Wizz Air ‘Blue Sky’ Scenario is Years Off in Ryanair Budget Duel
According to a new report from Bloomberg Intelligence (BI), Wizz Air's valuation, possibly reflecting further earnings-downgrade risk, may require solid passenger demand lasting to at least 2030 to bounce from depressed levels versus peers. Yet the budget carrier's grounded planes potentially returning to service in 2-3 years with 20%-plus annual seat growth coincides with rival Ryanair's slowdown.
Conroy Gaynor, Consumer Analyst at BI, commented: “Wizz Air is losing market share due to grounded planes, 40-45% on average for the next 18 months, amid geared turbofan engine (GTF) issues. The company now sees this lasting 2-3 more years (longer than previously), so we have a scenario analysis that 50% would return in the fiscal year ending March 2027 and the rest in the following 12 months. Allowing for constantly high utilisation, a requisite of the budget model, annualised seat growth may then surpass 20% in the five years to fiscal 2030. Wizz Air is at risk if too many planes come back to service in a given year, which might crater yields to accommodate up to 30% capacity growth. The potential support is that Ryanair may only achieve 1-2% growth during that time and travel demand could stay resilient as industry supply is squeezed.”
Wizz Air management sees untapped value in its A321neo orderbook, which it has been bringing forward using sale and leasebacks. Airbus delays are impacting the industry, as well as those from Boeing, weighing on Ryanair's schedules, so Wizz's goal to reach 500 planes has been pushed back two years to 2032. In the meantime, and while there remains supplier uncertainty, Wizz may be able to adjust fiscal 2028-30 deliveries to smooth capacity growth as GTF-impacted planes return.
Avoiding wet leases, less reliance on older aircraft and dilution of fixed costs as more efficient, larger A321neos enter an optimised fleet may be a boon for margin. Wizz's unit costs are broadly in line with Ryanair on an underlying basis, according to BI’s calculations, albeit from a larger mix of lower-yielding routes.
Conroy Gaynor, BI Consumer Analyst, added: “Wizz Air's strategic focus on core central and eastern European markets may better place it to compete with Ryanair on cost and drive profitability. Workers moving back to native lands, such as in Poland, and structural income gains could also mean demand tilting toward leisure vs. visiting family and friends. BI assumes that 30% of Wizz's routes are mature with scale, possibly having an underlying net income margin near 15%, while the other 70% still have upside and contain key battlegrounds for density and branding. Wizz only targets selective markets in western Europe, London, Italy and Austria, so has little overlap with EasyJet. Russia's invasion of Ukraine, Middle East conflict and Saudi Arabia being limited to an inbound market, with ideas to set up a local airline scrapped, tempers its "Go East" plans.”.
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