TIDMWIZZ
RNS Number : 7919O
Wizz Air Holdings PLC
03 June 2020
WIZZ AIR HOLDINGS PLC - UNAUDITED RESULTS FOR THE TWELVE MONTHS
TO 31 MARCH 2020
RECORD UNDERLYING PROFIT OF EUR345M ON 16% PASSENGER GROWTH IN
FY20
STRONG BALANCE SHEET AND LOWEST COST
SUPPORT RECOVERY
LSE Ticker: WIZZ
Geneva, 3 June 2020: Wizz Air Holdings Plc ("Wizz Air" or the
"Company"), the largest low-cost airline in Central and Eastern
Europe, today announces its unaudited results for the full year
ended 31 March 2020 ("2020", "FY2020" or "FY20") for the
Company:
Full year to 31 March 2020 2019 Change
---------------------------------------- ------- ------- --------
Passengers carried (million) 40.0 3 4.6 15.8%
Revenue (EUR million)(1) 2,761.3 2,319.1 19.1%
Underlying EBITDA (EUR million)(2) 783.4 692.4 13.1%
Underlying EBITDA margin (%)(3) 28.4% 2 9.9% (1.5ppt)
Underlying net profit for the year (EUR
million)(4) 344.8 2 65.4 29.9%
Underlying net profit margin (%) 12.5% 1 1.4% 1.1ppt
Statutory net profit (EUR million) (4) 281.1 1 23.0 128.5%
Statutory net profit margin (%) 10.2% 5 .5% 4.7ppt
RASK (EUR cent) 3.95 3 .85 2.6%
Ex-fuel CASK (EUR cent) 2.27 2 .29 (0.7%)
Total cash (EUR million) (5) 1,496.3 1,504.9 (0.6%)
Load factor (%) 93.6% 92.8% 0.8ppt
Year-end fleet 121 112 8.0%
---------------------------------------- ------- ------- --------
(1) Continuing operations
(2) EBITDA: profit (or loss) before net financing costs (or
gain), income tax expense (or credit), depreciation,
amortisation.and exceptional items (See also under Key
statistics)
(3) EBITDA margin: EBITDA divided by total revenue.
(4) FY19 was restated for IFRS16. FY20 underlying net profit
excludes the impact of fuel hedge losses classified as discontinued
(amounting to EUR63.7 million) resulting from the impact of
COVID-19 in the months of March, April and May 2020. FY19
underlying net profit excludes the impact of foreign exchange
losses from the retrospective adoption of IFRS 16 (amounting to
EUR138.7 million) and excludes the impact of discontinued Wizz
Tours operation (EUR3.7 million). FY19 and FY20 statutory results
include these exceptional expenses and items.
(5) Total cash comprises cash and cash equivalents and
restricted cash..
Commenting on the results, József Váradi, Wizz Air's Chief
Executive Officer said:
"During the 2020 financial year, Wizz Air once again
outperformed the market with an industry-leading passenger growth
rate of 16%, and delivered an underlying net profit of EUR 345m on
94% load factor. We continued to stimulate demand with our
ultra-low fares across our growing network which drove a revenue
increase of 19%. Our ancillary revenue growth of 31% was
outstanding and now makes up 45% of total revenues. The continuous
rollout of the game-changing A321neo aircraft ensures that we
remain Europe's undisputed airline cost leader.
The year marked exciting business developments: we placed an
order for 20 Airbus A321XLR aircraft which represents a significant
opportunity for Wizz Air to further expand the reach of its network
and connect points on the WIZZ map that are out of reach for the
current fleet. Moreover, we are excited to be establishing our new
airline Wizz Air Abu Dhabi which will launch later this year.
We have also stepped up our governance and sustainability
efforts: we are targeting to achieve 25% female representation in
pilot and over 30% in senior management and board positions within
the next decade. As the greenest choice of air travel, Wizz Air
committed to further reduce CO(2) emissions/passenger km by one
third by 2030. We remain committed to our order of 268 aircraft
with Airbus which further increases our competitiveness, while also
minimizing our environmental footprint.
None of this would have been possible without our people who
keep supporting our passengers and communities across the 45
countries in which we operate during these unprecedented times
caused by COVID-19, and I would like to sincerely thank them for
their incredible performance."
Commenting on the outlook for the Company, József Váradi
added:
"We have taken various initiatives during the COVID-19 pandemic
to safeguard the Company's cost position and excellent balance
sheet with EUR1.5 billion of cash, one of the strongest in the
airline industry. We remain focused on best servicing our markets,
while protecting the health of customers and employees. Our new
health and safety protocol is designed to ensure that our customers
and crew can fly safely during this unprecedented time for the
global aviation industry.
In addition, we are taking advantage of arising market
opportunities and have recently announced the expansion of our
network with new bases in Albania, Cyprus, Italy and Ukraine, with
more exciting developments to come. We are confident that we can
ramp up operations quickly, re-stimulate demand with our ultra-low
fares and contribute to the vital recovery of travel and tourism in
our markets.
It is too early to provide a detailed outlook for FY21 due to
the ongoing uncertainty caused by COVID-19. However, Wizz Air's
market positioning and our ever-disciplined attitude to cost mean
that we will emerge from this crisis as an even more formidable
business and will continue to deliver significant shareholder
value, environmental benefits and employment opportunities for
years to come."
RECORD NET PROFIT AND STRONG BALANCE SHEET
-- Underlying net profit grew 29.9% to a record EUR344.8 million
and underlying net profit margin was 12.5%.
-- Statutory net profit was EUR 281.1 million and net profit margin of 10.2%
-- Total cash at the end of March 2020 was EUR1,496.3 million of
which EUR1,310.5 million was free cash, one of the strongest
balance sheets of any European airline.
REVENUE AND COST HIGHLIGHTS
Revenues: Total revenue increase of 19.1% to EUR2,761.3
million.
-- Total unit revenue improved by 2.6% to 3.95 euro cents per available seat kilometre (ASK).
-- ASKs and passenger numbers grew 16% on 15% seat growth y-o-y.
-- Ticket revenue was up 10.4% to EUR1,508.5 million.
-- Ticket revenue per passenger fell by 4.6% to EUR37.7
-- Ancillary revenue up 31.5% to EUR1,252.8 million (representing 45% of total revenue).
-- Ancillary revenue per passenger increased by 13.5% to EUR31.3 per passenger.
-- Value added services EUR25.6 per passenger.
-- Baggage fees EUR5.7 per passenger.
Costs: Total CASK (excluding exceptional items) increased 1.1%
to 3.44 Euro cents in FY20 from 3.40 Euro cents
in FY19
-- Ex-fuel unit costs were 0.7% lower at 2.27 Euro cents, versus 2.29 Euro cents in 2019.
-- Fuel unit costs increased from 1.11 to 1.16 Euro cents, a 4.5% increase.
THE GREENEST CHOICE OF AIR TRAVEL
-- Wizz Air continues to operate at the lowest CO(2) emissions
per passenger amongst all competitor airlines. CO(2) emissions for
the year were at 57.2 g/RPK, 2.2% lower than last year.
-- Wizz Care's Sustainability Platform was launched to build
awareness of the many initiatives already being taken by Wizz Air
and those planned to ensure that Wizz Air remains one of the more
sustainable airlines in the world.
-- Targeting 25% woman pilots and over 30% senior management and
board positions within the next decade.
-- Our "Cabin-crew-to-captain" program targeting cabin crew
members who aspire to become pilots is launching in June 2020.
AIRBUS NEO AND FLEET UPDATE
-- Fleet expansion by 9 aircraft to 121 aircraft at the end of
FY20 (6x A321neos, 3x A321ceos) with over 47% of seats now served
by the more cost effective A321 type aircraft.
-- A memorandum of understanding was signed with Airbus S.A.S.
("Airbus") relating to exercising a part of existing options for
the purchase of 20 Airbus A321XLR aircraft. The present order will
be delivered over the course of three years starting in 2023 and
will allow us to connect even more airports within our wide and
diverse network.
-- Committed order book for a further 268 A320neo family
aircraft ensuring Wizz operates only the latest and most fuel
efficient technologies. Early indications show 16% lower fuel burn
and CO(2) emitted per flight and 50% lower noise pollution compared
to an Airbus A320 CEO aircraft.
-- The current average aircraft age of Wizz is 5.4 years, the
fleet remains one of the youngest and most cost efficient of any
major European airline.
MARKET LEADING POSITION IN CENTRAL AND EASTERN EUROPE AND
FURTHER GROWTH
-- 40.0 million passengers carried (+16%), consolidating our
number one LCC market share position in CEE at 40%.
-- 98 new routes started in FY20, strengthening our geographic
network and market leadership position in CEE.
-- We announced the establishment of Wizz Air Abu Dhabi in
partnership with Abu Dhabi Developmental Holding Company PJSC
(ADQ), to start in the second half of 2020. Wizz Air Abu Dhabi will
bring an entirely new business concept to the UAE market, being
both economically and operationally highly efficient as well as
environmentally sustainable.
OTHER BUSINESS DEVELOPMENTS
-- In April 2020, Wizz Air was deemed an eligible issuer under
the UK Government's Covid Corporate Financing Facility (CCFF) and
raised GBP300 million, which further strengthens the company's
excellent balance sheet.
-- Wizz Air celebrated 15 years of operation during FY20 and a
remarkable milestone of 200 million carried passengers.
-- The company announced its first ever flights from London
Luton to Moscow and St. Petersburg, as well as further expansion to
Russia by launching four new routes from Pulkovo Airport, Saint
Petersburg, as well as a route from Budapest to Kazan.
-- Wizz Air was named among the top ten safest low cost carriers
of 2019 in the world by airline safety and product rating agency
AirlineRatings.com.
-- Wizz Air was named "The Best Low Cost Carrier of the Year" at
the European Aviation Awards in September 2019.
CHANGE TO THE MANAGEMENT TEAM
Stephen Jones, Executive Vice President and Managing Director of
Wizz Air Hungary will step down from his position with effect of 30
June due to personal reasons. He has played a significant role in
driving growth and automation within the company over the past
three years and we thank him for his contributions, hard work and
dedication.
ABOUT WIZZ AIR
Wizz Air, the largest low-cost airline in Central and Eastern Europe,
operates a fleet of 122 Airbus A320 and A321 aircraft. A team of
dedicated aviation professionals delivers superior service and
very low fares, making Wizz Air the preferred choice of 40 million
passengers in the last 12 months. Wizz Air is listed on the London
Stock Exchange under the ticker WIZZ. The company was recently
named one of the world's top ten safest airlines by airlineratings.com,
the world's only safety and product rating agency, and 2020 Airline
of the Year by ATW, the most coveted honour an airline or individual
can receive, recognizing individuals and organizations that have
distinguished themselves through outstanding performance, innovation,
and superior service.
For more information:
Evelin Horvath, Wizz Air +41 22 555 9863
Tamara Vallois, Wizz Air: +36 1 777 9324
Edward Bridges / Jonathan Neilan, FTI Consulting
LLP: +44 20 3727 1017
- Ends -
Chief Executive's Review
Dear Shareholders,
The financial year 2020 marks another successful period for Wizz
Air; we delivered an industry leading growth rate of 16.1 per cent
in terms of ASKs and remain one of the most profitable businesses
in the industry. The drivers of our success in the past will also
be the drivers that will get Wizz Air through the current
challenges caused by COVID-19 and will enable us to thrive in the
long run: strong financial discipline and a resilient business
strategy.
The following section will provide you with an overview of how
Wizz Air created Shareholder value and further improved financial
performance in the past year, all the while ensuring operational
excellence. In addition, the key ingredients of our ultra-low-cost
strategy will be outlined which ensure that Wizz Air remains the
lowest cost, lowest emission airline in Europe and the leading
player in the growing Central and Eastern European market.
Wizz Air's ability to respond to market dynamics rapidly, as
well as its industry-leading cost structure, have allowed the
business to further diversify its network and drive profitable
growth. This has helped ensure that the Group is well placed to
face the substantial challenges that the current COVID-19 pandemic
is bringing to the airline industry.
Stimulating demand
In the past financial year, Wizz Air continued to successfully
stimulate traffic and increase passenger numbers by 15.8 per cent
to 40 million at a load factor of 93.6 per cent (an increase of 0.9
percentage points). We remained the undisputed market leader in the
CEE region, with a market share of 39.6 per cent in the low-cost
sector and 17.5 per cent of the total CEE market, up from 16.3 per
cent last year.
During FY 2020, we launched 98 new routes and now operate from
25 bases which connect 155 destinations in 45 countries. We remain
confident in the potential of the region and are taking advantage
of valuable market opportunities in and beyond CEE. Our new base in
Krakow opened in May 2019 with two based Airbus A321 aircraft. In
addition, we started operations to two new destinations in CEE
(Kazan in Russia and Odessa in Ukraine), as well as to seven new
destinations across Western Europe and the Middle East.
As at today, Wizz Air offers services from 23 CEE countries
including the 12 CEE countries where we have based aircraft and
crews. During the year, the Company started operations to/from 10
new airports, as follows:
New CEE stations
======================
Destination Country
============ ========
Krakow Poland
Kazan Russia
Odessa Ukraine
============ ========
New stations outside CEE
=================================
Destination Country
================ ===============
Bodo Norway
Molde Norway
Leipzig Germany
Edinburgh United Kingdom
London-Southend United Kingdom
Eilat-Ramon Israel
Santander Spain
================ ===============
The table below illustrates Wizz Air's market leadership in the
low-cost sector, which grew to 39.6%, an increase of 1 per cent
year on year. We are the number one carrier in 9 out of 14 CEE
countries.
Number 1 Number 2 Number 3
======================= ====================== ========================
Market Carrier Share Airline Share Airline Share
======================== =============== ====== ============== ====== ================ ======
CEE Wizz Air 39.6% Ryanair Group 31.9% Easyjet 6.1%
======================== =============== ====== ============== ====== ================ ======
Poland Ryanair Group 49.4% Wizz Air 39.9% Easyjet 4.1%
======================== =============== ====== ============== ====== ================ ======
Romania Wizz Air 61.3% Blue Air 20.3% Ryanair 15.6%
======================== =============== ====== ============== ====== ================ ======
Hungary Wizz Air 50.8% Ryanair 29.0% Easyjet 7.7%
======================== =============== ====== ============== ====== ================ ======
Bulgaria Wizz Air 53.3% Ryanair 33.7% Easyjet 4.8%
======================== =============== ====== ============== ====== ================ ======
Ukraine Wizz Air 45.2% Ryanair 30.7% Pegasus 8.1%
======================== =============== ====== ============== ====== ================ ======
Lithuania Ryanair 56.5% Wizz Air 37.8% Norwegian Group 5.7%
======================== =============== ====== ============== ====== ================ ======
Latvia Ryanair 53.1% Wizz Air 29.2% Norwegian Group 17.7%
======================== =============== ====== ============== ====== ================ ======
Slovakia Ryanair 66.3% Wizz Air 30.4% flydubai 2.7%
======================== =============== ====== ============== ====== ================ ======
Georgia Wizz Air 54.1% flydubai 13.1% Air Arabia 11.0%
======================== =============== ====== ============== ====== ================ ======
Serbia Wizz Air 57.1% Ryanair 10.5% Easyjet 10.4%
======================== =============== ====== ============== ====== ================ ======
Moldova Wizz Air 67.0% FlyOne 33.0%
======================== =============== ====== ============== ====== ================ ======
Macedonia Wizz Air 86.8% Germania 6.4% Pegasus 4.6%
======================== =============== ====== ============== ====== ================ ======
Bosnia and Herzegovina Wizz Air 49.3% Ryanair 12.0% Pegasus 12.0%
======================== =============== ====== ============== ====== ================ ======
Taking into account all airlines operating to CEE, we maintained
our position as the number one carrier with 17.5 per cent market
share, up from 16.3 per cent in FY 2019.
Number 1 Number 2 Number 3
=============================== ============================ =============================
Market Carrier Share Airline Share Airline Share
======================== ======================= ====== ==================== ====== ===================== ======
CEE Wizz Air 17.5% Ryanair 14.1% LOT Polish Airlines 6.2%
======================== ======================= ====== ==================== ====== ===================== ======
Poland Ryanair Group 25.9% LOT Polish Airlines 25.5% Wizz Air 20.9%
======================== ======================= ====== ==================== ====== ===================== ======
Romania Wizz Air 38.3% TAROM 16.0% Blue Air 12.7%
======================== ======================= ====== ==================== ====== ===================== ======
Ukraine Ukraine International 37.3% Wizz Air 12.3% Ryanair 8.3%
======================== ======================= ====== ==================== ====== ===================== ======
Hungary Wizz Air 31.8% Ryanair 18.1% Lufthansa 6.4%
======================== ======================= ====== ==================== ====== ===================== ======
Bulgaria Wizz Air 23.1% Bulgaria Air 14.9% Ryanair 14.6%
======================== ======================= ====== ==================== ====== ===================== ======
Latvia airBaltic 60.0% Ryanair 12.5% Wizz Air 6.9%
======================== ======================= ====== ==================== ====== ===================== ======
Serbia Air Serbia 46.2% Wizz Air 11.1% Lufthansa 5.9%
======================== ======================= ====== ==================== ====== ===================== ======
Lithuania Ryanair 31.3% Wizz Air 21.0% airBaltic 10.3%
======================== ======================= ====== ==================== ====== ===================== ======
Georgia Wizz Air 15.5% Turkish Airlines 12.0% Georgian Airways 11.4%
======================== ======================= ====== ==================== ====== ===================== ======
Moldova Air Moldova 41.1% Wizz Air 22.2% FlyOne 11.0%
======================== ======================= ====== ==================== ====== ===================== ======
Slovakia Ryanair 43.0% Wizz Air 19.7% Travel Service Group 16.0%
======================== ======================= ====== ==================== ====== ===================== ======
Macedonia Wizz Air 63.1% Turkish Airlines 6.9% Austrian Airlines 6.4%
======================== ======================= ====== ==================== ====== ===================== ======
Bosnia and Herzegovina Wizz Air 28.1% Turkish Airlines 12.0% Austrian Airlines 8.5%
======================== ======================= ====== ==================== ====== ===================== ======
(Source data for both tables: Innovata, April 2019 - March
2020)
Operational excellence
Wizz Air operates the youngest, most fuel-efficient aircraft
among European airlines. The 2020 financial year was yet another
period of significant investment into our fleet: six A321neos
joined the fleet, taking it to 121 aircraft at the end of March
2020.
March 2020 March 2021 March 2022
Actual Planned Planned
====================================== =========== =========== ===========
A320ceo without winglets (180 seats) 35 31 19
A320ceo with winglets (180 seats) 28 28 28
A320ceo with winglets (186 seats) 9 9 9
A320neo with winglets (186 seats) 0 7 13
A321ceo with winglets (230 seats) 41 41 41
A321neo with winglets (239 seats) 8 15 40
====================================== =========== =========== ===========
Fleet size 121 131 150
====================================== =========== =========== ===========
Proportion of seats on A321 47% 49% 60%
====================================== =========== =========== ===========
Average number of seats per aircraft 201.3 203.1 210.3
====================================== =========== =========== ===========
The new neo aircraft are powered by Pratt & Whitney GTF
engines, feature the widest single-aisle cabin with 239 seats in a
single class configuration and deliver close to a 50 per cent
reduction in noise footprint compared to previous generation
aircraft. In addition, Pratt and Whitney's GTF engine reduces fuel
burn by 16 per cent and nitrogen oxide emissions by 50 per
cent.
We have also placed an order for 20 A321 XLR aircraft during the
last year, which brings our total committed aircraft order to 268
aircraft to be delivered in the next eight years. Reacting to the
current market conditions, we also plan to return 32 older leased
aircraft in the coming years.
Today, 47 per cent of the Company's total seat capacity is on
A321 family aircraft. Our ultra-efficient fleet will ensure that
the Company can fulfil its mission to continuously grow our
footprint across Central and Eastern Europe and beyond, while
remaining the ultimate cost-leader in the industry. Based on the
current order book with Airbus and the aircraft return schedule,
the fleet will more than double in size by FY 2025.
The table below shows the fleet allocation by country at 31
March 2020 compared to a year earlier:
Fleet deployment by country
=================================
Year end March 2020 March 2019 Change
====================== =========== =========== =======
Total 121 112 +9
---------------------- ----------- ----------- -------
Romania 27 26 +1
Poland 26 24 +2
Hungary 16 15 +1
United Kingdom 10 9 +1
Bulgaria 8 7 +1
Austria 7 5 +2
Macedonia 5 4 +1
Ukraine 4 4 -
Lithuania 3 3 -
Moldova 3 2 +1
Georgia 3 2 +1
Serbia 2 2 -
Bosnia & Herzegovina 2 2 -
Latvia 2 2 -
Undesignated 3 5 -2
====================== =========== =========== =======
Driving financial performance
In line with the growth in traffic and capacity, we increased
revenues by 19.1 per cent to EUR2,761.3 million and report growth
in net profit to EUR281.1 million and an underlying profit of
EUR344.8 million. We continue to focus on strengthening our model
of unbundled services and increased our ancillary revenues by 31.5
per cent. At the same time, we reduced our ex-fuel unit costs by
0.7 per cent, driven by a relentless focus on our cost base. In the
current environment, which is characterised by widespread travel
restrictions as a result of the coronavirus pandemic, our cash
balance is the single most important key performance indicator.
With our total cash balance of EUR1.5 billion, we remain one of the
strongest players in the industry and our ultra-low cost base
allows us to sustain periods of business interruptions
significantly longer than other airlines. Subsequent to the annual
close for F20, we were able to further strengthen our balance sheet
in April 2020, when we raised GBP300 million from the Bank of
England under the UK Government's COVID Corporate Financing
Facility (CCFF), which is a clear vote of confidence in our
business.
Ultra-low-cost by design
In the coming year, we will focus on returning to stabilized
operations while carefully managing the Company's robust balance
sheet amidst the coronavirus pandemic. With our ultra-low-cost
business model, we have the ability to take advantage of
opportunities which may arise as a result of competitors
withdrawing capacity.
Our customer base allows us to plan ahead with more certainty
than most of our competitors. Most of our customers belong to a
younger age group with an average age of 36 years and 65% of them
travel for work or to be reunited with friends and relatives, the
most essential reasons to fly. At the same time, we want to ensure
passengers travel safely with Wizz in this new environment and we
are therefore implementing additional health and safety measures
aimed at minimizing the risk of transmission of the coronavirus on
our flights, with an emphasis on contactless travel.
Notwithstanding this challenging environment, Wizz Air is on
track to launch its operations in Abu Dhabi, the group's first
airline established outside of Europe. The airline will initially
focus on establishing routes to markets in which Wizz Air has
existing, high growth operations in Central and Eastern and Western
Europe, to be followed in due course by routes to the Indian
subcontinent, the Middle East and Africa. Wizz Air believes that
the establishment of a truly ultra-low-cost airline can contribute
to the continued growth of Abu Dhabi as a world-class cultural and
tourist destination.
With our agile infrastructure across all functions, we can
ensure that we remain competitive and continue on our growth
trajectory as soon as markets normalize. We intend to sustainably
grow our business in a scalable way while focusing on delivering
Shareholder value in an ever-changing market environment.
Focus on our people
Our people are the core of our business and we remain committed
to foster a diverse and inclusive working environment. We are proud
to employ aviation professionals from 54 different nationalities
and deliver a superior service across our network. The dedication
and enthusiasm displayed by them on a daily basis is vital to Wizz
Air's success and ensures that our customers feel safe and
comfortable on board. Our latest Employee Feedback Survey showed
that our employees are highly engaged and that Wizz Air is their
employer of choice. The general satisfaction within the WIZZ Team
was 79 per cent, which is 19 per cent higher than the average
engagement rate measured in Europe.
We continue to deliver world-class training to our people during
2020. From technical trainings for our crew to leadership and soft
skills trainings for our office employees, we are focusing on
giving the right tools to our employees so they can own their
development and progress in their career.
During 2020 we further grew our Pilot Academy - a unique pilot
training programme, giving a whole new generation of pilots with
little to no previous aviation experience the opportunity to obtain
a Commercial Pilot's License and the prospect of working as a pilot
for Wizz Air. The programme is based on high-quality pilot
training, starting from scratch, with the support of an experienced
flight school and in line with Wizz Air's training standards. In
the last financial year, we were happy to welcome 71 new cadets
into the Pilot Academy and to celebrate the successful graduation
of another 24 cadets.
Safety and stability remain our utmost priority. We are aware of
the hardships and tragedies of life none of us can prepare for but
some have to endure. As an employer, it is important for us that
our employees feel safe and secure. That is why, during calendar
year 2019, we have introduced WIZZ Aid, an employee emergency fund.
It is designed to provide financial support to our colleagues who
need urgent medical treatment or suffer from natural or man-made
disasters. In addition, the WIZZ People Council, a community of
Wizz Air employees, enables an effective two-way communication
between the management and employees, to support the
decision-making process on matters which affect all employees
within the company.
Excellence in our management team
We are focused on managerial excellence in order to execute our
strategy and create Shareholder value. In January 2020, we
announced that, effective from 1 February 2020, Mr Jourik Hooghe
will be appointed as Executive Vice President and Group Chief
Financial Officer responsible for Wizz Air's Finance and Supply
Chain organisations. Mr Hooghe has a proven track record as a
global operating executive with 20 years of experience in strategy,
operations and finance for consumer goods and retail businesses. He
worked for eighteen years at Procter & Gamble (P&G), a
world-leading consumer goods company, where his responsibilities
covered various roles in finance. In January 2018, he joined the
Adecco Group as Senior Vice President, Group Strategy, Finance and
Accounting, where he led the evolution of the company's strategy,
step-changed the performance framework and transformed the finance
and accounting team into a high-impact, data and technology-driven
organisation.
At the same time, Mr Iain Wetherall was appointed to the newly
created Chief Investment Officer position reporting to the EVP and
Group CFO. His responsibilities extend over corporate finance,
strategic analytics and subsidiary financial governance.
Environmental and humanitarian initiatives
Wizz Air is focused on continuous fleet renewal to decrease our
CO2 emissions by one third within the next ten years. We have also
unveiled our sustainability programme Wizz Cares, which rests on
three pillars to address the environmental, the social and the
people (including diversity and inclusion) aspects of our business.
It is overseen by Wizz Air's Audit & Sustainability Committee
and will be further developed in the years to come.
We strive not only to remain the greenest choice of air travel
but also to continuously decrease our environmental footprint. We
are proud to have the lowest emission rates in the European
aviation industry, while also being conscious of the many economic,
social and environmental developments impacting our
communities.
Therefore, we have a number of initiatives which address these,
such as 65 different fuel saving initiatives. In the past year, we
started reporting our monthly CO2 emissions in order to increase
transparency for our stakeholders.
Since the breakout of the coronavirus, we are making use of our
aircraft assets in a different way to serve our communities.
Starting in March 2020, we have operated over 130 repatriation and
cargo flights and transported several tons of protective equipment
for local hospitals and healthcare workers.
Focus on digital and offering our customers more
We see digital advancements as a key catalyst to fulfilling our
mission of liberating lives through affordable travel and a key
driver of our ultra-low-cost-carrier (ULCC) business model. Wizz
Air is continuously working on defining exceptional services and
value-added products which accompany the customer along their
entire journey, all the while remaining a truly digital business.
This is equally true for our internal processes and systems which
are designed to drive automation and efficiency.
In the past year, the Company focused on the following
areas:
-- Mobile-first strategy: Today, wizzair.com is Europe's fourth
most visited airline website with 194 million sessions in F20. Our
mobile application saw an increase in traffic by 40 per cent
year-on-year following a full redesign of the booking flow for
mobile website view and the mobile app, based on customer research
in order to make the process even more intuitive. Furthermore,
improvements in Wizz Air's digitally enabled customer self-service,
including the introduction of a credit card scanning functionality
which allows mobile app customers to enjoy a seamless booking
experience have reduced calls into the company's call centres by 27
per cent.
-- Self-service and automation: We introduced a hassle-free auto
check-in product that gives comfort to the customer of
automatically receiving their boarding card before the flight. We
also implemented a Flight Share functionality on the WIZZ
Application that supports fast journey-share with family and
friends. Furthermore, the extension of self-service possibilities
for customers allows a faster and more flexible resolution:
customers are now able to divide and then manage their bookings per
passenger and smooth rebook/refund self-service options were
introduced on the website and on the mobile app.
-- Travel experience: We introduced an enhanced product
recommendation as part of the personalization strategy of our
product portfolio. In addition, automated and frequent mobile app
push notifications are sent about flight related information to
passengers and an Internal Flight Status Tracker was introduced to
synchronize information for passengers on various communication
channels about their flight status. We are also working on
improving the physical customer journey experience: self-bag-drop
at the check-in area was introduced at 10+ stations and the WIZZ
Priority product experience was improved at airports via updated
information screens at airports and training materials for ground
handling agents, among other things.
We are also focusing on simplifying our processes, eliminating
waste and relentlessly automating core processes to maximize
productivity for our employees. Rethinking processes with new,
digitally enabled ways of working has allowed Wizz Air to digitize
many core processes such as recruitment, slots management, aircraft
type changes and customer claims management. Enterprise platforms
and digital tools have been introduced which have increased
employee productivity by up to 80 per cent in key domains. In
addition, cyber security and cloud-first initiatives are ensuring
the airline is secure, scalable and reliable from a technology
perspective. As we embark on the next financial year, we are seeing
unprecedented challenges within the industry and are looking for
further digital opportunities to support our customers. Wizz Air
will continue to improve its digital communications to help advise
our customers on how to stay safe as they return to flying.
Building on its strong foundation, the company will accelerate
automation initiatives to ensure it remains the industry's
ultra-low-cost leader and to be able to scale smoothly with market
fluctuation in demand. We will further leverage advanced analytics
for improved decision making in this dynamic environment and
generate a deeper understanding of our changing marketplace. As we
continue our remarkable growth story, we are committed to becoming
the most digital ULCC in the industry in order to better serve the
evolving expectations of our customers and people.
Especially in these uncertain times, Wizz Air is committed to
serving its 40 million passengers in a way that builds trust while
maintaining our low-cost leadership. The only way to achieve these
goals is by leveraging technology to the fullest. Management of the
large number of flight cancellations triggered by COVID-19 led to
automation and self-service improvements, including self-service
options for rebooking/refund of cancelled flight tickets, which
have been simplified to encourage customer self-servicing.
Outlook
The beginning of the new financial year brought significant
challenges for the entire airline industry: the coronavirus
pandemic led to widespread travel restrictions across Europe and,
as a result, brought air travel largely to a halt. Our decisions
and actions during these unprecedented times are guided by our
commitment to preserve a lean and agile organisation that has a
history of outperforming the market. As such, we are focused on
maintaining our strong balance sheet, protecting our cash balance
and increasing capacity as soon as possible. Our strong liquidity
position means that we are able to sustain the business throughout
this crisis and take advantage of market opportunities as they
arise:
-- Wizz Air's balance sheet is one of the strongest in the
industry with EUR1.5 billion of total cash at the end of March
2020.
-- Further liquidity has been secured by raising GBP300 million
under the UK Government's COVID Corporate Financing Facility (CCFF)
in April 2020.
-- Immediate cost mitigation measures put in place include the
reduction in third-party spending, overhead and discretionary
spending as well as non-essential capital expenditure.
-- We reduced the number of employees by 19 per cent in the
short term, in order to adjust the size of the company to the
current circumstances. However, longer term it is expected that the
workforce will be increased as the industry recovers and Wizz Air
resumes its growth trajectory.
We are able to scale up operations quickly thanks to our agile
setup:
-- We can stimulate traffic with low fares due to our ultra-low-cost base.
-- The majority of our passengers belong to a younger
demographic that travels abroad regularly for work and to visit
friends and relatives, which are more sustainable sources of
traffic than tourism.
-- We are reviewing our aircraft allocation and will react to
the new market reality by taking advantage of opportunities across
Europe as other carriers withdraw capacity.
Despite difficult conditions, we expect to grow the number of
seats by roughly 9 per cent compared to 2020, in line with the
growth of the fleet to 131 aircraft by March 2021. While we do not
expect a positive development in terms of ASKs and profit margin in
the fiscal year 2021, we are not in a position to give guidance on
net profit at this point due to the continued uncertainty regarding
the duration and impact of the coronavirus pandemic. Company
performance in 2021 is largely dependent on the level of flying
permitted throughout the summer period, as well as the revenue
performance in the second half of the 2021 fiscal year, a period
for which the Company, like most airlines, currently has limited
visibility.
Nevertheless, we remain confident that Wizz Air will emerge from
this crisis as an even more formidable company. Our agility has
been clearly demonstrated over the past months, as we have been
actively involved in humanitarian missions and operated in
geographies outside our markets. Since the breakout of the
coronavirus Wizz Air has worked with various governments to offer
repatriation flights for their citizens in Europe, Central Asia,
North Africa and North America. The Company has also operated a
number of flights between China and CEE to deliver medical
supplies.
Our fundamental principles remain unchanged and we look towards
the future with a firm plan to continue to drive Shareholder value.
Wizz Air undoubtedly remains best placed for long-term value
creation in the European aviation industry due to its low fare -
low cost business model and unique positioning in the growing CEE
market. As a result, we are expecting to deliver significant
Shareholder value, environmental benefits and employment
opportunities in the years to come.
Financial Review
Wizz Air carried 40 million passengers during the financial year
2020, which represents an increase of 15.8 per cent compared to the
previous year. The company grew revenues by 19.1 per cent to
EUR2,761.3 million compared to the previous year. Both figures were
negatively impacted by the drop in capacity in March, as a result
of the outbreak of the coronavirus pandemic. Notwithstanding this
challenge, Wizz Air remained one of the most profitable airlines in
Europe and grew capacity measured in terms of available seat
kilometres (ASK) by 16.1 per cent and in terms of seats by 14.8 per
cent.
At the same time Wizz Air reported a net profit of EUR281.1
million and an underlying net profit of EUR344.8 million (compared
to EUR265.4 million underlying net profit in 2019, as restated
under IFRS 16). As a result of the impact of COVID-19, the capacity
to be operated in the first part of financial year 2021 will be
significantly lower than that on which the hedging programme was
based and hence certain hedging instruments no longer correspond to
future purchases of jet fuel. As such, hedge accounting for these
derivatives has been discontinued. They have been classified as
'discontinued hedges' and have been charged to the income statement
as an exceptional operating cost. In our underlying numbers for
2020 we have excluded the impact of fuel hedge losses classified as
discontinued (worth EUR63.7 million) relating to March, April and
May 2020, whereas the underlying profit number does include the
effective hedge loss in March of EUR12.8 million which was the
result of the sharp drop in jet fuel prices behind unprecedented
demand and supply shocks. Underlying profit is defined in Note
7.
The Group achieved an increase in unit revenues measured in
terms of ASKs, which rose by 2.6 per cent to 3.95 Euro cents, while
unit costs grew by 1.1 per cent to 3.44 Euro cents in 2020 from
3.40 Euro cents in 2019. This increase in CASK was principally
driven by an increase of 4.8 per cent in fuel CASK (excluding the
exceptional item in 2020). CASK excluding fuel expenses decreased
by 0.7 per cent to 2.27 Euro cents in 2020 from 2.29 Euro cents in
2019.
Net underlying profit margin was 12.5 per cent in 2020, compared
to 11.4 per cent in 2019, 2020 having been impacted by the loss of
revenue due to the coronavirus pandemic.
Wizz Air continued to make investments during the financial
year, which drive efficiencies and lower costs to enable long-term
growth. Significant milestones include:
-- The delivery of six Airbus A321neo aircraft, which will
further strengthen Wizz Air's position as Europe's ultimate cost
leader.
-- The announcement of the establishment of Wizz Air Abu Dhabi
in partnership with Abu Dhabi Developmental Holding Company PJSC
(ADQ), to start in the second half of 2020.
-- The order of 20 Airbus A321 XLR aircraft, which will enhance
Wizz Air's future growth plans.
The macro variables with significant influence on the financial
performance of the Group developed during the year as follows:
2020 2019 Change
========================================== ===== ===== =======
Average jet fuel price ($/metric ton,
including into plane premium and impact
of effective hedges) 729 724 0.7%
Average USD/EUR rate (including impact
of effective hedges) 1.16 1.18 (1.7%)
Year-end USD/EUR rate 1.10 1.12 (1.8%)
========================================== ===== ===== =======
Financial overview
Summary statement of comprehensive income
EUR million 2019
Continuing operation 2020 (restated) Change in results
--------------------------------------------------------------- --------- ----------- -----------------
Total revenue 2,761.3 2,319.1 1 9.1 %
--------------------------------------------------------------- --------- ----------- -----------------
Fuel costs (including exceptional expense in 2020) (876.5) (667.9) 3 1.2 %
Operating expenses excluding fuel (1,546.5) (1,29 3 .3) 1 9.6 %
--------------------------------------------------------------- --------- ----------- -----------------
Total operating expenses (2,423.0) (1,961.2) 23.5%
--------------------------------------------------------------- --------- ----------- -----------------
Operating profit
Comprising:
* Operating profit excluding exceptional expense 338.3 357.9
(5.5%)
402.0 357.9
* Exceptional expense (63.7) - 12.3%
--------------------------------------------------------------- --------- ----------- -----------------
Operating profit margin (excluding exceptional expense) 14.6% 15.4%
Net financing expense (including exceptional expense in 2019) (44.2) (229.0)
Profit before income tax 294.1 128.9 128.2%
Income tax expense (13.1) (2.2)
--------------------------------------------------------------- --------- ----------- -----------------
Profit from continuing operations 281.1 126.7 121.9%
Loss from discontinued operation - (3.7)
=============================================================== ========= =========== =================
Profit for the year 281.1 123.0 128.5%
--------------------------------------------------------------- --------- ----------- -----------------
Underlying profit after tax 344.8 265.4 29.9%
=============================================================== ========= =========== =================
Profit for the
Adjusted performance measures (Note 7) year
====================
2019
EUR million 2020 (restated) Change
=================================================== ====== ============
Statutory (IFRS) profit for continuing operations 281.1 126.7
--------------------------------------------------- ------ ------------
Adjustment for exceptional items (Note 7):
Loss from fuel hedges classified as discontinued 63.7 -
FX loss from the retrospective application
of IFRS 16 - 138.7
=================================================== ====== ============
Total exceptional adjustments 63.7 138.7
=================================================== ====== ============
Underlying profit 344.8 265.4 29.9%
Underlying profit margin 12.5% 11.4% 1.1 ppts
=================================================== ====== ============ =========
Earnings per share
2019
Earnings per share, EUR (Note 9) 2020 (restated) Change
============================================ ====== ============ ========
Basic earnings per share from continuing
operation 3.76 1.74 116.1%
Diluted earnings per share from continuing
operation 2.22 1.01 119.8%
Basic earnings per share 3.76 1.69 122.5%
Diluted earnings per share 2.22 0.98 126.3%
Underlying earnings per share* 2.72 2.10 29.6%
-------------------------------------------- ------ ------------ --------
* Excluding the impact of exceptional items, as explained in Note 7.
Return on capital employed and capital structure
Return on capital employed (ROCE)* is a non-statutory
performance measure commonly used to measure the financial returns
that a business achieves on the capital it uses. ROCE for the 2020
financial year was 20.8% per cent, being a small decline compared
to the 21.5% rate for the previous year.
The Company's leverage* was 0.9 at the end of the 2020 financial
year, which is broadly flat compared to 2019.
Liquidity* declined from 56.7 per cent at the end of the 2019
financial year to 47.5 per cent a year later.
2019
2020 (restated) Change
============ ====== ============ ===========
ROCE* 20.8% 21.5% (0.7 ppts)
Leverage* 0.9 0.8 0.1 ppt
Liquidity* 47.5% 56.7% (9.2ppts)
============ ====== ============ ===========
* See the definition of these non-statutory measures and their
calculation under Key statistics on page 16.
Financial performance
Revenue
The following table sets out an overview of Wizz Air's revenue
items for 2020 and 2019 and the percentage change in those
items:
2020 2019
======================= ============================
Total Percentage Percentage
(EUR of total Total of total Percentage
million) revenue (EUR million) revenue change
========================== ========== =========== =============== =========== ===========
Passenger ticket revenue 1,508.5 54.6% 1,366.1 58.9% 10.4%
Ancillary revenue 1,252.8 45.4% 953.0 41.1% 31.5%
========================== ========== =========== =============== =========== ===========
Total revenue 2,761.3 100% 2,319.1 100% 19.1%
========================== ========== =========== =============== =========== ===========
Passenger ticket revenue increased by 10.4 per cent to
EUR1,508.5 million, primarily driven by 15.8 per cent higher
passenger numbers. The change in Wizz Air's cabin bag policy led to
higher ancillary revenues but partly cannibalised passenger ticket
revenues. Ticket revenues were also negatively influenced towards
the end of the fiscal year by the outbreak of the coronavirus
pandemic. Conversely, ancillary (or "non-ticket") revenue grew
strongly by 31.5 per cent to EUR1,252.8 million. Its share of the
total revenue increased to 45.4 per cent as a result of the change
in the company's cabin bag policy, as well as higher penetration
across all products.
Average revenue per passenger rose to EUR69.0 in 2020 from
EUR67.1 in 2019, representing an increase of 2.8 per cent. Average
ticket revenue per passenger decreased from EUR39.5 in 2019 to
EUR37.7 in 2020 (by 4.6 per cent), while average ancillary revenue
per passenger increased to EUR31.3 from EUR27.6 (by 13.5 per cent).
The increase in ancillary revenue per passenger was due to the
impact of the company's change of its cabin bag policy, as well as
due to higher customer penetration of existing products such as
allocated seating and priority boarding.
Operating expenses
Total operating expenses excluding exceptional expense increased
by 20.3 per cent to EUR2,359.3 million in 2020 from EUR1,961.2
million in 2019, in line with the capacity increase. CASK grew by
1.1 per cent to 3.44 Euro cents in 2020 from 3.40 Euro cents in
2019. The main driver of this was an increase in the average fuel
price.
CASK excluding fuel expenses decreased by 0.7 per cent to 2.27
Euro cents in 2020 from 2.29 Euro cents in 2019.
The following table sets out for 2020 and 2019 the expenses
relevant for the CASK measure (thus excluding exceptional expense),
and the percentage changes in those expenses:
2020 2019 (restated)
Percentage Percentage
of total of total Percentage
Total operating Unit Cost Total operating Unit Cost change of
(EUR million) expenses (EURcts/ASK) (EUR million) expenses (EURcts/ASK) total cost
======================== ============== =========== ============= ============== =========== ============= ===========
Staff costs 231.8 9.8% 0.33 198.6 10.1% 0.33 16.7%
Fuel costs (excluding
exceptional expense) 812.8 34.5% 1.16 667.9 34.1% 1.11 21.7%
Distribution and
marketing 44.1 1.9% 0.06 37.8 1.9% 0.06 16.7%
Maintenance, materials
and repairs 176.4 7.5% 0.25 134.1 6.8% 0.22 31.5%
Airport, handling and
en-route charges 641.6 27.2% 0.92 550.3 28.1% 0.91 16.6%
Depreciation and
amortisation 381.4 16.2% 0.55 334.5 17.1% 0.55 14.0%
Net other expenses 71.2 3.0% 0.10 37.9 1.9% 0.06 87.9%
======================== ============== =========== ============= ============== =========== ============= ===========
Total operating
expenses (excluding
exceptional expense) 2,359.3 100% 3.37 1,961.2 100% 3.25 20.3%
======================== ============== =========== ============= ============== =========== ============= ===========
Net cost from financial
income and expense 44.2 0.06 87.4 0.14 (49.4%)
======================== ============== =========== ============= ============== =========== ============= ===========
Total 2,403.5 3.44 2,048.6 3.40 17.3%
======================== ============== =========== ============= ============== =========== ============= ===========
Staff costs increased by 16.7 per cent to EUR231.8 million in
2020, up from EUR198.6 million in 2019, driven primarily by a 14.1
per cent rise in aircraft block hours.
Fuel expenses (excluding exceptional expense) increased by 21.7
per cent to EUR812.8 million in 2020, up from EUR667.9 million in
2019. The main driver for this increase was an ASK growth of 16.1
per cent as well as rising average fuel prices and a stronger US
Dollar. The average fuel price, including hedging impact and
into-plane premium, paid by Wizz Air in 2020 was US$729 per ton, an
increase of 0.7 per cent from the previous year's figure of US$724
per ton. The average euro / US dollar exchange rate, including the
impact of hedging, was 1.16 in 2020 compared to a rate of 1.18 in
2019. The impact of effective fuel hedges was EUR31.8 million loss
in 2020 (compared to EUR43.5 million gain in 2019). In addition,
fuel expenses in 2020 included an exceptional expense of EUR63.7
million which is excluded from this analysis (see Note 7 for more
details).
The increase in distribution and marketing costs of 16.7 per
cent to EUR44.1 million in 2020 from EUR37.8 million in 2019 is in
line with FY 2020 ASK growth of 16.1 per cent
Maintenance, materials and repair costs rose by 31.5 per cent to
EUR176.4 million in 2020 from EUR134.1 million in 2019. This cost
increase was the result of the increased numbers of hours flown and
the timing of certain maintenance events.
Airport, handling and en-route charges increased by 16.6 per
cent to EUR641.6 million in 2020 from EUR550.3 million in 2019.
This increase is primarily driven by the increase in both flights
and passenger numbers, which grew by 12.7 per cent and 15.8 per
cent respectively.
Depreciation and amortisation charges increased by 14.0 per cent
to EUR381.4 million in 2020, up from EUR334.5 million in 2019.
Net other expenses include primarily (i) office overhead and
crew related costs other than direct staff costs, (ii) passenger
welfare and compensation costs, (iii) aviation and other insurance
costs, and (iv) credits that do not classify as revenue from
customers. The increase in net other expenses to EUR71.2 million
was primarily driven by more significant credit items in 2019, when
compared to 2020, relating to various aircraft asset sale and
leaseback transactions and certain supplier contract
negotiations.
Net financing income and expense
The Group's net financing loss was EUR44.2 million in 2020 after
a loss of EUR229.0 million in 2019. This aggregate change was
driven by improvements both in financial income and expenses and in
foreign exchange impacts, as shown in the table below:
2019
EUR million 2020 (restated) Change
Net financial expense (44.2) (87.4) 43.1
Net foreign exchange loss 0.1 (3.0) 3.1
=============================== ======= ============ ========
Exceptional financial expense - (138.7) 138.7
=============================== ======= ============ ========
Net financing expense (44.2) (229.0) 184.9
=============================== ======= ============ ========
See also Note 6.
Net financial expense decreased significantly because of the
higher interest income earned by the Group after converting its
bank deposits from Euro to US Dollar on 1 April 2019.
In the 2019 financial year (as restated) the Group had
exceptional financial expense of EUR138.7 million relating to net
foreign exchange losses calculated and recognised retrospectively
as part of the IFRS 16 restatement of the Group's financial
statements. These unrealised losses were caused by the significant
appreciation of the US Dollar to the Euro during the 2019 financial
year. The same impact was immaterial in 2020 as the Group,
following adoption of IFRS 16, actively managed this FX
exposure.
Taxation
The Group recorded an income tax expense of EUR13.1 million in
2020 compared to EUR2.2 million in 2019. The effective tax rate for
the Group in 2020 was 4.4 per cent compared to 1.7 per cent in
2019. The tax charge in 2019 was exceptionally low because, in
relation to Swiss income tax, it included both a decrease in
deferred tax liabilities and an adjustment to the current tax of
prior periods, which were one-off in nature. The main components of
the tax charge are local business tax and innovation tax paid in
Hungary, and corporate income tax paid in Switzerland and in the
United Kingdom.
Profit for the year
The Group generated an underlying net profit for 2020 of
EUR344.8 million, a 29.9 per cent increase from the underlying net
profit of EUR265.4 million in 2019.
Other comprehensive income and expenses
In 2020 the Group had other comprehensive expense of EUR254.5
million compared to EUR5.7 million in 2019. This change was driven
primarily by the movements in the fair value of open hedge
instruments, as reflected in the balance of the cash flow hedging
reserve in equity. The significant expense in the 2020 hedge
reserve relates to fuel hedges for the 2021-2022 financial years
that are in a loss position due to the sharp decline in fuel
prices. It excludes the open fuel hedges that were classified as
discontinued at 31 March 2020 and were therefore recognised as
exceptional expense already in the 2020 financial year.
Cash flows and financial position
Summary statement of cash flows
The following table sets out selected cash flow data and the
Group's cash and cash equivalents for 2020 and 2019:
2019
EUR million 2020 (restated) Change
============================================ ======== ============ ===============
Net cash generated by operating activities 771.9 742.7 29.3
(682.4
Net cash used in investing activities ) (64.0) (618.4)
(93.6
Net cash used in financing activities ) (342.1) (248.5)
Effect of exchange rate fluctuations
on cash and cash equivalents (1.4) (0.1) (1.3)
============================================ ======== ============ ===============
Cash and cash equivalents at the end
of the year 1,310.5 1,316.0 (5.5)
============================================ ======== ============ ===============
Cash flow from operating activities
The majority of Wizz Air's cash inflows from operating
activities are derived from passenger ticket sales. Net cash flows
from operating activities are also affected by movements in working
capital items.
Operating cash flows increased from EUR742.7 million in 2019 to
EUR771.9 million in 2020 primarily due to the following
factors:
-- Operating cash flows before adjusting for changes in working
capital improved by EUR107.2 million year-on-year. This was driven
primarily by the improved underlying profitability of the business
(see earlier).
-- The positive contribution of working capital changes to
operating cash flows was only EUR3.5 million in 2020, compared to
EUR83.0 million in 2019, being a reduction of EUR79.5 million
year-on-year. The main driver behind this reduction was the sharp
decline in sales due to the coronavirus in the last period of the
2020 financial year. In contrast with 2019, when forward bookings
from the growing business supported cash flows by EUR103.1 million,
the same impact was EUR220.8 million negative on the 2020 cash
flows. This significant negative impact was partly offset by two
factors: (i) a decrease in receivables - both receivables from
customers and from lessors were lower, the latter due to
significant refunds of maintenance reserves; and (ii) an increase
in payables towards passengers, due primarily to the fact that many
of the tickets cancelled shortly before the 2020 year-end were not
refunded until after 31 March.
Cash flow from investing activities
Net cash used in investing activities increased to EUR682.4
million in 2020 from EUR64.0 million in 2019. The significantly
higher investment in 2020 is due to the following factors:
-- Advances paid for aircraft (pre-delivery payments, 'PDPs'):
The net PDP payments to Airbus net of refunds received were an
outflow of EUR298.2 million in 2020 compared to a net inflow of
EUR71.3 million in 2019. This increase was primarily driven by the
Company's delivery schedule and associated PDP commitments with
Airbus.
-- Purchase of tangibles and intangibles, net of proceeds from
the sale of tangible assets: The net outflow was EUR273.5 million
in 2020 compared to only EUR4.5 million in 2019. The key driver of
this significant increase in 2020 is the purchase of several new
aircraft (see Note 10), that were then refinanced through JOLCO
lease contracts (see below under financing activities). There were
no similar aircraft purchases in 2019.
Cash flow from financing activities
Net cash used in financing activities decreased by EUR248.5
million year on year resulting from a EUR93.6 million outflow in
2020 and a EUR342.1 million outflow in 2019 (the latter as restated
under IFRS 16). The significantly lower investment in 2020 was the
net of the following two factors:
-- Proceeds from new loan: This was nil in 2019 and EUR297.7
million inflow in 2020, relating to the JOLCO financing raised on
several new aircraft.
-- Repayment of loans plus interest paid on loans: The cash
outflow from these items was EUR392.8 million in 2020, which is
EUR50.7 million higher than in 2019. These were primarily related
to aircraft and spare engine leasing fees paid, presented in this
new form under IFRS 16.
Summary statement of balance sheet
The following table sets out summary statements of financial
position of the Group for 2020 and 2019:
2019
EUR million 2020 (restated) Change
====================================== ======== ============ ========
ASSETS
Property, plant and equipment 2,553.0 2,067.0 486.0
Restricted cash* 185.9 188.9 (3.1)
Derivative financial instruments* 18.2 31.5 (13.2)
Trade and other receivables* 189.7 285.9 (96.2)
Cash and cash equivalents 1,310.5 1,316.0 (5.5)
Other assets* 101.0 55.2 45.8
====================================== ======== ============ ========
Total assets 4,358.1 3,944.4 413.7
====================================== ======== ============ ========
EQUITY AND LIABILITIES
Equity
Equity 1,234.8 1,206.1 28.7
Liabilities
Trade and other payables 469.6 320.4 149.2
Borrowings (incl. convertible debt)* 2,039.4 1,841.3 198.1
Deferred income* 185.4 408.7 (223.3)
Derivative financial instruments* 307.8 18.8 289.0
Provisions* 121.1 149.2 (28.1)
Total liabilities 3,123.3 2,738.4 384.9
====================================== ======== ============ ========
Total equity and liabilities 4,358.1 3,944.4 413.7
====================================== ======== ============ ========
* Including both current and non-current asset and liability
balances, respectively.
Property, plant and equipment increased by EUR486.0 million as
at 31 March 2020 compared to 31 March 2019, primarily driven by the
investment made in JOLCO-financed aircraft, the increased PDP
balance with Airbus less the decrease in the balance of
right-of-use assets (see also Note 10).
Restricted cash (current and non-current) decreased by EUR3.1
million as at 31 March 2020 compared to the year before. The great
majority (95%) of this balance is linked to Wizz Air's aircraft
lease contracts, being cash deposits behind letters of credit
issued by Wizz Air's banks related primarily to lease security
deposits and maintenance reserves.
Derivative financial assets (current and non-current) decreased
by EUR13.2 million as at 31 March 2020 compared to 31 March 2019
(see also Notes 2 and 11). In 2020 these hedge receivable balances
all related to FX hedge instruments.
Trade and other receivables (current and non-current) decreased
by EUR96.2 million as at 31 March 2020 compared to 31 March 2019.
The reduction was caused mainly by lower receivables from customers
(due to decline in sales during March 2020) and by lower
maintenance reserve receivables (due to refunds received from
lessors during 2020 following the completion of maintenance
events).
Cash and cash equivalents remained largely unchanged over the
year and amounted to EUR1,310.5 million at 31 March 2020.
Trade and other payables increased by EUR149.2 million as at 31
March 2020 compared to 31 March 2019. The increase was driven
primarily by the EUR132.0 liability recognised towards passengers
in 2020 as many of the tickets cancelled shortly before the 2020
year-end were not refunded until after 31 March (2019: nil).
Borrowings (including convertible debt) increased by EUR198.1
million as at 31 March 2020 compared to 31 March 2019. The increase
was driven primarily by the EUR291.4 million debt recognised at 31
March 2020 in relation to JOLCO lease contracts (see Note 12).
Deferred income (current and non-current) decreased by EUR223.3
million as at 31 March 2020 compared to 31 March 2019 (see Note
13). This was driven by the cancellation of F21 flights (primarily
for April and May 2020) and by weaker sales for the summer towards
the end of the fiscal year, both due to the coronavirus
pandemic.
Derivative financial liabilities (current and non-current)
increased by EUR289.0 million as at 31 March 2020 compared to 31
March 2019 (see Notes 2 and 11). The EUR307.8 million liability at
31 March 2020 was all related to fuel hedges. (See also Note 17 on
further hedge losses to crystallise in FY21.)
Provisions (current and non-current) decreased by EUR28.1
million as at 31 March 2020 compared to 31 March 2019 (see Note
14). The reduction is due mainly to the utilisation of some
maintenance provisions in 2020 as the respective maintenance events
were performed during the year.
Hedging strategy
Wizz Air operates under a clear set of treasury policies
approved by the Board and supervised by the Audit Committee. The
aim of our hedging policy has been to reduce short-term volatility
in earnings and liquidity. Wizz Air hedges a minimum of 50 per cent
of the projected US Dollar and jet fuel requirements for the next
twelve months (40 per cent on an 18-month hedge horizon). However,
as a result of uncertainties caused by the coronavirus outbreak,
with effect from 24(th) April, the Company stopped hedging for the
net US Dollar liability position driven by the IFRS 16 lease
liability.
Details of the current hedging positions (as at 27 May 2020) are
set out below:
Foreign exchange (FX) hedge coverage of Euro/US Dollar
F21 F22
Period covered 10 months 8 months
=============================== ========== =========
Exposure (million) $277 $319
Hedge coverage (million) $216 $100
Hedge coverage for the period 78% 31%
=============================== ========== =========
Weighted average ceiling $1.1628 $1.1447
Weighted average floor $1.1243 $1.1003
=============================== ========== =========
Fuel hedge coverage
F21 F22
Period covered 10 months 6 months
================================ ========== =========
Exposure in metric tons ('000) 821 895
Coverage in metric tons ('000) 891 370
Hedge coverage for the period 108% 49%
================================ ========== =========
Blended capped rate $628 $554
Blended floor rate $572 $503
================================ ========== =========
Adoption of IFRS 16
The Group adopted IFRS 16 from 1 April 2019. This change had
significant impact on the financial statements of the Group. The
Group applied the full retrospective method of transition and has
restated the FY 2019 financial statements in this results release.
The details and the impacts of this change are explained in Note 1
and Note 4, respectively.
KEY STATISTICS
2020 2019 Change*
============================================ =========== =========== ========
CAPACITY
Number of aircraft at end of period 121 112 8.0%
Equivalent aircraft 117.4 103.0 13.9%
Utilisation (block hours per aircraft
per day) 12.02 12.03 0.1%
Total block hours 516,478 452,550 14.1%
Total flight hours 452,043 394,993 14.4%
Revenue departures 214,207 190,017 12.7%
Average departures per day per aircraft 4.98 5.05 (1.3%)
Seat capacity 42,788,903 37,266,876 14.8%
Average aircraft stage length (km) 1,635 1,618 1.1%
Total ASKs ('000 km) 69,972,524 60,283,961 16.1%
============================================ =========== =========== ========
OPERATING DATA
RPKs (revenue passenger kilometre) ('000
km) 65,680,231 55,993,952 17.3%
Load factor (%) 93.6% 92.8% 0.9ppt
Number of passenger segments 40,027,914 34,566,688 15.8%
Fuel price (US$ per ton, including hedging
impact and into-plane premium) 729 724 0.7%
Foreign exchange rate (US$/EUR including
hedging impact) 1.16 1.18 (1.7%)
============================================ =========== =========== ========
FINANCIAL MEASURES (for the Airline
only)
Yield (revenue per RPK, EUR cents) 4.20 4.14 1.5%
Average revenue per seat (EUR) 64.5 62.2 3.7%
Average revenue per passenger (EUR) 69.0 67.1 2.8%
RASK (EUR cents) 3.95 3.85 2.6%
CASK (EUR cents)** 3.44 3.40 1.1%
Ex-fuel CASK (EUR cents)** 2.27 2.29 (0.7%)
-------------------------------------------- ----------- ----------- --------
* Percentage changes in this table are calculated by division of
the two years' KPIs also when the KPIs are expressed in
percentage.
** CASK measures for 2019 have been restated (see Note 4).
Glossary of technical terms
Available seat kilometres (ASK): available seat kilometres, the
number of seats available for scheduled passengers multiplied by
the number of kilometres those seats were flown.
Block hours: each hour from the moment an aircraft's brakes are
released at the departure airport's parking place for the purpose
of starting a flight until the moment the aircraft's brakes are
applied at the arrival airport's parking place.
CASK: cost per ASK, where cost is defined as operating expenses
and financial expenses net of financial income, excluding
exceptional items.
Ex-fuel CASK: cost per ASK, where cost is defined as operating
expenses and financial expenses net of fuel expenses and financial
income, excluding exceptional items.
The definition of 'cost' applied in the CASK measures until the
2019 financial year was based only on operating expenses. Financial
income and expenses are now incorporated into the definition of
cost because following the adoption of IFRS 16 this results in a
more appropriate measure of cost development for the company. The
CASK measures for the prior period shown in this report were
restated to the current definition.
Equivalent aircraft: the number of aircraft available to Wizz
Air in a particular period, reduced on a per aircraft basis to
reflect any proportion of the relevant period that an aircraft has
been unavailable.
Flight hours: each hour from the moment the aircraft takes off
from the runway for the purposes of flight until the moment the
aircraft lands at the runway of the arrival airport.
JOLCO (Japanese Tax Lease) and French Tax Lease: special forms
of structured asset financing, involving local tax benefit for
Japanese and French investors, respectively.
Load factor: the number of seats sold divided by the number of
seats available.
PDP: the pre-delivery payments under the Group's aircraft
purchase arrangements.
Revenue passenger kilometres (RPK): revenue passenger
kilometres, the number of seat kilometres flown by passengers who
paid for their tickets.
RASK: total revenue divided by ASK.
Underlying net profit (from continuing operation): profit after
tax for the year as per IFRS excluding the impact of exceptional
items.
Utilisation: the total block hours for a period divided by the
total number of aircraft in the fleet during the period and the
number of days in the relevant period.
Yield: the total revenue per RPK.
Cash and cash equivalents comprise bank balances on current
accounts and on deposit accounts that are readily convertible into
cash without there being significant risk of a change in value to
the Group. Some of these deposits mature within 3-12 months of
inception, the balance of which was EUR282.4 million (in original
currency: $310 million) at 31 March 2020. Cash and cash equivalents
do not include restricted cash.
Total cash comprises cash and cash equivalents and restricted
cash.
Definition and reconciliation of non-statutory financial
performance measures
Return on capital employed (ROCE) is operating profit after tax
(excluding exceptional items) divided by average capital employed,
expressed as a percentage.
Average capital employed is the sum of annual average equity and
interest-bearing borrowings (including convertible debt), less
annual average cash and cash equivalents.
2019
EUR million 2020 (restated)
============================================================ ========== ============
Operating profit (excluding exceptional expense) 402.0 357.9
Effective tax rate for the year 4.4% 1.7%
============================================================ ========== ============
Operating profit after tax (excluding exceptional expense) 384.1 351.8
------------------------------------------------------------ ---------- ------------
Average shareholders' equity 1,220.5 1,147.5
Average borrowings 1,940.4 1,635.0
Average cash and cash equivalents (1,313.3) (1,147.8)
------------------------------------------------------------ ---------- ------------
Average capital employed 1,847.6 1,634.7
------------------------------------------------------------ ---------- ------------
ROCE (%) 20.8% 21.5%
============================================================ ========== ============
Leverage: net debt divided by EBITDA (excluding exceptional
items).
Net debt is interest bearing borrowings (including convertible
debt) less cash and cash equivalents.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) is profit (or loss) before net financing costs (or gain),
income tax expense (or credit), depreciation, amortisation and
exceptional items.
2019
EUR million 2020 (restated)
================================================== ========== =============
Operating profit (excluding exceptional expense) 402.0 357.9
Depreciation and amortization 381.4 334.5
EBITDA (excluding exceptional expense) 783.4 692.4
-------------------------------------------------- ---------- -------------
Borrowings 2,039.4 1,841.3
Cash and cash equivalents (1,310.5) (1,316.0)
-------------------------------------------------- ---------- -------------
Net debt 728.9 525.3
-------------------------------------------------- ---------- -------------
Leverage 0.9 0.8
================================================== ========== =============
Liquidity is cash and cash equivalents divided by last twelve
months' revenue, expressed as a percentage.
EUR million 2020 2019
=========================== ======== ========
Cash and cash equivalents 1,310.5 1,316.0
Revenue 2,761.3 2,319.1
--------------------------- -------- --------
Liquidity 47.5% 56.7%
--------------------------- -------- --------
Consolidated statement of comprehensive income (UNAUDITED)
FOR THE YEARED 31 MARCH 2020
2019
2020 (restated*)
Continuing operations Note EUR million EUR million
=========================================================== ===== =========== ===========
Passenger ticket revenue 5 1,508.5 1,366.1
Ancillary revenue 5 1,252.8 953.0
============================================================ ==== =========== ===========
Total revenue 5 2,761.3 2,319.1
============================================================ ==== =========== ===========
Staff costs (231.8) (198.6)
Fuel costs (876.5) (667.9)
Distribution and marketing (44.1) (37.8)
Maintenance materials and repairs (176.4) (134.1)
Airport, handling and en-route charges (641.6) (550.3)
Depreciation and amortisation (381.4) (334.5)
Net other expenses (71.2) (37.9)
============================================================ ==== =========== ===========
Total operating expenses (2,423.0) (1,961.2)
------------------------------------------------------------ ---- ----------- -----------
Operating profit 338.3 357.9
Comprising:
* Operating profit excluding exceptional expense
402.0 357.9
* Exceptional expense 7 (63.7) -
------------------------------------------------------------ ---- ----------- -----------
Financial income 6 47.3 6.2
Financial expenses 6 (91.5) (93.5)
Net foreign exchange gain/(loss) 6 0.1 (3.0)
Exceptional financial expense 7 - (138.7)
Net financing expense 6 (44.2) (229.0)
Profit before income tax 294.1 128.9
Income tax expense 8 (13.1) (2.2)
============================================================ ==== =========== ===========
Profit from continuing operation 281.1 126.7
------------------------------------------------------------ ---- ----------- -----------
Loss from discontinued operation - (3.7)
============================================================ ==== =========== ===========
Profit for the year 281.1 123.0
============================================================ ==== =========== ===========
Other comprehensive income/(expense)
- items that may be subsequently reclassified
to profit or loss:
Net movements in cash flow hedging reserve,
net of tax (254.2) (6.2)
Currency translation differences (0.3) 0.5
============================================================ ==== =========== ===========
Other comprehensive income/(expense)
for the year, net of tax from continuing
operation (254.5) (5.7)
Total comprehensive income for the year 26.6 117.3
============================================================ ==== =========== ===========
from continuing operation 26.6 121.0
============================================================ ==== =========== ===========
from discontinued operation - (3.7)
============================================================ ==== =========== ===========
Earnings per share from continuing operation
(Euro/share) 9 3.76 1.74
Diluted earnings per share from continuing
operation (Euro/share) 9 2.22 1.01
============================================================ ==== =========== ===========
Earnings per share (Euro/share) 9 3.76 1.69
Diluted earnings per share (Euro/share) 9 2.22 0.98
============================================================ ==== =========== ===========
* The prior year was restated - refer to Note 4 for more detail.
Consolidated statement of financial positioN (UNAUDITED)
AT 31 MARCH 2020
2019 2018
2020 (restated*) (restated*)
Note EUR million EUR million EUR million
============================================= ==== =========== ============ ============
ASSETS
Non-current assets
Property, plant and equipment 10 2,553.0 2,067.0 1,840.5
Intangible assets 27.2 20.5 17.6
Restricted cash 179.7 165.8 159.4
D eferred tax assets 3.1 0.6 -
Derivative financial instruments 11 0.9 3.0 2.5
Trade and other receivables 19.9 18.2 44.6
============================================= ==== =========== ============ ============
Total non-current assets 2,783.7 2,275.0 2,064.4
============================================= ==== =========== ============ ============
Current assets
Inventories 70.6 31.7 21.6
Trade and other receivables 169.8 267.8 177.8
Current tax prepaid - 2.4 -
Derivative financial instruments 11 17.3 28.5 31.7
Restricted cash 6.1 23.1 2.8
Cash and cash equivalents 1,310.5 1,316.0 979.6
============================================= ==== =========== ============ ============
Total current assets 1,574.4 1,669.4 1,213.4
============================================= ==== =========== ============ ============
Total assets 4,358.1 3,944.4 3,277.8
============================================= ==== =========== ============ ============
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital - - -
Share premium 380.6 379.1 379.1
Reorganisation reserve (193.0) (193.0) (193.0)
Equity part of convertible debt 8.3 8.3 8.3
Cash flow hedging reserve (241.7) 12.5 18.7
Cumulated translation adjustments 0.2 0.5 -
Retained earnings 1,280.3 998.7 875.7
--------------------------------------------- ---- ----------- ------------ ------------
Total equity 1,234.8 1,206.1 1,088.9
============================================= ==== =========== ============ ============
Non-current liabilities
Borrowings 12 1,671.9 1,510.3 1,190.5
Convertible debt 26.4 26.6 26.6
Deferred income 13 13.1 13.6 11.4
Deferred tax liabilities - - 7.4
Derivative financial instruments 11 41.3 1.5 0.9
Provisions for other liabilities and charges 14 46.9 45.9 94.8
============================================= ==== =========== ============ ============
Total non-current liabilities 1,799.5 1,597.8 1,331.6
============================================= ==== =========== ============ ============
Current liabilities
Trade and other payables 469.6 320.4 262.1
Current tax liabilities - - 1.8
Borrowings 12 340.8 304.3 211.4
Convertible debt 0.3 0.2 0.3
Derivative financial instruments 11 266.5 17.3 12.8
Deferred income 13 172.3 395.1 305.1
Provisions for other liabilities and charges 14 74.3 103.3 63.8
============================================= ==== =========== ============ ============
Total current liabilities 1,323.8 1,140.5 857.4
============================================= ==== =========== ============ ============
Total liabilities 3,123.3 2,738.3 2,188.9
============================================= ==== =========== ============ ============
Total equity and liabilities 4,358.1 3,944.4 3,277.8
============================================= ==== =========== ============ ============
* The prior year was restated - refer to Note 4 for more detail.
Consolidated statement of changes in equity
(UNAUDITED)
FOR THE YEARED 31 MARCH 2020
Equity part
of Cash flow Cumulated
Share Share Reorganisation convertible hedging translation Retained Total
capital premium reserve debt reserve adjustment earnings Equity
EUR EUR EUR EUR EUR
million million EUR million EUR million million EUR million million million
Balance at 1 April
2019 as stated
before - 379.1 (193.0) 8.3 12.5 0.5 1,320.2 1,527.7
================== ========= ========== ============== =========== ========= =========== ========== ==========
IFRS 16
adjustment* - - - - - - (303.3) (303.3)
Lessor
compensation
adjustment* (18.3) (18.3)
IFRIC 23 adoption
opening
adjustment** (3.7) (3.7)
Balance at 1 April
2019 (restated) - 379.1 (193.0) 8.3 12.5 0.5 995.0 1,202.4
================== ========= ========== ============== =========== ========= =========== ========== ==========
Comprehensive
income:
Profit for the
year - - - - - - 281.1 281.1
Other
comprehensive
income/(expense):
Hedging reserve - - - - (254.2) - - (254.2)
Currency
translation
differences - - - - - (0.3) - (0.3)
================== ========= ========== ============== =========== ========= =========== ========== ==========
Total other
comprehensive
income/(expense) - - - - (254.2) (0.3) - (254.5)
================== ========= ========== ============== =========== ========= =========== ========== ==========
Total
comprehensive
income for the
year - - - - (254.2) (0.3) 281.1 26.6
================== ========= ========== ============== =========== ========= =========== ========== ==========
Transactions with
owners:
Proceeds from
shares issued - 1.5 - - - - - 1.5
Share-based
payment charge - - - - - - 4.2 4.2
================== ========= ========== ============== =========== ========= =========== ========== ==========
Total transactions
with owners - 1.5 - - - - 4.2 5.7
================== ========= ========== ============== =========== ========= =========== ========== ==========
Balance at 31
March 2020 - 380.6 (193.0) 8.3 (241.7) 0.2 1,280.3 1,234.8
================== ========= ========== ============== =========== ========= =========== ========== ==========
* The prior year was restated - refer to Note 4 for more detail.
** The Group adopted IFRIC 23 on 1 April 2019 using 'the
cumulative effect method'. For more details, refer to Note 1.
Consolidated statement of changes in equity
(UNAUDITED)
FOR THE YEARED 31 MARCH 2019
Equity part Cash
of flow Cumulated
Share Share Reorganisation convertible hedging translation Retained Total
capital premium reserve debt reserve adjustment earnings equity
EUR EUR EUR EUR EUR
million million EUR million EUR million million EUR million million million
Balance at 1 April 2018
as stated before* - 379.1 (193.0) 8.3 18.7 - 1,025.6 1,241.9
IFRS 16 adjustment** - - - - - - (140.0) (140.0)
Lessor compensation
adjustment** (13.0) (13.0)
------------------------- -------- -------- -------------- ----------- -------- ----------- -------- ---------
Balance at 1 April 2018
(restated) - 379.1 (193.0) 8.3 18.7 - 872.6 1,085.8
========================= ======== ======== ============== =========== ======== =========== ======== =========
Comprehensive income:
Profit for the year
(restated) - - - - - - 123.0 123.0
Other comprehensive
income/(expense):
Hedging reserve - - - - (6.2) - - (6.2)
Currency translation
differences - - - - - 0.5 - 0.5
========================= ======== ======== ============== =========== ======== =========== ======== =========
Total other comprehensive
income/(expense) - - - - (6.2) 0.5 - (5.7)
========================= ======== ======== ============== =========== ======== =========== ======== =========
Total comprehensive
income for the year - - - - (6.2) 0.5 123.0 117.3
========================= ======== ======== ============== =========== ======== =========== ======== =========
Transactions with owners:
Proceeds from shares
issued - - - - - - - -
Share-based payment
charge - - - - - - 3.0 3.0
========================= ======== ======== ============== =========== ======== =========== ======== =========
Total transactions
with owners - - - - - - 3.0 3.0
========================= ======== ======== ============== =========== ======== =========== ======== =========
Balance at 31 March 2019
(restated) - 379.1 (193.0) 8.3 12.5 0.5 998.7 1,206.1
========================= ======== ======== ============== =========== ======== =========== ======== =========
* The Group adopted IFRS 15 on 1 April 2018 using the
'cumulative effect method'. The 1 April 2018 retained earnings
balance in this table already reflects the impact of this
adjustment. For more details, refer to the 2019 Annual Report.
** The prior year was restated - refer to Note 4 for more detail.
Consolidated statement of cash flows
(UNAUDITED)
FOR THE YEARED 31 MARCH 2020
2019
2020 (restated*)
Note EUR million EUR million
Cash flows from operating activities
Profit before income tax** 294.1 125.2
Adjustments for:
Depreciation 10 374.0 329.2
Amortisation 7.5 6.8
Financial income (3.1) (15.0)
Financial expenses 120.6 250.1
Gain on sale of property, plant and equipment (16.2) (25.7)
Other non-cash expense - 0.1
Share-based payment charges 4.2 3.0
====================================================================================== ==== =========== ===========
781.0 673.8
====================================================================================== ==== =========== ===========
Changes in working capital (excluding the effects of exchange differences on
consolidation)
Decrease / (increase) in trade and other receivables 115.6 (56.8)
Increase in restricted cash (6.8) (23.8)
Increase in inventory (39.0) (10.1)
Increase in provisions 8.0 3.0
Increase in trade and other payables 146.5 67.5
(Decrease) / increase in deferred income (220.8) 103.1
====================================================================================== ==== =========== ===========
Cash generated by operating activities before tax 784.5 756.8
====================================================================================== ==== =========== ===========
Income tax paid (12.6) (14.1)
====================================================================================== ==== =========== ===========
Net cash generated by operating activities 771.9 742.7
====================================================================================== ==== =========== ===========
Cash flows from investing activities
Purchase of aircraft maintenance assets (155.3) (133.0)
Purchase of tangible and intangible assets (296.9) (61.9)
Proceeds from the sale of tangible assets 23.4 57.4
Advances paid for aircraft 10 (383.4) 0.0
Refund of advances paid for aircraft 10 85.2 71.3
Interest received 44.5 2.2
====================================================================================== ==== =========== ===========
Net cash used in investing activities (682.4) (64.0)
====================================================================================== ==== =========== ===========
Cash flows from financing activities
Proceeds from the issue of share capital 1.5 -
Interest paid (87.9) (92.9)
Proceeds from new loan 297.7 -
Repayment of loans (304.9) (249.2)
Net cash used in financing activities (93.6) (342.1)
====================================================================================== ==== =========== ===========
Net increase in cash and cash equivalents (4.1) 336.6
Cash and cash equivalents at the beginning of the year 1,316.0 979.6
Effect of exchange rate fluctuations on cash and cash equivalents (1.4) (0.1)
====================================================================================== ==== =========== ===========
Cash and cash equivalents at the end of the year 1,310.5 1,316.0
====================================================================================== ==== =========== ===========
* The prior year was restated - refer to Note 4 for more detail.
** Profit before income tax for 2019 does not tie to the same
figure in the statement of comprehensive income because the latter
does not include the result of the discontinued operation.
Notes forming part of the financial statements
1. Accounting policies
Basis of preparation - unaudited financial statements
These consolidated financial statements consolidate those of the
Company and its subsidiaries. The consolidated financial statements
have been prepared and approved by the Directors in accordance with
International Financial Reporting Standards as adopted by the EU
("Adopted IFRSs" and IFRS IC interpretations).
Based on the exemption provided in Article 105 (11) of the
Companies (Jersey) Law 1991 the Company does not present its
individual financial statements and related notes. The financial
information set out in this document does not constitute the
statutory accounts of the Group for the years ended 31 March 2019
and 31 March 2020.
The financial statements are presented in Euros, which is the
functional currency of all companies in the Group other than Wizz
Air UK Limited and two dormant entities, Dnieper Aviation LLC and
Wizz Air Ukraine Airlines LLC.
The company has a policy of rounding each amount and percentage
individually from the fully accurate number to the figure disclosed
in the accounts. This results that some amounts and percentages do
not total - though such differences are all small.
The consolidated financial statements have been prepared under
the historical cost convention, as modified by the revaluation of
financial assets and financial liabilities (including derivative
instruments) at fair value through profit or loss.
The preparation of the consolidated financial statements in
conformity with IFRS legislates the use of certain critical
accounting estimates and requires management to exercise judgments
in the process of applying the Group's accounting policies. The
areas involving a high degree of judgment or complexity or areas
where assumptions and estimates are significant to the consolidated
financial statements are disclosed in Note 3.
New standards and interpretations / Standards, amendments and
interpretations effective and adopted by the Group
Adoption of IFRS 16 'Leases'
The Group adopted IFRS 16, 'Leases' ('the Standard') as of 1
April 2019 (date of initial application).
Introduction:
IFRS 16 addresses the classification, measurement and
recognition of leases with the objective of ensuring that lessees
and lessors provide relevant information that faithfully represents
those transactions. The Standard supersedes IAS 17, 'Leases'.
The Group leases most of its aircraft and spare engines (and
until the date of initial application it leased all of its
aircraft); therefore, IFRS 16 materially impacts the Group's
financial statements. Other than aircraft and spare engines the
Group has only a limited number of leases related to offices,
flight training simulator building (and earlier also equipment),
and maintenance hangar.
Transition:
The Group chose the full retrospective method of transition, as
per the Standard. This means that leases existing at the date of
transition were recalculated as if the Standard had been applied
from their inception. The exception from this rule set by the
Standard is that sale and leaseback transactions incurred before
transition are not re-assessed. Instead, on the date of transition
the balance of deferred credits existing at that date, coming from
previous sale and leaseback transactions, was transferred into
right-of-use assets.
The financial statements for the financial year starting 1 April
2018 (that is therefore the 'date of transition') are restated. The
cumulative impact of the Standard until 1 April 2018 is recognised
in the opening (1 April 2018) retained earnings balance.
Practical expedients and other accounting policy choices:
The Group elected to use the following practical expedients
permitted by the Standard:
-- lease payments associated with short-term leases (contracts
with a duration of 12 months or less) and with leases for which the
underlying asset is of low value (defined by the Group as below
EUR5,000) are recognised on a straight-line basis over the lease
term;
-- did not reassess whether a contract that the Group entered
into before the date of initial application was a lease or
contained a lease - that is, IFRS 16 has only been applied to
contracts that were previously classified as leases;
-- when applying the Standard retrospectively, excluded the
initial direct costs from the measurement of the right-of-use
asset.
The Group does not have short-term leases. The Group does not
apply the Standard to leases of intangible assets.
The Group chose to treat compensations expected to be payable to
lessors, either in the form of recurring maintenance reserve
payments or compensation payable at lease end, as 'non-lease
components' under the Standard. These payments are therefore not
included in the measurement of the lease liability. Contractual
maintenance obligations which are not dependent on the use of the
aircraft or spare engine are recognised in full on commencement of
the lease.
Lease extension options
Some of the Group's lease contracts contain lease extension
options. The extension option is taken into account in the
measurement of the lease liability only when the Group is
reasonably certain that it would later exercise the option. Such
judgment is relevant both at inception, for the initial measurement
of the lease liability, and also for a subsequent remeasurement of
the lease liability if the initial judgment is revised at a later
date.
Sale and leaseback transactions after transition:
The existing aircraft and spare engine lease contracts were all
entered into by the Group through sale and leaseback
transactions.
Most of these contracts do not include a repurchase option for
Wizz Air. On such contracts, where sale proceeds received are
judged to reflect the aircraft's fair value, the gain or loss
arising on the disposal is directly recognised in the statement of
comprehensive income to the extent that it relates to the rights
that have been transferred to the lessor, while the gain or loss
that relates to the rights that have been retained by the Group are
included in the carrying amount of the right of use asset
recognised at commencement of the lease. The Group has not sold any
asset above fair value.
Among the sale and leaseback contracts some include a repurchase
option for Wizz Air. These leases relate to some of the aircraft
that arrived after 1 April 2019 and are commonly referred to as
JOLCO (special Japanese tax lease) contracts. Such contracts do not
meet the definition of a sale under IFRS 15 Revenue from Contracts
with Customers, and therefore are not accounted for as a lease
contract under IFRS 16. As a result, the treatment of such
contracts for Wizz Air (as the lessee) is to (i) retain the asset
as PP&E (as if there was no sale at all) and (ii) recognise a
liability under IFRS 9 (as if the sale proceeds received from the
lessor were receipts from debt financing).
Foreign exchange:
The lease liability (being a monetary liability) is regularly
revalued to reflect the changes in currency exchange rates where
the currency of the future lease payments differs from the
functional currency of the legal entity having the lease liability.
In this respect currently the relevant currency pairs for the Group
are the US Dollar to Euro and the US Dollar to British Pound, as
most future payments under the aircraft lease contracts of the
Group are defined in US Dollar while the functional currency of
Wizz Air Hungary Ltd. is the Euro and of Wizz Air UK Limited is the
British Pound.
The EUR/USD FX rate was 1.23 on the date of transition and 1.12
on the date of initial application. As a result, a significant
foreign exchange loss coming from the revaluation of the lease
liability was recognised in the restatement of the 2019 financial
year (see in Notes 4 and 6). Going forward, from 1 April 2019, the
Group is managing this exposure with natural offset and by the use
of derivative financial instruments (see in Note 2).
The initial value of right-of-use assets, where applicable, is
determined using historic FX rates. These are non-monetary assets
and are not revalued during their life.
Discount rate:
The Group is not able to readily determine the interest rate
implicit in its lease contracts, therefore the Group applied its
incremental borrowing rate for discounting lease liabilities, as
required by paragraph 26 of the Standard. The incremental borrowing
rate, in turn, was determined with reference to the market rate of
interest observable on financial instruments with appropriate
value, term, and currency, and adjusted, as required, to reflect
risks specific to the leased asset as well as the risk specific to
the entity in the Group leasing the asset. These rates have been
calculated for each identified asset, reflecting the underlying
lease terms and based on observable inputs. The discount rates are
in a range of 2.07% to 2.81% for EUR and 3.63% to 23.37% for USD
leasing contracts (the oldest of which are from 2007, resulting a
wide range of discount rates mainly due to the financial crisis of
2008).
Right-of-use assets and depreciation:
With respect to depreciation, the requirements of IAS 16
Property, Plant and Equipment are applicable also to the
right-of-use assets recognised under IFRS 16. Therefore, in case of
aircraft and spare engines, component accounting is required for
the right-of-use assets, similar to that applicable to owned
aircraft or spare engine assets. The right-of-use assets associated
with aircraft and spare engine lease contracts are split into asset
components on the basis of value proportions that could be observed
on an owned aircraft of the same type and age.
The useful economic life of the asset components that represent
the maintenance condition of the aircraft and of its key components
is estimated to last until the respective aircraft component does
not any longer meet the return conditions defined in the lease
contract (at which point the lease-related asset component is
derecognised and a maintenance asset is recognised - see also
below). The useful economic life of the residual asset component
(that is not related to the maintenance condition of the underlying
asset) is the lease term.
The asset components related to maintenance condition are
depreciated either straight line or based on usage, depending on
their nature.
Maintenance accounting:
The Group's policy for heavy maintenance accounting for aircraft
and spare engines held under lease agreements is not impacted by
IFRS 16. The maintenance assets that are recognised when the
respective aircraft component does not any longer meet the return
condition defined in the lease contract are also right-of-use
assets. The Group continues to recognise asset restoration costs as
part of its maintenance accounting policy, applying IAS 37
Provisions, and to present the respective assets as maintenance
assets within property, plant and equipment.
Cash flows:
The cash outflows related to leases are presented under cash
flows from financing activities; the interest element under
interest paid and the rest under repayment of loans. Out of the
total amounts presented in these categories in the statement of
cash flows the following related to leases under IFRS 16: in 2020
EUR85.2 million interest and EUR298.8 million loan repayment; in
2019 EUR89.4 million interest and EUR246.1 million loan repayment
(see also in Note 4).
Adoption of Interpretation 23 'Uncertainty over Income Tax
Treatments' (IFRIC 23)
The Group adopted this interpretation for the first time for its
2020 financial year commencing 1 April 2019. The Group assessed the
impact of uncertainty of each of its tax positions separately
assuming that the relevant tax authority will examine the uncertain
tax treatments and have full knowledge of all related information,
i.e. ignored detection risk in the measurement. On this basis the
Group concluded that for the tax returns of its Hungarian
subsidiaries for the 2015-2019 financial years it is more likely
than not that certain expenses would not be accepted by the tax
authority as deductible. The cumulative impact of these adjustments
is EUR3.7 million increase to current tax related to the 2015-2019
financial years. The Group applied the modified retrospective
approach under IFRIC 23 for recognising this liability and,
accordingly, adjusted (reduced) the opening retained earnings as of
1 April 2019 for EUR3.7 million.
Going concern
Wizz Air's business activities, financial performance and
financial position, together with factors likely to affect its
future development and performance, are described on pages 4 to 16.
Emerging and principal risks and uncertainties facing the Group are
described in the section named 'Emerging and principal risks and
uncertainties' of our Annual Report for the financial year. Note 2
to the accounts in this document sets out the Group's objectives,
policies and procedures for managing its capital and liquidity and
provides details of the risks related to financial instruments held
by the Group.
At 31 March 2020, the Group held cash and cash equivalents of
EUR1,310.5 million (total cash of EUR1,496.3 million including
EUR185.8 million of restricted cash), while net current assets were
EUR250.6 million. In legal terms the only external borrowings of
the Group are convertible debt with a balance of EUR26.7 million,
while in accounting terms a further EUR2,012.7 million are
presented as borrowings in relation to future commitments from
lease contracts.
The Directors have reviewed financial forecasts including plans
to finance future aircraft deliveries. After making enquiries and
testing the assumptions against different forecast scenarios, the
Directors have satisfied themselves that the Group is expected to
be able to meet its commitments and obligations for at least the
next twelve months from the date of signing this report.
These enquiries and testing included a base case model of how
the operations of the business would return to activity post
COVID-19. Wizz Air has been one of the first airlines to restart
operations and, whereas the airline was nearly completely grounded
in April 2020, in the base case it assumes a gradual increase in
operation in May and June, and subsequently to fly the majority of
its capacity from July onwards.
In addition, the Directors have also modelled a severe but
plausible downside scenario based on a minimal number of flights in
April, May and June 2020. For the remainder of F21 only 60 per cent
of capacity would be flown, improving to 75 per cent of capacity
flown for the remainder of the going concern period from April to
June 2021. In this scenario, the Group is still forecasting
significant liquidity throughout this period.
Due to the level of uncertainty in the projections and the
varying patterns of how the operations of the business could emerge
from the pandemic, the Directors also assessed the cash burn rate
of the business in the event of a full grounding of the airline for
the going concern period. The Directors concluded that, due to a
combination of a strong balance sheet going into the pandemic and a
low monthly cash burn rate, the business would have sufficient
liquidity for more than 12 months even if it remained grounded over
that time.
Accordingly, the Directors concluded it was correct to retain
the going concern basis in preparing the financial statements.
2. Financial risk management
Financial risk factors
The Group is exposed to market risks relating to fluctuations in
commodity prices, interest rates and currency exchange rates. The
objective of financial risk management at Wizz Air is to minimise
the impact of commodity price, interest rate and foreign exchange
rate fluctuations on the Group's earnings, cash flows and equity.
To manage commodity and foreign exchange risks, Wizz Air uses
various derivative financial instruments, including foreign
currency and commodity zero-cost collar contracts.
Risk management is carried out by the treasury department under
policies approved by the Board of Directors. The Board provides
written principles for overall risk management, as well as written
policies covering specific areas, such as foreign exchange risk,
fuel price risk, credit risk, use of derivative financial
instruments, adherence to hedge accounting, and hedge coverage
levels. The Board has mandated the Audit Committee of the Board to
supervise the hedging activity of the Group and the compliance with
the policies approved by the Board.
Risk analysis
Market risks
Foreign currency risk
The Group is exposed to foreign currency risk on sales,
purchases and commitments that are denominated in a currency other
than the Euro. The foreign currency exposure of the Group is
significant for two reasons: (i) only a small portion of the
Group's revenues are denominated in or linked to the US Dollar
while a significant portion of the Group's expenses are US Dollar
denominated, including fuel, aircraft leases, maintenance reserves
and aviation insurance; and (ii) there are various currencies in
which the Group has significantly more revenues than expenses,
primarily the British Pound (GBP) and - to a smaller extent - the
Polish Zloty (PLN).
The Group chooses the Euro/US Dollar foreign currency rate as
the major underlying foreign currency pair in its foreign currency
rate hedging strategies. The main objective is to cover the Group's
ongoing US Dollar cash flow requirements. The Group's maximum hedge
coverage level is 85%. of the total anticipated US Dollar purchases
hedged by the time the respective quarter on a monthly rolling
forward basis is reached. This level was not always reached during
the current or prior years.
The Hedging Policy defines also the hedging of the GBP/Euro
foreign currency rate net exposure in order to mitigate FX risk on
the Group's second largest revenue currency. The Group's maximum
target coverage on this currency pair is 60% on a rolling
twelve-month basis, but in 2020 at year-end there were no open
positions.
During the 2020 year a new type of foreign currency exposure was
created for the Group by the adoption of IFRS 16. The lease
liability recognised under IFRS 16 is a monetary liability and most
of the future lease payments of the Group behind this liability are
denominated in US Dollar. The periodic revaluation of this
liability against the Euro, if not managed, can result in very
significant foreign exchange gains and losses, and hence in
significant volatility to earnings. The Group, starting from 1
April 2019 has been mitigating these exposures through the
implementation of the following risk measures: (i) conversion of
Euro bank deposits into US Dollar deposits, thus creating a US
Dollar monetary asset offsetting part of the lease liability; and
(ii) the entry into Euro/US Dollar FX forwards to cover the
residual risk. The amount of such new deposits was US$1,235 million
and the notional amount of the FX instruments was US$676 million at
the beginning of April 2019, altogether creating the required
coverage of US$ 1,911 million. The balance of the forward contracts
was actively managed during the year on a roll-forward basis to
cover the estimated future net US Dollar liability. During 2020 the
focus of the programme shifted from Euro/US Dollar hedges toward
British Pound/USD Dollar hedges as part of the net US Dollar
liability was linked to Wizz Air UK Limited, the functional
currency of which is the British Pound. However, the fair value
hedging programme was suspended in April 2020 due to the
implications of the corona virus outbreak, as the Group decided not
to hedge exposures that do not impact its cash position.
The table below analyses the financial instruments by the
currencies of future receipts and payments as follows:
EUR USD Other Total
At 31 March 2020 EUR million EUR million EUR million EUR million
================================= =========== =========== =========== ===========
Financial assets
Trade and other receivables 71.7 68.3 13.3 153.3
Derivative financial assets - 18.3 - 18.3
Cash and cash equivalents 52.2 1,206.1 52.2 1,310.5
Restricted cash 185.5 - 0.3 185.8
================================= =========== =========== =========== ===========
Total financial assets 309.4 1,292.7 65.8 1,667.9
================================= =========== =========== =========== ===========
Financial liabilities
Borrowings 484.7 1,528.0 - 2,012.7
Convertible debt 26.7 - - 26.7
Trade and other payables 200.7 16.5 33.9 251.1
Derivative financial liabilities - 307.8 - 307.8
================================= =========== =========== =========== ===========
Total financial liabilities 712.1 1,852.3 33.9 2,598.3
================================= =========== =========== =========== ===========
EUR USD Other Total
At 31 March 2019 (restated) EUR million EUR million EUR million EUR million
================================= =========== =========== =========== ===========
Financial assets
Trade and other receivables 71.1 116.8 37.9 225.8
Derivative financial assets - 31.5 - 31.5
Cash and cash equivalents 1,228.0 40.0 48.0 1,316.0
Restricted cash 188.8 - 0.1 188.9
================================= =========== =========== =========== ===========
Total financial assets 1,487.9 188.3 86.0 1,762.2
================================= =========== =========== =========== ===========
Financial liabilities
Borrowings 91.7 1,722.8 - 1,814.5
Convertible debt 26.8 - - 26.8
Trade and other payables 43.4 11.2 20.2 74.7
Derivative financial liabilities - 18.8 - 18.8
================================= =========== =========== =========== ===========
Total financial liabilities 161.9 1,752.8 20.2 1,934.8
================================= =========== =========== =========== ===========
As explained earlier in this Note, most of the Group's non US
Dollar cash deposits were converted into US Dollar deposits by
early April 2019. EUR1,102 million was converted into US$1,235
million. This is the reason why the distribution of the financial
assets of the Group by currency looks substantially different in
2020 compared to 2019.
Trade and other receivables in this table, and also in the other
disclosures in this Note 2, exclude balances that are not financial
instruments, being prepayments, deferred expenses, accrued income,
and part of other receivables. Similarly, trade and other payables
in this table, and also in the other disclosures in this Note 2,
exclude balances that are not financial instruments, being accruals
and other payables.
Interest rate risk
The Group has future commitments under certain lease contracts
that are based on floating interest rates. The floating nature of
the interest charges on the leases exposes the Group to interest
rate risk. Interest rates charged on convertible debt liabilities
and on short and long-term loans to finance the deposits of
aircraft are not sensitive to interest rate movements as they are
fixed until maturity.
The Group is also exposed to interest rate risk in relation to
the valuation of financial instruments as they are carried at fair
value.
The Group has not used financial derivatives to hedge its
interest rate risk during the year. The Directors may in the future
consider hedging interest rate risk to reduce earnings volatility
arising from fluctuations in interest rates.
Commodity risks
One of the most significant costs for the Group is jet fuel. The
price of jet fuel can be volatile and can directly impact the
Group's financial performance. The Group's maximum hedge coverage
is 70% on a rolling twelve-month basis and 60% on a rolling
18-month basis. This level was not always reached during the
current or prior years.
Hedge transactions during the year
The Group uses non-derivatives, zero-cost collar instruments and
outright forward contracts to hedge its foreign exchange exposures
and uses zero-cost collar instruments to hedge its jet fuel
exposures. The time horizon of the hedging programme with
derivatives is usually up to a maximum of 18 months; however, this
horizon can be exceeded at the Board's discretion.
The volume of hedge transactions that expired during the years
was as follows :
a) Foreign exchange hedge (USD versus EUR):
US$2,820.0 million (2019: US$762 million).
b) Foreign exchange hedge (GBP versus EUR):
GBP63.9 million (2019: GBP44.8 million).
c) Foreign exchange hedge (USD versus GBP):
US$1,466.0 million (2019: nil).
d) Fuel hedge:
995,000 metric tons (2019: 821,000 metric tons).
The significant increase in USD FX hedges compared to the prior
year was caused by the introduction of FX forward contracts from
April 2019 to manage the IFRS 16 related FX exposure (as explained
earlier).
The gains and losses during the year arising from the hedge
transaction were as follows:
a) Foreign exchange hedge (USD versus EUR):
Cash-flow hedges:
EUR27.2 million gain (2019: EUR18.8 million gain). EUR26.4
million gain in 2020 was recognised on fuel cost and EUR0.8 million
gain as financial income. Out of the EUR18.8 million gain in 2019,
EUR10.1 million gain was recognised on fuel cost; the rest of the
gain (EUR8.7 million) was originally recognised within lease rental
expenses but after the restatement to IFRS 16 it is part of net
foreign exchange gains/losses.
Further EUR1.9 million gain (2019: nil) was recognised within
financial income in relation to hedges expiring in April-May 2020,
but classified as discontinued due to reduced business
activity.
Fair value hedges:
EUR6.2 million gain recognised within financial income (related
to the forward point element of the hedges) and EUR0.6 million gain
recognised within net foreign exchange gains/losses (related to the
spot-to-spot element of the hedges). (2019: nil)
b) Foreign exchange hedge (GBP versus EUR):
Zero-cost collar instruments:
EUR0.5 million loss (2019: EUR0.2 million loss). GBP foreign
exchange hedge affects revenue.
c) Foreign exchange hedge (USD versus GBP)
Forward contracts:
EUR1.5 million gain recognised within financial income (related
to the forward point element of the hedges) and EUR0.3 million gain
recognised within net foreign exchange gains/losses (related to the
spot-to-spot element of the hedges) (2019: nil).
d) Fuel hedge:
EUR31.8 million loss (2019: EUR43.5 million gain) was recognised
within fuel cost related to effective hedges; and EUR9.9 million
loss (2019: nil) was recognised within fuel cost as exceptional
operating expense in relation to hedges expiring in March 2020,
that were classified as discontinued for hedge accounting.
Further EUR53.8 million loss (2019: nil) was recognised within
fuel cost as exceptional operating expense in relation to hedges
expiring in April-May 2020 (i.e. yet open at year end), that were
classified as discontinued for hedge accounting.
e) ETS hedge:
During 2020 the Group sold put options in relation to EU ETS
quota purchases, and in relation to these recognised net EUR1.4
million loss under financial expenses, being the net of EUR1.2
million cash fee received on the sale of the options and EUR2.6
million fair value loss accumulated on the instruments until the
year end.
Hedge year-end open positions
At the end of the year and the prior year the Group had the
following open hedge positions:
a) Foreign exchange hedge with derivatives:
The fair value of the open positions was a EUR18.3 million gain
(2019: EUR18.0 million gain). Out of this fair value, EUR9.3
million gain, including EUR6.8 million gain on zero-cost collar
instruments and EUR2.5 million gain on forward contracts, was
recognised within other comprehensive income and assets. This
EUR9.3 million gain can be analysed further into EUR7.4 million
intrinsic value gain and EUR1.9 million time value gain components.
The EUR18.0 million gain in 2019 was recognised within other
comprehensive income, corresponding to assets of EUR19.7 million
and liabilities of EUR1.7 million, respectively. Additionally,
EUR1.9 million gain related to hedges classified as discontinued
was recognised within financial income and assets (2019: nil) and
EUR7.1 million related to fair value hedges was recognised partly
within foreign exchange gain partly within financial income (2019:
nil).
For cash-flow hedges, the notional amount of the open positions
was US$427.0 million on EUR/USD zero-cost collar instruments (2019:
US$463.0 million), US$91.0 million on EUR/USD forward contracts
(2019: US$676.0 million) and GBP0.0 million on GBP/EUR zero-cost
collar instruments at the end of the current year (2019: GBP24.1
million).
The open FX cash-flow hedge positions at year-end can be
analysed according to the maturity periods and price ranges of the
underlying hedge instruments as follows:
Euro/US Dollar foreign exchange hedge:
F21 F22
At 31 March 2020 12 months 6 months
=============================================== ========== =========
Maturity profile of notional amount (million) $436 $82
Weighted average ceiling $1.1622 $1.1485
Weighted average floor $1.1263 $1.1039
=============================================== ========== =========
F20 F21
At 31 March 2019 12 months 6 months
=============================================== ========== =========
Maturity profile of notional amount (million) $444 $19
Weighted average ceiling $1.24 $1.21
Weighted average floor $1.19 $1.16
=============================================== ========== =========
Euro/British Pound foreign exchange hedge:
F20 F21
At 31 March 2019 3 months
============================================== ========= =====
Maturity profile of notional amount (million) GBP24 -
Weighted average ceiling GBP0.92 -
Weighted average floor GBP0.88 -
============================================== ========= =====
There were no open positions on Euro/British Pound hedges at 31
March 2020.
The open positions on fair value hedges at year-end can be
analysed according to the maturity periods and price rates of the
underlying hedge instruments as follows:
-- Euro/US Dollar hedges: notional amount of US$221.0 million
with 1.11 average contracted FX rate, all expired in April 2020
(2019: notional amount of US$676 million with 1.13 average
contracted FX rate, expired during April-July 2019).
-- British Pound/US Dollar hedges: notional amount of US$170.0
million with 1.29 average contracted FX rate, all expired in April
2020 (2019: nil).
b) Foreign exchange hedge with non-derivatives:
Non-derivatives are existing financial assets that hedge highly
probable foreign currency cash flows in the future and therefore
act as a natural hedge. At the end of the year out of its
non-derivative financial assets position the Group had US$9.8
million designated for hedge accounting (2019: US$6.7 million).
This amount is part of trade and other receivables on the
consolidated statement of financial position.
c) Fuel hedge:
The fair value of the open positions was a EUR251.4 million loss
(2019: EUR5.3 million loss) recognised within other comprehensive
income corresponding to assets (nil in 2020 and EUR11.8 million in
2019) and liabilities (EUR251.4 million in 2020 and EUR17.1 million
in 2019), respectively. The total EUR251.4 million loss can be
analysed further into EUR337.9 million intrinsic value loss and
EUR85.3 million time value gain components.
In addition, a loss of EUR53.8 million was recognised within
fuel cost as exceptional operating expense in relation to open fuel
hedge positions (related to April and May 2020) that were
discontinued for hedge accounting.
The notional amount of the open positions was 1,461,000 metric
tons (2019: 712,000 metric tons), out of which 170,000 tons related
to hedges that were classified as discontinued at year end.
The fuel hedge positions at year-end can be analysed according
to the maturity periods and price ranges of the underlying hedge
instruments as follows:
F21 F22
At 31 March 2020 12 months 6 months
===================================== ========== =========
Maturity profile ('000 metric tons) 1,091 370
Blended capped rate $632 $554
Blended floor rate $576 $503
===================================== ========== =========
F20 F21
At 31 March 2019 12 months 6 months
===================================== ========== =========
Maturity profile ('000 metric tons) 624 88
Blended capped rate $700 $670
Blended floor rate $639 $613
===================================== ========== =========
During the year the Group realised EUR254.2 million loss in
other comprehensive income in relation to change in the fair value
of cash flow hedge open positions and EUR6.2 million loss in
2019.
d) ETS hedge:
The fair value of the open positions on ETS hedges was EUR2.6
million loss at the year end (2019: nil).
With respect to cash flow hedging instruments, during the
year:
-- a loss of EUR322.8 million was recognised in other
comprehensive income due to changes in fair value of the
instruments (2019: EUR55.4 million gain recognised);
-- a loss of EUR66.9 million was transferred out of other
comprehensive income to the statement of comprehensive income,
partly to offset the fuel price and foreign exchange impacts on the
underlying transactions (EUR5.1 million loss transferred) (2019:
EUR62.1 million gain transferred) partly as a result of hedges
having been discontinued from accounting point of view (EUR61.8
million loss transferred).
Hedge effectiveness
As a result of COVID-19, the capacity to be operated in the 2021
financial year will be significantly lower than that on which the
hedging programme was based and hence certain hedging instruments
no longer correspond to future purchases of jet fuel or, to a
smaller extent, foreign currency purchases. As such, hedge
accounting for these derivatives has been discontinued and the
associated loss on these instruments of EUR61.8 million, split
between a loss of EUR63.7 million on fuel price hedges and a gain
of EUR1.9 million on the foreign currency hedges, has been charged
to the statement of comprehensive income in 2020.
As explained below in the credit risk section, in the opinion of
the management none of the hedge counterparties had a material
change in their credit status that would have influenced the
effectiveness of the hedging transactions.
Sensitivity analysis
The table below shows the sensitivity of the Group's profits to
various markets risks for the current and the prior year, excluding
any hedge impacts.
2020 2019
Difference in profit after tax
Difference in profit after tax (restated)
EUR million EUR million
=========================================== ================================ ==============================
Fuel price sensitivity
Fuel price $100 higher per metric ton -107.1 -90.0
Fuel price $100 lower per metric ton +107.1 +90.0
=========================================== ================================ ==============================
FX rate sensitivity (USD/EUR)
FX rate 0.05 higher (meaning EUR stronger) +99.4 +93.7
FX rate 0.05 lower -108.8 -102.2
=========================================== ================================ ==============================
FX rate sensitivity (GBP/EUR)
FX rate 0.03 higher (meaning EUR stronger) -9.2 -6.0
FX rate 0.03 lower +10.1 +6.4
=========================================== ================================ ==============================
FX rate sensitivity (PLN/EUR)
FX rate 0.15 higher (meaning EUR stronger) -5.1 -4.5
FX rate 0.15 lower +5.5 +4.8
=========================================== ================================ ==============================
Interest rate sensitivity (EUR)
Interest rate is higher by 100 bps +13.0 +13.2
Interest rate is lower by 100 bps -13.0 -13.2
=========================================== ================================ ==============================
The interest rate sensitivity calculation above considers the
effects of varying interest rates on the interest income on bank
deposits. Regarding lease rentals on floating rate leases the
impact of changing interest rates would be the remeasurement of the
lease liability under IFRS 16 and of the corresponding right of
used assets. 100 basis points increase/decrease in the reference
interest rate would result in EUR11.2 million increase/ EUR11.6
million decrease (2019: EUR11.5 million increase/ EUR12.0 million
decrease) in the lease liability and the RoU asset. This, in turn,
would impact future profits on average by EUR4.2 million (2019:
EUR4.6 million) per year over the remaining lease term, with higher
interest rates resulting in lower profits.
The 2019 sensitivities in the table related to FX rates and
interest rates have been restated. The changes in the impacts of
the USD/EUR FX rate and of interest rates are caused by IFRS 16:
the base of the FX impact now excludes lease expenses but includes
the lease liability as per IFRS 16; the base of the interest rate
impact now excludes floating rate lease expenses. The GBP/EUR and
PLN/EUR sensitivities were amended due to corrections in the
calculations versus the original disclosure in 2019, not related to
IFRS 16.
The table below shows the sensitivity of the Group's other
comprehensive income to various markets risks for the current and
the prior year. These sensitivities relate to the impact of the
market risks on the balance of the cash flow hedging reserve (that
includes gains and losses related to open cash flow hedges both for
foreign exchange rates and jet fuel price).
2020 2019
Difference Difference
EUR million EUR million
========================================================= ============ ============
Fuel price sensitivity
Fuel price $100 higher per metric ton +117.6 +63.5
Fuel price $100 lower per metric ton -117.6 -63.5
========================================================= ============ ============
FX rate sensitivity (USD/EUR)
FX rate 0.05 higher (meaning EUR stronger) +10.5 -0.6
FX rate 0.05 lower -10.5 +0.6
========================================================= ============ ============
Fuel volume sensitivity (metric tons)
100,000 metric tons reduction in forecast fuel purchases +14.4 N/A
100,000 metric tons increase in forecast fuel purchases -14.4 N/A
========================================================= ============ ============
The sensitivity analyses for 2020 above were performed with
reference to the following market rates, as the base case:
-- For profits, annual average rates: jet fuel price $729 per
metric ton; EUR/USD FX rate 1.11; EUR/GBP FX rate 0.87; EUR/PLN FX
rate 4.30;
-- For other comprehensive income, year-end spot rates: jet fuel
price $270.0 per metric ton; EUR/USD FX rate 1.10.
Liquidity risks
Prudent liquidity risk management implies maintaining sufficient
cash and the availability of funding. In the recent years the Group
has been holding a high level of cash funds compared to the needs
of the business operations. Nevertheless, the unprecedented impact
of COVID-19 on the industry is affecting the liquidity of the Group
in 2020 especially in a scenario of prolonged grounding. The Group
responded to these special challenges with a number of actions to
improve costs and liquidity, the most important ones being as
follows:
-- Continue to ensure that the flights that are operated deliver positive cash contribution;
-- Securing lease financing for aircraft delivery positions until summer 2021;
-- Working with suppliers to reduce contracted rates and improve payment terms;
-- Reducing discretionary spending and suspending non-essential capital expenditure;
-- Reducing the fixed cost of the workforce by aligning reduced
working hours and temporarily reduced salary rates (for Directors
and Officers see details in the Directors Remuneration Report). In
addition, in April 2020, the Group made 1,000 positions redundant,
representing a 19 per cent workforce reduction.
-- Working with governments to align deferral of certain tax
payments and to secure temporary financing - the most important
result being the GBP 300 million COVID Corporate Financing Facility
raised from the Bank of England in April 2020.
As a result of these measures, Wizz Air is confident in its
ability to survive even a potential prolonged grounding well beyond
any current estimates for the impact of COVID-19 in Europe.
The Group invested excess cash primarily in EUR and USD
denominated short-term time deposits with high quality bank
counterparties.
The table below analyses the Group's financial assets and
liabilities (receivable or payable either in cash or net settled in
case of certain derivative financial assets and liabilities) into
relevant maturity groupings based on the remaining period at the
statement of financial position date to the contractual maturity
date.
The amounts disclosed in the table below are the contractual
undiscounted cash flows except for derivatives where fair values
are presented. Therefore, for certain asset and liability
categories the amounts presented in this table can be different
from the respective amounts presented in the statement of financial
position.
Between
Within three months Between
three and one one and More than
months year five years five years Total
At 31 March 2020 EUR million EUR million EUR million EUR million EUR million
============================ ============ ============= ============ ============ =============
Financial assets
Trade and other receivables 118.3 15.1 19.9 - 153.3
Derivative financial
assets 10.5 6.9 0.9 - 18.3
Cash and cash equivalents 1,310.5 - - - 1,310.5
Restricted cash 0.5 5.6 146.6 33.1 185.8
============================ ============ ============= ============ ============ =============
Total financial assets 1,439.8 27.6 167.4 33.1 1,667.9
============================ ============ ============= ============ ============ =============
Financial liabilities
Borrowings 108.4 307.3 1,297.5 547.5 2,260.7
Convertible debt - 2.1 28.7 - 30.8
Trade and other payables 251.1 - - - 251.1
Derivative financial
liabilities 93.5 173.0 41.3 - 307.8
Financial guarantees 0.7 - - - 0.7
============================ ============ ============= ============ ============ =============
Total financial liabilities 453.7 482.4 1,367.5 547.5 2,851.1
---------------------------- ------------ ------------- ------------ ------------ -------------
Between
Within three months Between
three and one one and More than
months year five years five years Total
At 31 March 2019 (restated) EUR million EUR million EUR million EUR million EUR million
============================ ============ ============= ============ ============ =============
Financial assets
Trade and other receivables 176.3 34.3 10.0 5.20 225.8
Derivative financial
assets 10.9 17.6 3.0 - 31.5
Cash and cash equivalents 1,316.0 - -- - 1,316.0
Restricted cash 21.0 2.2 117.7 48.0 188.9
============================ ============ ============= ============ ============ =============
Total financial assets 1,524.2 54.1 130.7 53.2 1,762.2
============================ ============ ============= ============ ============ =============
Financial liabilities
Borrowings 103.9 284.4 1,223.6 513.6 2,125.5
Convertible debt - 2.1 30.9 - 33.0
Trade and other payables 74.7 - - - 74.7
Derivative financial
liabilities 3.3 14.0 1.5 - 18.8
Financial guarantees 0.8 - - - 0.8
============================ ============ ============= ============ ============ =============
Total financial liabilities 182.7 300.5 1,256.0 513.6 2,252.8
---------------------------- ------------ ------------- ------------ ------------ -------------
The Group has obligations under financial guarantee contracts.
The most significant financial guarantee contracts relate to
aircraft leases, hedging, and convertible notes. For these items
the respective underlying liabilities are reflected under the
appropriate line of the financial liabilities part of the table
above (for leases the liability is presented under borrowings).
Since the liability itself is already reflected in the table, it
would not be appropriate to include also the financial guarantee
provided by another Group entity for the same obligation. The only
guarantee separately disclosed in this table relates to a contract
for the provision of public services in Hungary, with respect to
which there is no liability recognised in the statement of
financial position. This possible obligation is disclosed in the
table above with the shortest maturity under the financial
guarantees line.
Management does not expect that any payment under these
guarantee contracts will be required by the Company.
Credit risk
The Group's exposure to credit risk from individual customers is
limited as the large majority of the payments for flight tickets
are collected before the service is provided.
However, the Group has significant banking, hedging, aircraft
manufacturer and card acquiring relationships that represent
counterparty credit risk. The Group analysed the creditworthiness
of the relevant business partners in order to assess the likelihood
of non-performance of liabilities due to the Group. The credit
quality of the Group's financial assets is assessed by reference to
external credit ratings (published by Standard & Poor's or
similar institutions) of the counterparties as follows:
A A- Other Unrated Total
At 31 March 2020 EUR million EUR million EUR million EUR million EUR million
============================ =========== =========== =========== =========== ===========
Financial assets
Trade and other receivables - - - 153.3 153.3
Derivative financial assets 10.2 1.0 7.0 - 18.3
Cash and cash equivalents 892.5 271.4 145.7 0.9 1,310.5
Restricted cash 185.6 0.1 0.2 - 185.8
============================ =========== =========== =========== =========== ===========
Total financial assets 1,088.2 272,5 152.9 154.2 1,667.9
============================ =========== =========== =========== =========== ===========
A A- Other Unrated Total
At 31 March 2019 (restated) EUR million EUR million EUR million EUR million EUR million
============================ =========== =========== =========== =========== ===========
Financial assets
Trade and other receivables 8.2 - - 217.6 225.8
Derivative financial assets 20.7 10.8 - - 31.5
Cash and cash equivalents 1,313.3 - 2.4 0.2 1,316.0
Restricted cash 188.7 - 0.1 - 188.9
============================ =========== =========== =========== =========== ===========
Total financial assets 1,530.9 10.8 2.6 217.9 1,762.2
============================ =========== =========== =========== =========== ===========
From the unrated category within trade and other receivables the
Group has EUR60.9 million (2019: EUR100.0 million) receivables from
different aircraft lessors in respect of maintenance reserves and
lease security deposits paid. However, given that the Group
physically possesses the aircraft owned by the lessors and that the
Group has significant future lease payment obligations towards the
same lessors (see Note 15), management does not consider the credit
risk on maintenance reserve receivables to be material. Most of the
remaining balance in this category in both years relate to ticket
sales receivables from customers and non-ticket revenue receivables
from business partners. These balances are spread between a
significant number of counterparties and the credit performance in
these channels has historically been good.
Within cash and cash equivalents in 2020, out of the EUR145.7
million in the unrated category EUR141.2 million relates to cash
deposits held with banks with BBB+ rating. The Group did not hold
cash at these banks in 2019.
Based on the information above management does not consider the
counterparty risk of either party being material and therefore no
fair value adjustment was applied to the respective cash or
receivable balances.
Capital management
The Group's objectives when managing capital are (i) to
safeguard the Group's ability to continue as a going concern in
order to provide returns for Shareholders and benefits for other
stakeholders, (ii) to secure funds at competitive rates for its
future aircraft acquisition commitments (see Note 15) and (iii) to
maintain an optimal capital structure to reduce the overall cost of
capital.
The current sources of capital for the Group are equity and
borrowings. Borrowings include primarily capitalised lease
obligations (see Note 12) and, to a small extent, convertible
debt.
Wizz Air's strategy is to hold significant cash and liquid funds
to mitigate the impact of potential business disruption events and
to invest in opportunities as they come along in an increasingly
volatile market environment. Accordingly, the Group has so far
retained all profits and paid no dividends and financed all its
aircraft and most of its spare engine acquisitions through sale and
leaseback agreements. This strategy has been delivering great
benefits in managing the consequences of COVID-19.
The existing aircraft orders of the Group create a need for
raising significant amounts of capital in the following years. The
strategy of the Group is to ensure that it has access to various
forms of long-term financing, which in turn allows the Group to
further reduce its cost of capital and the cost of ownership of its
aircraft fleet.
3. Critical accounting estimates and judgments made in applying
the Group's accounting policies
a) Maintenance policy
Estimate: For aircraft held under lease agreements, provision is
made for the minimum unavoidable costs of specific future
maintenance obligations created by the lease at the time when such
obligation becomes certain. The amount of the provision involves
making estimates of the cost of the heavy maintenance work that is
required to discharge the obligation, including any end of lease
costs.
Estimate: The cost of heavy maintenance is capitalised and
recognised as a tangible fixed asset (and classified as an
"aircraft maintenance asset") at the earlier of: (a) the time the
lease re-delivery condition is no longer met; or (b) when
maintenance, including enhancement, is carried out. The calculation
of the depreciation charge on such assets involves making estimates
for the future utilisation of the aircraft and in the case of
engines also of the future operating conditions of the engine.
The bases of these estimates are reviewed annually, and also
when information becomes available that is capable of causing a
material change to an estimate, such as renegotiation of end of
lease return conditions, increased or decreased utilisation of the
assets, or changes in the cost of heavy maintenance services.
Judgment: The Group lease by lease makes a judgment whether it
would perform future maintenance that would impact the condition of
the respective aircraft or spare engine asset in a way that it
eliminates the need for paying compensation to the lessor on the
re-delivery of the leased asset. When such maintenance is not
expected then accrual is made for the compensation due to the
lessor in line with the terms of the respective lease contract.
Judgment: The policy adopted by the Group, as summarized above,
is only one of the policies available under IFRS in accounting for
heavy maintenance for aircraft held under lease agreements. A
principal alternative policy involves recognising provisions for
future maintenance obligations in accordance with hours flown or
similar measure, and not only when lease re-delivery conditions are
not met. In the judgment of the directors the policy adopted by the
Group, whereby provisions for maintenance are recognised only when
lease re-delivery conditions are not met, provides the most
reliable and relevant information about the Company's obligations
to incur major maintenance expenditure on leased aircraft and at
the same time it best reflects the fact that an aircraft has lower
maintenance requirements in the early years of its operation.
b) Hedge and derivative accounting
Estimate: The fair value of derivatives (namely the open
position of cash flow hedges) is estimated by the contracting
financial institutions as per their industry practice. As required,
the fair values ascribed to those instruments are verified also by
management using high-level models.
Estimate: The effectiveness of hedges is tested both
prospectively and retrospectively to determine the appropriate
accounting treatment of hedge gains and losses. Prospective testing
of open hedges requires making certain estimates, the most
significant one being for the future expected level of the business
activity of the Group. Estimating the expected level of future
business activity is particularly critical in periods of high
uncertainty like the current corona virus outbreak. See sensitivity
analysis in Note 2 under hedges.
c) Net presentation of government taxes and other similar
levies
The Group's accounting policy stipulates that where charges
levied by airports or government authorities on a per passenger
basis represent a government tax in fact or in substance, then such
amounts are presented on a net basis in the statement of
comprehensive income (netted between the revenue and the airport,
handling and en-route charges lines).
Judgment: Management reviews all passenger-based charges levied
by airports and government authorities to ensure that any amounts
recovered from passengers in respect of these charges are
appropriately classified within the statement of comprehensive
income. Given the variability of these charges and the number of
airports and jurisdictions within which the Group operates, the
assessment of whether these items constitute taxes in nature is an
inherently complex area, requiring a level of judgment.
d) Accounting for aircraft and spare engine assets
Estimate: In accounting for aircraft and spare engine assets,
the Group must make estimates about the expected useful lives of
the assets, the expected residual values of the assets, and (for
the purposes of component accounting) the cost and timing of major
future airframe and engine overhauls.
Judgment: When the Group acquires new aircraft and spare
engines, it additionally applies the following critical judgments
in determining the acquisition cost of these assets:
-- Engine contracts typically include the selection of an engine
type to be installed on future new aircraft, a commitment to
purchase certain number of spare engines, and lump-sum (i.e. not
per engine) concessions from the manufacturer. Management
recalculates the unit cost of engines by allocating lump-sum
credits over all engines ordered and by adjusting costs between
installed and spare engines in a way that ensures that identical
physical assets have equal acquisition cost.
-- Aircraft acquisition costs are recalculated to reflect the
impacts of (i) any adjustment on the cost of installed engines (as
above); and (ii) concessions received from the manufacturers of
other aircraft components under selection agreements. Such
acquisition cost has relevance also for leased aircraft when
calculating the amount of total gain or loss on the respective sale
and leaseback agreement (see next).
Estimate: What regards gains and losses coming from sale and
leaseback agreements for aircraft and spare engines, the
determination of the amounts to be deferred and to be recognised
immediately, respectively, requires estimating the fair value of
these assets at the date of the transaction. In determining fair
values the Group relies on independent third party valuation
reports prepared by specialist aircraft and engine valuation
experts.
e) Accounting for leases
During the adoption and the ongoing application of IFRS 16 the
following critical judgments and estimates were made by the
Group:
Judgment: Some of the Group's lease contracts contain lease
extension options. The extension option is taken into account in
the measurement of the lease liability only when the Group is
reasonably certain that it would later exercise the option. Such
judgment is relevant both at inception, for the initial measurement
of the lease liability, and also for a subsequent remeasurement of
the lease liability if the initial judgment is revised at a later
date.
Judgment: The Group takes the view that, as a lessee, it is not
able to readily determine the interest rate implicit in its lease
contracts. Therefore, it applies its incremental borrowing rate for
discounting future lease payments.
Estimate: The Group does not currently have external debt
through which its incremental borrowing rate could be observed. The
incremental borrowing rate of the Group is at any point in time
determined by taking into account the risk-free rate of return
(that on the financial markets is applied for debt with similar
characteristics), the assumed credit rating of the Group (this is
for historic periods when it was not available from rating
agencies) and estimating the risk premium associated with that
credit rating.
Estimate: The right-of-use assets associated with aircraft and
spare engine lease contracts are split into asset components on the
basis of value proportions that could be observed on an owned
aircraft of the same type and age. The useful economic life of the
asset components that represent the maintenance condition of the
aircraft and of its key components is estimated to last until the
respective aircraft component does not any longer meet the return
conditions defined in the lease contract.
f) Income taxes
Judgment: A significant judgment has been made by the Group in
relation to the position that the Swiss tax authority would take
with respect to the calculation of the income tax base for
financial years 2018-2020 for one of the legal entities of the
Group. In applying IFRIC 23 the Group applied the 'most likely
amount method' and, by relying also on professional advice, took
the view that the positions taken by the Group represent also the
most likely outcome for the Swiss income tax liabilities.
4. Prior year adjustments/restatements
The Group adopted IFRS 16 on 1 April 2019 (the date of initial
application) using the "full retrospective method" of transition.
The financial statements for the year ended 31 March 2019 were
re-stated to IFRS 16.
The Group is accruing for the compensation payable to lessors
related to re-delivery condition of its leased aircraft where it is
not expected that such obligations would be avoided by performing
maintenance at the re-delivery. The Group in earlier years failed
to accrue for these costs on a few of its aircraft leases of
shorter tenure. These costs, albeit these are immaterial to any
statement of comprehensive income, are now recognised with
retrospective effect, as if were accrued from the inception of the
respective lease contracts, and the financial statements for the
year ended 31 March 2019 were re-stated accordingly.
The consolidated statement of financial position at 31 March
2018 has been restated as follows:
Impact of
Balance at Balance a
31 March 2018 Impact of lessor compensation 1 April 2018
As previously stated IFRS16 restatement restatement As restated
EUR million EUR million EUR million EUR million
Property, plant and equipment 684.5 1,155.9 - 1,840.5
Deferred interest
(non-current) 3.4 (3.4) - -
Deferred interest (current) 0.2 (0.2) - -
Trade and other receivables
(non-current) 4 3.7 0.9 - 44.6
Trade and other receivables
(current) 1 95.4 (17.6) - 177.8
Retained earnings 1,028.7 (140.0) (13. 0 ) 875.7
Trade and other payables
(current) 249.1 - 13.0 262.1
Deferred income (non-current) 1 07.3 (95.8) - 1 1.4
Deferred income (current) 3 30.1 (25.0) - 305.1
Borrowings (non-current) 4 .7 1,185.7 - 1,190.5
Borrowings (current) 0. 6 210.8 - 211.4
============================= ===================== =================== ============================ =============
The consolidated statement of financial position at 31 March
2019 has been restated as follows:
Impact of
Balance at Balance at
31 March 2019 Impact of lessor compensation 31 March 2019
As previously stated IFRS16 restatement restatement As restated
EUR million EUR million EUR million EUR million
---------------------------- --------------------- ------------------- ---------------------------- --------------
Property, plant and
equipment 659.3 1,407.6 - 2,067.0
Deferred tax assets 0.1 0.5 - 0.6
Deferred interest
non-current 2.3 (2.3) - -
Trade and other receivables
non-current 17.0 1.2 - 18.2
Trade and other receivables
current 287.3 (19.5) - 267.8
Deferred interest current 0.6 (0.6) - -
Retained earnings 1,320.2 (303.3) ( 18.3) 9 98.7
Borrowings non-current 2.1 1 ,508.1 - 1 ,510.3
Deferred income non-current 104.2 (90.6) - 13.6
Deferred tax liabilities 2.2 (2.2) - -
Trade and other payables 306.4 (4.3) 1 8.3 3 20.4
Borrowings current 0.1 3 04.1 - 3 04.3
Deferred income current 420.0 (24.9) - 395.1
============================ ===================== =================== ============================ ==============
The Consolidated statement of comprehensive income for the year
ended 31 March 2019 has been restated as follows:
Impact of
2019 Impact of lessor compensation 2019
As previously stated IFRS16 restatement restatement As restated
EUR million EUR million EUR million EUR million
----------------------------- --------------------- ------------------- ----------------------------- ------------
Maintenance materials and
repairs (115.1) (15.2) (3.9) (134.1)
Aircraft rentals (326.0) 326.0 - -
Depreciation and amortization (92.7) (241.8) - (334.5)
Other expenses (30.9) (7.0) - (37.9)
Financial expenses (4.1) (89.4) - (93.5)
Net foreign exchange loss (1.6) - (1.4) (3)
Exceptional financial expense - (138.7) - (138.7)
Income tax expense (4.9) 2.7 - (2.2)
============================= ===================== =================== ============================= ============
Profit from continuing
operation 295.3 (163.3) (5.3) 126.7
Profit for the year 291.6 (163.3) (5.3) 123.0
============================= ===================== =================== ============================= ============
Earnings per share for the year ended 31 March 2019 has been
restated as follows:
Impact
of
Euro/ share Impact
of lessor
As previously IFRS16 compensation
stated restatement restatement As restated
----------------------------------- ------------- ------------ ------------- ------------
Earnings per share from continuing
operation 4.06 (2.25) (0.07) 1.74
Diluted earnings per share
from continuing operation 2.34 (1.28) (0.04) 1.01
Earnings per share 4.01 (2.25) (0.07) 1.69
Diluted earnings per share 2.31 (1.28) (0.04) 0.98
=================================== ============= ============ ============= ============
The Consolidated statement of cash flows for the year ended 31
March 2019 has been restated as follows:
Impact of
2019 Impact of lessor compensation 2019
As previously stated IFRS16 restatement restatement As restated
EUR million EUR million EUR million EUR million
----------------------------- --------------------- ------------------- ----------------------------- ------------
Profit before tax 296.6 (166.1) (5.3) 125.2
Adjustment for depreciation 87.4 241.8 - 329.2
Adjustment for financial
income (6.4) (8.6) - (15.0)
Adjustment for financial
expense 5.9 244.2 - 250.1
Impact of change in trade and
other receivables (57.5) 0.7 - (56.8)
Impact of change in deferred
interest 0.7 (0.7) - -
Impact of change in trade and
other payables 62.2 - 5.3 67.5
Impact of change in deferred
income 79.0 24.1 - 103.1
============================= ===================== =================== ============================= ============
Interest paid (3.5) (89.4) - (92.9)
Repayment of loans (3.1) (246.1) - (249.2)
============================= ===================== =================== ============================= ============
5. Revenue
The split of total revenue presented in the statement of
comprehensive income, being passenger ticket revenue and ancillary
revenue, is a non-IFRS measure (or Alternative Performance
Measure). The Group did not change the disaggregation of revenue to
that defined under IFRS 15. The existing presentation is considered
relevant for the users of the financial statements because (i) it
mirrors disclosures presented outside of the financial statements
and (ii) it is regularly reviewed by the Chief Operating Decision
Maker for evaluating financial performance of the (now only one)
operating segment.
Revenue from contracts with customers can be disaggregated as
follows based on IFRS 15:
2020 2019
EUR' 000 EUR'000
============================================ ======== =======
Revenue from contracts with passengers 2,706.1 2,296.4
Revenue from contracts with other partners 55.2 22.7
Total revenue from contracts with customers 2,761.3 2,319.1
============================================ ======== =======
These two categories represent revenues that are distinct from a
nature, timing and risks point of view. Revenue from contracts with
other partners relate to commissions on the sale of on-board
catering, accommodation, car rental, travel insurance, bus
transfers, premium calls and co-branded cards.
The contract assets reported in 2020 as part of trade and other
receivables amounted to EUR1.2 million and the contract liabilities
(unearned revenues) reported as part of deferred income were
EUR168.4 million. Of the EUR2,706.1 million revenue recognised in
2020, EUR395.1 million was included in the contract liability
balance at the beginning of the year (see unearned revenue in Note
13). For 2019 the same amount was EUR304.4 million.
6. Net financing income and expense
2019
2020 (restated)
EUR million EUR million
Interest income 45.4 2.8
Gain on discontinued FX hedges 1.9 0
Other - 3.4
Financial income 47.3 6.2
================================= ============ ============
Interest expenses:
Convertible debt (2.0) (2.0)
Leases (86.5) (89.7)
Other (3.0) (1.8)
Financial expenses (91.5) (93.5)
================================= ============ ============
Net foreign exchange gain/(loss) 0.1 (3.0)
================================= ============ ============
Exceptional financial expense - (138.7)
================================= ============ ============
Net financing expense (44.2) (229.0)
================================= ============ ============
Interest income and expense include interest on financial
instruments (earned on cash and equivalents and in 2020 also on FX
forward hedges) and, under the 'Other' category the effect of the
initial discounting of long-term deposits and the later unwinding
of such discounting.
Interest income has increased due to the Group converting its
bank deposits from Euro to US Dollar on 1 April 2019 and earning
higher rate of interest.
In the 2019 financial year (as restated) the Group had
exceptional financial expense of EUR138.7 million relating to net
foreign exchange loss calculated and recognised retrospectively as
part of the IFRS 16 restatement of the Group's financial
statements. This unrealised loss was caused by the significant
appreciation of the US Dollar to the Euro during the 2019 financial
year, impacting on the net US Dollar liability position of the
Group recognised under IFRS 16. The same impact was immaterial in
2020 as the Group, following adoption of IFRS 16, actively managed
this FX exposure.
The Group changed the presentation of foreign exchange gains and
losses, and combined realised and unrealised foreign exchange gains
and losses in one line; the comparative numbers were changed
accordingly.
7. Exceptional items and underlying profit
Exceptional items
Exceptional items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the Group. They are
material non-recurring items of income or expense that have been
shown separately due to the significance of their nature or
amount.
In the 2020 financial year the Group had exceptional operating
expense of EUR63.7 million relating to fuel hedges that were
classified as discontinued during March 2020 as a consequence of
the grounding of the majority of the Group's fleet under the COVID
19 virus situation. In the 2019 financial year the EUR138.7 million
exceptional expense related to foreign exchange loss calculated and
recognised retrospectively as part of the IFRS 16 restatement of
the Group's financial statements (see also in Note 6). These items
were used by management in the determination of the non-IFRS
underlying profit measure for the Group - see below.
Underlying profit
2019
2020 (restated)
EUR million EUR million
================================================ =========== ===========
Profit from continuing operation 281.1 126.7
Adjustment for (exclusion of) exceptional items 63.7 138.7
================================================ =========== ===========
Underlying profit after tax 344.8 265.4
================================================ =========== ===========
The tax effects of the adjustments made above are
insignificant.
8. Income tax expense
Recognised in the statement of comprehensive income
2019
2020 (restated)
EUR million EUR million
==================================================== ============ ============
Current tax on profits for the year 4.5 1.4
Adjustment for current tax of prior years - (2.9)
Other income-based taxes for the year 10.5 10.4
Adjustment for income-based taxes of prior years - 1.0
---------------------------------------------------- ------------ ------------
Total current tax expense 15.0 9.9
---------------------------------------------------- ------------ ------------
Deferred tax - decrease in deferred tax liabilities - (7.1)
Deferred tax - increase in deferred tax assets (1.9) (0.6)
==================================================== ============ ============
Total deferred tax benefit (1.9) (7.7)
==================================================== ============ ============
Total tax charge 13.1 2.2
==================================================== ============ ============
The Company, that is Wizz Air Holdings Plc, has a tax rate of
13.97% (2019: 7.8%). The tax rate relates to Switzerland, where the
Company is tax resident. The income tax expense is fully
attributable to continuing operations.
Reconciliation of effective tax rate
The tax charge for the year (including both current and deferred
tax charges and credits) is different to the Company's standard
rate of corporation tax of 13.97% (2019: 7.8%). The difference is
explained below.
2019
2020 (restated)
EUR million EUR million
======================================================================== ============ ============
Profit before tax 294.1 128.9
======================================================================== ============ ============
Tax at the corporation tax rate of 13.97% (2019: 7.8%) 41.1 10.1
Adjustment for taxes of prior years - (1.9)
Decrease in deferred tax liabilities due to reduced Swiss tax rate (0.1) (5.3)
Effect of different tax rates of subsidiaries versus the parent company (38.4) (12.1)
Other income based foreign tax 10.5 11.4
======================================================================== ============ ============
Total tax charge 13.1 2.2
======================================================================== ============ ============
Effective tax rate 4.4% 1.7%
======================================================================== ============ ============
The effect of different tax rates of subsidiaries is a
composition of impacts primarily in Switzerland and the UK,
relating to the airline subsidiaries of the Group.
The Company paid EUR12.6 million tax in the year (2019: EUR14.1
million - this figure has been corrected from the EUR0.2 million
originally stated in the 2019 Annual Report; otherwise this amount
was presented and accounted for in the prior year financial
statements correctly). Substantially all the profits of the Group
in 2020 and 2019 were made by the airline subsidiaries of the
Group, and substantially all the tax charges presented in this Note
were incurred by these two entities.
Other income based foreign tax represents the "innovation
contribution" and the local business tax payable in Hungary in 2020
and 2019 by the Hungarian subsidiaries of the Group, primarily Wizz
Air Hungary Kft. Hungarian local business tax and innovation
contribution are levied on an adjusted profit basis.
Recognised in the statement of other comprehensive income
2020 2019
EUR million EUR million
================= =========== ===========
Deferred tax (0.6) (0.3)
================= =========== ===========
Total tax charge (0.6) (0.3)
================= =========== ===========
Interpretation 23 'Uncertainty over Income Tax Treatments'
(IFRIC 23)
The Group has open tax periods in a number of jurisdictions
involving uncertainties of different nature and materiality, the
most important open ones being for the F18-F20 financial years. The
Group assessed the impact of uncertainty of each of its tax
positions in line with the requirements of IFRIC 23. The outcome of
this assessment was to recognise EUR3.7 million current income tax
liability in 2020 (against opening retained earnings). (There was
no liability recognised in 2019 as the Group adopted IFRIC 23 in
2020.) The EUR3.7 million additional liability relates to uncertain
tax positions in certain subsidiary tax returns of the Group for
the 2015-2019 financial years. For all other tax returns the Group
concluded that it was probable that the tax authority would accept
the uncertain tax treatment that has been taken or is expected to
be taken in those tax returns and therefore accounted for income
taxes consistently with that tax treatment. The final liabilities,
as later assessed by the tax authorities, may vary from the amounts
that have been recognised by the Group.
9. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted
average number of Ordinary Shares in issue during each year.
2019
2020 (restated)
============================================================ ========== ===========
Profit from the year from continuing operation, EUR million 281.1 126.7
Profit from the year, EUR million 281.1 123.0
============================================================ ========== ===========
Weighted average number of Ordinary Shares in issue 74,685,880 72,753,686
============================================================ ========== ===========
Basic earnings per share from continuing operation, EUR 3.76 1.74
============================================================ ========== ===========
Basic earnings per share, EUR 3.76 1.69
============================================================ ========== ===========
There were also 17,377,203 Convertible Shares in issue at 31
March 2020 (29,830,503 at March 31, 2019). These shares are
non--participating, i.e. the profit attributable to them is nil.
These shares are not included in the basic earnings per share
calculation above.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the
weighted average number of Ordinary Shares in issue with the
weighted average number of Ordinary Shares that could have been
issued in the respective year as a result of the conversion of the
following convertible instruments of the Group:
-- Convertible Shares;
-- Convertible Notes; and
-- employee share options (vested share options are included in the calculation).
The profit for the year has been adjusted for the purposes of
calculating diluted earnings per share in respect of the interest
charge relating to the debt which could have been converted into
shares.
2019
2020 (restated)
=========================================================================================== =========== ===========
Profit for the year from continuing operation, EUR million 281.1 126.7
Profit for the year, EUR million 281.1 123.0
=========================================================================================== =========== ===========
Interest expense on convertible debt (net of tax), EUR million 2.0 2.0
=========================================================================================== =========== ===========
Profit used to determine diluted earnings per share from continuing operation, EUR million 283.1 128.7
=========================================================================================== =========== ===========
Profit used to determine diluted earnings per share, EUR million 283.1 125.0
=========================================================================================== =========== ===========
Weighted average number of Ordinary Shares in issue 74,685,880 72,753,686
Adjustment for assumed conversion of convertible instruments 52,572,127 54,372,732
=========================================================================================== =========== ===========
Weighted average number of Ordinary Shares for diluted earnings per share 127,258,007 127,126,418
=========================================================================================== =========== ===========
Diluted earnings per share from continuing operation, EUR 2.22 1.01
=========================================================================================== =========== ===========
Diluted earnings per share, EUR 2.22 0.98
=========================================================================================== =========== ===========
Interest expense on convertible debt was all related to the
continuing operation. The dilution effect of each class of
convertible instrument from the total 52,572,127 dilutive shares in
2020 was the following: Convertible Shares: 27,993,131 shares;
convertible debt: 24,246,715 shares and employee share options:
332,281 shares.
Underlying earnings per share
The underlying earnings per share is a fully diluted non-IFRS
measure defined by the Company, calculated as follows:
2020 2019
============================================================================= =========== ===========
Underlying profit for the year (see Note 7), EUR million 344.8 265.4
Interest expense on convertible debt, EUR million 2.0 2.0
============================================================================= =========== ===========
Profit used to determine underlying earnings per share, EUR million 346.8 267.3
============================================================================= =========== ===========
Weighted average number of Ordinary Shares for underlying earnings per share 127,258,007 127,126,418
============================================================================= =========== ===========
Underlying earnings per share, EUR 2.72 2.10
============================================================================= =========== ===========
The calculation of the underlying EPS is different from the
calculation of the IFRS diluted EPS measure in that for earnings
the underlying profit for the year was used (see Note 7) as opposed
to the statutory (IFRS) profit for the year. The underlying EPS
measure was introduced by the Company to better reflect the
underlying earnings performance of the business.
10. Property, plant and equipment
Advances RoU
Advances paid assets
Aircraft Fixtures paid for aircraft
Land and Aircraft assets and for aircraft and RoU assets
building maintenance and parts fittings aircraft maintenance spares other Total
EUR assets EUR EUR EUR assets EUR EUR EUR
million EUR million million million million EUR million million million million
============= ========= =========== ========= ========= ========= =========== ========= ========== ==========
Cost
At 1 April
2018
(restated) 0.7 351.1 64.3 12.5 331.2 103.6 1,884.3 11.1 2,758.8
Additions 17.1 44.5 31.6 0.9 102.7 76.2 489.8 3.0 765.8
Disposals - (12.1) (26.7) (0.1) (174.0) (10.3) (88.1) (6.2) (317.5)
Transfers - 30.9 5.0 (5.0) - (30.9) - - -
At 31 March
2019
(restated) 17.9 414.3 74.1 8.3 259.9 138.6 2,286.0 7.9 3,207.0
============= ========= =========== ========= ========= ========= =========== ========= ========== ==========
Additions 0.2 46.2 277.1 4.6 383.4 76.3 162.3 3.0 953.1
Disposals - (20.0) (8.4) (0.2) (85.2) - (25.8) - (139.6)
Transfers - 22.9 12.1 - (12.1) (22.9) - - -
At 31 March
2020 18.1 463.4 354.9 12.6 546.0 192.0 2,422.5 10.9 4,020.5
============= ========= =========== ========= ========= ========= =========== ========= ========== ==========
depreciation
Accumulated
At 1 April
2018
(restated) 2.8 160.3 20.6 4.2 - - 729.5 0.9 918.3
Depreciation
charge for
the year 1.7 75.3 8.6 0.8 - - 240.7 0.6 327.7
Disposals (3.0) (11.9) (2.8) (0.2) - - (88.1) - (106.0)
At 31 March
2019
(restated) 1.6 223.7 26.4 4.8 - - 882.1 1.4 1,140.0
============= ========= =========== ========= ========= ========= =========== ========= ========== ==========
Depreciation
charge for
the year 1.2 82.2 16.8 0.9 - - 271.7 1.2 374.0
Disposals (0.7) (19.0) (1.7) (0.2) - - (25.8) - (47.4)
FX
translation
effect - 0.1 0.2 - - - - 0.6 0.9
At 31 March
2020 2.1 287.0 41.7 5.5 - - 1,128.1 3.2 1,467.5
============= ========= =========== ========= ========= ========= =========== ========= ========== ==========
Net book
amount - -
At 31 March
2020 16.0 176.6 313.4 7.1 546.0 192.0 1,294.3 7.6 2,553.0
============= ========= =========== ========= ========= ========= =========== ========= ========== ==========
At 31 March
2019
(restated) 16.3 190.6 47.8 3.5 259.9 138.6 1,403.9 6.5 2,067.0
------------- --------- ----------- --------- --------- --------- ----------- --------- ---------- ----------
Aircraft assets and parts from 2020 include aircraft leased
under special Japanese tax lease contracts ('JOLCO') as part of
sale and leaseback arrangements that under IFRS 16 are not
classified as leases.
Other RoU (right-of-use) assets include leased buildings and
simulator equipment.
Additions to aircraft maintenance assets (EUR46.2 million in
2020 and EUR44.5 million in 2019) were fixed assets created
primarily against provision, as the Group's aircraft or their main
components did not any longer meet the relevant return conditions
under lease contracts.
Additions to 'advances paid to aircraft maintenance assets'
reflect primarily the advance payments made by the Group to the
engine maintenance service provider under fleet hour agreements
(FHA).
Additions to 'advances paid for aircraft' represent pre-delivery
payments (PDP) made in the year, while disposals in the same
category represent PDP refunds received from the manufacturer where
the respective aircraft or spare engine was leased (i.e. not
purchased) by the Group. During 2019 the balance was reduced and
there were no PDP payments made by the Group during the year -
hence in the statement of cash flows there was only cash inflow
(EUR71.3 million 'refund of advances paid for aircraft') but there
was no cash outflow. The net increase in cost (additions less
disposals and transfers) in this table for 2020 of EUR286.1 million
represent the new PDP payments made in the year.
The Group considered potential triggers of impairment of its
property, plant and equipment particularly in the context of
COVID-19 but did not identify triggers of significant impairment,
thus concluded that no impairment is needed, taking into account
also that it is expected that the business performance will
materially recover during the 2021 financial year.
11. Derivative financial instruments
2020 2019
EUR million EUR million
======================================= =========== ===========
Assets
Non-current derivatives
Cash flow hedges 0.9 3.0
Current derivatives
Fair value hedges 7.1 -
Cash flow hedges 10.2 28.5
======================================= =========== ===========
Total derivative financial assets 18.2 31.5
======================================= =========== ===========
Liabilities
Non-current derivatives
Cash flow hedges (41.3) (1.5)
Current derivatives
Cash flow hedges (266.5) (17.3)
======================================= =========== ===========
Total derivative financial liabilities (307.8) (18.8)
======================================= =========== ===========
Derivative financial instruments represent cash flow and fair
value hedges (see Note 2). The full value of a hedging derivative
is classified as a current asset or liability if the remaining
maturity of the hedged item is less than a year.
The net position of assets and liabilities in respect of open
cash flow hedges matches the cash flow hedging reserve in the
statement of financial position, the reconciling items being (i)
deferred tax recognised in the hedging reserve; (ii) the
ineffective or discontinued portion of the hedges; and (iii) the
impact of hedging with non--derivatives.
Starting from 1 April 2019 the Group started to use fair value
hedges as well in order to mitigate change in lease liability
value. The value of fair value hedge open positions is recorded
immediately in the statement of comprehensive income as financial
gain or loss.
The mark-to-market gains (derivative financial assets) were
coming from gains on call options bought (as part of zero-cost
collar instruments) and FX forward transactions that were in the
money at year end. In 2020 these gains related almost exclusively
to FX options while in 2019 related both to fuel and FX
options.
The mark-to-market losses (derivative financial liabilities)
were coming from losses on put options sold (as part of zero-cost
collar instruments) that were out of the money at year end. In 2020
and 2019 these losses related almost exclusively to fuel options,
and the loss was particularly high in 2020 as the fuel price
dropped significantly at the end of the year.
12. Borrowings
2019
2020 (restated)
EUR million EUR million
----------------------------------------------- -------------
Lease liability under IFRS 16 324.3 304.3
Liability related to JOLCO contracts 16.5 -
-------------------------------------- ------- -------------
Total current borrowings 340.8 304.3
-------------------------------------- ------- -------------
Lease liability under IFRS 16 1,397.0 1,510.3
Liability related to JOLCO contracts 274.9 -
-------------------------------------- ------- -------------
Total non-current borrowings 1,671.9 1,510.3
-------------------------------------- ------- -------------
Total borrowings 2,012.7 1,814.5
-------------------------------------- ------- -------------
The reconciliation of the opening lease liability balance to
operating lease commitments previously disclosed:
EUR million
------------------------------------------------- -----------
Operating lease commitments disclosed as at 31
March 2019 2,550.1
Finance lease liabilities recognised as at 31
March 2019 under IAS 17 2.3
Effect of discounting under IFRS 16 (372.4)
Value of lease commitments with contract signed
but service not started (327.9)
Contract for the lease of intangible asset (37.6)
------------------------------------------------- -----------
Lease liability recognised as at 1 April 2019 1 814.5
------------------------------------------------- -----------
Non-current lease liabilities 1,510.3
Current lease liabilities 304.3
------------------------------------------------- -----------
Operating lease commitments disclosed in 2019 covered all lease
agreements signed until 31 March 2019, including also those leases
that commenced only after 31 March 2019. However, under IFRS 16
such contracts (that have not commenced during the year) are not
included in the measurement of the lease liability. The EUR327.9
million in the table represents the amount of lease commitments
under such contracts.
The maturity profile of borrowings as at 31 March 2020 is as
follows:
IFRS 16 aircraft
and engine lease IFRS 16 other JOLCO lease
liability lease liability liability Total
EUR million EUR million EUR million EUR million
---------------------- ------------------- ------------------ -------------- ------------
Payments due:
Within one year 323.4 0.9 16.5 340.8
Between one and five
years 1,078.7 2.0 69.5 1,150.2
More than five years 311.1 5.3 205.3 521.7
====================== =================== ================== ============== ============
Total borrowings 1,713.2 8.2 291.3 2,012.7
====================== =================== ================== ============== ============
The maturity profile of borrowings as at 31 March 2019 is as
follows:
IFRS 16 aircraft
and engine IFRS 16 other JOLCO lease
lease liability lease liability liability Total
EUR million EUR million EUR million EUR million
(restated) (restated) (restated) (restated)
====================== ================= ================== ============= ============
Payments due:
Within one year 303.2 1.0 - 304.3
Between one and five
years 1,026.3 2.3 - 1,028.5
More than five years 478.8 2.9 - 481.7
====================== ================= ================== ============= ============
Total borrowings 1,808.3 6.2 - 1,814.5
====================== ================= ================== ============= ============
13. Deferred income
2019
2020 (restated)
EUR million EUR million
================================== ============ ============
Non-current financial liabilities
Deferred income 13.1 13.6
================================== ============ ============
Current financial liabilities
Unearned revenue 168.4 395.1
Other 3.9 -
================================== ============ ============
172.3 395.1
================================== ============ ============
Total deferred income 185.4 408.7
================================== ============ ============
Non-current deferred income represents the value of benefit for
the Group coming from concessions (cash credits and free aircraft
components) received from aircraft and certain component suppliers,
that will be recognised as a credit (an aircraft rentals expenses
decreasing item) on a straight-line basis over the lease term of
the respective asset.
Current deferred income represents the value of tickets paid by
passengers for which the flight service is yet to be performed
('unearned revenue'), the value of membership fees paid but not yet
recognised and the current part of the value of supplier credits
received. The decrease in unearned revenue was driven by the high
number of cancellations shortly before year end and the significant
drop in ticket sales in March 2020 due to the corona virus
outbreak.
The contract liabilities (unearned revenue) of EUR168.4 million
existing at 31 March 2020 will become revenue during the 2021
financial year (subject to further cancellations that might happen
after the year end).
14. Provisions for other liabilities and charges
Aircraft maintenance Other Total
EUR million EUR million EUR million
================================================= ==================== =========== ===========
At 1 April 2018 150.7 7.9 158.6
================================================= ==================== =========== ===========
Non-current provisions 94.8 - 94.8
Current provisions 55.9 7.9 63.8
------------------------------------------------- -------------------- ----------- -----------
Capitalised within property, plant and equipment 36.2 - 36.2
Charged to comprehensive income - 4.5 4.5
Used during the year (48.6) (1.5) (50.1)
================================================= ==================== =========== ===========
At 31 March 2019 138.3 10.9 149.2
================================================= ==================== =========== ===========
Non-current provisions 45.9 - 45.9
Current provisions 92.4 10.9 103.3
================================================= ==================== =========== ===========
Capitalised within property, plant and equipment 42.4 - 42.4
Charged to comprehensive income - 24.4 24.4
Used during the year (74.8) (20.0) (94.8)
================================================= ==================== =========== ===========
At 31 March 2020 105.9 15.3 121.2
================================================= ==================== =========== ===========
Non-current provisions 44.2 2.7 46.9
Current provisions 61.7 12.6 74.3
================================================= ==================== =========== ===========
Non-current provisions relate to future aircraft maintenance
obligations of the Group on leased aircraft and spare engines,
falling due beyond one year from the balance sheet date. Current
aircraft maintenance provisions relate to heavy maintenance
obligations expected to be fulfilled in the coming financial year.
The amount of provision reflects management's estimates of the cost
of heavy maintenance work that will be required in the future to
discharge obligations under the Group's lease agreements (see Note
3). Maintenance provisions in relation to engines covered by FHA
agreements are netted off with the FHA prepayments made to the
engine maintenance service provider in respect of the same group of
engines.
The decrease in maintenance provisions from 2018 to 2019 and
from 2019 to 2020 both related primarily to engine LLP
replacements.
Other provisions relate to future liabilities under the Group's
customer loyalty programme, all within one year.
15. Capital commitments
At 31 March 2020 the Group had the following capital
commitments:
-- a commitment to purchase 268 Airbus aircraft of the A320
family in the period 2020-2026. Of the 268 aircraft 248 relate to
the "neo" version of the A320 family (102 from the purchase orders
placed in June 2015 and 146 from the purchase order placed in
November 2017), while the remaining 20 relate to the "neo XLR"
version (from the purchase order placed in June 2019). The total
commitment is valued at US$33.5 billion (EUR30.5 billion) at list
prices in 2018 US Dollar terms (as at 31 March 2019: US$31.9
billion (EUR28.4 billion), valued at 2018 list prices). As at the
date of approval of this document 11 of the 268 aircraft are
covered by sale and leaseback agreements; and
-- a commitment to purchase 36 IAE "neo" (GTF) spare aircraft
engines in the period 2020-2026. In July 2016 the Group entered
into an engine selection agreement with Pratt & Whitney that,
among other matters, included a commitment for the Group to
purchase 16 spare engines (of which five were received in the 2019
financial year). In September 2019 the Group restated and amended
this engine selection agreement with certain other commitments
including a purchase of additional 25 spare engines until 2026. The
total commitment is valued at US$569.1 million (EUR518.4 million)
at list prices in 2020 US Dollar terms (as at March 2019: US$218.8
million (EUR195.2 million), valued at 2019 list prices). As at the
date of approval of this document the 36 engines are not yet
financed. Only a few of these 36 engines will be delivered in the
2021 financial year.
16. Contingent liabilities
Legal disputes
European Commission state aid investigations
Between 2011 and 2015, the European Commission has initiated
state aid investigations with respect to certain arrangements made
between Wizz Air and the following airports, respectively: Timi
oara, Cluj-Napoca, Târgu Mure , Beauvais and Girona. In the context
of these investigations, Wizz Air has submitted its legal
observations and supporting economic analyses of the relevant
arrangements to the European Commission, which are currently under
review. The European Commission has given notice that the state aid
investigations involving Wizz Air will be assessed on the basis of
the new "EU Guidelines on State aid to airports and airlines" which
were adopted by the European Commission on 20 February 2014. Where
relevant, Wizz Air has made further submissions to the European
Commission in response to this notification. In relation to the
Timisoara arrangements, the European Commission confirmed on 24
February 2020 that the arrangements did not constitute state aid.
We are awaiting decisions in relation to the other airport
arrangements mentioned herein above. Ultimately, an adverse
decision by the European Commission could result in a repayment
order for the recovery from Wizz Air of any amount determined by
the European Commission to constitute illegal state aid. None of
these ongoing investigations are expected to lead to exposure that
is material to the Group.
Claims by Carpatair
Between 2011 and 2013, Carpatair, a regional airline based in
Romania, has initiated a number of legal proceedings in Romania
alleging that Wizz Air has been receiving state aid from Timi oara
airport, demanding that Wizz Air reimburse any such state aid. In
addition, Carpatair has initiated an action for damages demanding
recovery from Wizz Air of approximately EUR93 million in alleged
damages, which damages claim was dismissed by the Bucharest court
of appeals on the basis of the substantive argument that Carpatair
lacks an interest in the matter. Technically, the decision by the
Bucharest court of appeals remains open to further appeal.
Importantly, in light of the favourable European Commission
decision on the Timisoara arrangements referred to above, it is
expected that the Romanian courts will rule in favour of Wizz Air
dismissing the respective requests and claims filed by
Carpatair.
No provision has been made by the Group in relation to these
issues because there is currently no reason to believe that the
Group will incur charges from these cases.
17. Subsequent events
There were no matters arising, between the statement of
financial position date and the date on which this results release
was approved by the Board of Directors, requiring adjustment in
accordance with IAS 10, Events after the reporting period. The
following important non-adjusting events should be noted, all being
direct or indirect consequence of the COVID-19 pandemic:
-- Compared to what it estimated at end of March 2020 the Group
further reduced its expected capacity utilisation for the 2021
financial year.
-- Following from the above, the forecast for fuel consumption
in the 2021 financial year was also further reduced, resulting in
further hedge instruments being discontinued for hedge accounting.
During May 2020 fuel hedges with notional amount of 115,000 metric
tons were discontinued, which represented EUR31.9 million loss in
the cash flow hedging reserve at 31 March 2020. (This is on top of
the fuel hedges that were classified as discontinued already in
March 2020, with a notional amount of 170,000 metric tons.) The
forecast of additional 115,000 metric tons gap between the fuel
consumption and the notional amount of hedges relates to the period
to 31 July, for which the Group has a relatively high degree of
confidence. It cannot be excluded that there will be a gap also
beyond 31 July but currently the financial impact of this is not
expected to be significant. There were also some FX hedges
classified as discontinued post 31 March 2020 but the impact of
these is not material.
-- Due to the flight cancellations made by the Group after the
year-end, primarily for May-June 2020, of the unearned revenue
balance of EUR168.4 million that existed at 31 March 2020, further
EUR54.6 million liability was reclassified from deferred income
into trade and other payables. It is yet to be seen how much of
this amount will be used by customers for re-booking tickets for
later dates and how much will need to be refunded by the Group in
cash, respectively.
-- The Group implemented a range of cost saving and cash-flow
improvement measures, including the laying off of app. 1,000 of its
employees announced in April 2020.
-- To strengthen its liquidity position the Group raised GBP 300
million debt through the UK Government's COVID Corporate Financing
Facility ('CCFF') programme.
-- In May 2020 the Group established Wizz Air Abu Dhabi LLC, a
joint venture airline company in the United Arab Emirates as a
subsidiary of Wizz Air Abu Dhabi Limited.
18. Related parties
Identity of related parties
Related parties are:
-- Indigo Hungary LP and Indigo Maple Hill LP (collectively
referred to as "Indigo" here), because it appointed two Directors
to the Board of Directors (all in service at 31 March 2020);
-- key management personnel (Directors and Officers); and
Indigo, Directors and Officers altogether held 20.0% of the
voting shares of the Company at 31 March 2020 (2019: 23.5%).
Transactions with related parties
Transactions with Indigo
At 31 March 2020 Indigo held 15,000,000 Ordinary Shares (equal
to 17.6% of the Company's issued share capital) and 17,377,203
Convertible Shares of the Company (2019: 15,000,000 Ordinary Shares
and 29,830,503 Convertible Shares).
Indigo has interest in convertible debt instruments issued by
the Company. The Company's liability to Indigo, including principal
and accrued interest, was EUR26.7 million at 31 March 2020 (2019:
EUR26.8 million).
During the year ended 31 March 2020 the Company entered into
transactions with Indigo as follows:
-- the Company recognised interest expense on convertible debt
instruments held by Indigo in the amount of EUR2.0 million (2019:
EUR2.0 million); and
-- fees of EUR0.2 million (2019: EUR0.3 million) were paid to
Indigo in respect of the remuneration of two of the Directors who
were delegated by Indigo to the Board of Directors of the
Company.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR FJMATMTBMMRM
(END) Dow Jones Newswires
June 03, 2020 02:00 ET (06:00 GMT)
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