Wizz Air cuts annual profit estimate as competition bites

By Alistair Smout LONDON (Reuters) - Eastern European-focused Wizz Air cut its full-year profit estimate on Wednesday, citing pressure on fares in the industry, and said it would press ahead with plans to expand aggressively to build market share. Wizz Air's London-listed shares fell more than 8 percent, their steepest decline since the aftermath of Britain's vote to leave the European Union last June, having been more resilient than rivals over the last year. The group has felt the effects of pricing pressures after larger low-cost rivals easyJet and Ryanair put more seats on to the market to take advantage of previously low oil prices and to try to capture market share. Both Lufthansa and Ryanair have said they expect fares to fall again this year, although they have predicted the drop will be less steep as oil prices creep back up. Wizz Air, which has its headquarters in Budapest, lowered its underlying net profit guidance to a range of between 225 million euros and 235 million euros for the year to the end of March, from a previous forecast of 245 to 255 million euros. Underlying net profit for the third quarter was 13.5 million euros ($14.6 million), a year on year decrease of 21.5 percent, which broker Goodbody described as "disappointing". The firm said around half of the cut to the profit forecast was due to the low fare environment, as a result of a combination of industry overcapacity and weakness in sterling. Rising fuel costs and disruptions because of severe weather also dented the outlook, echoing an update from Flybe earlier in the week. Unlike most of its rivals, Wizz Air did not downgrade its profit forecasts in the wake of last year's Brexit vote, and it has outperformed since the start of 2016. http://reut.rs/2kfQzMM However, while it has limited exposure to Britain, a 15 percent slump in sterling has hit Wizz Air's revenues, as it reports results in euros. The airline is continuing to expand and started 26 new routes over the previous three months. It is expecting to deliver full-year capacity growth of 20 percent. "We are taking advantage of the low-fare environment, and we are growing more aggressively than planned before," Chief Executive József Váradi told Reuters. "I think our competitors are affected in a much bigger way, and I think this is why this is right for us to take advantage." WizzAir flew 22.7 million passengers in 2016, compared with 117 million reported by Ryanair, which overtook Lufthansa as Europe's biggest airline by passenger numbers.. (Reporting by Alistair Smout; Editing by Keith Weir)