Wizz Air Shares Drop 6.8% Following Traffic Figures

Wizz Air shares declined by 6.8% on Wednesday after the release of its September 2024 traffic figures and the company’s Capital Markets Day.

Investor Sentiment

Low investor sentiment may be attributed to concerns over a decline in load factors, challenges in fleet growth, and profitability.

Traffic Update

In its September traffic report, Wizz Air carried 5.76 million passengers, reflecting a 3.9% year-on-year increase, while seat capacity grew by 4.8% to 6.28 million. However, the load factor slightly decreased from 92.4% to 91.7% compared to the prior year. Despite capacity issues related to Pratt & Whitney engine groundings, the company noted it achieved its strongest passenger growth rate of the year.

Capital Markets Day Concerns

During the Capital Markets Day, Wizz Air revealed concerns regarding fleet growth. A note from Morgan Stanley indicated that while the long-term growth outlook is positive, fleet deliveries will be slower than expected. They project a 15% fleet growth rate for FY25-28, which is below the contracted rate, although a 25% seat growth is still anticipated.

Investor Concerns

Investors are particularly worried about the pace of fleet growth. Wizz Air’s contracted fleet should allow for a substantial increase in capacity over the next three years (19%, 27% including 40-45 planes returning), but slow aircraft deliveries are expected to limit fleet growth.

Profit Margins

Wizz Air also indicated potential profit margin pressures for FY25, estimating a 4.5 percentage point impact due to indirect costs tied to engine issues and operational challenges.

Financing Model

Additionally, the airline is considering a blended aircraft financing model that would balance aircraft ownership with leasing.

While Wizz Air is focused on expanding in Central and Eastern Europe, investor caution has contributed to the recent share price drop. Morgan Stanley noted that slower fleet growth and escalating costs could pressurize margins in the short term.