It hasn’t been a great time for airline stocks. Planes have mostly been sitting on tarmacs due to the pandemic, but things are changing. I’m not quite ready to dip my toe in yet, so it’s on my watch list. Here’s why.
Glimmer of hope
Wizz Air’s statement was very punchy. The company faced a difficult first quarter as it was only able to operate at 33% of its available capacity. I’m looking past the fact it still generated a loss for the three-month period. In fact, this widened when compared to last year.
But the main point is that things are starting to change. I’m focusing on the bigger picture here. The total revenue for the period surged by 119% to €199m. And the number of passengers carried during the quarter increased significantly too.
This reflects the pent-up demand as well as the easing of travel restrictions. I guess this can only improve from here as the vaccine rollout continues in the UK and overseas.
The airline has now entered the busy part of the summer and has ramped up its operations to meet the increased demand. The icing on the cake was that it expects to operate in July and August at around 90% and 100% of its 2019 capacity respectively.
So what does this mean? Well, it’s pretty big news. It will make Wizz Air the first major European airline “to fully recover capacity to pre-Covid-19 levels”. Someone has to make the first move, and it appears that this company has decided to take the leap.
Clearly the Wizz Air share price was up yesterday on this positive news. It means that there’s light at the end of the tunnel and normality could be close.
As I said, the airline is ramping up its operations to cater for this increase in demand. It has hired 600 additional crew members as well as adding more routes to its schedule. The company has also renewed its fleet by taking the delivery of new planes.
Should I buy now?
I’m holding fire and have placed the stock on my watch list. Things maybe recovering but I’m treading carefully. Even though Wizz Air expects to fly at high capacity during the next two months, what happens after this period?
Even the FTSE 250 company highlights that it’s “cautious with making predictions for the winter period amid unpredictable government decision making.” So even the airline can’t give forward guidance yet. It’s worth noting here that the coronavirus has a natural advantage during the colder months, which could hinder progress.
While I’m confident that things should have improved by then, we aren’t out of the woods yet. Another Covid-19 variant could emerge and cause a spike in cases again thereby placing pressure on the Wizz Air share price.
I’d like to see some clarity from the company regarding the post-summer months before I buy the stock. So I’ll continue to wait and see.
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Nadia Yaqub has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.