Wizz Air swings to quarterly loss after Iran war sends jet fuel costs soaring

With Wizz Air swinging to a loss in an “extremely volatile” period following the Middle East conflict which has sent fuel costs soaring, AJ Bell investment director Russ Mould explains why the company is having problems.

He said: “A swing to a wider than expected loss in the first quarter was always likely to lead to turbulence in Wizz Air shares and so it’s proved.

“The company’s inability to point to a clear path through the current issues clouding the outlook for the airline sector also didn’t help.

“Budget airlines are more exposed to the increase in fuel costs given the need to keep a lid on fares to sustain their value credentials.

“Plus, their cohort of customers’ ability and willingness to spend is disproportionately affected by renewed inflationary pressures.

“Wizz Air’s big expansion in recent years plus its decision to redirect planes on routes affected by the Middle East conflict to European destinations has resulted in overcapacity and means that despite flying more passengers it is doing so much less profitably.

“The decision to continue expanding its fleet is a bold call, pursued in the hope that it can take market share if less robust rivals exit the market. For now, investors look to be unconvinced by this strategy.”