ii view: Wizz Air optimistic about passenger numbers

Passenger traffic update

ii round-up:

Eastern European focused carrier Wizz Air Holdings (LSE:WIZZ) today reported passenger numbers of 5.06 million for the month of December. 

That’s an increase of 1.9% from December last year’s 4.96 million passengers and ahead of a 1.7% increase for November. The airline’s load factor for December, or the percentage of available seating capacity filled with passengers, improved to 86.5% from 82.1% a year ago. 

Shares in the FTSE 250 company climbed 1% in UK trading having come into this latest news down by just over a third in 2024. That’s similar to troubled aircraft maker Boeing Co (NYSE:BA) and in contrast to a 10% gain for easyJet (LSE:EZJ) shares over the year. The FTSE 250 index itself gain 4.7% last year.  

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

Wizz flies to over 190 airports in more than 50 countries. Just days ago, Wizz and Pratt & Whitney agreed compensation terms for 2025. Some Wizz planes have remained grounded given issues relating to their Pratt & Whitney GTF engines.

Early demand indications for the fourth quarter to late March remain positive, with bookings currently running ahead by over 2% versus this time last year. 

The airline, which prides itself on being one of Europe’s most sustainable airlines, detailed a 3.4% fall in CO2 emissions for December compared to a year ago. Emissions for the 12 months to December had however risen 4.7%, hindered by Wizz’s required use of older less efficient aircraft given the Pratt & Whitney situation.

Wizz is projecting a continued grounding of around of 40 of its Airbus SE (EURONEXT:AIR) A320NEO aircraft through the full year 2026 given ongoing GTF engine inspections.

A third-quarter trading update is scheduled for 30 January. 

ii view:

Making its maiden flight in 2004, Wizz today employs around 8,000 people. Operating a fleet of around 220 airbus aircraft, flying more than 750 routes, Wizz competes against rivals including easyJet, Ryanair, Jet2 Ordinary Shares (LSE:JET2) and flights operated by travel company TUI AG (XETRA:TUI1). During its last financial year to late March, Wizz flew a record 62 million passengers, up from 51 million the year before. 

For investors, raised geopolitical tensions including an ongoing war between Russia and Ukraine, should not be forgotten. Challenges for industry suppliers such as Pratt & Whitney and Boeing have created operational difficulties for airlines. Wizz’s net debt of €4.76 billion in late September compares to a current stock market value of £1.46 billion, while the many factors outside of management’s control such as the weather, air traffic control strikes, and the price of fuel all warrant consideration. 

• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
• Watch our video: a FTSE 100 stock to watch in 2025
• The UK stock market outlook for 2025

To the upside, consumer demand for travel remains robust, with year-over-year passenger numbers rising. Compensation from Pratt & Whitney for 2025 has been agreed, aiding difficulties not of its own making. A high focus on environmental credentials persists, while actions to hedge against volatile fuel and currencies remain active.  

Many events outside of the airline industry’s control make Wizz shares arguably higher risk, while shares near a record low suggests a lack of confidence among investors. However, a consensus analyst fair value estimate above £17 per share appears to give grounds for some hope among those with a greater appetite for risk.   

Positives: 

• Focus on costs
• Positive environmental credentials

Negatives:

• Operations hit by challenges at engine maker Pratt & Witney
• Many factors outside of management’s control 

The average rating of stock market analysts:

Hold