UPDATE 2-Wizz Air postpones float over valuation-sources

Mon Jun 16, 2014 9:52am EDT

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(Adds detail, analyst comment)

By Pamela Barbaglia and Marton Dunai

LONDON/BUDAPEST, June 16 (Reuters) - Wizz Air, central eastern Europe's largest airline, has postponed plans to list its shares on the London Stock Exchange because it was unlikely to get the valuation it wanted, sources close to the deal told Reuters on Monday.

In a statement posted on its web site, Wizz cited market volatility in the airline business for the decision, without giving further detail. The sources said recent turbulence in the airline market meant it would not have been valued at around 500 million pounds ($839.6 million) as it had hoped, one source said.

The budget carrier said last month it aimed to raise 200 million euros ($272 million) via the listing to strengthen its balance sheet as it seeks to fund more growth.

"The outlook for Wizz Air's business remains extremely positive and unaffected by the decision not to proceed with an IPO (initial public share offering)," the company said.

The sale was not scrapped, only postponed, the sources said, with none of them able to pinpoint when Wizz might attempt to go public again.

"It typically takes some time before launching another roadshow," or series of presentations to investors, one of the sources said, adding there were no sale talks they were aware of.

Wizz Air is not the only business to scrap plans for a stock market debut in the past few weeks. Clothes retailer Fat Face for instance pulled its listing in May.

Airline stocks were hammered last week after German carrier Lufthansa cut profit targets for the next two years, citing competition from Middle East-based and low-cost rivals.

That weakness in the sector was a factor in the Wizz Air decision, the sources said, along with escalating problems in Iraq and a subsequent rise in oil prices. The Russian-Ukrainian conflict has also undermined confidence in emerging markets.

MAKING MONEY

Wizz competes with no-frills rivals including Ryanair and easyJet. Shares in easyJet have fallen 9 percent over the past week, while Ryanair's are about 7 percent lower.

Wizz Air, which started to fly 10 years ago, is the largest budget airline in central and eastern Europe with a market share of 38 percent, and has been making money while traditional local airlines have struggled or have gone bust in recent years.

Wizz has planned to expand its operations to carry an annual 30 million passengers by the end of the decade, by which time its current fleet of 50 Airbus A320 planes would have doubled in size.

The company recently began to serve destinations outside its core European markets, such as the Middle East or Russia, and has indicated it would replace all of its A320s with the larger A321 model within the next decade.

Although Wizz has a long way to go to reach the size of Ryanair, growth opportunities do exist in expanding to markets that are under-served and flying further afield, said Ascend Aviation analyst Peter Morris.

"There is room for growth," Morris said. "They have to keep the cost base down and go for markets where they can gain traction. I would look at Austria, Switzerland and some of the secondary destinations in France, like Marseilles or Lyon."

Wizz Air had revenue of 1 billion euros in the year through March 2014 and net profit of 89 million, nearly triple its level the previous year.

At a press conference in May, Wizz Air Chief Executive Jozsef Varadi said he wanted the company to benefit from takeovers and mergers in the sector. "It is hard to say when and where, but we expect consolidation and we want to be able to act," he said. ($1 = 0.7345 Euros) ($1 = 0.5956 British Pounds) (Additional reporting by Steve Slater and Sarah Young; Editing by Tom Pfeiffer and David Holmes)

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