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(Sharecast News) - Shares in Wizz Air nosedived on Thursday as operating profits came in lower than expected with the budget carrier blaming plane groundings due to a long-running engine issue which hit capacity along with higher costs.
Operating profit slumped 61% to 167.5m for the year to March, well below the 246m expected by analysts. Shares in the carrier were down 25% in early London trade.
Hungary-based Wizz has been plagued by issues with repairs of RTX-owned Pratt and Whitney engines, severely reducing its seat capacity.
"Despite the unproductivity of a grounded fleet, we successfully delivered a second consecutive year of profitability. We have the benefit of more than a year of experience operating under these unique circumstances - conditions airlines would never experience when demand exceeds supply," said chief executive Jozsef Varadi.
The engine problem, due to the use of contaminated powdered metal during manufacturing and which causes components to crack, has hit more than 40 operators of the Airbus A320 aircraft.
Varadi said the company was forced to lease a dozen aircraft and 40 spare engines to fulfil its flight schedule. Only part of these costs were covered by a compensation package from US-based Pratt.
The company did not provide guidance for 2026, citing limited visibility across its trading seasons, but did say low single digits fare cuts would be used to drive traffic and leverage higher summer close-in booking yields.
Susannah Streeter, head of money and markets at Hargreaves Lansdown said while shareholders have been aware of the engine issues for a while, "there appears to be sharp disappointment about the depth of the problems and the lack of guidance for the year".
"Also, the two-year compensation package with Pratt & Whitney, the engine manufacturer, will only mitigate some but not all of operational and financial impacts on the business. The airline is still mired in problems, and although management have said the number of grounded aircraft will start reducing, the issues are expected to linger for two to three years."
Reporting by Frank Prenesti for Sharecast.com
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