Wizz Air has reported sharply lower profits for its fiscal year ended 31 March, after continuing to be squeezed by widespread groundings of its GTF-powered aircraft and geopolitical turmoil across several of its core markets. Operating profit declined 62% to €168 million ($191 million) as expenses related to groundings, lease payments and depreciation pushed per-ASK costs up by more than a tenth. Wider inflationary pressures and higher ATC charges also hurt, although it did benefit from slightly lower fuel costs. Wizz's net profit, at €214 million, was down 42% year on year, and included a bump from a one-off, €194 million tax credit far above expectations. The airline's ability to make profits has been affected by groundings of its Airbus A320neo-family aircraft because of powdered metal issues with Pratt & Whitney GTF engines, requiring enhanced maintenance. Forty of its aircraft were grounded last summer. Across the year, this represented 14% of the fleet but 21% of ASK capacity. Although it received €300 million in compensation from Pratt & Whitney, Wizz calculates it absorbed two-thirds of the extra costs itself. It expects that most of the grounded aircraft will have returned to service by the end of 2027. Wizz's problems have been compounded by damage from the closure of Ukrainian airspace in 2022 followed by the collapse in demand to Israel amid the outbreak of conflict there in 2023. Combined, those two markets accounted for around 30% of Wizz's capacity. "You can imagine the morale of the company – everyone is scared of more changes," says Wizz chief executive Jozsef Varadi. "I don't know how much this is appreciated [by markets]…. It's been incredibly challenging over the past three years." Further potentially significant changes to its business model include a refocusing of its network towards its core markets of central and eastern Europe and away from western Europe. Varadi characterises the western Europe market as expensive, mature and sclerotic. CEE, in contrast, is "still emerging" and represents the carrier's "backbone". Wizz will also seek to densify its operations to improve crew efficiency, and concentrate capacity at the lowest-cost airports. Likewise, its network will shift dramatically away from "hot and harsh" locations where engines wear out faster, accelerating groundings of aircraft. It will generally pull away from its operations in the Middle East, until recently designated a core growth area for the business. "The less we operate on hot and harsh, the faster can move beyond the Pratt & Whitney GTF cycle," says Varadi, adding that this is the "single biggest objective for the company". Hot and harsh operations accounted for around a fifth of Wizz capacity last year. The airline also plans to induct more aircraft during the winter to avoid placing “immature” capacity into the summer months before high loads can be achieved. "There is a competitor that only grows in winter so they can be better in summer," says Varadi, likely referencing Ryanair, which typically forgoes accepting new aircraft in the peak season. "I think that is what we are looking at." Maintenance costs are scheduled to spike through the current fiscal year and into 2027 as Wizz returns swathes of its A320ceo fleet to lessors. As these aircraft have been worked harder and for longer given Wizz's shortage of A320neo equipment, they will require greater investment before being handed back to lessors to meet contract conditions. More than half of the aircraft to be returned to lessors this decade are scheduled for the next three years, notes Wizz, resulting in a large, although temporary, spike in costs. The airline is declining to give guidance for the year "given the lack of visibility" for forward trading, having issued two profit warnings over the past 12 months. Its shares were trading down 28% at 13:00 local time in London.

Virgin Australia has confirmed that its controlling shareholder Bain Capital will proceed with an A$685 million ($445 million) initial public offering for the airline that will see it list on the Australian Securities Exchange on 24 June. The airline formally lodged its prospectus on 6 June following an initial bookbuild by joint lead managers Goldman Sachs, UBS and Barrenjoey, which are also acting as underwriters. As per earlier reports in the Australian Financial Review, the prospectus indicates that the IPO sets an indicative market value of A$1.3 billion for the airline, and an enterprise value of A$3.62 billion. The offering is comprised of 236 million shares that will be offered to retail and institutional investors at a price of A$2.90 per share. The offer period will run from 16-19 June, closing at 17:00 eastern Australian time. Trading will start on a conditional and deferred settlement basis on 24 June, with full trading commencing two days later. "On completion, investors participating in the offer are expected to hold 30.2% of shares on issue, with the remainder being held by existing investors, which include Bain Capital, Qatar Airways Group, Virgin Group, and Queensland Investment Corporation," the airline states. "After making significant progress in Virgin Australia’s transformation and with the backing of leading global airline Qatar Airways Group as a strategic investor, we believe it is now appropriate for the business to transition to a publicly listed company,” says Virgin chairman Peter Warne. “This provides an opportunity for new investors to share in the success of Virgin Australia as the airline enters its next phase." Reunion Capital Partners is acting as independent financial adviser while Gilbert + Tobin is the legal adviser.

Latvia's State Audit Office has called for the viability of Air Baltic's business plan to be "assessed seriously" and for increased scrutiny of the government's shares in the carrier, after concluding that not enough action has been taken to ensure that state aid provided to the airline during the Covid-19 pandemic is paid back. The Latvian Ministry of Transport, Air Baltic Council and Cabinet of Ministers have all failed to take sufficient action to facilitate the return of the state's investment in the airline, says the State Audit Office of Latvia. It has recommended that oversight of the government's shares in Air Baltic be transferred "to another ministry or competent institution to mitigate risks to the state budget". Latvia's government has invested a total of €545 million ($621 million) in Air Baltic since the pandemic, including €340 million in 2020-22 to mitigate the effects of the crisis and an increased shareholding to 97.97% from 80.05%, say the auditors. Initially, they add, the state had "committed to recovering the €250 million allocated to Air Baltic in the first stage". "According to the strategy approved by the Cabinet of Ministers in 2021, the recovery of the investment was planned in the initial public offering (IPO) process, in which part of the state-owned shares would be sold by reducing the shareholding to 51%," notes the audit office in its report. "However, the strategy lacked a specific action plan because it was not specified how and under what conditions the investment would be recovered. "It is evidenced by the fact that the approved strategy has not been revised even once despite significant changes, including the second wave of the Covid-19 pandemic, Russia's full-scale invasion of Ukraine, aircraft engine problems and multiple changes to Air Baltic's business plans. Meanwhile, the state invested another €90 million in the company." Air Baltic first raised the possibility of an IPO in 2019, but it has been repeatedly delayed. The carrier had expected to float last year but said in November that it would wait until the first half of 2025. The IPO has yet to go ahead. Air Baltic's chief executive of 15 years, Martin Gauss, was ousted by the carrier's board in April. "The State Audit Office of Latvia considers that the viability of Air Baltic's business plan must be assessed seriously now," says Martins Abolins, a council member at the audit office. "The company's financial situation is complicated – that is evidenced by losses both last year and at the beginning of this year, negative equity and a significantly delayed and repeatedly postponed IPO process." He adds: "There is no longer any talk of the state recovering the invested funds through the IPO. On the contrary, the company indicates the need for additional state funding openly and that the implementation of the IPO is unlikely without the latter. Although the company has grown rapidly and reached the initially planned fleet size, its financial situation has deteriorated." Abolins points to "visible shortcomings" in Air Baltic's business model, and says: "In our opinion, further investment of state funds in the existing model without assessing its viability and sustainability would be unjustified." Air Baltic tells Cirium it "appreciates the constructive co-operation with the State Audit Office during the audit process and acknowledges the published report". The carrier says that throughout the audit process, it has provided "detailed information and explanations regarding the capital market situation, the specifics of a potential IPO and the content of the company's business plan". It points to adjustments it has been forced to make to its plans amid challenges including Covid-19 and Russia's full-scale invasion of Ukraine, and emphasises the need for flexibility. "The execution of the strategy, including progress toward a potential IPO, has been regularly adjusted to changing market conditions without losing a clear development course," says Air Baltic. "It should be emphasised that a potential IPO is not a technical process with a guaranteed or predictable outcome, but a complex market mechanism that is significantly influenced by various external factors and requires ability to adapt." Air Baltic adds that it will provide "all necessary support to conclude the evaluation process of the previous operational phase together with the shareholder, implement the recommendations given by the SAO and maintain a focus on sustainable development and public trust".