Budget airline Wizz sees Brexit impact on bookings

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Customers start postponing bookings,Wizz CEO says
Customers start postponing bookings,Wizz CEO says

Uncertainty over Brexit is hitting bookings for budget airline Wizz Air and could mean that full-year results come in towards the lower end of its guidance, the company said on Wednesday.

Wizz Air maintained its full-year net profit forecast range of 270-300 million euros but said that final results for the year to the end of March would depend on how badly Brexit hit consumer confidence.

Consumers are uncertain and they (will) probably postpone their bookings. We’ve started seeing that in our bookings,” Chief Executive Jozsef Varadi told Reuters.

“These issues stand to be fairly temporary… It is not Brexit itself, but the uncertainties around it. So once there is certainty around how Brexit will play out, I think consumer confidence will be restored.”

Ryanair, Europe’s largest budget airline, issued a profit warning this month and warned of the risk of a further downgrade if Brexit causes disruption.

Although Varadi said he expected flights to continue after Brexit, much remains unclear about Britain’s scheduled departure on March 29. Wizz Air is the largest budget airline in central and eastern Europe.

Britain remains on a collision course with the European Union after lawmakers demanded that Prime Minister reopen a divorce deal with the EU that the bloc said was not up for renegotiation.

Wizz Air has undertaken Brexit contigency planning. Wizz Air UK was launched in May 2018, and it was granted a UK route licence by the transport minister in the quarter ended December 31 to protect flights to non-EU destinations from Britain.

The airline said the arrangement “future-proofs the status of Wizz Air UK Limited as a British airline, regardless of the outcome of the negotiations,” despite the impact of Brexit uncertainty on bookings.

LESS ROOM FOR ERROR

Wizz reiterated its profit guidance after lowering it in November, due to higher fuel prices and disruption from air traffic control strikes in the summer.

The airline posted 15 percent passenger growth in the quarter, while unit revenues were up 6 percent. It said it had adjusted its growth capacity to boost yields in the face of the higher fuel price.

Shares in Wizz recovered from initial losses to trade 1.5 percent higher by 0925 GMT.

Analysts at RBC said that a softer March backdrop for bookings reflected the Brexit impact in the UK and meant there was “less room for error than before” for the airline, but retained its “top pick” rating on the stock.

Varadi, the Hungarian co-founder of the Budapest-based airline, said that yield performance in its core markets of central and eastern Europe was outperforming western Europe.

“I think we are seeing a fairly robust yield environment for our business,” he said. “We remain very confident in the yield environment.”

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