Ordinarily full year results showing record profits and growth in all areas would be strongly welcomed by investors.
But in the case of budget airline Wizz Air (WIZZ), which has withdrawn earnings guidance for its current 2021 financial year, its 12-month results to 31 March 2020 only show how the business was doing before the coronavirus pandemic fundamentally reshaped the global aviation industry.
BIG REVENUE AND PROFIT JUMP
However, with revenue up 19.1% to €2.76bn and underlying net profit up 29.9% to a record €344.8m, as well as a 15% rise in passengers carried to 40m, the results do show a business heading into the current crisis in a strong position.
Its shares jumped 2.34% to £35.04 in mid-morning trading.
On a more fundamental level the results also show Wizz Air was able to squeeze more out of passengers, with a 2.6% increase in revenue per available seat kilometre (RASK) to 3.95 € cents, and reduce costs excluding fuel (the price of which it has no control over) by 0.7% to 2.27 € cents per available seat kilometre.
Its passenger load factor also increased, rising 0.8% to 93.6%, suggesting it was getting even better at filling seats on its planes.
HIT TO ANCILLARY REVENUES
One big issue for Wizz Air going forward however is the fact that 45% of its revenue is made up from ancillary sales - extras like baggage fees, seat preferences, and food and drink during a flight.
Getting more money from ancillary sales is a target for all airlines, as the price of such services remains stable and secure unlike ticket sales which are volatile and have to fluctuate based on demand.
AJ Bell investment director Russ Mould believes it will be difficult for Wizz Air to get through the short-term without taking a big hit to earnings.
Commenting on the firm’s ancillary revenue, he said: ‘This is going to be vulnerable area for the business as a result of restrictions on how people will fly. Airlines are likely to stop serving food and drink on flights where possible as part of coronavirus safety measures.
‘The European Union Aviation Safety Agency, the EU’s air safety body, recommends cutting down on cabin bags to speed up boarding and reduce contamination risk.
‘Airlines are being encouraged to incentivise customers to do this, so companies like Wizz Air may have to cut charges to put bags in the hold, thus lowering an important source of income.’
