Wizz Air continues to deliver strong passenger growth but most pleasingly for investors its load factor is also improving.

With 13 new routes, Wizz boosted capacity by 27.5% in October but managed to see a 30.5% rise in passenger numbers. This helped lift load factor to 92.1%.

Wizz’s focus on eastern and central Europe is paying off. Shares in Wizz have rocketed more than 110% in the last 12 months and are +83% over the last six months as the company seems to be carving out a very tidy little niche for itself in relatively immature markets. Whatever toll is being taken on the industry by rapid capacity expansion and lower fares, Wizz is on the right side of the bargain.

The company will release interim results for the six months ended 30 September 2017 this Wednesday.

Jul-Sep also saw strong load improvements and passenger growth but in a sector of overcapacity and falling fares, the real test will be profitability and margins. In the first quarter Wizz passed the test, improving capacity without compromising on pricing.

In Q1, passengers carried climbed by 25%, while revenues were 28% ahead of last year and profits were 50% higher at €58.1m. Free cash was more than €900m. Q1 unit revenues climbed 3.4% per available seat km, while costs per ASK were 2.1% higher. Profit margins climbed 1.8 percentage points to 12.4%.

At the time Wizz was still trading at a hefty discount to peers but as we noted on July 19th this wasn’t going to last long given the rate of growth. After gaining c30% since the Q1 update, WIZZ is now trading at a multiple of c19, broadly in line with EasyJet (c20) and Ryanair (c17). Shares rose 1.8% in early trading to 3,341p.

EasyJet also delivered 10% of passenger growth in October on better loads, which rose to 92.5% for the month from 90.2% in the prior year period. The +2.3pp load factor improvement beat the rolling 12-month average of 1.5pp, suggesting some pickup from Ryanair.

Undoubtedly Wizz and EasyJet picked up some business as a result of Ryanair’s rostering problems and cancellations. Passenger growth at Ryanair declined to +8% in October from a rolling annual level of c12%. Loads were still very strong and ahead of peers at 96%, although like Wizz and EasyJet, these were probably helped to some extent by the cancellations.

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