FTSE 250 airline Wizz Air (LSE:WIZZ) saw its share price fall 20% in a day after its latest earnings release, as engine reliability issues caused profits to dive 98%. But this looks a lot like a short-term issue.
I don’t see this as a good reason to avoid the stock. But the business also has a fundamental pricing dilemma that I think is much more significant and that’s enough to keep me well away.
Engine trouble
Despite revenues increasing slightly, Wizz reported a 98% decline in profits. This is partly due to 46 of its 179 aircraft being grounded due to engine issues.
The company has been leasing planes and staff to boost its capacity, but this has been expensive. Nonetheless, I don’t think this is why the stock just fell 20%.
There are three reasons for my view. One is that the engine troubles are likely to be a short-term issue and another is that Wizz is receiving compensation.
Most importantly, though,…
