Wizz Air shares surge as profits rise almost 26%

By Joanna Plucinska and Shashwat Awasthi

(Reuters) -Wizz Air's shares surged as much as 16% on Thursday after the airline reported a strong first-half operating profit, but it also forecast a low-single-digit decline in full-year revenue and said winter capacity was a "short-term challenge."

The company's operating profit rose almost 26% to 439.2 million euros ($512.2 million) beating expectations, with analysts polled by LSEG having forecast operating profit of 367 million euros.

Chief Executive Jozsef Varadi said they were looking to manage capacity for the upcoming winter season, given the expected drop in unit revenues. He said the first-half profit beat was thanks to lower fuel and flight disruption charges.

"The company has made the decisions needed to appropriately address the weaknesses of the business and exploit the strengths of the business," Varadi told Reuters in an interview after the results.

Bernstein analyst Alex Irving said the decision to cut the capacity forecast was a "sensible move to stabilise operations," while investors and analysts were positive on what they saw as stronger execution by Wizz Air in the last quarter.

Wizz Air's shares were up 16% at 0903 GMT. They remain a laggard in the European market, down 30% in the last six months, even after Thursday's boost. 

SHORT-TERM PAIN, LONG-TERM GAIN

European airlines have largely had a mixed quarter, despite cost savings tied to lower fuel costs. 

Wizz Air said last week that it had delayed taking delivery of 88 Airbus jets from 2030 to 2033 as the group looks to cut costs and revive profits.

But those changes will not kick in immediately.

"Whatever is contracted over the course of the next 12 months for deliveries, you will have to take it, and we are taking it so that will create some inherent inefficiency in the ecosystem," Varadi said. 

ENGINE ISSUES

The airline has struggled to recover from a string of disappointing quarters. It has largely blamed this on external challenges, including an issue with Pratt & Whitney engines, a slow repair schedule for those engines and geopolitical challenges in the Middle East and Eastern Europe.

Wizz also gave an update on its expected timeline for engine servicing with RTX-owned Pratt & Whitney engines.

Varadi said a deal to accelerate servicing with the engine maker, first reported by Reuters in September, was largely agreed.

The airline has adjusted its schedule for the full return to service of all planes from mid-2027 to the end of 2027.

"We agreed that we should be putting the target as something achievable and deliverable, and that's how we ended up with the end of '27," Varadi told Reuters.

($1 = 0.8575 euros)

(Reporting by Yamini Kalia and Shashwat Awasthi in Bengaluru, Joanna Plucinska in London; Editing by Louise Heavens, Ros Russell and Jane Merriman)