The air industry includes many successful and failed companies, and investors need to distinguish them. Any turmoil in the sector entails changes in the distribution of power among competitors (Nguyen Thi, 2021; Szabo et al., 2019). Air transport has a crucial role in the European economy (Button, 2017; Gúčik, Vetráková, and Marciš, 2018). For instance, the industry supports approximately thirteen million jobs, thus contributing to a 4.4% GDP (Fichert, 2020). In addition, the Air Transport Industry impacts the Tourism Sector, which stimulates the economy (Ivanova, 2017). In 2018, 2.7 million individuals secured job positions in the aviation sector (Fichert, 2020). Within this huge industry, even cooperation with military airports is growing to reduce the burden on civilian ones (Boldizsár and Kővári, 2017). However, the Air Industry was negatively affected during the pandemic due to travel restrictions (Suau-Sanchez, Voltes-Dorta, and Cugueró-Escofet, 2020). Despite the difficulties of the pandemic, some companies maintain their activities at a high level.
One of the famous airlines attracting the attention of investors is Wizz Air. It is a low-cost carrier (LCC), one of the youngest companies in Europe, which uses secondary airports, and provides affordable air transport (Endrizalova et al., 2018; Huderek-Glapska, 2020; Klophaus, Merkert, and Lordan, 2021). Ambitious budget carrier was founded in Budapest less than two decades ago. The plan to launch Wizz Air appeared in June 2003 when six people with a wide range of airline expertise teamed up with Jozsef Vardi, the company’s CEO, former chief of Malev Hungarian Airlines (How it all started, n.d.). In three months, Wizz Air was a registered company ready to fly (How it all started, n.d.). Its lead investor wasIndigo Partners, an American private equity firm specializing in transportation investments (Ahlgren, 2021). In this way, the company’s appearance was rapid, and it immediately managed to enlist the support of a prominent investor.
Despite its young age, Wizz Air began to develop quickly. Wizz Air’s first flight from Katowice International Airport in Poland occurred on May 19th, 2004, a year after being founded (Tłoczyński, 2019). Wizz Air completed an initial public offering on February 25th, 2015, and was admitted to the London Stock exchange (Wizz Air Holdings PLC, 2020). Wizz Air was named Value airline of the year by Air Transport World, a leading industry magazine, in 2016 and 2020 (Sisk, 2020). Its beneficence for investors was also supported by various studies held before the world pandemic (Maertens, 2018; Tłoczyński, 2019). Thus, the successful company’s background assumes its attractiveness for investment.
The pandemic has made adjustments to the activities of all companies, and especially strong for air ones. According to the Chairman’s report, the COVID-19 pandemic gave a massive blow to the airline industry, unlike any other situation for the last 75 years (Wizz Air Holdings PLC, 2021). Passenger numbers declined 98%, which affected all air companies and stakeholders of their activity (Wizz Air Holdings PLC, 2021). There was a financial loss of € 576 million for the year ended March 31st, 2021, and the first annual loss since 2012 (Wizz Air Holdings PLC, 2021). Such circumstances may lead to the closure of many companies, but Wizz Air is learning to cope effectively.
Unlike many competitors, the industry-focused to emerge as a structural winner from the prolonged crisis. The Director’s report stated the three areas of the company’s activity during the pandemic: an investment in network expansion and diversification continued investment in their fleet, and focus on the newest A320 family aircraft (Wizz Air Holdings PLC, 2021). Moreover, Wizz Air has also concentrated on the Board and its leadership team to achieve one of its objectives: double the business in the next five years (Wizz Air Holdings PLC, 2021). Even in an unstable environment, this company feels confident in its activities.
The Auditor’s report concentrates on maintaining the appropriate balance of skill set and experience to implement the company’s strategy. The company thanked customers for their trust in Wizz Ai and employees for their commitment and enthusiasm during a challenging period (Wizz Air Holdings PLC, 2021). Despise the pandemic, Wizz Air has placed a relentless focus on pursuing its strategic plan. The company’s share price increased during the financial year 2020, exceeding its price at the outbreak of the COVID-19 pandemic and hitting an all-time high in early 2021 (Wizz Air Holdings PLC, 2021). The strength of Wizz Air’s liquidity position ensures it remains at the European Airline in its ability to prosper as economies open.
It is noteworthy that Wizz Air is an open and discussed company, which provides transparency to potential investors. An additional advantage of the company is the clarity and availability of annual reports, including graphs and photos with the necessary discussion. Wizz Air maintains the professional level of its documents, combining brevity and comprehensiveness in the tone of the language. These facts represent Wizz Air as a company focused on its stakeholders.
Liquidity Ratio = Current Assets / Current Liabilities
= 1657.2 / 1303.1 = 1.27174 (2021)
= 1574.4 / 1323.8 = 1.1893 (2020 )
The ratio is healthy for the company in both considered years. The company can pay its current liabilities without a struggle in a short-term period.
Profitability Ratio = Net Income / Shareholders Equity
= -572.1 / 1234.8 = 0.4663 (2021)
= 281.1 / 903.7 = 0.3111 (2020)
The ratio is healthy since the company can earn profits and shareholding value from its sales.
Solvency Ratio = Net Income + Depreciation / (Short + Long) Term Liabilities
= -572.1 + 345.3 / 3818.9 = – 0.05939 (2021)
= 281.1 – 381.4 / 3123.3 = – 0.03211 (2020)
The ratio is negative hence, the company may fail to meet its long-term debt obligations.
Activity Ratio = Revenue / Net * Asset
= 739 / 3065.4 = 0.2411 (2021)
= 2761.3 / 2783.7 = 0.9919 (2020)
The ratio is healthy hence, the company can use its different operating assets and convert the same into sales.
Valuation Ratio = Current Share Price / Earings Per Share
= 20.86 / 6.73 = 3.09955 (2021)
= 20.86 / 3.76 = 5.54787 (2020)
The Ratio is healthy, hence, there is a good market value of the company and earnings. Therefore, one can invest in it.
The company’s financial performance was quite affected by the COVID-19 pandemic, but it has fought the effects and tried to stabilize in the year 2021. Comparing the ratios from the two years, it is evident that the company is growing and recovering to where it was before the COVID-19 pandemic. It would be a good idea to invest in the company since it has viable financial rates for its performance. Moreover, European aviation markets and companies are rapidly developing, indicating investment favor (Wasowska, 2020). Wizz Air, in turn, has demonstrated that it can provide for the company even in pandemic conditions (Reuters Staff, 2021). Despite the sale by the largest investor, Indigo Partners, of its shares, their value grew at the beginning of 2021 (Reuters Staff, 2021). Therefore, the qualitative analysis of Wizz Air’s reliability is confirmed by its quantitative analysis.
The position of Wizz Air company vis-a-vis the industry despite the challenges of the pandemic is quite good. An earlier analysis by Tłoczyński (2019) showed that the company occupies a highly competitive position even in the Polish market. Using more recent data, the company’s report suggests that Wizz Air is “expecting to be recognized as the most sustainable company” in 2021, not only in the environmental sphere but also as an industry leader (Wizz Air Holdings PLC, 2021, p. 5). Moreover, by creating a strategy to support the company during the pandemic, Wizz Air will recover in a year compared to competitors who will need two or three years (CAPA Centre for Aviation, 2020). Thus, calculations, forecasts, and actual information demonstrate its investment attractiveness compared to competitors in the industry.
In conclusion, based on the above analysis, it is evident that investing in Wizz Air Shares is a good deal. Reports, news, and ratios have shown that the company has ensured that it remains at its position at the European airlines. There is no denying that Wizz Air and industry as a whole were significantly affected by the pandemic in 2020 due to travel restrictions and cessation of movement. However, seeing how Wizz Air Company performed under those circumstances, it would be an excellent investment to buy their shares. Considering that the airline is looking to expand its network, this measure would increase its income and guarantee an increase in share dividends.
Ahlgren, L. (2021) Indigo Partners sells 9% of Wizz Air for $550 million.
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How it all started (no date).
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Reuters Staff (2020) Wizz Air’s biggest shareholder sells half its stake for 400 million pounds.
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Wizz Air Holdings PLC (2021) Annual report and accounts.
Wizz Air Holdings PLC. (2020) Annual report and accounts.