Wizz Air flies into turbulence as cancellation crisis continues to dog industry

New(ish) airlines are a bit like Hollywood starlets.

After they initially shoot to prominence, they either don’t last long or they become Tom Cruise. Much as it pains me to say it, the latter would be Ryanair, which is basically the European travel industry’s bankable star. At least from an investment perspective. Travellers may feel otherwise.

This brings us to its rival Wizz Air, which had looked to be on a Channing Tatum trajectory but could still end up looking like a dog, and by that I don’t mean the starry canine Channing shared top billing with a recent movie, aptly named Dog.

The London-listed outfit, which is headquartered in Budapest, likes to indulge in the sunny optimism of summertime rom-coms even in the midst of an industry-wide crisis, which has seen mass cancellations with passengers stranded in sometimes dire circumstances.

Unveiling Wizz’s latest results, CEO Jozsef Varadi trumpeted: “At the start of (full year) F23, we stand ready to deliver our largest ever summer flying programme and the fastest growth in the industry, enabled by more than 6,000 colleagues across the business.”

And there was more. Covid? Nincs problema. The war in Ukraine? We’ve handled the trading impact.

The industry’s staffing crisis? The company is “deploying extra resources to minimise disruption and urges all other stakeholders to do the same”.

How about escalating fuel costs? Varadi says the company has partly hedged and rising energy costs and inflation across Europe will continue to favour ultra-low-cost carriers as consumers reconsider spending choices.

Honestly, this guy could turn a wet bank holiday in Grimsby into a sunny Ibiza party weekend. Of course, when your maximum pay could hit £100m you have every reason to play the optimist.

Wizz will have to go like DC Comics’ Flash for him to hit his targets but that’s how it had been running when the company’s rapid expansion was flying it past easyJet, which it tabled a (rejected) bid for last year.

Trouble is, times change and history tells us that you have to worry about a company when it starts saying things like losses weren’t as bad as we feared in the fourth quarter. The company also sought to highlight its EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation), which was in near positive territory, in stark contact to the headline pre-tax loss of €642.5m (£550m) for the year to the end of March.

For those new to EBITDA, it strips out a load of nasties that are sometimes classed as one-offs, along with accounting issues, financing costs, you know the drill. It is sometimes looked at in parts of the City. It is often looked at with cynicism elsewhere.

The company is forecasting more losses between April and June. Worse still, it isn’t offering any forecasts at all beyond that. This is the sort of thing that justifiably worries investors and it sent the shares plunging into the red upon the results’ release.

The company has stressed its cash holdings, which are reassuringly chunky, but it also burned through nearly a quarter of a billion euros last year.

True, the problems Wizz is facing with flight cancellations, and travel disruption generally, are hardly unique to this airline. Some are in even worse shape.

The chaos witnessed at airports comes from a similar place (staff shortages). Wizz isn’t the author of these misfortunes.

But the horror stories of people left stranded are coming through thick and fast and Wizz hasn’t been immune. Those stories may ultimately cause people to reassess whether flying is for them, at least in the short term.

Combine them with a fast deteriorating global economy, and looming fare increases (they’re already above pre-pandemic levels), and you have a brew that poses a serious challenge to this wizzy, fast-expanding outfit.