Wizz Air has reported a significant decline in its annual profits, underscoring the mounting challenges faced by the budget airline due to engine issues affecting a substantial portion of its fleet. For the financial year ending in March, Wizz Air's operating profit plummeted to €167.5 million (£141 million), representing a stark 62% drop from the previous year's profit of €437.9 million (£368.7 million). Despite this downturn, the airline managed to carry a record 63.4 million passengers, suggesting robust demand for its services amidst the operational turmoil.

Central to Wizz Air's struggles are ongoing issues with engines manufactured by Pratt & Whitney. Over the course of the year, an average of 44 planes—nearly one-fifth of its fleet—were grounded due to defects in Pratt & Whitney's turbofan engines, which were manufactured with contaminated powdered metal. This limitation on capacity has had a profound impact on Wizz Air's operational capabilities and financial outlook. While the airline reported a slight revenue increase of 3.8%, it still fell short of analyst expectations, as the operational setbacks have led to a turbulent financial landscape. In light of these challenges, the company’s shares have decreased by over 30% in the past year, marking it as one of the worst-performing stocks among European carriers.

Jozsef Varadi, the company’s CEO, expressed optimism about the airline's resilience, stating that Wizz Air has successfully navigated through these difficulties. He noted that the number of grounded aircraft is expected to decrease both in absolute numbers and as a percentage of the fleet. As part of its efforts to mitigate financial losses, Wizz Air secured a two-year compensation agreement with Pratt & Whitney, aimed at alleviating some of the operational and financial burdens caused by these groundings. However, he cautioned that the engine-related challenges could linger for another two to three years, leading the airline to refrain from providing financial guidance for 2026 due to prevailing market uncertainties.

In recent updates, Wizz Air’s financial forecasts have been revised downward, reflecting the ongoing costs associated with grounded aircraft. The company has projected a net income for the year ending in March between €250 million and €300 million, a stark decrease from earlier expectations that estimated net income between €350 million and €450 million. Despite these setbacks, Varadi indicated a commitment to navigating through the issue while concurrently focusing on operational efficiency to bolster the airline’s performance.

Overall, while Wizz Air has managed to maintain a growth trajectory in passenger numbers, the airline finds itself grappling with significant operational hurdles. The outlook remains complex, as safety measures related to engine inspections will continue to affect its fleet size and service capacity in the coming months. As Wizz Air strives to return to a growth phase, the aviation industry keeps a watchful eye on the unfolding developments, particularly the effectiveness of the newly established compensation agreement with Pratt & Whitney and its implications for long-term operational stability.

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Source: Noah Wire Services