has seen its shares slump after disclosing that 20 per cent of its fleet is grounded due to engine issues.
Wizz Air operated over 63 million flights to and from the UK last year, offering connections to favourite getaway locations such as Spain, Greece, and Italy. Nonetheless, the airliner's profits took a nosedive by 62 per cent to £141 million, largely due to ongoing strife in two key markets – Israel and Ukraine.
Adding to their woes, about 40 of their jets are currently idle because of global complications with some Airbus engines, putting a significant chunk of Wizz's profit generators out of action. As a repercussion, share prices plunged to 1207p, a steep fall from their high of 5500p in 2021.
Despite these challenges, Wizz Air has experienced an uptick in British customers, with over 12 million Brits opting for the budget carrier for trips abroad. Battling substantial adversities, however, the airline had to signal two profit warnings within a year.
The Chief Executive, Jozsef Varadi, conveyed to the Mail: "Wizz Air is a more resilient business today. Despite the unproductivity of a grounded fleet, we successfully delivered a second year of profitability.", reports the Express.
He also noted: "We have the benefit of more than a year of experience operating under unique circumstances - conditions airlines would never experience when demand exceeds supply."
The budget operator's plummeting share value and profits have raised red flags for airports throughout the UK. With operations from key international hubs such as Luton as well as regional airports including Liverpool, Birmingham, Doncaster, Aberdeen, and Edinburgh, Wizz Air's financial performance is significant.
Recovery does not seem on the horizon for Wizz Air, with engine checks and services on its Airbus fleet experiencing extensive delays, now reaching 300 days and potentially stretching into 2027.
The troubles started back in 2023 after the manufacturer issued a recall of certain engine models due to fears of powdered metal tainting the manufacturing process.
However, the airline's CEO has declared that they are at a "transformation point" concerning these issues. Despite having 44 aircraft out of a fleet of 200 impacted, the company anticipates reducing this figure to 37 by September, thereby missing the peak summer period.
As one of the most severely impacted airlines in Europe, Wizz Air has managed to negotiate a compensation arrangement with Pratt & Whitney, the company responsible for manufacturing the engines for Airbus. CEO Varadi said this agreement helps alleviate "some, but not all, of the operational and financial impacts on the business."
AJ Bell's Investment Director Russ Mould remarked: 'The aviation firm labelled its previous year as "resilience and transformation", yet market reactions imply "awful" would be more apt.
"Formerly seen as the ambitious growth contender, even considering acquiring Easyjet back in 2021, Wizz Air now appears to be falling behind in the race.
'With shares at a fraction of their peak, failure to resolve its problems could see Wizz turn from predator to prey. '.
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