WIZZ’s Lofty Growth Ambitions Backed Up by a Solid Balance Sheet and Order Book; FVE Unchanged

One wouldn’t think the aviation industry is experiencing its greatest downturn in history if you look at no-moat Wizz Air’s growth ambitions. Since the outbreak of COVID-19, the airline added 260 new routes, established 14 new airport bases, and took delivery of 17 new aircraft, with ambitions to double the size of the airline in five years. The group certainly has the order book and liquidity to back it up. Wizz Air is in the sweet spot of an airline’s life--big enough to matter, but small enough to be unencumbered by legacy agreements and unionization. Passenger numbers declined by 77% year on year in the third quarter of 2021, with revenue down at a similar rate to EUR 150 million. Stubborn staff and maintenance costs resulted in EBITDA of negative EUR 41 million, compared with positive EUR 130 million in the same quarter last year. Despite the uncertain outlook for a recovery in air travel, we believe Wizz Air is in a unique position to use this downturn to its benefit. Our fair value estimate of GBX 5,000 provides some upside to investors who buy into the growth story.