Wizz Air downgraded to Ba2 by Moody’s as fleet issues slow recovery

Investing.com -- Moody’s Ratings downgraded Wizz Air Holdings plc’s long-term corporate family rating to Ba2 from Ba1 on Tuesday, while maintaining a negative outlook.

The rating action reflects Wizz Air’s weak credit metrics and slower-than-expected recovery due to aircraft groundings caused by GTF engine issues. These groundings have led to higher costs beyond agreed compensation levels and hindered the airline’s growth plans.

"The grounding of aircraft has significantly hindered Wizz Air’s growth plans, which are essential for improving profitability. The airline relies on growth to offset rising operating and inflation-related costs, but this strategy is undermined by its inability to fully utilize its fleet," said Dirk Goedde, Moody’s Ratings Vice President and lead analyst for Wizz Air.

The airline’s financial performance in fiscal year 2025 fell short of expectations, with metrics remaining outside the Ba1 rating category. Despite fleet expansion, the GTF engine issue resulted in flat capacity as measured by available seat kilometers (ASK) in FY25.

While Wizz Air achieved 4% revenue growth through improved load factor and increased yields, structural cost increases impacted profitability. The company’s Moody’s-adjusted EBIT margin declined to 2.8% from 5.8%, affected by higher staff and network costs, increased maintenance expenses from groundings, and higher depreciation from its growing but partially non-operational fleet.

Moody’s expects credit metrics to remain subdued over the next 12-18 months. Based on the delivery schedule and assuming improved load factors against slightly lower yields, the rating agency forecasts revenue growth of 12% and 10% in fiscal years 2026 and 2027 respectively.

Lower fuel prices are expected to support margin recovery, though cost increases for staff and network will persist. Moody’s projects the adjusted EBIT margin to increase toward 5% in 2026 with potential improvement thereafter, leading to an improved debt/EBITDA ratio of approximately 5.0x and 4.8x in 2026 and 2027, compared to 5.9x in fiscal year 2025.

The rating agency also downgraded Wizz Air’s Probability of Default rating to Ba2-PD from Ba1-PD and Wizz Air Finance Company BV’s backed senior unsecured notes and medium-term note program ratings to Ba2 from Ba1 and to (P)Ba2 from (P)Ba1.

Despite these challenges, Wizz Air’s rating remains supported by its superior cost base, efficient fleet, and focus on the growing CEE aviation market. The company also maintains a strong liquidity profile with approximately €1.7 billion in cash and cash equivalents as of March 2025, representing 32% of fiscal year 2025 revenue.

Wizz Air faces debt maturities of €500 million in backed senior unsecured notes in January 2026 and a €272 million ETS repurchase obligation due in March 2026, with the latter expected to be rolled over at maturity.

The negative outlook reflects credit metrics outside the requirements for a Ba2 rating and risks surrounding recovery and expansion in a volatile industry. Moody’s may stabilize the outlook if Wizz Air’s credit metrics align with their base case without external negative effects.

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