Hungary's Wizz Air revives bid to list in London

By bne IntelliNews May 23, 2014

bne -

 

Hungary's Wizz Air Holdings announced on May 22 that it is to revive plans to conduct an IPO on the London Stock Exchange in June. Central and Eastern Europe's biggest budget airline hopes to raise around $200m through the sale of new and existing shares.

The capital raised in the float, which will be run by by Barclays, Citi and JP Morgan, with Nomura acting as lead manager, will be used by the airline to expand routes in CEE and further to the east. That will see it chasing underserved markets with a growing appetite for flying, rather than fighting for a European market still in the doldrums.

Hungarian flag carrier Malev was one of several European airlines to bite the dust during the crisis when it folded in 2012. A combination of the economic slowdown, price pressure from budget carriers, raised fuel prices and EU resistance to state aid still has many national airlines on the edge. 

"We look forward to building on our success to date as we leverage opportunities both in our current markets, new markets in the Central and Eastern European region and further East, many of which have significantly higher GDP growth forecasts than the rest of Western Europe and whose propensity to travel by air can be stimulated and driven by the low air-fares we offer," said CEO Joozsef Varadi in a statement.

The collapse of Malev allowed Wizz Air to swiftly step in to boost its capacity at Budapest airport, and the struggles of flag carriers in the Baltics, Poland and Czech Republic have only strengthened its hand. Wizz Air has a market share of 38% in CEE, the company said. It currently has a fleet of 46 Airbus planes, and saw turnover grow 19% to just over €1bn last year. 

"We will continue to grow the business. New markets can be stimulated," Varadi told Reuters. The company plans to expand its fleet to 82 planes by the end of 2017, as it eyes consolidation in the sector. "We expect more consolidation in the market. It is hard to say when and where but we expect consolidation and we want to be able to act," the CEO stated. 

Wizz Air said it also plans to use the money to strengthen its balance sheet. Existing shareholders, including private-equity firm Indigo Partners, will pare their stakes to around 50%, Varadi told the Wall Street Journal. Indigo will remain the largest shareholder.

The CEO also suggested the IPO will help reduce borrowing costs. The size of a planned secondary offering hasn't been set, he added. Wizz Air offered no details on the number of shares it plans to sell in the IPO, nor any guidance on pricing.

A float has been on the cards for some time, but has struggled to take off due to market conditions. Having apparently decided to bypass the Budapest bourse to list in London, the airline was reportedly due to make an IPO last summer, but the sale was quietly put on the back burner.

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