Wizz Air: why Europe’s second lowest cost producer may be looking for fresh capital: IPO time?

The fast-growing Wizz Air Group, privately owned and not subject to the same financial and traffic reporting requirements as publicly listed companies, has remained a mystery when it comes to its cost structure and profitability. CAPA has obtained and analysed detailed financial and operating data and the results are presented in this article. The group's cost base is certainly low - it has the second lowest unit costs among European carriers, with CASK more than one third lower than easyJet's, and a track record of cutting ex fuel unit costs. This cost structure, built mainly on Europe's most productive and low-cost labour force, has helped Wizz Air to a strong market position in Central and Eastern Europe, where it was the leading LCC in the 12 months to Mar-2013.

Its last reported financial year (to Mar-2012) saw a healthy EBIT margin of 5.8%, after seeing net losses in six of the previous seven years, suggesting that the business may be maturing. Wizz's closest competitor, with overlap on around one quarter of its routes, is Ryanair, whose unit costs are 14% lower than Wizz Air's. Ryanair is growing strongly in the region and this could threaten Wizz Air's goal to become its largest carrier over the next decade unless it can continue to lower unit costs.