Founder & Managing Director, AIR Control Tower, AIR Control Tower

Neil Glynn

Founder & Managing Director, AIR Control Tower

AIR Control Tower

AIR Control Tower is an independent research and analysis platform. Its mission is to provide impactful insight and analysis across the global airline industry at a company and market level via detailed financial models to aid decision making for key stake holders at a time when risks have seldom, if ever, been higher and the global sector grapples with the imperative of funding de-carbonisation. Unique analysis forecasting global carrier-level earnings/cash flows, and restructuring/de-leveraging prospects, is designed to dynamically assess the health of the industry, predict surprises and identify potential requirements for third party support.

Insights on the global airline industry

Equity Bottom-Up

<ul>
<li>Wizz Air's FY24 contained multiple distortions; we disaggregate cash flow dynamics to show an improving picture.</li>
<li>Capacity restraint has been enforced by engine issues, not zero growth in FY25 is producing high single-digit % unit revenue gains.</li>
<li>We see an opportunity for Wizz Air to rise above distortion to earnings from engine issues and compensation by providing incremental cash flow clarity.</li>
</ul>


Wizz Air's FY24 contained multiple distortions; we disaggregate cash flow dynamics to show an improving picture.
Capacity restraint has been enforced by engine issues, not zero growth in FY25 is producing high single-digit % unit revenue gains.
We see an opportunity for Wizz Air to rise above distortion to earnings from engine issues and compensation by providing incremental cash flow clarity.


Wizz Air - Opportunity to Shift Focus from P&L Distortion to Cash Flow Clarity

<ul>
<li>Summer pricing data suggests growth yoy for European short haul carriers.</li>
<li>This prompts us to raise our easyJet PBT forecast 11% to £676m for FY24.</li>
<li>We continue to see underperforming Wizz Air as the carrier with greatest opportunity to improve perception towards it by executing well in summer 2024.</li>
</ul>


Summer pricing data suggests growth yoy for European short haul carriers.
This prompts us to raise our easyJet PBT forecast 11% to £676m for FY24.
We continue to see underperforming Wizz Air as the carrier with greatest opportunity to improve perception towards it by executing well in summer 2024.


European Airlines – Increasing Confidence in LCC Summer Pricing and Profitability

<ul>
<li>Wizz Air held guidance for FY24 to March 2024, or net income of €350m-€400m, but only due to compensation from Pratt &amp; Whitney.</li>
<li>With no capacity growth in FY25 to March 2025, and costs apparently under control, Wizz Air should be able to drive significant earnings improvements.</li>
<li>Wizz Air seems set to receive over €200m in P&amp;W compensation for aircraft groundings in 4Q24 to March; read across for other airlines operating grounded GTFs.</li>
</ul>


Wizz Air held guidance for FY24 to March 2024, or net income of €350m-€400m, but only due to compensation from Pratt &amp; Whitney.
With no capacity growth in FY25 to March 2025, and costs apparently under control, Wizz Air should be able to drive significant earnings improvements.
Wizz Air seems set to receive over €200m in P&amp;W compensation for aircraft groundings in 4Q24 to March; read across for other airlines operating grounded GTFs.


Wizz Air - Distortion Continues but Conditions Favourable to Pass Key Summer Test

<ul>
<li>​Early three-month and six-month fare levels largely remain above prior year for the full service carriers (FSCs) and low cost carriers (LCCs)</li>
<li>EasyJet’s 2024 PBT can reach £600m, Ryanair FY25 net income can near-€2.5bn following €2.0bn in FY24, while Wizz Air can exceed €500m net income in FY25.</li>
<li>Wizz has the strongest potential to demonstrate its ability to improve EBITDAR/ASK by managing capacity, which may provide insight into future prospects as operations normalize/developmental routes mature.</li>
</ul>


​Early three-month and six-month fare levels largely remain above prior year for the full service carriers (FSCs) and low cost carriers (LCCs)
EasyJet’s 2024 PBT can reach £600m, Ryanair FY25 net income can near-€2.5bn following €2.0bn in FY24, while Wizz Air can exceed €500m net income in FY25.
Wizz has the strongest potential to demonstrate its ability to improve EBITDAR/ASK by managing capacity, which may provide insight into future prospects as operations normalize/developmental routes mature.


European Airlines - LCCs Unlikely to Pass Through Fuel Tailwinds in 2024

Controladora Vuela Cia De-A / Equity Bottom-Up

<ul>
<li>Mexico's Volaris has announced its 1Q24 and FY24 capacity is likely to be down 16-18% yoy due to GTF engine inspections grounding aircraft.</li>
<li>However, on this reduced capacity, management anticipates a 31-33% EBITDAR margin, up from 26% in 2023, helped by fuel costs down c.9%. We model $1bn EBITDAR in 2024 (2023 $840m).</li>
<li>This dynamic has read across for many short/medium haul markets around the world has capacity constraints are likely to drive up pricing/earnings for affected carriers and also competitors.</li>
</ul>


Mexico's Volaris has announced its 1Q24 and FY24 capacity is likely to be down 16-18% yoy due to GTF engine inspections grounding aircraft.
However, on this reduced capacity, management anticipates a 31-33% EBITDAR margin, up from 26% in 2023, helped by fuel costs down c.9%. We model $1bn EBITDAR in 2024 (2023 $840m).
This dynamic has read across for many short/medium haul markets around the world has capacity constraints are likely to drive up pricing/earnings for affected carriers and also competitors.


Global Airlines: Mexico's Volaris Shows GTF Groundings Can Drive Higher Pricing

Switzerland

Wizz Air Holdings Plc provides passenger and cargo air transportation services. The Company offers flight and connection programs in Central and Eastern Europe.

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Wizz Air Holdings (WIZZ LN)

Wizz Air - Opportunity to Shift Focus from P&L Distortion to Cash Flow Clarity

A deep dive into the complicated dynamics of Wizz Air's cash flow generation as it digests engine issues, compensation, and aircraft sale and...

Neil Glynn

European Airlines – Increasing Confidence in LCC Summer Pricing and Profitability

Deep dive on European low cost carrier fare developments into summer 2024 and ramifications for profitability development via detailed earnings...

Neil Glynn

Wizz Air - Distortion Continues but Conditions Favourable to Pass Key Summer Test

Deep dive on true underlying earnings of Wizz Air. Insight into GTF compensation from Pratt & Whitney applicable to impacted airlines

Neil Glynn

European Airlines - LCCs Unlikely to Pass Through Fuel Tailwinds in 2024

Deep dive on early 2024 pricing developments and the prospect of the major European low cost carriers retaining fuel price tailwinds in 2024

Neil Glynn

Global Airlines: Mexico's Volaris Shows GTF Groundings Can Drive Higher Pricing

Valuable read across from Mexico's Volaris for all airlines impacted by GTF engine inspections - as well as their closest competitors - as capacity...

Neil Glynn

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