July 25, 2018 / 9:19 AM / 22 days ago

Air traffic controller strikes force Wizz Air to trim capacity growth outlook

(Reuters) - Budget airline Wizz Air (WIZZ.L) trimmed its full-year forecast for capacity growth on Wednesday, sending its shares down as much as 10 percent, as it expects disruptions due to strikes by air traffic controllers in Europe to continue into autumn.

FILE PHOTO: A Wizz Air Airbus 321-231HA-LXJ aircraft taxis to the runway at the Chopin International Airport in Warsaw, Poland January 8, 2018. REUTERS/Kacper Pempel/File Photo

Profits at European airlines have been pressured this year by the rising cost of flight cancellations associated with the strikes in Europe, particularly in France.

Ryanair (RYA.I), Easyjet (EZJ.L), Wizz and IAG (ICAG.L) submitted complaints on Tuesday to the European Commission against France, where air traffic controllers have joined public sector protests over the government’s economic reforms.

Airlines are exploring measures to counter the fallout from the strikes, including keeping spare capacity and crew reserves.

“We are looking at using or creating more spare capacity in the system for recovery and we are also looking at creating more reserves on the crew side,” Wizz Chief Executive Officer József Váradi said.

The strikes are compounding problems for airlines already grappling with high fuel costs as oil prices rebound after a more than two-year slump.

Budapest-based Wizz said in May it was confident it could pass on the rise to customers. The company said at the time that it aimed to take market share when high-cost carriers are forced to withdraw unprofitable capacity due to rising fuel costs.

The airline, which mainly serves passengers in central and eastern Europe, has also managed to keep costs down, thanks to a growing proportion of Airbus A321 aircraft in its fleet that are more fuel efficient and carry more passengers.

This helped the carrier maintain its full-year net profit guidance of 310 million euros ($362 million) to 340 million euros.

However, profit fell 14 percent to 50 million euros in the first quarter ended June 30, hurt by the timing of Easter and higher-than-expected disruption costs related to the strikes.

Revenue rose 17.9 percent to 553.4 million euros, with passenger volume rising 19.7 percent in the quarter.

Wizz Air shares fell 10 percent after its results but recovered most losses and were down 3.5 percent at 3433 pence by 1000 GMT.

($1 = 0.8559 euros)

Reporting by Arathy S Nair in Bengaluru; Editing by Saumyadeb Chakrabarty and Susan Fenton

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