Wizz Air Puts Growth Before Margins in Challenge to Ryanair

(Bloomberg) --

Wizz Air Holdings Plc said it will cut fares at the expense of profitability in a bid to pack planes and grab market share as European travel demand rebounds.

The low-cost carrier posted a second-quarter profit on Thursday but forecast a 200 million-euro ($232 million) operating loss for the current three months that “may carry over” into early 2022.

Wizz, already Europe’s third-biggest discounter, is staging an aggressive expansion as it seeks to narrow the gap to sector leader Ryanair Holdings Plc. While the Budapest-based firm became the first major European carrier to return to pre-Covid capacity in August as demand boomed, it said the winter months will require keener pricing to spur sales.

“We are seeing the peak periods like Christmas looking very strong but in the off-peak periods we are going to be seeing some weaker demand.” Chief Executive Officer Jozsef Varadi told Bloomberg Television. 

Bookings should surge again from next spring, he said.

Wizz will stimulate the market as necessary while remaining in “investment mode,” the CEO said. The company has already taken 37 new aircraft since the start of the pandemic, opened 16 bases and added 300 routes.

Shares of Wizz traded 0.5% higher as of 9:04 a.m. in London, where the company has its main listing, after earlier falling 4%. The stock has gained 5.8% this year.

Long-Term Plan

Wizz’s strategy should position it to “capture attractive markets,” Bernstein analyst Alex Irving said in a note.

Varadi said that Eastern Europe’s slow rate of coronavirus vaccinations is holding back bookings in Wizz’s biggest markets, though takeup levels are beginning to accelerate. The same countries were a boon for Wizz earlier in the year as looser travel restrictions and lower infection levels allowed a faster return to travel than further west.

Wizz reported an operating profit of 57 million euros for the September quarter that fell short of the 92 million euros forecast by analysts.

Ryanair Holdings Plc on Monday cut its forecast for the year, also citing price competition. CEO Michael O’Leary warned that the Irish company would need to cut fares over the traditional low season in order to sustain the recovery.

Wizz was the unidentified bidder that made a takeover offer for British discount carrier EasyJet Plc, Bloomberg reported in September.

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