Wizz Air (WIZZLN 26s; Ba1/NR/BBB- Neg) 1Q (to June) Earnings Call

It's emphasising the dip is caused by one-off's and will reverse. There is (some) truth to that based on the GTF linked numbers it threw at us this morning (e.g. EBIT unch yoy ex. the wet leases impact) but keep in mind it is getting some support from Pratt's compensation. The impressive feat of Wizz this morning was unit revenues actually increasing +3% (joining easyJet and Air France in bucking the industry dynamic) but based on Ryanair's aggressive pricing in the market, that strength is unlikely to last. It will leave anyone running elevated/sticky costs (like Wizz Air this qtr) more exposed on margins/bottom line. Not much concern from us for the €26s - we heard sellers this morning for a change and we do see value still on mids. July traffic numbers come tomorrow.

• Mgmt reported net leverage to EBITDA(R) was 3.7x - it's still targeting the 2-handle on that. It will need to direct cash to the BS to get there given earnings flatlining now.
• Booking curve similar to last year; August 75%, September 38%, October 18% booked.
• Its flagging supply chain is stretched and seeing challenges around maintenance - unclear how much of this Lufty's maintenance division (Technik) is riding to its benefit - strong results from the division yesterday.
• Reiterates will phase out (the costly) wet leases nearly completely by the end of October.
• It was asked about long-term views on the pricing/yield dynamics in the sector; it said it reflects broader consumer slowdown and regardless benefits low-cost carriers like itself (as consumers rotate into them). Reminder Lufthansa mgmt stuck with view yesterday that Boeing/airbus supply disruptions will eventually benefit the sector.
• It has admitted Ryanair dropping fares aggressively has impacted it and been a driver for more moderate yield assumptions for the rest of the year. Reminder Ryanair reported the average fare falling by -15% in June quarter and still sees "materially" lower fares this summer (yoy).