Wizz Air’s profit collapsed in the first three months of its financial year as issues with its Pratt and Whitney-manufactured engines grounded scores of its planes.
Operating profit at the budget airline fell from €79.9m to €44.6m, well below analyst expectations of €144.3m. Revenue rose a marginal 1.8 per cent to €1.3bn, although this was also below analyst forecasts.
The update sent shares plummeting beyond 14 per cent in early trading.
It came despite Wizz carrying the same number of passengers as last year (15.3m) at the start of the busier summer months.
The Hungarian carrier has been forced to slash capacity over the last year as it grapples with problems relating to some of its geared turbofan (GTF) engines, supplied by the US aerospace firm Pratt and Whitney.
It said 46 aircraft were grounded at the end of June, with peak aicraft groundings now expected to be 47, against a prior forecast of 50. Wizz has also been impacted by renewed conflict between Israel and Hamas in the Middle East, with thousands of flights to the region cancelled.
Shares are down over 13 per cent this year to date.
Chief executive József Váradi said: “Our performance this quarter demonstrates the resilience of Wizz Air’s ultra-low-cost business model.
“Despite the competitive landscape and ongoing supply chain challenges, our strategic focus on delivering the lowest fares, improving our route network, and maintaining high operational efficiency has yielded results.”
The sub-par results will likely fuel investor concern over the airline sector after a turbulent end to July. Last week, Wizz’s budget rival Ryanair triggered a sell-off in a number of major airlines’ stocks after it reported a sharp dip in profit and forecast “materially lower,” ticket fares over the peak summer period.
Varadi told Reuters in an interview on Thursday: “Our fares are still improving, but our competitors are dropping theirs and that impacts us.”
Airline investors are fretting over the possibility that a two-year post-Covid travel boom, fuelled by so-called “revenge travel,” may be coming to an end.
Easyjet, which is pipped only by Ryanair for passenger numbers in Europe, quelled concerns slightly last Wednesday when it forecast a second consecutive summer of record profit and said ticket prices would hold steady.