Wizz Air Holdings Plc

Welcome to the Wizz Air F2022 half year results. Throughout the call all participants will be in listen only mode and afterwards there will be a live question and answer session followed by an audio question and answer session. If you wish to ask a question via the audio question and answer session please press 01 on your telephone keypad. Just to remind you this conference call is being recorded. Today I'm pleased to present Wizz Air CEO Joseph Irradi and Wizz Air Executive Vice President and Group CFO, Jurek Huj, in your meeting.

Thank you very much. So again, good morning, everyone. Thank you for coming. I really appreciate your presence. I'm good to see you as human beings around us. Good to be back in life in business. So this is to report the first half of our financial year called FISCO 22. So maybe I would start with... a quick wrap-up upfront. So in summer, just behind us, we ramped up operations pretty much to 2019 capacity levels. This is one of the highest in the industry in Europe. We did pretty well on that. It was a profitable quarter in terms of operating profit. So we were clearly seeing a ramp-up of the financial metrics as well during this period. We delivered positive cash flow in this period, liquidity reaching 1.7 billion euros at the end of September. Importantly, both Fitch and Moody's reconfirmed our credit rating, investment grade credit rating. That obviously is a very important matter to us, given our exposure to the capital market, especially when it comes to aircraft financing. Short term, we are seeing a number of temporary challenges the business is facing. I will talk about this later, but just headlines. We are seeing a few of our markets that are under vaccinated relative to Western European levels. Obviously that is affecting short-term demand. We are seeing a significant ramp up of our capacity to 170 act of the next year versus 119. At the breakout of the pandemic, that's a significant growth. Obviously, that carries some level of inefficiency at the moment with regard to actual utilization and crew productivity. But once we are fully ran up, we will go to our historical operational levels. And also, we are seeing the macro environment playing against us. on commodities when it comes to fuel pricing and effects. We are much focused on executing against this 500 agenda that is strategically important to us. We continue to invest in our fleet, in our network, and our people. Just to give you some numbers, as said, we are going up to 170 aircraft operations in September next year. This is roughly 50% capacity increase versus the breakout of COVID in March. We are hiring people. We are looking at having 6,700 employees in the company at that time in September. That compares to 5,000 at the breakout of COVID-19 and 4,000 at the low end during the pandemic period. I've been investing a lot into diversifying our markets. We opened up a lot of new countries, new operating bases and new routes, and you see how that investment has been flown through. If you look at the current snapshot of our business metrics, as said, we have been back into 2019 level on capacity and to a large extent also in terms of passenger traffic, a number of airports, aircraft and operating bases. So we are now having 44 operating bases in operations or announced compared to 26 in March 2020. If you look at the route network, we have a total network of 1,155 routes of which 440 were opened during the pandemic. So we greatly diversifying our network during this period. So if you look at capacity levers, you are seeing that this is the calendar year from week 13 to week 44. We are in week 44 today. So this is tracking until week 43. You are seeing that our capacity level is pretty much on 2019 ASK level. Load factor is also ramping up. We have not reached the level of operational efficiency what the business believed in 2019, but we are certainly on the way to achieve that. So it's still a weaker demand environment, but relative to the industry, relative to our competitors, we have been performing quite well, showing how effective we've been in ramping up operations. Market share gain and the market share gain given the period we are in. And this is a deliberate choice. If you look back in 2019, 2010, we did exactly the same thing. We took advantage of the weak market. We took advantage of the weakness of our competitors and we invested into those markets by gaining market shares. That's exactly the same what's happening at this point in time. You can see that pretty much in every one of our, we are building our market positions. We are grabbing significant market shares. Just to name a few countries, if you look at Albania, Out of the blue, we became the largest carrier in the country. We stepped up in Italy in a big way, tripling our presence in the market, going from 3% to 9%. But even on our existing markets, like Romania, we've been able to step up. taking advantage of the situation, the weakness of our competition. So this is a deliberate investment into markets, which we believe will benefit us on the medium haul and the long-term, irrespective of some of the short-term challenges that we are facing right now. And with that note, let me hand it over to Jari.

Thanks, Joseph, and good morning also from my side. It's great to see some of you face-to-face. Let me give some on the financial performance. So looking at the key KPIs, starting with revenue, you see that the revenue for the first half increased 87%. Revenue for the quarter increased 80%, so very strong performance. Obviously, the base was still very low, but as explained, we're nearing the ASK levels of 2019, which is very strong. Looking at the profit side, the operating profit for the year, sorry, for the first half of the year was minus 50. The operating profit for the quarter, as Joseph said, was 57 million positive. So we're turning a positive on the operating profit from a total net income for the first half. We're at the minus 120. which basically implies a minus 6 million net income loss for the quarter. There's a big difference between this positive 57 million operating profit and the 6 million loss, and that difference is essentially explained by the unrealized FX losses that we have. As you know, your loan on U.S. dollar liabilities on the balance sheet And as the dollar strengthened during the last two weeks of September, basically we've kind of had to recognize this unrealized loss. But this has nothing to do with operational performance. This is, let's say, purely related to the devaluation of the balance sheet liabilities. We'll talk a little bit more about cash in a few slides. Looking at the cash performance, you'll see that the first half delivered a cash performance of 2.75 euros. The quarter delivered a performance of 2.43 euros for quarter two. That is around 12% above the quarter pre-COVID. So we're getting closer to our cash performance, but we're not fully there yet. As Joseph highlighted, we're continuing to carry a little bit of inefficiency because of utilization on fleets and on crew. So if you look at the fleet line here, the depreciation line, you'll see there's a significant inefficiency still. Here it's about, you know, close to 30 cents. And then also in the crew line, you can see that the balance of those two lines basically add up almost to 0.40 euro cents of inefficiency in the first half. And we'll continue to carry that until we really, really fully ramped up. Remember, at this point in time, we have 20% more capacity than we operate, but that gap is going to close by next spring. And then obviously the normal regular cost structure, pre-COVID cost structure will be fully back and may even have potential to do better. Obviously, we have invested a lot, not only in fleet, but in better fleet, and that should come and translate back into the cost structure. Moving on to cash, you can see that we have gradually maintained and even built our cash position, our liquidity position. We've remained at 1.7 billion. Our balance sheet remains investment-graded with Fitch and Moody's, as I've mentioned. Fitch revised the outlook in a report last week, which you may have seen, from negative to stable, as they basically revised the outlook for next summer, where they see, obviously, stronger vaccination rates, giving more confidence for travel to return to pre-COVID and above levels. We continue to have a short booking window, which you actually see in the next slide, when we unpack the cash performance into the different drivers. So if you look at cash from an operating point of view, given the cost structure, which I said was around 12% higher on the ex-fuel cask, but also giving the pricing environment, which is still 25% below pre-COVID from a RASC point of view in the last quarter. Obviously, the operating profit was positive, was not where it used to be. So clearly, we have ways to go. As confidence comes back, as restrictions fully lift, that pricing performance will return. So that should happen by next spring, next summer. And that operating cash flow will obviously continue to increase. Working capital was a positive change. There's two components to that. I mean, we had a higher volume of activity, so payables contributed to working capital, but we're in front of a lower volume quarter from a revenue point of view. Seasonally speaking, winter is slower than, let's say, summer, so unflown revenue has declined, but still those two combinations together to a positive 36 million contribution from a working capital point of view. currencies, whereas a hurt on a P&L were a help on cash because of the US dollar deposits. And then lastly, as we've always guided, PDP payments this quarter would be relatively elevated. For the year, we have around 120 million pre-delivery payments. Most of that came this quarter. The balance, the 40 million balance is coming in the second half. So all in all, very strong cash performance. If you look at ancillaries, that continues to be a stronghold for us. Ancillaries in the first half were up €5 per passenger versus F20, so €2.5 per year. That's kind of well ahead of our target of one euro per passenger per year increase. The quarter was a bit lower than the five euros. In Q2, we had three euro per passenger per passenger increase versus F20. So it's slowing down a little bit, continue in half two. And the reason for that is obviously the market is more price sensitive, more price elastic, I would say. And that also means that you lure in or you get basically passengers which are more price sensitive and they would also buy less ancillary services over the summer quarter. And that may continue to some extent over half two. But as pricing will restore next year, That obviously will also restore further the strength on NCLE. So all in all, we're well on track to deliver our targets for the full year also on NCLE performance. And with that, I hand it back to Joseph.