Shares in low-cost airline Wizz Air have slumped by 22% today, the biggest drop in the FTSE 250 today, after it reported sharply reduced profits for the last quarter.
The carrier has been one of the worst affected by the Pratt & Whitney engine issues in Airbus planes, which have forced it to ground more than a fifth of its fleet on average over the three months to June.
Operating profits were down to €44.6m, compared to €79.9m in the same period in 2023.
With lower growth and almost €40m in leasing costs to cover the grounding – albeit partly offset by compensation from the manufacturers – Wizz lowered its full year forecast profits by almost €200m, to €350-400m.
While the Budapest headquartered carrier has slightly stalled in its ambition to challenge Ryanair’s crown as Europe’s biggest budget airline, chief executive, József Váradi, said that performance had improved despite the problems, adding: “We remain on track to return to annual capacity growth [next year], underpinned by the pipeline of Airbus deliveries.”
Closing summary
Time for a recap….
The Bank of England has cut interest rates for the first time since the start of the Covid pandemic.
The Bank’s monetary policy committee (MPC) voted by a narrow majority to cut its base rate by a quarter of a percentage point to 5%, down from a 16-year high of 5.25%.
The MPC was split by five votes to four, with the governor, Andrew Bailey, casting the deciding vote for the first reduction in borrowing costs since March 2020.
With headline inflation holding at the Bank’s 2% target for a second consecutive month in June, financial markets had expected a cut in rates, although City economists had predicted it would be a close call amid fears over stubbornly high inflation becoming entrenched. The pound fell against the US dollar and euro.
The Bank also lifted its forecast for UK growth this year, saying the economy had been stronger than expected in 2024.
Bailey said inflationary pressures had “eased enough” to enable the first reduction in borrowing costs since the Bank stopped ramping up interest rates this time last year – the joint longest period that rates have been held after a hiking cycle since the turn of the millennium.
But he also insisted the Bank must be careful not to cut interest rates “too quickly or by too much.”
Bailey also told reporters that the government’s new public sector pay deal will have almost no impact on inflation.
Breaking: Andrew Bailey says the government's 5.5% public sector pay deal will have almost no impact on inflation. Less than 0.1%.
— Richard Partington (@RJPartington) August 1, 2024
"[an] increment in the inflation space which is very small... quite small second decimal place."
Former prime minister Rishi Sunak, and ex-chancellor Jeremy Hunt, had both claimed that these pay deal would threaten future rate cuts.
City economists predict the Bank will cut rates by another quarter of one percent by the end of this year, with November seen as a likely date for the next cut.
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