Wizz Air shares are falling as supply issues hamper capacity expansion plans

Wizz Air announced on Thursday that their capacity growth will be slower than expected due to issues with their supply chain and engines. This news caused their shares to drop over 6%, despite reporting higher profits that met consensus. 


Other airlines are also struggling to increase capacity to meet demand as travel rebounds from the pandemic. Aircraft deliveries have been delayed due to issues such as staff shortages and problems with sourcing materials. Wizz Air, which operates Airbus planes, faced additional problems when Pratt & Whitney announced that over 1,000 engines needed to be removed from Airbus planes and checked for microscopic cracks. 


CEO Jozsef Varadi told Reuters that 12 engines operated by Wizz Air are set to be inspected from mid-September. Due to these issues, the airline has reduced its growth forecast for available seat kilometers from 30% to 25% for the first half of its financial year (April-September). Despite this setback, Wizz Air is still on track to meet its full-year profit guidance of 350-450 million euros. 


Varadi stated that the inspections will be absorbed in the less busy second half of the year, limiting some of the impacts. Wizz Air is planning to continue growing its fleet even if plane deliveries might slow. They recently placed an order for 75 additional A321neo aircraft from Airbus and plan to expand into Georgia, North Macedonia, and Poland. The airline posted a first-quarter net profit of 61.1 million euros ($67 million) and carried a record 15.3 million passengers. Their first-quarter operating profit of 79.9 million euros compared to a loss of 284.5 million euros a year ago.

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