Ultra-Low-Fare Wizz Air Feeling the Pinch From the Competition

The Hungarian low-fare carrier warns that its bottom line will take a hit from a budding price war and overall increased capacity from competitors.

Shares for Budapest-based ultra-low-fare carrier Wizz Air took a big hit following reports that the company has lowered its profit forecast on Tuesday. CEO Jozsef Varadi, however, told investors that he remains bullish on the airline’s overall health in the coming year.

“Although the current financial year is looking like a very good year for Wizz Air and we remain excited about our prospects for the next financial year, lower fuel prices continue to feed through to lower airfares,” Varadi explained during the company’s third quarter results call. “This downward trend looks likely to continue well into 2017.”

While there was plenty of good news in the airline’s report, the markets and media reports mostly focused on the fact that previously robust profit guidance was dropped by an estimated €10 million. The total number of passengers carried by Wizz Air actually increased by more than 20 percent over the last quarter, but company officials say that fierce competition helped to drive down ticket prices and led to the more down-to-earth profit forecast.

The financial report also cited a rash of severe weather as an unanticipated strain on profits.

Although the company’s stock price dropped by nearly 10 percent after news of the profit warning, Wizz management says it will continue with aggressive expansion plans in an effort to seize a greater market share. The airline plans to grow capacity by more than 20 percent in 2017. Investors were assured that despite unforeseen strains on the bottom line, revenues remain high and “current market conditions favor ultra-low-cost-carriers (ULCC).”