It was second-time-a-charm for Hungary’s Wizz Air, as the company saw a better-than-expected initial stock offering this week after last year’s aborted attempt. Shares were trading at 8.4% over the initial public offering price, which gave the company an initial market value of over EUR 825 million.
The budget airline was forced to pull back from its previous plan to list the stock last June amid “current market volatility” and profit warnings from several larger airlines, including Germany’s Lufthansa. Wizz Air noted that it would receive net proceeds of about EUR 140 million, which it intends to use to boost its fleet of 54 Airbus A320s to 85 by 2017 to help compete with larger rivals such as Ryanair and easyJet.
Banner year leads to banner profits
Despite not being able to push ahead with the stock offering last year, the company had a banner year that saw passenger numbers jump 18% to 12.7 million and earnings increase 38% to EUR 305 million in the last nine months of 2014. At the same time, the airline, whose maiden flight was only back in 2004, continued to open new bases and add routes and planes.
The company continues to increase its capacity, as well as its profits, in the wake of the 2012 collapse of Hungarian flagship airline Malév. Wizz Air now flies 350 routes to 106 destinations in 37 countries.
CEO József Váradi noted the confluence of deregulation, a growing middle class and higher-than-average GDP growth as the main factors behind the increase in capacity in the Central and Eastern European market.
The “unexpectedly strong demand for shares from investors”, as Váradi admitted, has clearly delighted the airline and has the London market abuzz. Only weeks before, another highly anticipated offering, that of the UK-based tool hire firm HSS, was underwhelming.
While the initial offering saw the Hungarian carrier offer around 71% of the business, American private equity firm Indigo Partners remains Wizz Air’s biggest investor, with nearly 13% of the company.
“The response to the offering and our investment case has been extremely positive,” Váradi said, noting that full trading of Wizz Air stock began on Monday. With record profits, increasing capacity through new routes and planes, and now a strong public stock offering under the company’s respective belt, it certainly seems as though the sky’s the limit for Hungary’s lone major airline.