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Wizz Air shares slip as airline forecasts flat capacity

(Sharecast News) - Shares in Wizz Air fell on Thursday after the low-cost airline said it expects capacity - as measured by available seat kilometres (ASK) - to be flat next financial year. ASK, the airline industry's standard measure of capacity, improved by 26.9% year-on-year in the fiscal third quarter ended 31 December, despite the company having to cancel 6% of its planned capacity for the third quarter in early October due to the unfolding geopolitical crisis in Israel.

Affected capacity was redeployed across the network, while travel to the nearby markets of Jordan and Egypt also had to be partially redeployed, accounting for additional 3% of redeployed capacity.

"More recently and following a comprehensive security analysis Wizz Air is restarting operations into Israel with a routes from Budapest, Sofia, Bucharest, Krakow, London, Rome to Tel Aviv from beginning of March," the company said.

As for the fourth quarter, chief executive József Váradi said trading has so far been "positive", as Wizz pointed to a 15% increase in capacity year-on-year and a load factor of above 90%, in line with guidance given at the half-year stage.

However, looking ahead to next financial year, capacity is expected to be flat, held back by anticipated grounding of aircraft in the fourth quarter as Pratt & Whitney GTF engines are removed for mandatory inspections.

"We have worked hard to adjust the schedule in line with updated capacity projections, focusing on seasonality and markets with the greatest potential to deliver stronger yields and optimal operational performance. We continue to actively manage the GTF engine issues to minimise the impact on our operations," Váradi said.

Commenting on the outlook, Susannah Streeter, head of money and markets at Hargreaves Lansdown, said Wizz "continues to navigate capacity issues and disruption from the Israel-Hamas war". She added: "While overall customers have been coming thick and fast, it's clearly been a challenge with engine inspections ongoing, which have forced it to alter schedules to deal with the disruption."

In the third quarter, Wizz's revenues per ASK fell by 8% to €3.43 due to lower ticket revenue and extra capacity added in the period. However, load factor improved by 0.3 percentage points to 87.6%. As a result, passenger ticket revenue increased by 19.2% to €553.9m.

EBITDA totalled €18.7m for the quarter, compared with a EBITDA loss of €2.8m in the third quarter the year before. However, higher expenses and a lower net foreign exchange gain compared with last year resulted in an operating loss of €105.4m, after a profit of €33.5m before.

The stock was down over 4% at 1,945p by 1017 GMT.

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Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

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