Wizz Air Pinched by Fuel Price Rise

Quarterly profit at European low-cost carrier Wizz Air plunged over the winter as high fuel prices and increased labor costs ate into earnings.

Profit in the three months to the end of December dropped 88 percent to $1.9 million (€1.7 million.)

It wasn’t all bad news. Passenger numbers grew 15 percent to 8.1 million while revenue also increased: up 21 percent to $586 million (€513 million.) The period is traditionally a quieter one for European travel companies.

Fuel expenses increased 40 percent to $190 million (€166 million) in the period through a combination of the airline’s growth and higher average prices. Staff costs rose 41 percent to $58 million (€51 million) in part because of a rise in pilot salaries.

Wizz Air did manage to successfully squeeze more money out of its customers with higher ancillary revenue. It introduced a new carry-on bag policy in November in a similar move to low-cost rival Ryanair. Airlines say the changes reflect a desire to cut delays but they also help generate more cash. Anciliary revenue increased 22 percent to $253 million (€222 million.)

While the profit slump looks alarming, Wizz Air said it was maintaining its net profit guidance range of between €270m and €300m for the full year. Where it fell within this range would depend on a range of factors, including Brexit.

Part of the way Wizz Air hopes to mitigate some of the Brexit related issues is through a new UK subsidiary.

Wizz Air secured its UK operating license last May and will allow it to continue flying from the UK to non-European Union countries following Brexit. Setting up the offshoot was one of the reasons why costs increased in the quarter.

The airline operates a fleet of 106 aircraft and offers more than 600 routes from 26 bases. It is particularly strong in central and eastern Europe.