We Lower Wizz Air’s Fair Value Estimate by 17% As Fuel Costs Bite; Attractive Upside Remains

Wizz Air’s late fuel-hedging policy is biting into its short-term profitability and cost competitiveness. The group increased operating losses to EUR 284 million in the first fiscal quarter of 2023, from losses of EUR 108 million a year ago. Excluding fuel, unit costs are nearing precoronavirus levels, but the airline’s unhedged position has fully exposed it to a 94% increase in fuel unit costs. Fuel is now 45% of total costs, versus 35% before COVID-19, and drove total unit costs 40% higher compared with normalized prepandemic unit costs. Yields are rising by double digits across the industry, but we believe it will be at least another year before the airline is on a fuel-cost comparable basis compared with peers.