Wizz Air shares fall 6.8% on slower growth in fleet deliveries by Investing.com

Investing.com — Shares of Wizz Air fell 6.8% on Wednesday after the release of September 2024 traffic figures. The company also held Capital Markets Day.

Low investor sentiment was likely driven by concerns about a drop in load factors in September, as well as fleet growth and profitability challenges.

In its September traffic update, Wizz Air reported carrying 5.76 million passengers, up 3.9% year-on-year, while seat capacity rose 4.8% to 6.28 millions.

The airline’s load factor fell slightly to 91.7%, down from 92.4% the previous year. Despite the Pratt & Whitney engine tie-ups that hurt capacity, the company posted its strongest passenger growth rate of the year.

However, Wizz Air’s Capital Markets Day highlighted some concerns for investors.

According to a Morgan Stanley note, while the airline’s long-term growth outlook remains positive, fleet deliveries are expected to be slower than anticipated.

The bank said the company projects a fleet growth rate of 15% for FY25-28, lower than the contracted rate, but still expects 25% seat growth over the period.

“One of the key concerns investors have for Wizz is the pace of growth. The company noted that although its contracted fleet implies a significant increase in capacity over the next 3 years (19%, 27% including 40-45 aircraft re-entry into the fleet), the slow delivery of aircraft means that the estimated fleet growth is more small,” wrote Morgan Stanley.

The company also acknowledged a potential 4.5 percentage point hit to profit margins in FY25 due to indirect costs related to engine issues and other operational challenges.

In addition, Wizz Air has signaled a potential shift to a mixed aircraft financing model, balancing ownership with leasing.

While Wizz Air remains focused on growth in Central and Eastern Europe, investors appear cautious, sending the share price lower. According to Morgan Stanley, slowing fleet growth and rising costs could pressure margins in the near term.