Wizz Air Ltd., Eastern Europe’s biggest budget carrier, scrapped plans for an initial public offering in London less than four weeks after announcing it would list, citing unpredictable conditions in the sector.
The outlook for the business is “unaffected by the decision not to proceed with an IPO,” Vecses, Hungary-based Wizz said in a statement today. The share sale on the main market of the London Stock Exchange had been targeting proceeds of about 200 million euros ($271 million).
Both Deutsche Lufthansa AG and Aer Lingus Group Plc issued profit warnings last week, and Wizz Air, which began flying a decade ago, faces heightened competition as Ryanair Holdings Plc sets up more bases in eastern Europe. As of the end of March, Wizz had a fleet of 46 Airbus Group NV single-aisle planes, flying 13.9 million passengers a year to 35 countries.
“Wizz Air today announces that the company has decided not to proceed with an IPO at this stage due to the current market volatility in the airline sector,” the carrier said. “The board will continue to focus on executing its strategy of driving growth and value.”
Lufthansa shares fell the most since 9/11 on June 11 after the airline cut earnings forecasts for this year and next. Europe’s second-biggest network carrier said a capacity boost at Gulf competitors is weighing on prices. Ireland’s Aer Lingus trimmed its profit goals the following day as a strike by crew members over work assignments hit bookings.
“The timing of the IPO was very unfortunate given the two profit warnings last week and the weakness of the sector in general,” said Jack Diskin, a Goodbody Stockbrokers analyst in Dublin. “The company has looked to list on more than one occasion before and encountered similar circumstances last autumn when a number of airlines started speaking cautiously.”
Investors have become more selective in what they buy as London has its busiest year for initial share sales since 2007.
Saga Plc, a provider of insurance and holidays to Britain’s over-50s, priced its May IPO at the bottom of its range, and the shares have fallen since then. Other companies, including Fat Face Group Ltd., have postponed their IPOs.
Funds from Wizz’s public offering were due to be used to strengthen its balance sheet, boost cash reserves and allow for broadening strategic options to finance growth, Chief Executive Officer Jozsef Varadi said May 22.
The propensity of central and eastern Europeans to fly grew by almost five times between 2002 and 2010, according to Wizz, a trend that’s prompted carriers based in the west of the continent, such as Ryanair, to take an interest in the market.
Diskin said that Wizz could look to float again over the next year to 18 months, once the airline sector’s outlook has becomes more “robust,” underpinned by the carrier’s own competitive cost base and access to growing markets. A private sale could also be an option, he added.