Airline stocks are under renewed pressure this morning after Wizz Air issued a profit warning amid the Middle East conflict.
The budget airline said it expected a €50million (£43.5million) hit to its profits as planes were grounded and fuel prices soared as the price of brent crude rose to above $84 a barrel.
In an update after the market closed on Wednesday, Wizz Air said the war in Iran would push its full-year net profit below previous guidance, prompting a sell-off across the sector.
Shares in Wizz Air were down 5.63 per cent or 62.00p to 1,040.00p on Thursday morning, having fallen over 37 per cent in the past year.
IAG shares have fallen around 16 per cent in the past five days, while shares in Easyjet – which fell out of the FTSE 100 this week – were down nearly three per cent to 421.00p on Thursday.
According to analytics firm Cirium, the war has forced airlines to axe approximately 23,000 flights since the weekend.
Profit warning: Airline stocks fell across the board this morning after Wizz Air issued a profit warning amid the Middle East conflict
Wizz Air said around a third of the €50million impact it had braced for stemmed from the cancellation of scheduled services to the Middle East. It said the remainder looked set to come from adverse fuel prices and currency shifts linked to the conflict.
As a result, Wizz said its reported net profit would drop below the guidance issued in January, and now expects a loss for the year.
This week, analysts at Morgan Stanley said around 8 per cent of Wizz Air’s scheduled capacity was connected to the Middle East, against minimal exposure at Ryanair and easyJet, which operate almost entirely within Europe and are also more heavily hedged on fuel.
IAG faces some impact through British Airways and Iberia’s long-haul Middle East services, but its exposure is spread across a much bigger revenue base, curtailing the potential impact.
Sanjay Raja, Deutsche Bank’s chief UK economist, said travel fares were ‘highly sensitive to energy prices.’
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