Wizz Air pulls €200m float on market turbulence

Wizz Airs plans for flotation have been shelved as the industry struggles

The Hungarian airline, central and eastern Europe’s biggest no-frills operator, had said last month that it planned to raise €200 million (£159m) to strengthen its balance sheet, lease new aircraft and launch new routes.

But Wizz Air’s U-turn today came after a bumpy week for the aviation industry. Shares in airlines were hammered after Germany carrier Lufthansa slashed its profit targets for the next two years, citing competition from Middle East and low-cost rivals.

The next day Irish airline Aer Lingus issued its second profit warning this year after industrial action hit passenger bookings.

Wizz Air, which flies from 96 airports including Edinburgh and Glasgow, competes head-on with budget rivals EasyJet and Ryanair, whose shares have fallen 9 per cent and 7 per cent respectively over the period.

Despite the decision not to go ahead with its listing, Wizz Air said it was confident about prospects for the business. “The outlook for [the] business remains extremely positive and unaffected by the decision not to proceed with an IPO [initial public offering],” the group said.

Wizz Air, founded in 2004, has a network spanning 35 countries comprising 315 routes from 17 bases in nine central and eastern European countries. Last year it flew 13.9 million passengers.

The company’s decision to pull its London float follows a more volatile market for listings in the past month after a buoyant start to 2014 when companies rushed to market to raise cash.

Last month fashion retailer Fat Face, where former Marks & Spencer boss Sir Stuart Rose is chairman, cancelled its flotation citing “current equity market conditions”.

Recently floated companies such as Pets at Home and online retailer AO are trading below their listing prices, while holidays group Saga floated at the bottom end of its targeted price range.

Despite this, however, other companies have stuck to current plans to float. The motor breakdown giant AA has outlined plans for a £1.4 billion float in the second half of June, with ownership of the business passing from private equity backed Acromas Holdings to a group of blue-chip institutional investors.

And SSP, the catering giant behind 2,000 train station and airport fast foot outlets such as Caffe Ritazza and Upper Crust, is believed to be poised to unveil a £2bn summer float.

B&M, European Value Retail, chaired by former Tesco chief executive Sir Terry Leahy, has confirmed a flotation that is seen as valuing the business at between £2.5bn and £3bn while Zoopla, the online property advertising business majority owned by Daily Mail & General Trust, is set to float with an expected valuation of about £1bn.

One banking source commented: “Fears a few weeks back that the flotation market had peaked was due to a feeling some floats might have been over-priced and subsequently disappointed investors.

“But Wizz Air’s decision looks to be highly sector-specific [after] the recent profit warnings in the sector.”