Wizz Air Holdings Plc Annual report and accounts 2017
1
CONTENTS
Strategic report
Financial highlights
Company overview
Chairman’s statement
Chief Executive’s review
Selected statistics
Financial review
Key statistics
Principal risks and uncertainties
Governance
Corporate governance report
Compliance with the UK Corporate Governance Code
Management of the Company
Report of the Chairman of the Audit Committee
Report of the Chairman of the Nomination Committee
Directors’ remuneration report
Corporate responsibility
Directors’ report
Company information
Statement of Directors’ responsibilities
Independent auditors’ report
Accounts and other information
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes forming part of the financial statements
4
5
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25
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32
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81
References to “Wizz Air”, “the Company”, “the Group”, “we” or “our” in this report are references to Wizz Air Holdings Plc, or to
Wizz Air Holdings Plc and its subsidiaries, as applicable.
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC
REPORT
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC REPORT
FINANCIAL HIGHLIGHTS
Financial year
Total revenue
Profit for the year
Underlying profit after tax*
Financial year
Passengers**
Year-end fleet
Number of employees (average)***
2017
€ million
1,571.2
246.0
225.3
2017
23.8m
79
3,033
2016
€ million
1,429.1
192.9
223.9
2016
20.0m
67
2,396
Change
+10%
+28%
+1%
Change
+19%
+18%
+27%
*
See Note 9 to the financial statements for reconciliation between underlying (non-GAAP) and IFRS profit for the year.
** Booked passengers.
*** Including rented pilots.
*
*
* F14 and F15 include exceptional items.
2017, F17, FY17 and FY 2017 in this document refer to the financial year ended 31 March 2017.
2016, F16, FY16 and FY 2016 in this document refer to the financial year ended 31 March 2016.
Equivalent terms are used for prior financial years.
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC REPORT
COMPANY OVERVIEW
Our presence across Europe
Number of routes operated from CEE* countries as at 31 March 2017:
Poland
Romania
Hungary
Bulgaria
Lithuania
Macedonia
Bosnia and Herzegovina
Serbia
Czech Republic
Latvia
Ukraine
Moldova
Georgia
Slovakia
Montenegro
Slovenia
Croatia
136
129
55
32
28
25
16
16
9
9
9
7
6
4
2
2
1
*
Central and Eastern Europe, or CEE, is a region comprised of Albania, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, the
Czech Republic, Estonia, Georgia, Hungary, Kosovo, Latvia, Lithuania, Macedonia, Moldova, Montenegro, Poland, Romania,
Russia, Serbia, Slovakia, Slovenia and Ukraine.
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC REPORT
COMPANY OVERVIEW CONTINUED
History of the Group
Wizz Air was founded in 2003 by its current Chief Executive Officer (CEO) József Váradi and five other
individuals who recognised a demand for low-cost carriers in CEE driven in particular by the accession of ten
new EU member states on 1 May 2004, eight of which are in CEE (the Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland, Slovakia and Slovenia), and the anticipated accession of Bulgaria and Romania to the EU in
January 2007. Wizz Air was established with bases in Budapest in Hungary and Katowice in Poland and its
first flight took off from Katowice on 19 May 2004.
Significant milestones in the development of Wizz Air since its first flight have included:
FY 2005
By the end of its first year of operation, Wizz Air had established bases in Hungary and Poland, and started
flying to eight other European countries (Belgium, France, Germany, Greece, Italy, Spain, Sweden and the
United Kingdom), flying a total of 36 routes by March 2005.
On-board catering, hotel bookings, car rental services and airport agents were offered as ancillary services.
0.9 million passengers were carried and Wizz Air had six aircraft in its fleet at the year end.
FY 2006
A third base was established in Gdansk, Poland.
Wizz Air’s first aircraft order was placed with Airbus to acquire twelve A320 aircraft.
2.1 million passengers were carried and Wizz Air had eight aircraft in its fleet at the year end.
FY 2007
A base was established in Sofia in Bulgaria, ahead of the country joining the EU in January 2007. Wizz Air
started flying to Croatia, Romania and the Netherlands, bringing the number of operated routes to 64 at
the year end.
A second order was placed with Airbus to acquire a further 20 A320 aircraft.
Priority boarding was launched as an additional ancillary service.
3.1 million passengers were carried and Wizz Air had ten aircraft in its fleet at the year end.
FY 2008
A base was opened in Romania and Wizz Air started flying to Norway and operated 86 routes at the year
end.
A third order was placed with Airbus to acquire a further 50 A320 aircraft.
Multi-currency pricing, extra legroom and travel insurance products were launched.
4.6 million passengers were carried and Wizz Air had 17 aircraft in its fleet at the year end.
FY 2009
Wizz Air Ukraine was established in July 2008, the country’s first low-cost carrier, and a base was opened
in Kiev. Wizz Air started flying to Finland and operated 124 routes at the year end.
6.2 million passengers were carried and Wizz Air had 22 aircraft in its fleet at the year end.
FY 2010
A base was opened in Prague in the Czech Republic and Wizz Air started flying to Latvia.
A fourth order was placed with Airbus to acquire a further 50 (later reduced to 30) A320 aircraft.
A co-branded credit card was launched in Hungary, followed by similar programmes in Poland
and Romania.
8.2 million passengers were carried and Wizz Air had 30 aircraft in its fleet at the year end.
FY 2011
Wizz Air started flying to Serbia and Turkey, operating a total of 194 routes at the year end, and
subsequently opened a base in Belgrade in Serbia.
Wizz Air established a new head office in Geneva, Switzerland.
An online check-in option was launched and charges were implemented for airport check-in.
9.8 million passengers were carried and Wizz Air had 35 aircraft in its fleet at the year end.
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC REPORT
COMPANY OVERVIEW CONTINUED
History of the Group continued
FY 2012
A base was established in Vilnius in Lithuania and Wizz Air started flying to Cyprus, operating a total of
217 routes at the year end.
Wizz Exclusive Club (the predecessor to the Wizz Discount Club) loyalty programme was launched.
Wizz Reserved Seat ancillary product, selling the first two rows of seats, was launched.
11.3 million passengers were carried and Wizz Air had 36 aircraft in its fleet at the year end.
FY 2013
A base was established in Macedonia and Wizz Air started flying to Georgia, Israel, Slovenia and
Switzerland. Wizz Air operated a total of 233 routes at the year end.
A new cabin baggage policy was introduced. Wizz Air was the first EU airline to charge for large
cabin baggage.
Re-launched and re-branded the loyalty programme as “Wizz Discount Club”.
A mobile sales channel was launched to enable bookings on iOS and Android mobile telephones.
12.3 million passengers were carried and Wizz Air had 40 aircraft in its fleet at the year end.
FY 2014
A base was established
in Donetsk, Ukraine, and Wizz Air started flying to Azerbaijan,
Bosnia and Herzegovina, Malta, Moldova, Russia, Slovakia and the United Arab Emirates.
The Wizz Air flight simulator and training centre in Budapest, Hungary, opened.
Wizz Tours package holiday booking platform commenced sales in October 2013.
Part 145 maintenance organisation established enabling Wizz Air to perform certain in-house
maintenance activities.
13.9 million passengers were carried and Wizz Air had 46 aircraft in its fleet at the year end.
FY 2015
Bases were opened in Riga, Latvia, in June 2014 and in Craiova, Romania, in July 2014.
The Donetsk, Ukraine, base was suspended in April 2014 due to a political crisis in the east of the country.
Wizz Air announced bases in Tuzla, Bosnia and Herzegovina, and Kosice, Slovakia, with operations starting
in June 2015.
Wizz Air commenced flights to Egypt, Portugal and Denmark.
Baggage fee discounts were offered to Wizz Discount Club members.
Two types of memberships of Wizz Discount Club were created, comprising a standard membership for
two passengers and a group membership for up to six passengers.
Significant summer 2015 route expansion was announced for Wizz Air’s core markets in CEE. New
destinations included Aberdeen, Belfast and Bristol (United Kingdom), Billund (Denmark), Hurghada
(Egypt), Iasi (Romania), Kosice (Slovakia), Lisbon (Portugal), Maastricht and Groningen (the Netherlands),
Molde (Norway), Nis (Serbia), Nuremberg (Germany), Ohrid (Macedonia) and Pescara (Italy).
Wizz Air announced the closure of Wizz Air Ukraine and the consolidation of Ukrainian routes into the
Wizz Air Hungary route network.
In March 2015 the Company completed an initial public offering (IPO) with a premium listing of its shares
on the London Stock Exchange.
16.5 million passengers were carried and Wizz Air had 55 aircraft in its fleet at the year end.
FY 2016
In April 2015 Wizz Air announced the introduction of full allocated seating on all services.
In May 2015 a comprehensive re-branding, including new livery, was announced.
Network expansion continued with steady growth and the following new destinations were added:
Reykjavik (Iceland), Tenerife (Spain), Chisinau (Moldova), Birmingham (United KIngdom), Palanga
(Lithuania), Bratislava (Slovakia), Kaunas (Lithuania), Ibiza (Spain) and Porto (Portugal).
Stable growth requires a stable source of professional pilots and Wizz Air launched its Cadet Pilot
programme in September to train and eventually hire new pilots for its growing fleet.
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC REPORT
COMPANY OVERVIEW CONTINUED
History of the Group continued
FY 2016 continued
New bases were opened in Tuzla (Bosnia and Herzegovina) and Kosice (Slovakia) in June 2015, Lublin
(Poland) in September 2015, and Debrecen (Hungary) in December 2015.
The Company concluded a purchase agreement with Airbus for 110 A321neo aircraft, with deliveries
commencing in 2019.
Wizz Air reached the cumulative 100 million passengers carried milestone.
Wizz Tours (online tour operator business unit), which was previously outsourced was brought in house.
In November 2015 the first A321ceo aircraft was delivered to the fleet followed by a further three aircraft
by the end of March 2016, taking the Company’s fleet to 67 by the end of the financial year.
FY 2017
Wizz Air announced new bases in London Luton (United Kingdom) and Varna (Bulgaria) with
commencement dates in June 2017 and July 2017 respectively.
New bases were opened in Sibiu (Romania) in July 2016, Iasi (Romania) in August 2016, Kutaisi (Georgia)
in September 2016 and Chisinau (Moldova) in March 2017, taking the total number of operating bases to
26 by the end of the financial year. The eighth Polish airport, Olsztyn-Mazury, was added to the already
extensive Polish network.
Wizz Air announced the start of operations from Lviv, its second Ukrainian airport, commencing April 2017,
consolidating its position as the pioneer and largest low-cost carrier operating in Ukraine.
After already being the second largest airline operating from London Luton, Wizz Air announced the
launch of operations from London Gatwick airport, with a flight to Bucharest, connecting the Romanian
capital with both the South London and South England catchment areas.
Wizz Air won a public tender process issued by the Hungarian state to launch five unserved routes
between the Western Balkans and Budapest.
The brand new wizzair.com website was launched across all platforms, which was the first airline website
to introduce the ‘three click express booking’ function for registered customers.
Wizz Air was the proud supporter of the Polish and Hungarian national football teams and launched
charter flights bringing the fans to several European Championship games.
Pratt & Whitney’s new technology geared turbofan engines were selected to supply the order of 110 Airbus
A321neo aircraft with deliveries commencing in 2019.
Wizz Air launched a new cadet programme in co-operation with flight schools in Europe as part of its
programme to ensure the future flow of highly qualified pilots entering the Company.
A second simulator, this time an A320 fixed base simulator, was installed in Budapest, together with
additional in-house training facilities for the Wizz Air crew.
Wizz Air received the Low Cost Airline of the Year award from CAPA (a leading specialist aviation
consulting firm) and was named the Value Airline of the Year 2016 by Air Transport World.
Wizz Air was registered under the International Air Transport Association (IATA) Operational Safety Audit
(IOSA), the global benchmark in airline safety recognition.
An additional twelve A321ceo aircraft joined the Company’s fleet, taking the total to 79 aircraft at the end
of the financial year.
FY 2018 to date
Wizz Air added Astana in Kazakhstan as a destination increasing its network to 42 countries.
Emphasising its position as Bulgaria’s largest airline, Wizz Air announced its title sponsorship of the Sofia
Marathon on the eleventh birthday of its Sofia, Bulgaria, base.
Wizz Air launched the ‘WIZZ Youth Challenge’, a business case-study challenge for students, attracting
almost 400 entries from across Europe and beyond, with the final 40 teams attending a two-day final in
Budapest.
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC REPORT
CHAIRMAN’S STATEMENT
I am delighted to report that Wizz Air’s 2017 financial year saw the Company achieve another year of market
leading growth while continuing to deliver one of the highest profit margins of all European airlines. Despite
the challenging business conditions facing the European airline industry during the year, Wizz Air carried 23.8
million passengers, an increase of 18.9 per cent. year-on-year. The Company generated an underlying net
profit of €225.3 million, an increase of 0.6 per cent. year-on-year, which translates to an underlying net profit
margin of 14.3 per cent., a performance which few airlines in Europe can match.
Capacity growth and a dedication to achieving the lowest possible operating costs are, and will remain, the
key focus for Wizz Air. Together, they allow Wizz Air to continue to take advantage of the significant growth
opportunity in Central and Eastern Europe and to strengthen our market leading position as Central and
Eastern Europe’s largest low-cost carrier. We believe that our unique position in Central and Eastern Europe,
ultra-low-cost base, diversified point-to-point network and ability to adjust capacity quickly altogether place
Wizz Air in an enviable position to meet industry challenges and continue to deliver significant growth and
create long-term value for our Shareholders.
Wizz Air’s business achieved a number of key milestones during the 2017 financial year, including:
continuing to grow and diversify our network by opening four new bases and announcing two future base
openings, including our first in the United Kingdom, and launching 113 new routes. Wizz Air now offers
more than 500 routes from 28 bases, connecting 141 destinations across 42 countries;
the delivery of a further twelve brand new A321ceo aircraft, increasing our fleet of Airbus A320-family
aircraft to 79 and the average seat count per aircraft to 190 at the end of the financial year; and
driving load factors higher with an impressive 1.9 percentage point increase year-on-year to 90.1 per cent.
Customers
I would like to take this opportunity to thank all of our customers for their continued support. As we expand
our network we are delighted that many new customers throughout the region will be able to enjoy our
services at incredibly low fares. Enhancing the service we deliver to our customers is a constant focus for us.
In the last twelve months we have undertaken a number of initiatives including the launch of our new
wizzair.com website and the introduction of a simple three-step booking process for registered
customers. Now more than ever before, it’s faster and simpler to book the lowest fare flights with Wizz Air.
Employees
Our team of over 3,000 aviation professionals delivered a superior service to the 23.8 million customers who
flew with us over the last twelve months. Our colleagues’ dedication, passion and enthusiasm for the airline
and our customers makes the airline what it is today. I want to thank them once again for all their hard work –
without them we would not have achieved our success to date nor will we realise the growth which we are
targeting in the future.
Board of Directors
I would also like to thank the Board for its continued support and hard work in what has been another
successful year for the Company. During the year, we welcomed Ms Wioletta Rosołowska to the Board as a
Non-Executive Director. Ms Rosołowska has had an accomplished career in Central and Eastern Europe
specialising in the consumer and marketing sector and she brings valuable and relevant experience and
consumer insights to the Board. I know that the Board is looking forward to working with the Company’s senior
management team and all colleagues in what will be another year of exciting growth.
Looking ahead
As the 2018 financial year begins we remain very optimistic for the coming twelve months. Growth will
continue to be a top priority for us and, with an ever stronger balance sheet, a continued focus on driving
operating costs lower, one of the youngest, most efficient fleets in Europe and an underpenetrated market in
Central and Eastern Europe, we believe we can continue to deliver improving returns for our Shareholders.
William A. Franke
Chairman
24 May 2017
Wizz Air Holdings Plc Annual report and accounts 2017
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STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW
Financial performance
The 2017 financial year delivered profitable growth, with passenger numbers increasing by 18.9 per cent. year-
on-year to 23.8 million. The trading environment experienced in FY 2017 of very low fares and increasing fuel
prices unquestionably favoured our ultra-low-cost business model and we were able to increase our growth
rate, strengthen our number one position in CEE and also maintain one of the highest profit margins of any
European carrier. Our market leading position, with the combination of one of the highest growth rates and
profit margins of all European airlines, makes Wizz Air one of the most exciting airline businesses in Europe.
Operating the most efficient aircraft with the latest technology has always been a key foundation stone of
Wizz Air’s ultra-low cost base. Our fleet currently has an average age of just 4.4 years, one of the youngest in
Europe. We continue to build on that foundation with a delivery stream of brand new A321ceo aircraft which
deliver double digit cost savings compared to A320ceo aircraft. At the end of FY 2017 we operated 16 A321ceo
aircraft, representing a quarter of the airline's seat capacity, which gives us a clear cost advantage compared
to most of our rivals.
The resilience of our ultra-low cost business model, which we are convinced is the best model for stimulating
air travel in CEE, combined with our growing diversified network and our ever stronger balance sheet places
Wizz Air in a unique position to exploit the significant market opportunity that exists in a market of over 300
million people.
Our strong performance was driven by capacity expansion, higher load factors, higher passenger growth and
continued improvements to our industry-leading ultra-low-cost base. In numbers, we delivered:
ticket revenues that increased by 2.3 per cent. to €915.5 million;
ancillary revenue that increased by 22.7 per cent. to €655.7 million;
total airline unit cost that decreased by 7.8 per cent. to €3.15 cents per Available Seat Kilometre (ASK);
a 19.7 per cent. increase in the capacity offered to the market (as measured by ASKs), as we extended and
deepened our network of routes to and from Central and Eastern Europe; and
an increase in our average load factor by 1.9 percentage points to 90.1 per cent. in the financial year,
despite significant capacity expansion.
Strategic progress
The Company is convinced that its strategy of building on its strong network, highly efficient model,
compelling customer proposition, solid finances and sound risk management policies will enable it to deliver
sustainable growth and returns for Shareholders.
Wizz Air’s management team enforces rigorous cost control in all aspects of the Group’s business and has
created a company-wide business culture that is keenly focused on driving costs lower. The Company believes
that this cost advantage protects Wizz Air’s market position, enables it to offer some of the lowest ticket prices
in its markets, stimulates demand in its markets and supports continued profitable growth.
With its ultra-low-cost structure, innovative unbundled pricing strategy, leading market position among low-
cost carriers in CEE and track record of expansion in CEE and beyond, the Company believes that it is well
positioned to continue to grow profitably. Wizz Air’s infrastructure, including personnel, processes, systems
and relationships with suppliers of outsourced services, is scalable and sufficiently flexible to support Wizz
Air’s growth plans.
The Company believes that Wizz Air is a “pioneering” airline in the markets in which it operates by seeking to
bring the low-cost carrier concept and Western European aviation standards into currently under-served new
Eastern markets and is at the forefront of airline innovation in these new markets. Wizz Air has a strong track
record of working with regulators to develop appropriate regulatory structures in non-EU countries. Wizz Air
has been able to leverage the know-how, market understanding and cultural awareness of its senior
management team and employees to build strong relationships with airport operators, suppliers, governments
and regulators in new markets and is able to present itself as a reliable partner that, to date, has never exited
from a country where it has established an operating base.
Wizz Air Holdings Plc Annual report and accounts 2017
10
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Strengthened leadership in CEE
Wizz Air continues to be the clear market leader in Central and Eastern Europe, maintaining our market share
of over 39 per cent. of low-cost airline traffic. The expansion of our network with 113 new routes launched in
FY 2017 has allowed us to strengthen our position, reaching new customers throughout the region.
Today we operate in 19 of the 21 CEE countries, serving the market by offering a network of 28 bases and 141
destinations in 42 countries. With a low propensity to travel and low-cost market penetration currently at 40.4
per cent. (source data: Innovata, April 2016 – March 2017), there remains a significant opportunity for Wizz Air
and we continue to believe that the ultra-low-cost business model is best placed to serve this market.
Wherever we operate, Wizz Air brings safe, reliable operations, low fares, hassle-free services and a distinctive
brand designed to appeal to the whole market.
As a result, Wizz Air’s aggregate market share in CEE was 39.1 per cent. in the 2017 financial year and we are
the number one or number two low-cost airline in all but one of our CEE base countries. The table below shows
the Company’s ranking by low-cost market share in each of its CEE base countries.
Number 1
Number 2
Number 3
Carrier
Market
CEE
Wizz Air
Ryanair
Poland
Romania
Wizz Air
Ukraine
Wizz Air
Czech Republic EasyJet
Hungary
Wizz Air
Bulgaria
Wizz Air
Ryanair
Latvia
Serbia
Wizz Air
Ryanair
Lithuania
Georgia
Wizz Air
Ryanair
Slovakia
Macedonia
Wizz Air
Bosnia and
Wizz Air
Herzegovina
Share Carrier
39.08% Ryanair
51.61% Wizz Air
54.76% Blue Air
43.00% Pegasus Airlines
28.01% Ryanair
49.34% Ryanair
59.55% Ryanair
57.05% Wizz Air
64.24% Pegasus Airlines
53.26% Wizz Air
34.61% Flydubai
75.37% Wizz Air
89.51% Pegasus Airlines
47.70% Pegasus Airlines
Share Carrier
32.20% Easyjet
39.49% Easyjet
26.31% Ryanair
25.46% Flydubai
19.47% Wizz Air
25.80% Easyjet
29.53% Easyjet
29.30% Norwegian
7.91% Ryanair
42.32% Norwegian
30.68% Pegasus Airlines
20.89% Flydubai
7.66% Flydubai
19.30% Flydubai
Share
6.21%
4.12%
16.37%
20.90%
12.20%
8.47%
6.12%
13.41%
7.43%
4.20%
19.35%
3.74%
2.83%
13.78%
Source data: Innovata, April 2016 – March 2017.
The table below shows the fleet allocation by country at 31 March 2017 compared to a year earlier.
Fleet deployment by country
Year end
Total
Poland
Romania
Hungary
Bulgaria
Lithuania
Macedonia
Bosnia and Herzegovina
Latvia
Czech Republic
Serbia
Slovakia
Ukraine
Georgia
Moldova
Undesignated
March 2017
79
21
21
10
7
4
3
2
2
1
1
1
1
1
1
3
March 2016
67
19
15
10
6
4
3
1
2
1
1
1
1
0
0
3
Change
+12
+2
+6
0
+1
0
0
+1
0
0
0
0
0
+1
+1
0
Wizz Air Holdings Plc Annual report and accounts 2017
11
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Strengthened leadership in CEE continued
The Company offers services from 19 CEE countries including the 14 CEE countries where it has base aircraft
and crews. The Company opened four new CEE bases and started flights from further four new CEE airports
in the 2017 financial year as well as ten new destinations outside of CEE, as follows:
New CEE stations
New stations outside CEE
City
Podgorica
Olsztyn-Mazury
Satu Mare
Suceava
Country
Montenegro
Poland
Romania
Romania
City
Hanover
Lamezia Terme
Eilat - Ovda
Lanzarote
Fuerteventura
Ibiza
Santander
Porto
Växjö
London Gatwick
Country
Germany
Italy
Israel
Spain
Spain
Spain
Spain
Portugal
Sweden
UK
Fleet development securing long-term growth
During the 2017 financial year, we continued to invest significantly in our fleet by adding twelve A321ceo aircraft, taking
our fleet to 79 aircraft at the end of March 2017. Deliveries of the A321ceo commenced in November 2015 and in just
18 months we are already operating 16 of the type representing 24.5 per cent. of the Company’s total seat capacity.
We are excited about the cost savings we are seeing from the A321ceo aircraft, and the continued roll-out of these
aircraft across our network is expected to further improve our cost base and competitive edge.
The composition of our fleet at the end of the 2017 financial year and currently anticipated at the end of the
next two financial years is as follows:
A320ceo without winglets (180 seats)
A320ceo with winglets (180 seats)
A320ceo with winglets (186 seats)
A321ceo with winglets (230 seats)
A321neo with winglets (239 seats)
Fleet size
Share of fleet with winglets
Average number of seats per aircraft
March 2017
Actual
35
28
-
16
-
79
55.7%
190
March 2018
Planned
35
28
3
25
-
91
61.5%
194
March 2019
Planned
28
28
9
31
3
99
71.7%
198
A321neo
In FY 2016 the Company concluded a purchase agreement with Airbus for 110 firm-order A321neo aircraft and
purchase rights for a further 90 of the type. During the 2017 financial year the Company selected and contracted Pratt
& Whitney’s new technology geared turbofan engines to power these aircraft.
We anticipate that, based on the estimates of both Airbus and Pratt & Whitney, the A321neo will deliver significantly
better fuel burn efficiency and even lower unit costs compared to the ceo version, making it the perfect aircraft to
underpin the Company’s ambitious growth plans and replace older aircraft as they are returned to lessors. Our first
A321neo is scheduled to be delivered in 2019 and deliveries will continue until the end of 2024. The purchase
agreement includes uncommitted purchase rights for 90 additional A321neo aircraft as well as certain conversion
rights to receive the smaller A320neo, providing the flexibility needed to match aircraft deliveries with the
Company’s capacity needs.
Based on our current order book with Airbus, and lessor return schedule, our fleet will nearly double in size
from the end of FY 2017 to the end of FY 2024.
Improving the customer experience
New routes and base operations
We launched 113 new routes during the 2017 financial year, taking our route network to 486 routes from 28
bases, connecting 141 destinations in 42 countries at the end of March 2017.
Our markets are also reacting very well to the emergence of air travel within CEE with the Company launching
13 new routes connecting CEE countries in FY 2017. This trend is continuing into FY 2018 with the Company
commencing operations on five previously unserved Western Balkan routes between Budapest and Kosovo,
Montenegro, Bosnia and Herzegovina, Macedonia and Albania. In addition to connecting CEE countries we
are also experiencing significant demand on the two domestic routes launched in Romania and Bulgaria.
Wizz Air Holdings Plc Annual report and accounts 2017
12
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Improving the customer experience continued
Offering our customers more
We know that our customers welcome the opportunity to fly at Wizz Air’s lowest prices yet experience the
great on-board service provided by our dedicated crew. We also know that many of our customers also
welcome the opportunity to tailor their travel experience to their requirements by adding additional services.
We took a look at what our customers are buying and decided to make it easier and cheaper for them to buy
some of the most popular additional services together, with the "WIZZ Go" bundle, which offers a discount
over the “Basic Fare” and the prices of the included additional services when bought separately.
Many of our customers are loyal Wizz Air fans who fly with us on multiple occasions each year. Our Wizz
Discount Club enables our most loyal customers and their friends and families to benefit from even lower fares
than normal, throughout the year. No wonder it’s popular: membership of the Wizz Discount Club reached
1.05 million members by the end of the 2017 financial year, representing a 29 per cent. growth compared to
the 2016 financial year.
Our customers have always enjoyed the convenience of being able to book accommodation and car hire,
along with other travel services, with our partners through wizzair.com. But, demonstrating our commitment
always to give our customers more, for less, we launched our own inclusive package tour operator Wizz Tours,
in 2015. The opportunity to book flights and accommodation at the same time, in a single package and at a
discounted price, is proving increasingly popular – Wizz Tours’ revenues increased fourfold to €18.1 million in
the 2017 financial year.
None of this means that we’ve taken any less interest in ancillary revenue, though, which continues to be a
very important part of the Company’s business model. For the financial year ended 31 March 2017, total
ancillary revenues represented 41.8 per cent of overall airline revenue, up from 37.4 percent in the previous
financial year.
Technology advancements
In FY 2017 Wizz Air launched the new wizzair.com website across all platforms through a mobile-first phased
roll-out in May and August. The new responsive design caters for the needs of Wizz Air's young and mobile savvy
audience, through a clean and fast one-page booking process. The introduction of our unique three-click express
booking functionality enables an even faster booking experience. Throughout the year hundreds of major and
minor digital optimizations contributed to a record high conversion rate on ticket and ancillary sales.
With a website now available in 24 languages and 11 on the app, Wizz Air served over 200 million sessions to
more than 50 million users. Wizz Air is the eighth most visited airline website in the world with one of the
highest (56%) share of mobile visitors. Our mobile app user base more than doubled to 3.7 million users in FY
2017. With 1.8 million followers on Facebook, Wizz Air has by far most fans per available seat among its peers
in Europe. New digital initiatives in the next financial year will further strengthen the engagement with our ever
more connected customers.
Balanced hedging approach
Wizz Air operates under a clear set of treasury policies approved by the Board and supervised by the
Audit Committee. The aim of our hedging policy is to reduce short-term volatility in earnings and liquidity.
Therefore Wizz Air hedges a minimum of 50 per cent of the projected US Dollar and jet fuel requirements
for the next twelve months (40 per cent on an 18-month hedge horizon). Recently, the Company started
to hedge it largest non-EUR revenue currency, GBP against EUR in order to smooth out potential future
volatility due to Brexit. Unlike for the US Dollar, there is no minimum coverage set, while the maximum is
60% of projected net GBP exposure on rolling twelve-month basis.
Details of the current hedging positions (as at 15 May 2017) are set out below:
Foreign exchange (FX) hedge coverage of Euro/US Dollar
Period covered
Exposure (million)
Hedge coverage (million)
Hedge coverage for the period
Weighted average ceiling
Weighted average floor
F18
11 months
$787
$396
50%
$1.13
$1.09
F19
7 months
$488
$135
28%
$1.09
$1.07
Wizz Air Holdings Plc Annual report and accounts 2017
13
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Balanced hedging approach continued
Foreign exchange (FX) hedge coverage of Euro/British Pound
Period covered
Exposure (million)
Hedge coverage (million)
Hedge coverage for the period
Weighted average floor
Weighted average ceiling
F18
11 months
£170
£48
28%
0.860
0.827
F19*
N/A
N/A
N/A
N/A
N/A
*GBP hedging program is applicable on a twelve-month horizon, started in April 2017, so currently covering F18 only.
Fuel hedge coverage
Period covered
Exposure in metric tons ('000)
Coverage in metric tons ('000)
Hedge coverage for the period
Blended capped rate
Blended floor rate
F18
11 months
831
551
66%
$526
$482
F19
7 months
508
127
25%
$545
$496
Sensitivities
Pre-hedging, a one cent movement in the Euro/US Dollar exchange rate impacts the 2018 financial year
operating expenses by €6.9 million.
Pre-hedging, a one penny movement in the Euro/British Pound exchange rate impacts the 2018 financial
year operating expenses by €2.3 million.
Pre-hedging, a $10 (per metric ton) movement in the price of jet fuel impacts the 2018 financial year fuel
costs by $8.3 million.
In the Company’s view, the profit impact of such changes is likely to be less given the empirical evidence
of major industry-wide movements in input costs being passed through to air fares with a lag of twelve
to eighteen months.
Management changes
There were a number of management changes throughout the year.
John Stephenson, the Group’s Executive Vice President and Gyorgy Abran, Chief Commercial Officer stepped
down from their positions in August 2016. I would like to take this opportunity to thank John and Gyorgy for
their significant contribution they have made to the Company over the last 10-12 years, respectively. They
played a central role in building Wizz Air into the leading low cost carrier in CEE and one of the strongest
airlines in Europe. We wish them all the best in the future.
As announced earlier in the year Sonia Jerez Burdeus stepped down from her position of Chief Financial Officer
in order to relocate back to Spain. I would like to thank her once again for her contribution during the time
that she was with us. We are making good progress in recruiting her replacement and will make a further
announcement in due course.
During the 2017 financial year George Michalopoulos, Chief Commercial Officer and Jozsef Ujhelyi, Chief Flight
Operations Officer, were promoted to their current roles and Diederik Pen was promoted to become Executive
Vice President & Chief Operations Officer, reflecting the importance of the Operations function to the success
of Wizz Air. I would like to congratulate each of them on their appointments and wish them well as their careers
continue to develop at Wizz Air. Between them, Diederik, George and Jozsef have collectively been with Wizz
Air for over 25 years, which demonstrates the continuity and depth of experience within the Wizz Air
management team, something which the Company is fortunate to be able to call upon as it continues its fast
growth in the coming years.
Wizz Air Holdings Plc Annual report and accounts 2017
14
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
Outlook
2018 financial year
In FY2018 growth continues as a top priority with increase in capacity by around 23% targeting to carry nearly
30 million passengers. The Company recorded a strong start to FY2018 due to the timing of Easter, and
although still at an early stage of the financial year, currently the Group net profit is expected to be in a range
between €250 million and €270 million in FY2018. This guidance is heavily caveated by the revenue
performance for the all-important summer period as well as the second half of FY2018, a period for which the
Company currently have limited visibility.
Full year guidance
Capacity growth (ASKs)
Average stage length
Load Factor
Fuel CASK
Ex-fuel CASK
Total CASK
RASK
Tax rate
Net profit
József Váradi
Chief Executive Officer
24 May 2017
2018
Financial Year
23%
Modest increase
+1%
+10%
Broadly flat
+3%
Low single digit increase
6%
€250 - 270 million
Comment
Throughout the financial year
-
-
Assumes spot price of $515/MT
Assumes $/€ 1.11
-
Stable fuel prices leading to stable fares
-
-
Wizz Air Holdings Plc Annual report and accounts 2017
15
STRATEGIC REPORT
SELECTED STATISTICS
* Reliability = (1 - number of operational cancellations/number of revenue flight legs) x 100 per cent.
** On-time performance = (1 - number of delays > 15min/number of revenue flight legs) x 100 per cent. The decline in 2017 was
due to the operating environment being more challenging than in the previous years, with unusually severe winter weather in
CEE and with an increase in disruption caused by industrial action by various air traffic control and airport organisations.
Wizz Air Holdings Plc Annual report and accounts 2017
16
STRATEGIC REPORT
SELECTED STATISTICS CONTINUED
*
*
* F14 and F15 include exceptional item.
**
Including rented pilots.
Wizz Air Holdings Plc Annual report and accounts 2017
17
STRATEGIC REPORT
FINANCIAL REVIEW
During the 2017 financial year Wizz Air carried 23.8 million passengers, an 18.9 per cent. increase compared to
the previous year. Revenue grew to €1,571.2 million, representing a 9.9 per cent. increase compared to the
previous year. Wizz Air recorded a balanced capacity growth measured in terms of available seat kilometres
(ASK) of 19.7 per cent. and seats of 16.4 per cent.
As indicated throughout the 2017 financial year, most airlines, including Wizz Air, added capacity in response to
lower fuel prices. During the 2017 financial year Wizz Air collected ca. 20% of its revenues in British Pounds, which
leading up to the UK referendum to leave the European Union and right after the actual vote has devalued
significantly against the Euro. In addition the peculiarity of the 2017 financial year was that both Easter holidays of
2016 and 2017 calendar years fell outside of the 2017 financial year, resulting in related additional revenues
materializing in the 2016 and 2018 financial years. The combined effect of the above mentioned events resulted in
revenue per ASK decreasing by 8.5 per cent. in 2017 compared to the previous financial year.
Despite the UK’s decision to leave the European Union (“Brexit”), there are no signs of demand weakness on
routes to/from the UK. The negative translation effect on British pound revenues due to Brexit in the 2017
financial year is estimated at €17 million, which was partially offset by the positive translation effect on British
pound costs. The Company continues to examine the terms on which Brexit might materialize, the potential
implications of these to Wizz Air’s business, and take actions that are considered necessary.
Unit costs further improved as lower fuel prices complemented by a healthy fuel hedging position resulted in
fuel unit cost (per ASK) declining 21.9 per cent. This, combined with another strong performance on non-fuel
cost, which declined 0.6 per cent., delivered a total unit cost decline of 7.8 per cent.
The profit for the year was €246.0 million and included a €20.7 million net gain from unrealised FX gains and
exceptional items. These comprised unrealised foreign exchange gains of €1.9 million and a gain from the change
in the time value of hedge positions of €14.3 million, and a €4.5 million net gain on fuel caps sold before expiry.
The income tax expense for the year was €9.8 million (2016: €8.5 million) giving an effective tax rate for the
Group of 3.8 per cent. (2016: 4.2 per cent.). The main components of this charge are local business tax and
innovation tax paid in Hungary, and corporate income tax paid in Switzerland.
Underlying profit after tax increased by 0.6 per cent. to €225.3 million in 2017 from €223.9 million in 2016.
Average jet fuel price ($/metric ton, including into plane
premium and hedge impact)
Average USD/EUR rate (including hedge impact)
Year-end USD/EUR rate
2017
553
1.10
1.07
2016
Change
740
1.20
1.14
-25.2%
-8.0%
-6.1%
Wizz Air Holdings Plc Annual report and accounts 2017
18
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Group Financial overview
Summary statement of comprehensive income
€ million
Continuing operations
Passenger ticket revenue
Ancillary revenue
Total revenue
Staff costs
Fuel costs
Distribution and marketing
Maintenance materials and repairs
Aircraft rentals
Airport, handling and en-route
charges
Depreciation and amortisation
Other expenses
Total operating expenses
Operating profit
Financial income
Financial expenses
Net foreign exchange gain/(loss)
Net exceptional financial
income/(expense)
Net financing income/(expense)
Profit before income tax
Income tax expense
Profit for the year
Airline
2017
909.3
652.7
1,562.0
112.6
375.2
27.0
74.7
233.9
390.0
57.5
43.6
1,314.5
247.4
0.6
(13.0)
2.6
18.8
9.0
256.4
(9.8)
246.7
Consolidation
adjustment
(8.9)
(8.9)
Wizz Tours1
2017
6.3
11.8
18.1
0.3
0.9
17.8
18.9
(0.8)
(8.9)
(8.9)
(0.9)
(0.9)
Group
2017
915.5
655.7
1,571.2
112.9
375.2
27.9
74.7
233.9
390.0
57.6
52.4
1,324.5
246.7
0.6
(13.0)
2.6
18.8
9.1
255.8
(9.8)
246.0
Group
2016
894.9
534.2
1,429.1
101.4
401.5
23.5
77.5
176.2
343.1
28.8
41.7
1,193.6
235.5
2.0
(8.0)
(11.8)
(16.3)
(34.1)
201.4
(8.5)
192.9
Change in
Group results
2.3%
22.7%
9.9%
11.3%
(6.6)%
18.7%
(3.6)%
32.8%
13.7%
100.0%
25.7%
11.0%
4.8%
27.0%
27.5%
Adjusted performance measures (Note 9)
€ million
Statutory (IFRS) profit
Exceptional items (Note 9):
Net gain on fuel caps sold before expiry
Realised FX gain on conversion of deposits
(Gain)/loss from change in time value of hedges
Total exceptional adjustments
Unrealised foreign exchange (gains)/losses (Note 10)
Underlying profit
Underlying profit margin
Earnings per share
Earnings per share (Note 12)
Basic earnings per share, EUR
Diluted earnings per share (statutory), EUR
Proforma earnings per share (underlying), EUR
Proforma earnings per share (underlying), GBP*
Profit for the year
2017
246.0
(4.5)
-
(14.3)
(18.8)
(1.9)
225.3
14.3%
2017
4.30
1.95
1.79
1.53
2016
192.9
-
(8.7)
25.0
16.3
14.7
223.9
15.7%
2016
3.62
1.54
1.78
1.41
* Translated from EUR to GBP at 1.164 for 2017 (rate applicable at 31 March 2017) and at 1.263 for 2016 (rate applicable at
31 March 2016).
The proforma underlying earnings per share (EPS) is a fully diluted measure defined by the Company.
Its calculation differs from the IFRS diluted EPS measure in the following:
for earnings the underlying profit for the year is used, as opposed to the statutory (IFRS) profit
for the year; and
for the fully diluted number of shares the year-end position was taken rather than the weighted average
for the year.
1 Starting from the 2017 financial year the Company introduced separate reporting for its airline and tour operator business units. Where a measure is
reported for a business unit as opposed to the Group as a whole then this fact is explicitly stated. All other measures and statements relate to the Group
as a whole. See also Note 5 to the financial statements.
Wizz Air Holdings Plc Annual report and accounts 2017
19
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Return on capital employed and capital structure
ROCE** is a non-statutory performance measure commonly used to measure the financial returns that a
business achieves on the capital it uses. ROCE for the 2017 financial year was 17.6 per cent., a decrease of 4.8
percentage points compared to the previous year driven by varying level of growth in earnings before interest
and tax (EBIT), shareholder’s equity, net cash position, and capitalised leases.
The Company’s leverage, defined as net debt adjusted to include capitalised operating lease obligations*
divided by earnings before interest, tax, depreciation, amortisation and aircraft rentals (EBITDAR), fell to a
ratio of 1.7 from 1.4 at the end of the 2017 financial year.
The year-on-year comparisons of ROCE and leverage were negatively impacted by the translation effect of
the stronger US Dollar compared to last year as capitalised US dollar aircraft leases are translated into a higher
Euro value.
Liquidity, defined as cash and equivalents as a percentage of the last twelve months’ revenue, rose from
45.2 per cent. at the end of the 2016 financial year to 49.3 per cent. a year later.
ROCE**
Leverage
Liquidity
2017
17.6%
1.7
49.3%
2016
22.4%
1.4
45.2%
Change
(4.8) ppts
0.3 pts
4.1 ppts
* Annual aircraft lease expenses multiplied by seven as an estimate of the total outstanding obligation.
** ROCE: underlying operating profit after tax/average capital employed, where average capital employed is the sum of average
equity (excluding convertible debt) and capitalised operating lease obligations, less average free cash.
Financial performance
Starting from 2017, revenues and operating expenses are analysed by business segment, compared to the
same measures for the 2016 financial year. In the 2016 Annual Report these analyses were done for the Group
as a whole. Therefore revenues, certain expenses, and certain KPIs for 2016 (for the Airline) are different in this
report from the corresponding numbers presented in the 2016 report (for the Group). The remaining measures
(financial income and expenses, taxation, other comprehensive income and expense) are continued to be
analysed for the Group, as the share of the tour operator business unit is immaterial or nil in these measures.
Airline revenue
The following table sets out an overview of Wizz Air’s revenue items for 2017 and 2016 and the percentage
change in those items:
Passenger ticket revenue
Ancillary revenue
Total revenue
2017
Total
(€ million)
909.3
652.7
1,562.0
Percentage of
total revenue
58.2%
41.8%
100%
2016
Total
(€ million)
893.5
533.8
1,427.4
Percentage of
total revenue
62.6%
37.4%
100%
Percentage
change
1.8%
22.3%
9.4%
The decline in RASK by 8.5 per cent. was the main driver for passenger ticket revenue increasing by only 1.8 per
cent. to €909.3 million, while ancillary (or “non-ticket”) revenue increased by 22.3 per cent. to €652.7 million.
Average revenue per passenger decreased from €71.4 in 2016 to €65.7 in 2017, a decrease of 8.0 per cent
which helped stimulate more passenger volumes. Average passenger ticket revenue per passenger declined
from €44.7 in 2016 to €38.3 (-14.4 per cent.), while average ancillary revenue per passenger increased from
€26.7 in 2016 to €27.5 in 2017, an increase of €0.8 per passenger or 2.8 per cent. This slight decrease in average
revenue per passenger was due to:
a decrease in average passenger ticket revenue per passenger in 2017 compared to 2016, which was the
result of lower input prices feeding into lower fares even though load factors increased by 1.9 percentage
points to 90.1%; and
the combined impact of the modification of certain products, the introduction of new services (‘Go Fare’),
and the adaptation of customers to some of the longer standing products such as allocated seating and
different checked-in luggage sizes.
Airline operating expenses
Total airline operating expenses increased by 10.3 per cent. to €1,314.5 million in 2017 from €1,191.2 million in
2016. Airline CASK declined by 7.8 per cent. to 3.15 Euro cents in 2017 from 3.42 Euro cents in 2016. This
reduction in CASK was principally driven by a reduction in the average fuel price and continued improvement
of the airport mix. CASK excluding fuel expenses decreased to 2.25 Euro cents in 2017 from 2.27 Euro cents in
2016 driven by the combined effect of further improvement of major cost items (maintenance, airport,
handling and en-route charges) set off by increasing aircraft rentals.
Wizz Air Holdings Plc Annual report and accounts 2017
20
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Financial performance continued
Airline operating expenses continued
The following table sets out the airline operating expenses for 2017 and 2016 and the percentage changes
in those items:
Staff costs
Fuel costs
Distribution and marketing
Maintenance, materials and repairs
Aircraft rentals
Airport, handling and en-route charges
Depreciation and amortisation
Other expenses
Total operating expenses
2017
Percentage of
total
operating
expenses
8.6%
28.5%
2.1%
5.7%
17.8%
29.7%
4.4%
3.3%
100%
Total
(€ million)
112.6
375.2
27.0
74.7
233.9
390.0
57.5
43.6
1,314.5
2016
Percentage of
total
operating
expenses
8.6%
33.7%
2.0%
6.5%
14.8%
28.8%
2.4%
3.3%
100%
Total
(€ million)
102.1
401.5
23.3
77.5
176.2
343.1
28.8
38.8
1,191.2
Percentage
change
10.3%
(6.6)%
16.0%
(3.6)%
32.8%
13.7%
99.9%
12.3%
10.3%
Staff costs increased by 10.3 per cent. to €112.6 million in 2017, up from €102.1 million in 2016. The increase in
overall staff costs reflected a 15.7 per cent. rise in aircraft block hours and reduced bonus payments made
compared to the previous year as certain profitability targets were not reached.
Fuel expenses decreased by 6.6 per cent. to €375.2 million in 2017, down from €401.5 million in 2016. Although
there was an increase of 19.7 per cent. growth in ASKs, and an 8.0 per cent. appreciation of the US Dollar
against the Euro after hedging (moving from an average 1.20 rate in 2016 to 1.10 in 2017), it has been offset by
a 1.6 per cent. reduction in fuel consumption per block hour and a 25.2 per cent. decline in the average fuel
price (after hedging). The average fuel price (including hedging impact and into-plane premium) paid by Wizz
Air in 2017 was US$553 per ton, a decline of 25.2 per cent. from the previous year’s figure of US$740 per ton.
Distribution and marketing costs rose 16.0 per cent. to €27.0 million in 2017 from €23.3 million in 2016. This
increase is modestly lower than the passenger growth of 18.9 per cent. during the same period.
Maintenance, materials and repair costs decreased by 3.6 per cent. to €74.7 million in 2017 from €77.5 million
in 2016. This cost decrease was the combined result of several renegotiated maintenance contracts with third
party providers and the timing of certain maintenance events.
Aircraft rental costs increased 32.8 per cent. to €233.9 million in 2017, from €176.2 million in 2016. This increase
was largely due to fleet growth (equivalent aircraft expanded by 15.3 per cent.), an increasing average lease
rate due to the A321 aircraft joining the fleet and the appreciation of the US Dollar to the Euro which was 8.0
per cent. stronger than the previous year (after hedging impact).
Airport, handling and en-route charges increased by 13.7 per cent. to €390.0 million in 2017 from €343.1 million
in 2016. This category comprised €224.2 million of airport and handling fees and €165.8 million of en-route and
navigation charges in 2017 and €193.9 million of airport and handling fees and €149.3 million of en-route and
navigation charges in 2016. The cost increase was primarily due to a 12.9 per cent. increase in the number of
flights, and an 18.9 per cent. rise in passenger numbers.
Depreciation and amortisation charges increased by 99.9 per cent. to €57.5 million in 2017, up from €28.8
million in 2016 as the airline is preparing to return older leased aircraft back to lessors and engine maintenance
programs are required. See Note 13 to the financial statements for more details.
Other expenses increased by 12.3 per cent. to €43.6 million in 2017 from €38.8 million in 2016. Other expenses
include cancellation and delay related costs of €12.2 million, an increase of 92.5 per cent year-on-year. The
European airline industry is experiencing a significant increase in customer compensation costs – to levels that
the Company believes is disproportionate to the Company’s very low fares, especially as the Company only
cancelled 214 flights out of a total of 141,698 flights in the financial year. With the exception of cancellation
and delay related costs the Company delivered a strong cost performance on all other areas in this line item.
Airline operating profit
As a result of the foregoing factors, the Airline made an operating profit in respect of its airlines operations of
€247.4 million in 2017, a 4.8 per cent. increase from the operating profit of €236.1 million made in 2016.
Wizz Tours
Wizz Tours generates revenue by selling package holidays made up of flight tickets purchased from the airline
and hotel accommodation purchased from wholesalers (bedbanks). Revenue grew by 364.1 per cent. in the
2017 financial year to €18.1 million from €3.9 million in 2016 financial year. Operating costs in the same period
increased from €4.5 million to €18.9 million.
Wizz Air Holdings Plc Annual report and accounts 2017
21
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Financial performance continued
Net financing income and expense
The Group’s net financing income resulted in a net gain of €9.1 million in 2017 after an expense of €34.1 million
in 2016. This significant change was driven primarily by the change in the time value of hedges, with the net
impact of all other items being limited, as shown in the table below:
€ million
Net FX-related impacts (including exceptional item in 2016)
Change in time value of hedges (exceptional)
Fuel cap impacts (including exceptional item in 2017)
All other financial income and expenses, net (recurring)
Net financing income and expense*
*
See also Notes 9 and 10 to the financial statements.
2017
2.6
14.3
(4.5)
(3.3)
9.1
2016
(3.1)
(25.0)
(5.3)
(0.7)
(34.1)
Change
5.7
39.3
(0.9)
(2.7)
43.2
Changes in the time value of hedges, as accounted for under IAS 39, resulted in significant gains and losses in
the two years, respectively. Such changes will stop impacting earnings from the 2018 financial year as the
Group adopted IFRS 9 from 1 April 2017.
Fuel caps impacted the two years similarly, after taking into account for 2017 the one-off impacts of the closure
of caps in September 2016. By that date all caps expired or were sold, so there will be no further impacts from
these instruments in future years.
The remaining recurring items had relatively limited impacts. The €2.7 million higher net financial income and
expenses in 2017 was caused by (i) the lower interest yield environment; (ii) some gains in 2016 coming from
ineffective fuel hedges; and (iii) the net impact of discounting long-term financial assets.
Taxation
The Group recorded an income tax expense of €9.8 million in 2017, slightly higher than the €8.5 million in
2016. The effective tax rate for the Group was 3.8 per cent. in 2017 and 4.2 per cent. in 2016. The reduction in
the effective tax rate reflects the impact of Hungarian local taxes, the tax base of which is different from the
corporate tax base – particularly given that financial income and expenses are not in the scope of these taxes.
Profit for the year
As a result of the foregoing factors, the Group generated an IFRS profit for 2017 of €246.0 million, a 27.5
per cent. increase from the profit of €192.9 million in 2016.
Other comprehensive income and expense
In 2017 the Group had other comprehensive income of €15.5 million compared to €33.2 million in 2016. This
change was driven by the movements in the balance of the cash flow hedging reserve (in equity) in the two
years. This situation arises when, based on the spot prices at year end there is an overall more favourable
position on the Group’s open hedge instruments than a year before.
Cash flows and financial position
Summary statement of cash flows
The following table sets out selected cash flow data and the Company’s cash and cash equivalents for 2017
and 2016:
€ million
Net cash generated by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of exchange rate fluctuations on cash and
cash equivalents
Cash and cash equivalents at the end of the year
2017
310.9
(179.7)
(1.8)
(1.0)
774.0
2016
288.9
(90.6)
(1.7)
0.5
645.6
Change
22.0
(89.1)
(0.1)
(1.5)
128.5
Wizz Air Holdings Plc Annual report and accounts 2017
22
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Cash flows and financial position continued
Cash flow from operating activities
The vast majority of Wizz Air’s cash inflows from operating activities are derived from passenger ticket sales.
Net cash flows from operating activities are also materially affected by movements in working capital items.
Operating cash flows improved from €288.9 million in 2016 to €310.9 million in 2017 primarily due to the
following factors:
Profit before tax and depreciation: Profit before tax in 2017 was €54.4 million higher than in 2016. However,
this increase in the profits was almost exclusively due to the impacts from financial income and expense
items that are non-cash. (It is for similar reasons that on an ‘underlying’ basis there was only a small
increase in profits from 2016 to 2017, as shown earlier.) On the other hand, depreciation and amortisation
expenses were €28.8 million higher in 2017 – this almost alone explains the €29.0 million increase in
operating cash flows before adjusting for changes in working capital.
Changes in working capital: The movements in working capital items helped the 2016 operating cash
flows by €20.7 million, while the same impact was only €14.1 million for 2017. This is a relatively small
difference between the two years when compared to the absolute size of the respective asset and liability
balances. There are two differences between the two years that are worth noting as contributors: (i) the
restricted cash balance increased by €20.8 million more during 2017 than in 2016; and (ii) the trade and
other payables balance increased by €25.2 million less during 2017 than in 2016 (primarily because the
increase in 2016 was particularly high).
Cash flow from investing activities
Net cash used in investing activities increased by €89.1 million from a net cash outflow of €90.6 million in
2016 to a n e t c a s h o u t f l o w o f €179.7 million in 2017. There are three contributors to the higher
investments in 2017:
Aircraft maintenance assets: There was €35.0 million more invested into aircraft maintenance assets in
2017 than in 2016, caused primarily by the increase in the number of engine LLP replacements performed
in the year (there was one such event in 2016 and nine in 2017).
Purchases of tangible assets: The Group invested €25.7 million more into tangible assets in 2017 than in
2016 due primarily to more spare engines being purchased.
Advances paid for aircraft (pre delivery payments, ‘PDP’): The net PDP flows (payments paid to Airbus
less refunds received) required €28.3 million more cash investment in 2017 than in 2016.
Cash flow from financing activities
Net cash used in financing activities were immaterial and increased by only €0.1 million to a €1.8 million outflow
in 2017 from a €1.7 million outflow in 2016.
Summary statement of balance sheet
The following table sets out summary statements of financial position of the Group for 2017 and 2016:
€ million
ASSETS
Property, plant and equipment
Restricted cash*
Derivative financial instruments*
Trade and other receivables*
Cash and cash equivalents
Other assets*
Total assets
EQUITY AND LIABILITIES
Equity
Equity
Liabilities
Trade and other payables
Convertible debt and other borrowings*
Deferred income*
Derivative financial instruments*
Provisions*
Other liabilities*
Total liabilities
Total equity and liabilities
2017
2016
Change
505.7
155.8
10.1
208.7
774.0
42.1
1,696.3
353.6
101.6
1.7
197.7
645.6
31.7
1,331.8
152.1
54.2
8.4
11.0
128.4
10.4
364.5
952.5
688.8
263.7
197.7
33.0
388.8
1.8
113.7
8.9
743.8
1,696.3
177.3
33.6
321.6
17.6
84.9
8.1
643.1
1,331.8
20.4
(0.6)
67.2
(15.8)
28.8
0.8
100.7
364.5
*
Including both current and non-current asset and liability balances, respectively.
Wizz Air Holdings Plc Annual report and accounts 2017
23
STRATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Summary statement of balance sheet continued
Property, plant and equipment increased by €152.1 million as at 31 March 2017 compared to 31 March 2016 (see Note
13 to the financial statements). This was driven by investments in all the important fixed asset categories, as follows:
(i) the gross book value of aircraft maintenance assets (including advances paid for these assets) increased by
€87.7 million, mainly due to more engines being out of condition under the respective lease contract at the end of
2017 than a year before; (ii) PDPs increased by €64.0 million due to the growing number of aircraft deliveries and
their respective payments as well as the relatively higher PDP of the A321ceo compared to the A320ceo; and (iii)
investment into aircraft parts in the amount of €37.3 million, with most of this related to the delivery of several spare
engines during the year.
Restricted cash (current and non-current) increased by €54.2 million as at 31 March 2017 compared to
31 March 2016. This was driven by the growth in the amount of lease-related letters of credit, particularly as
security in relation to future maintenance obligations.
Derivative financial instruments (current and non-current) increased by €8.4 million as at 31 March 2017
compared to 31 March 2016 (see Notes 3 and 20 to the financial statements). The receivable from open hedge
instruments at the end of 2016 was close to nil (rather there were payable positions, see below), but at the end
of 2017 there were few million Euro receivables both on the open foreign exchange and fuel hedges. .
Trade and other receivables (current and non-current) increased by €11.0 million as at 31 March 2017 compared
to 31 March 2016 (see Note 18 to the financial statements).
Cash and cash equivalents increased by €128.4 million as at 31 March 2017 compared to 31 March 2016. This
change is explained in detail in the cash flow analysis above.
Trade and other payables increased by €20.4 million as at 31 March 2017 compared to 31 March 2016. This rate
of increase is broadly consistent with rate of increase for the Group’s business during the year.
Deferred income (current and non-current) increased by €67.2 million as at 31 March 2017 compared to
31 March 2016 (see Note 26 to the financial statements). This was driven primarily by the increase in unflown
revenues (€52.3 million), itself primarily due to the increase in offered seat capacity, and to a smaller extent
by the concessions received from aircraft and component manufacturers during the year.
Derivative financial liabilities (current and non-current) decreased by €15.8 million as at 31 March 2017
compared to 31 March 2016 (see Notes 3 and 20 to the financial statements). At the end of 2016 the Group
had primarily payable positions (and only very small receivables) in relation to its open foreign exchange and
fuel hedge instruments, but this situation reversed by the end of 2017 (having primarily receivables on both
foreign exchange and fuel, with only very small fuel-related payables).
Provisions (current and non-current) increased by €28.8 million as at 31 March 2017 compared to 31 March 2016
(see Note 29 to the financial statements). The increase relates primarily to new provisions made for future
heavy maintenance events, particularly engine LLP replacements.
József Váradi
Acting Chief Financial Officer
24 May 2017
Wizz Air Holdings Plc Annual report and accounts 2017
24
STRATEGIC REPORT
KEY STATISTICS
CAPACITY
Number of aircraft at end of period
Equivalent aircraft
Utilisation (block hours per aircraft per day)
Total block hours
Total flight hours
Revenue departures
Average departures per day per aircraft
Seat capacity
Average aircraft stage length (km)
Total ASKs (’000 km)
OPERATING DATA
RPKs (revenue passenger kilometre) (’000 km)
Load factor (%)
Number of passenger segments
Fuel price (US$ per ton, including hedging impact and
into-plane premium)
Foreign exchange rate (US$/€ including hedging impact)
FINANCIAL MEASURES (for the Airline** only)
Yield (revenue per RPK, € cents)
Average revenue per seat (€)
Average revenue per passenger (€)
RASK (€ cents)
CASK (€ cents)
Ex-fuel CASK (€ cents)
2017
2016
Change*
79
72.13
12.48
329,592
286,188
141,698
5.37
26,378,840
1,582
41,690,967
67
62.57
12.44
284,894
246,930
125,501
5.48
22,654,100
1,538
34,844,016
37,627,831
90.1
23,764,385
30,786,117
88.2
19,981,377
553
1.10
4.15
59.21
65.73
3.75
3.15
2.25
740
1.20
4.64
63.01
71.43
4.10
3.42
2.27
17.9%
15.3%
0.4%
15.7%
15.9%
12.9%
(2.1)%
16.4%
2.8%
19.7%
22.2%
1.9ppt
18.9%
(25.2)%
(8.0)%
(10.5)%
(6.0)%
(8.0)%
(8.5)%
(7.8)%
(0.6)%
* Percentage changes in this table are calculated by division of the two years’ KPIs also when the KPIs are expressed in percentage.
** These measures in the 2016 Annual Report were presented for the Group as a whole.
Glossary of technical terms
Available seat kilometres (ASK): available seat kilometres, the number of seats available for scheduled
passengers multiplied by the number of kilometres those seats were flown.
Block hours: each hour from the moment an aircraft’s brakes are released at the departure airport’s parking
place for the purpose of starting a flight until the moment the aircraft’s brakes are applied at the arrival airport’s
parking place.
CASK: operating cost per ASK.
EBITDAR: profit (or loss) before net financing costs (or gain), income tax expense (or credit), depreciation,
amortisation and aircraft rentals.
Equivalent aircraft: the number of aircraft available to Wizz Air in a particular period, reduced on a per aircraft
basis to reflect any proportion of the relevant period that an aircraft has been unavailable.
Ex-fuel CASK: operating cost net of fuel expenses per ASK.
Flight hours: each hour from the moment the aircraft takes off from the runway for the purposes of flight until
the moment the aircraft lands at the runway of the arrival airport.
Leverage: net debt adjusted to include capitalised operating lease obligations divided by earnings before
interest, tax, depreciation, amortisation and aircraft rentals.
Load factor: the number of seats sold divided by the number of seats available.
PDP: the pre-delivery payments under the Group’s aircraft purchase arrangements.
Utilisation: the total block hours for a period divided by the total number of aircraft in the fleet during the
period and the number of days in the relevant period.
Revenue passenger kilometres (RPK): revenue passenger kilometres, the number of seat kilometres flown by
passengers who paid for their tickets.
RASK: passenger revenue divided by ASK.
Yield: the total revenue per RPK.
Wizz Air Holdings Plc Annual report and accounts 2017
25
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES
Wizz Air operates in a dynamic, fast-paced and competitive industry. The Company’s success to date reflects
not only its ability to identify and capitalise upon opportunities, but also its ability to react and deal effectively
with risks and challenges. The aviation industry is one where reputations and businesses can be lost quickly if
a risk is not anticipated and dealt with effectively and the Company is committed to ensuring that it employs
best practice in order to identify and mitigate risks as best it can.
This section of the annual report sets out our risk management process, as well as a short description of some of
the key risks that could, if not properly dealt with, affect Wizz Air’s future success, although it does not by any
means list all risks that might possibly affect our business. Risk management is itself a dynamic and developing
area and the Company understands that what was appropriate and adequate in the past may not continue to be
so as the Company continues to grow. The Directors will therefore continue to review risk management on an
ongoing basis to ensure that the processes used in the Company remain appropriate and adequate.
Our risk management process
The Board oversees the Company’s risk process and has delegated authority for this to the Audit Committee.
The Company’s Head of Internal Audit reports directly to the Chairman of the Audit Committee. Each year, a
risk universe exercise is undertaken by the Head of Internal Audit with the Company’s senior and operational
management. The results of this exercise are used to produce an Internal Audit plan for the coming year. The
Internal Audit plan generally always covers internal control risks as well as some other enterprise risks.
Senior management reports to the Board at each of the scheduled Board meetings and the Board also
received a report from the Chairman of the Audit Committee at each of the scheduled Board meetings. These
reports include detailed assessment of, for example, commercial and operational risks which may have arisen
or been dealt with during the reporting period. In addition, the Board is kept updated by senior management
as and when specific risk issues arise between Board meetings.
To date, the Company’s small administrative headcount has ensured that consideration of risk has enjoyed
close oversight in relation to day-to-day matters by the Company’s senior management. The Board, however,
recognised that as the Company continues to grow quickly, a more structured process of risk management
was required.
Some areas of the Company’s business have always had sophisticated risk analysis and mitigation processes
in place. For example, the Company’s flight operations are subject to a world-class risk assessment and
mitigation programme and the Company’s exposure to foreign exchange and fuel price changes is mitigated
through a Board-approved hedging programme administered by the Audit Committee. Risks and internal
controls relating to financial reporting were subject to a detailed and comprehensive analysis as part of the
Company’s preparations for its initial public offering in March 2015. For other areas, however, a comprehensive
enterprise risk management (ERM) process appropriate for the Company’s business was developed and
implemented by management during the course of the 2017 financial year, working with Ernst & Young and
overseen by the Audit Committee.
Following the completion and implementation of the ERM process, the Company has a more robust process in
place to review and monitor both existing and new risks that may arise. In order to ensure that the principles and
methodology underpinning the ERM process and the ERM manual enjoyed a common understanding throughout
the Company, a comprehensive and practical training programme was rolled out across the Company from
senior management down, with the actual training being tailored to each colleague’s position in the risk
management process. A formal internal Risk Council was established, involving the Company’s senior
management team and a number of other senior employees on a regular basis, to consider and update the risks
identified in the risk universe. The new ERM methodology was then used to assess these various risks with the
relevant risk owners on either a quantitative or qualitative basis, as appropriate. The outcome of the ERM
methodology employed for each risk leads to a decision as to whether to transfer, avoid, reduce or accept the
particular risk. The resulting principal risk report was then reviewed with the Audit Committee and presented to
the Board. The principal risk report will be comprehensively reviewed by the Risk Council at least every quarter
and will form the basis of regular, specific risk reports to the Audit Committee, with any changes to the principal
risk report and emerging risks being highlighted. These key risks, many of which were already the subject of
regular reporting and discussion between senior management and the Board, are detailed below. In addition, and
as part of the Company’s regular mid-term planning process, management has, where appropriately measurable,
provided financial models of the possible effects of some of these key risks to the Board. The Board is therefore
satisfied that it has carried out a robust assessment of the principal risks facing the Company, including those
that would threaten its business model, future performance, solvency or liquidity.
Wizz Air Holdings Plc Annual report and accounts 2017
26
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Our risk management process continued
The Board also reviewed the effectiveness of the risk management and internal control systems of the Company.
The following action points were defined and implemented: (i) a more formal communication and reporting line
between the Chairman of the Audit Committee and the Head of Internal Audit was set-up; and (ii) in order to
give more time for the proper review of the outcome of internal audits and to follow-up on any issues raised,
additional meetings of the Committee are being held during the year focusing on internal audit matters.
The new ERM system enhances and develops the Company’s risk management activities and internal control
processes and puts them in a framework appropriate not only for the coming year but the coming decade.
Risks relating to the Group
Introduction
The key risks identified by the Risk Committee fall into six broad groupings:
information technology and cyber risk, including website availability, protection of our own and our
customers’ data and ensuring the availability of operations-critical systems;
external factors, such as the default of a partner financial institution, fuel cost, foreign exchange rates,
competition and geopolitical risk;
product development, making sure that we are making the best use of our capacity and ensuring that we
have access to the right airport infrastructure at the right price so that we can keep on delivering the
superior Wizz Air service at low fares across an ever wider network;
fleet development, to ensure the Company has the right number of aircraft available at the right time to
take advantage of commercial opportunities and grow in a disciplined way;
regulatory risk, ensuring that we remain compliant with regulations affecting our business and operations;
operations, including safety events and terrorist incidents; and
human resources, ensuring we are able to recruit the right number of colleagues of the right quality to
continue to grow or, once recruited, that they remain sufficiently engaged and motivated and ensuring
that the Company has appropriate succession management for key colleagues in place.
Information technology and cyber risk
Wizz Air is, primarily, an e-business. During the 2017 financial year, 95 per cent. of bookings were made
through our website and mobile applications. We are therefore dependent on our information technology
systems to receive, process and manage ticket reservations, process credit and debit card payments, check in
passengers, manage our traffic network, perform flight operations and engage in other critical business tasks.
Our website is our shop window and therefore it is critical that it is secure and reliable. We outsource the
hosting and operation of these systems to a number of IT suppliers. However, we retain an experienced internal
team to oversee the operation of these systems and include suitable contractual recovery and other key
performance standards with each of our key IT suppliers. We have also increased the number of card acquirers
and payment service providers that we use, with each provider being an effective back-up for the others. We
will continue to review our business-critical systems to ensure that the appropriate level of back-up is in place.
The Company has employed business continuity processes since its beginning and our existing processes and
procedures ensure that key staff can be relocated to an alternative location should our normal offices become
unusable. As a project for the 2018 financial year, these business continuity processes will be comprehensively
reviewed and, where necessary, updated to ensure that they remain appropriate and sufficient for the
Company’s continued growth.
Cyber risk is a hugely important consideration for a business such as ours and is one of the areas on which
specific work has been done with the Board over the last year. Our systems could be attacked in a number of
ways and with varying outcomes – for example, unavailability of our website or operations-critical systems or
theft of our customers’ data. Quite apart from immediate commercial loss, any loss of customer data is likely
to result in considerable loss of confidence of our customers. Cyber security is a constantly evolving challenge
and one of the key issues related to cyber security is our colleagues’ awareness of the risk and of the possible
ways in which our business could be attacked and, therefore, a comprehensive and compulsory e-learning
training course for all colleagues has been implemented. Our in-house IT security department will continue to
review emerging threats and the Board will be kept up to date on the actions being taken by the Company to
safeguard its systems. More generally, protection of both our own and our customers’ data remains a key
issue. The Company is preparing itself for the implementation of the General Data Protection Regulation in
May 2018 through a cross-functional working group which will review the Company’s existing, comprehensive
data protection processes and policies. The Board will be kept updated on the Company’s preparations for
this step change in the Company’s data protection obligations.
Wizz Air Holdings Plc Annual report and accounts 2017
27
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risks relating to the Group continued
External risks
We are a truly international business and, while we report in Euros, we transact in 20 currencies. We also
have to make a large number of payments in US Dollars. Appreciation of the US Dollar against the Euro may
impact results and margins. Therefore, to reduce our exposure to currency fluctuations in respect of costs
incurred in US Dollars, we engage in Euro/US Dollar hedging in accordance with a Board-approved hedging
policy. In addition and recognising the importance of the Pound Sterling as accounting for around 20 per cent.
of the Company’s total revenues, the Company’s Board-approved hedging policy was amended during the
course of the 2017 financial year to allow for the possibility of hedging Pound Sterling against the Euro. In all
cases, hedging transactions are subject to the approval of the Audit Committee.
Fuel accounted for 28.3 per cent. of our total Group operating cost in the 2017 financial year. A rise in fuel
prices could significantly affect our operating costs. We therefore hedge our aviation fuel cost in accordance
with a Board-approved hedging policy. The Audit Committee is involved in and approves each hedging
decision.
In the past few years, Wizz Air has seen its cash reserves increase considerably. We believe that a strong cash
position is a vital foundation for the Company’s continued, aggressive growth and ability to deal with and/or
take advantage of competitive situations when they arise. However, the security of our cash and the financial
strength of our hedging counterparties is something that we actively manage. In particular, all of the
Company’s cash is invested in accordance with a Board-approved counterparty risk policy which assigns
certain investment limits for each counterparty based upon its credit rating.
Competition is one of the key risks to our business. The airline industry in Europe is fiercely competitive. We
have yet to see consolidation on the scale experienced in, for example, the United States and so there are a
large number of airlines, including ultra-low-cost and low-cost carriers, traditional airlines and charter airlines,
competing throughout our network. Our competitors may seek to protect or gain market share in markets in
which we operate, perhaps by offering discounted fares or more attractive schedules. We believe that
competition is good for the industry – both for consumers, who benefit from lower prices, as well as airlines
themselves as they must embrace cost discipline – but we must react to a competitive threat. Ultimately, our
key competitive strength is our commitment to driving our cost ever lower while delivering a superior
customer service. We firmly believe that, in a tough market, lowest cost ultimately wins and the necessary cost
discipline is something to which we are committed, day in, day out. Competition can, however, adversely affect
revenues and so we constantly monitor our competitors’ actions and the performance of our route network
to ensure that we take both reactive and proactive actions in a timely manner, as required.
We are exposed to political and economic events and trends in CEE and elsewhere. Our business extends
beyond the borders of the EU and into countries such as Russia, Turkey and Ukraine and regions including
the Caucasus, North Africa and the Middle East. These and other countries in the region have experienced,
and may still be subject to, potential political and economic instability caused by changes in governments,
political deadlock in the legislative process, contested election results, tension and conflict between federal
and regional authorities, corruption among governmental officials, social and ethnic unrest and currency
instability. We maintain close relationships with local authorities and, as an organisation, we are able to react
quickly to adverse events.
Like all European airlines, we have prospered in a liberalised regulatory environment which makes the free
movement of people throughout the European Union a reality. Any event which adversely affects either the
liberalised operating environment or the free movement of people has the potential to affect our business. As
with all airlines in Europe, the outcome of the Brexit vote has created significant uncertainty for our business.
While demand on our routes to and from the United Kingdom has not weakened, the weakness of the Pound
Sterling following the Brexit vote has adversely affected the Euro value of the revenue. However, the most
critical issue facing the Company and all European airlines is the lack of clarity on how the Brexit negotiations
will affect access to the liberalised market between the United Kingdom and the rest of the European Union.
Wizz Air firmly believes that the liberalised air market has significant benefits for both the United Kingdom
and the European Union and urges all parties to settle as a matter of priority on the continuation of access to
the liberalised market. However, whatever the outcome and while we continue to have a strong United
Kingdom business, we have always believed that diversification of our network and our customers is a key
part of a sustainable business. That remains the case and we are confident that there remains a large
addressable market in CEE which will continue to provide opportunities for profitable growth should our UK
business be adversely affected.
Wizz Air Holdings Plc Annual report and accounts 2017
28
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risks relating to the Group continued
Product development
We do not just compete for customers, we compete for access to infrastructure too. Wizz Air enjoys high
growth – but as we grow, we need more terminal space, slots and aircraft parking to be able to operate our
flights. Certain airports to which we operate may already be or become congested, meaning we may not be
able to secure access to those airports at our preferred times and, therefore, when we have slots we need to
make sure that we retain them. We mitigate this risk by operating primarily from secondary airports which
have significant spare capacity and, where we do fly to congested airports, our flights often constitute in-
bound traffic for such airports and take up off-peak capacity. However, we ensure that we maintain close
working relationships with relevant airport authorities and slot co-ordinators and we are continually improving
our system to ensure that slot requests and submissions are made in a timely way – and used in a way that
delivers the maximum benefit for the Company.
Fleet development
Our planned growth means we need planned aircraft deliveries. Wizz Air has big plans – we will continue to
grow and we will continue to be ready to respond to competitive challenges. However, in order to do so, we
need capacity and that means that we need an appropriate supply contract for new aircraft which
manufacturers are able to deliver. And the emphasis here is on new aircraft – we currently operate one of the
youngest fleets in Europe, with an average age of 4.4 years, and that means we have a more efficient fleet
which is more reliable and therefore able to be utilised for over twelve hours a day. For the business, that
means lower unit operating costs, and for our customers, lower prices. Our existing order book with Airbus as
at 31 March 2017 comprised a further 23 Airbus A320ceo-family aircraft, split into eight A320ceo and 15
A321ceo deliveries, all of which will be delivered before the end of 2018. From 2019 onwards, we will start to
take delivery of the A321neo aircraft ordered at the Paris Air Show in June 2015. We have selected Pratt &
Whitney’s geared turbofan engine to power our A321neo deliveries. However, there have been a number of
operational issues connected with the introduction of the geared turbofan engine. This is always a risk with
groundbreaking new technology but the advantage is that, once solved, the new technology offers a step
change in efficiency and the prospect of development and optimisation in the years ahead. While we remain
confident in our selection of the geared turbofan engine, we are in constant dialogue with Pratt & Whitney to
ensure that we have sufficient capacity to deliver our planned growth.
A large aircraft order is a significant financial commitment and so requires financing. To date, we have
financed all of our new aircraft deliveries through sale and leaseback arrangements. This will continue to be
the case for the remaining A320ceo-family deliveries through to the end of 2018, for which we already have in
place fully committed sale and leaseback financing. We are now starting to consider the best options for
financing the first A321neo deliveries from 2019 – we are confident that, given the aircraft’s desirability as a
result of its superior operating economics and Wizz Air’s established strong financial track record, finance will
be readily available on competitive terms.
Regulatory risks
Ensuring compliance. Even in a liberalised air traffic right environment, aviation remains a highly regulated
industry. Wizz Air relies on an air operator’s certificate (AOC) and operating licence issued by Hungary in
order to exercise the right to operate air services both within Europe and to and from countries with which
Europe has liberalised air traffic agreements. The AOC requires the Company to be majority owned and
effectively controlled by qualifying nationals, which currently means nationals of the European Economic Area
and Switzerland. If the Company ceases to be majority owned and effectively controlled by qualifying
nationals, then its AOC and operating licence – and, so, its right to operate its business – could be at risk. The
Company therefore closely monitors the nationality of its Shareholders. The Board has set a limit (permitted
maximum) of 49% of its issued Ordinary Shares for ownership by non-qualifying nationals and the Board has
the power to take action in relation to non-qualifying Shareholder shareholdings to protect the Company’s
AOC and operating licence. During the course of the 2017 financial year, the Board exercised some of these
powers, placing a temporary ban on the further acquisition of Ordinary Shares by non-qualifying Shareholders
to stop the permitted maximum being exceeded. The Board receives a report at each Board meeting of the
level of share ownership by non-qualifying nationals.
Operational risks
Safety events. An accident or incident, or terrorist attack, can adversely affect an airline’s image and
customers’ willingness to travel with that airline.
At Wizz Air, our number one priority is the safety of our aircraft, passengers and crew. Our aircraft fleet is
young and reliable, we use the services of world-class maintenance organisations and we have a strong safety
culture. A cross-functional safety council meets twice a year, involving both senior management as well as
operational staff, and reviews any issues which have arisen in the past six months and the actions taken as a
consequence. In addition to this, we collect detailed data from all aspects of our operation in order to identify
Wizz Air Holdings Plc Annual report and accounts 2017
29
STRATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Risks relating to the Group continued
Operational risks continued
trends and relevant personnel from our Operations department meet twice a year to discuss any trends
identified in their sphere of operation and how they are being dealt with. We also operate an anonymous safety
reporting system, to allow our flight and cabin crew to report safety issues which are a concern to them. Our
entry standards for operating crew are high and our own Approved Training Organisation (ATO) ensures that
all of our pilots are trained to the same exacting standards. In July 2016, Wizz Air achieved registration under
the International Air Transport Association’s Operational Safety Audit (IOSA). The IOSA programme is the
worldwide standard in airline safety evaluation and assesses an airline’s safety management and control
systems and processes.
Our experienced security team has an ongoing programme to check that the security of our operations and
the airports which we serve meet high standards. We know that the proper management of risk means that
we must anticipate and deal with issues in advance. Our security team also maintains close contact with
relevant authorities in order to assess any potential security or other threats to our operations. Any serious
threat will be escalated to senior management. We have in the past suspended operations to destinations
where the safety of our aircraft, passengers and crew cannot be guaranteed. In December 2015, Wizz Air
Hungary Ltd. was named as a company of strategic importance by the Hungarian Parliament and, as such, the
Company now enjoys enhanced security information and protection under the auspices of the Hungarian
Constitution Protection Office.
Human resources
Wizz Air is a people business. We know that our people are the backbone of our business and it is their
dedication, day in, day out, that allows us to deliver our low-cost, quality service. But we know that we cannot
take our people for granted and that competition for the high quality people who we seek is keen and may
become even more so.
From time to time, pilots and others can be in short supply. We invest a huge amount of time in recruiting
pilots and also training them to maintain our high standards. In order to ensure the future availability of
pilots of the right calibre, we have recently announced a five-year training partnership with CTC Aviation
Training and Central European Flight Academy to provide cadet pilots to Wizz Air. We have also
introduced an innovative scheme which allows pilots who are currently turboprop captains to transition
quickly to a position with Wizz Air.
We are proud that, to date, we have maintained a good relationship with our employees and we have not
experienced industrial unrest. We strive to make sure that this will remain the case, but we realise that
there can be no guarantee. We know that we need to ensure that we continue to motivate our colleagues.
Feedback is an essential part of this process – both giving and receiving – and we consider direct
communication between senior management and other employees as the best way of listening to our
employees’ concerns. Visits by senior management to each of our operating bases are organised at least
annually. Following on from last year’s online and in-person employee feedback programme, follow-up
surveys relating to a number of matters that arose were conducted with our colleagues from Flight
Operations and Cabin Operations and a number of improvement actions were implemented.
Our success to date has also depended on a number of key personnel, including our Chief Executive
Officer, other senior managers and post holders required by regulation. Our continuing success will
depend on having the right people in those key positions. While, in the past, we have successfully recruited
for those positions, we recognise that we have a pool of talent within the Company and have recently
started a talent assessment and leadership development programme for our staff. Succession of key
personnel is a matter which we take extremely seriously and we shall continue to develop our succession
planning processes to ensure that we have colleagues of the right calibre to lead the Company in the
future.
This Strategic report has been signed off on behalf of the Board by
József Váradi
Chief Executive Officer
24 May 2017
Wizz Air Holdings Plc Annual report and accounts 2017
30
GOVERNANCE
Wizz Air Holdings Plc Annual report and accounts 2017
31
GOVERNANCE
CORPORATE GOVERNANCE REPORT
A COMPANY COMMITTED TO HIGH STANDARDS OF CORPORATE GOVERNANCE
Chairman’s statement on corporate governance
Wizz Air is a company which continues to grow at a market-leading rate. Wizz Air’s Directors recognise the
trust that investors have placed in the Company’s business and continue to ensure high standards of corporate
governance.
Continuing the Board’s development to reflect the Company’s standing as a FTSE 250 company, I was
delighted to welcome Wioletta Rosołowska as an additional Non-Executive Director shortly before the
Company’s annual general meeting, with effect from 1 June 2016. Wioletta brings to the Board extremely
relevant, extensive Central and Eastern European consumer and marketing experience gained during her
ongoing, successful executive career.
As I reported in last year’s annual report, the Directors participated in a performance evaluation of the Board,
its Committees and individual Directors and a number of actions were implemented as a result. For example,
Directors were given the opportunity to spend a number of days visiting the Company’s office in Budapest as
well as its base in Warsaw to speak with management and employees, as well as experience a number of areas
of the Company’s business from crew training to ramp handling. The Board also has a renewed focus on the
Company’s strategy, essential as the business continues to grow rapidly, with the existing aircraft orders
projecting an airline of at least 150 aircraft by the end of 2024. The Board will repeat the performance
evaluation with reference to the financial year ended 31 March 2017 through an internally facilitated process to
ensure that actions arising from the previous evaluation were implemented appropriately and to ensure that
processes continue to develop to support the Company’s growth in the future.
One key example of the continuous review and development of processes is the development of a more
structured enterprise risk management system, which has now been completed and the results presented to the
Board. The Company’s Audit Committee and management worked with Ernst & Young to implement this
enterprise risk management system, with the participation of a newly created Risk Council involving the
Company’s Chief Executive Officer, all other officers and a number of heads of functions. The enterprise risk
management system has been embedded in the Company’s culture through comprehensive training at all
management levels and ongoing training will ensure that the principles continue to be applied in the Company’s
risk management processes and as the Company encounters and deals with new issues in the future.
Trading in the Company’s shares over the financial year ended 31 March 2017 resulted in a number of changes
in the Company’s shareholders. Following an increase in the shareholdings of a number of shareholders who
were not Qualifying Nationals, as defined in the Company’s Articles of Association, the Board took certain
measures to ensure that the aggregate of those shareholdings did not exceed the Permitted Maximum, also
as defined in the Company’s Articles of Association. Those measures have now been removed, although the
Company continues to monitor closely such shareholdings on a regular basis. This demonstrates that, where
required, the Board is prepared to take decisive action to ensure the protection of the Company’s interests
and ongoing compliance with regulatory requirements.
The Board thanks each and every one of our investors for the faith they have shown in the Company’s business
and, also, recognises the trust that the Shareholders have placed in the Board and senior management. Over
the course of the last year, a large number of meetings with investors were organised by senior management
and, in addition, I have also spoken to a number of Shareholders myself. Any concerns or comments raised
were fed back to the Board.
Once again, I would stress that the trust that both investors and other stakeholders have placed in the Board
is not taken for granted. We will continue to develop our processes to ensure that our policy of ensuring high
standards of governance appropriate for the Company is maintained in the future and in a manner which is
appropriate for the Company’s continued fast rate of growth.
Wizz Air Holdings Plc Annual report and accounts 2017
32
GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
The Directors support high standards of corporate governance and it is the policy of the Company to comply
with current best practice in UK corporate governance to the extent appropriate for a company of its size. The
Board intends that the Company will comply fully with the requirements of the Corporate Governance Code
(April 2016) during the 2018 financial year, save as set out below:
a) William A. Franke, the Chairman, does not meet the independence criteria set out in the Corporate
Governance Code, given that he is the managing partner of Indigo. However, given the benefits to the
Company of his recognised experience in the airline industry, the Board believes that Mr Franke should
continue as Chairman.
b) The underlying principles of the Company’s Remuneration Policy, described in more detail in the
Remuneration Report on pages 50 to 54, are that: (i) remuneration must be competitive whilst not being
more than is necessary to attract, retain and motivate executive management of the quality required to
continue to run the Company successfully; and (ii) a significant proportion of remuneration remains
performance based. Following a period of consultation with a large number of significant Shareholders,
the policy was approved by the Company’s Shareholders at the Company’s 2015 annual general meeting
and will remain in place for a period of three years. The policy does not include provisions allowing the
Company to recover sums paid or withhold the payment of any sum as mentioned in paragraph D.1.1. of
the Corporate Governance Code. The Company believes that the policy as approved by Shareholders
reflects the Company’s preference to keep all aspects of its business as simple as possible. Nonetheless,
the Company has been transparent with its Shareholders in this respect and the Remuneration Committee
will continue to review all aspects of the Remuneration Policy on an ongoing basis to ensure that it
continues to align with the Company’s and Shareholders’ interests.
The Board considers that it and the Company have, during the financial year ended 31 March 2017, complied
with the Corporate Governance Code (September 2014), save as set out above.
The Corporate Governance Code is issued by the Financial Reporting Council and is available for review on
the Financial Reporting Council's website: www.frc.org.uk.
Our key Shareholders
As at 31 March 2017, the Company had been notified pursuant to DTR 5 of the Financial Conduct Authority’s
Disclosure Rules and Transparency Rules (DTRs) that the following Shareholders held more than 3 per cent.
of the Company’s issued Ordinary Shares:
Shareholder
Indigo Hungary LP
FMR LLC
Indigo Maple Hill LP
Váradi, J.J.
AGTA Invest Co. Ltd
Reported shareholding
14.49 per cent.
9.97 per cent.
4.38 per cent.
3.52 per cent.
3.75 per cent.
Reported number of shares
8,245,590
5,713,122
2,495,043
2,020,500
1,962,208
As at 23 May 2017, being the latest practicable date before the approval of the annual report and accounts,
the positions were the same as listed above for 31 March 2017.
Changes in interests that have been notified to the Company pursuant to DTR 5 of the DTRs since 23 May 2017
can be found in the Regulatory News section of the Investor Relations page of the Company’s corporate
website: http://corporate.wizzair.com/en-GB/investor_relations/news/press_releases.
Our relationship with Indigo
On 31 March 2017, Indigo (Indigo Hungary LP and Indigo Maple Hill LP together) held 18.7 per cent. of the
Company’s issued Ordinary Shares, as well as 44,830,503 convertible shares of £0.0001 each in the capital of
the Company (“Convertible Shares”). The Convertible Shares do not have any right to participate in the
Company’s profits and are, save in very limited circumstances, non-voting. These limited circumstances include
the consideration of a resolution for the winding-up of the Company or the variation of the rights attaching to
the Convertible Shares or any variation of the rights attaching to the Ordinary Shares into which the
Convertible Shares may be converted.
Each Convertible Share may be converted into one Ordinary Share, as long as the ownership of the Company
remains compliant with applicable EU ownership and control rules. Indigo also holds a number of convertible
notes which may be converted into Ordinary Shares, again provided that the Company’s ownership remains
compliant with EU ownership and control rules. The terms of these convertible notes are governed by a note
purchase agreement dated 24 February 2015 and entered into between the Company, Wizz Air Hungary Ltd.
and Indigo. Our Chairman, William A. Franke, is the managing partner of Indigo.
Wizz Air Holdings Plc Annual report and accounts 2017
33
GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
CONTINUED
Our key Shareholders continued
Our relationship with Indigo continued
According to the Financial Conduct Authority’s Listing Rules (the “Listing Rules”), any person who exercises
or controls the exercise, on their own or together with any person with whom they are acting in concert, of
30 per cent. or more of the votes able to be cast on all or substantially all matters at general meetings of a
company are known as “controlling shareholders”. During its preparation for its initial public offering in
February 2015, the Company discussed with the UK Listing Authority that, in the circumstances, Indigo would
be treated as a controlling shareholder of the Company for these purposes. The Listing Rules require
companies with controlling shareholders to enter into a written and legally binding agreement, which is
intended to ensure that the controlling shareholder complies with certain independence provisions. The
agreement must contain undertakings that:
a) transactions and arrangements with the controlling shareholder (and/or any of its associates) will be
conducted at arm’s length and on normal commercial terms;
b) neither the controlling shareholder nor any of its associates will take any action that would have the effect
of preventing the listed company from complying with its obligations under the Listing Rules; and
c) neither the controlling shareholder nor any of its associates will propose or procure the proposal of a
Shareholder resolution which is intended or appears to be intended to circumvent the proper application
of the Listing Rules.
Wizz Air entered into a relationship agreement with Indigo dated 24 February 2015. The key terms of this
relationship agreement are set out below.
Independence
Indigo has undertaken to exercise its voting powers in relation to the Company to ensure that the Company is
capable of operating and making decisions for the benefit of the Shareholders of the Company as a whole and
independently of Indigo at all times. In addition, Indigo has undertaken that it will not, and will procure that
none of its associates will: (a) take any action that would have the effect of preventing the Company from
complying with its obligations under the Listing Rules; and (b) propose or procure the proposal of a
Shareholder resolution which is intended or appears to be intended to circumvent the proper application of
the Listing Rules.
Board
Indigo may nominate: (a) three Directors to the Board if Indigo and its associates hold in excess of 30 per cent.
of the fully converted share capital of the Company (i.e. assuming the conversion in full of all Convertible
Shares and Convertible Notes); (b) two Directors to the Board if Indigo and its associates hold in excess of
20 per cent. of the fully converted share capital; or (c) one Director to the Board if Indigo and its associates
hold in excess of 10 per cent. of the fully converted share capital (each an “Indigo Director”). If Indigo and/or
its associates no longer hold at least 30, 20 or 10 per cent., respectively, of the fully converted share capital of
the Company, then Indigo has agreed to procure, insofar as it is legally able to do so, that the appropriate
number of Indigo Directors resigns from the Board unless a majority of the independent Directors resolve that
any Indigo Director should remain on the Board.
Indigo may not nominate any person to be an Indigo Director whose re-election has been proposed to, but
not approved by, the holders of Ordinary Shares in general meeting, or who has been removed from office by
a resolution of the holders of Ordinary Shares.
Indigo may also nominate one Indigo Director to each of the Audit Committee and the Remuneration
Committee until the earlier of: (a) twelve months from admission; or (b) Indigo and its associates ceasing to
hold at least 10 per cent. of the fully converted share capital of the Company.
The Board shall manage the Company independently of Indigo in accordance with the articles of association,
the Listing Rules and applicable law. The parties have also agreed that at least half of the Board (excluding the
Chairman) shall comprise independent Non-Executive Directors, the Nomination Committee shall consist of a
majority of independent Directors and, save as set out in the paragraph above, the Remuneration and Audit
Committees shall consist only of independent Directors.
Arm’s length transactions
All transactions and relationships between the Company and Indigo or any of their associates shall be
conducted at arm’s length, on a normal commercial basis and in accordance with the related party transaction
rules set out in Chapter 11 of the Listing Rules.
Wizz Air Holdings Plc Annual report and accounts 2017
34
GOVERNANCE
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
CONTINUED
Our key Shareholders continued
Our relationship with Indigo continued
Provision of information and confidentiality
Indigo shall, subject to the Company’s obligations under all applicable laws (including, without limitation, the
Listing Rules and the DTRs), be provided with financial, management and/or other information relating to
any member of the Group as Indigo (or any of its associates) may reasonably require for the purposes
of any internal or external reporting requirements which the relevant party is required by internal compliance,
law or regulation to make. Indigo may disclose any such financial, management and/or other information
to its associates provided that: (a) Indigo will (and will procure that any associate to whom any information
is passed will) keep confidential any such information; (b) such information does not include information
relating to any transaction between the Company and Indigo or any of their associates obtained as a result
of an Indigo Director’s position as a Director; (c) disclosure would not result in the breach by the
Company of the DTRs or require the Company to make a public announcement; and (d) the name of such
persons to whom information is disclosed is added to the Company’s insider list.
Confirmation regarding compliance
The Board confirms that, since the entry into the relationship agreement, on 24 February 2015, until
24 May 2017, being the latest practicable date prior to the publication of this report:
d) the Company has complied with the independence provisions included in the relationship agreement; and
e) so far as the Company is aware, the independence provisions included in the relationship agreement have
been complied with by Indigo.
Engaging with our Shareholders
Wizz Air recognises the need to engage with its Shareholders.
Over the course of the past year, the Company’s Investor Relations department has arranged a number of
roadshows, timed around the release of financial results, as well as other meetings with investors. At the 2016
annual general meeting, attended by all of the Directors, both the Chairman and the Senior Independent Non-
Executive Director, along with the Chairmen of the Audit Committee and the Remuneration Committee, were
available to answer questions from investors. The Chairman, the Senior Independent Non-Executive Director
and the Chairmen of the Audit Committee and the Remuneration Committee will be present at the 2017 annual
general meeting and, again, will be available to answer questions from investors.
A report on investor relations is presented by the Chief Financial Officer and, in the absence of the Chief
Financial Officer, the Head of Investor Relations at each Board meeting, during which feedback from meetings
held by senior management with investors is provided. The Board is supplied with copies of analysts’ and
brokers’ briefings as they are received.
Reflecting the importance that the Company places on being transparent with its Shareholders, key
Shareholders were consulted on certain aspects of the proposed Remuneration Policy before it was put to a
Shareholder vote at the 2015 annual general meeting.
Wizz Air Holdings Plc Annual report and accounts 2017
35
GOVERNANCE
MANAGEMENT OF THE COMPANY
The Board of Directors
Effective oversight of Wizz Air’s business is the key function of the Board. Key to this oversight is the approval
of the Company’s long-term strategy and commercial objectives and these matters are reserved to the Board,
along with the approval of annual operating and capital expenditure budgets and any changes thereto. Other
key areas also reserved to the Board include financial reporting and controls, internal controls, the review and
approval of key contracts, Board membership, the remuneration of Directors and senior executive employees,
corporate governance and the review of safety issues.
Board membership
Wizz Air’s Board currently comprises one Executive and nine Non-Executive Directors, which the Directors
consider to be an appropriate Board structure. The current Directors bring a wealth of experience from both
the worldwide aviation industry as well as other international industries and so together bring to the Company
an appropriate breadth, depth and balance of skills, knowledge, experience and expertise. The Directors who
have served during the 2017 financial year are:
Position
Committee membership (as at 31 March 2017)
Name
Executive Director
József Váradi
Non-Executive Directors
William A. Franke
Thierry de Preux
Guido Demuynck
Simon Duffy
Susan Hooper
Stephen L. Johnson
John McMahon
Wioletta Rosołowska
John R. Wilson
*Appointment effective as of 1 June 2016.
Chief Executive Officer
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director,
Senior Independent Director
Non-Executive Director*
Non-Executive Director
Nomination Committee
Remuneration Committee
Remuneration Committee
Audit Committee, Nomination Committee
Audit Committee, Remuneration
Committee
Audit Committee, Nomination Committee
William A. Franke, Chairman
Mr Franke has been Chairman of Wizz Air since 2004. The Chairman’s role is to lead the Board and ensure that
it operates effectively. Mr Franke is the founder and managing partner of Indigo, a private equity fund focused
on air transportation. He is currently chairman of Frontier Airlines, Inc and JetSMART SpA.. From 1998 to 2001,
Mr Franke was a managing partner of Newbridge Latin America, a private equity fund focused on Latin America.
Mr Franke was the chairman and chief executive officer of America West Airlines from 1993 to 2001 and currently
serves on the board of directors of Concesionaria Vuela Compañía de Aviación, S.A. de C.V., a Mexican airline
that does business as Volaris. He served as chairman of Spirit Airlines Inc., a United States airline, from 2006 to
2013 and Tiger Aviation Pte. Ltd, a Singapore-based airline, from 2004 to 2009, and held directorships in
Alpargatas S.A.I.C., an Argentina-based footwear and textiles manufacturer, from 1996 to 2007, and Phelps
Dodge Corporation, a mining company, where he served as the lead outside director for several years, from 1980
to 2007. He has in the past served on a number of publicly listed company boards of directors including ON
Semiconductor, Valley National Corporation, Southwest Forest Industries and the Circle K Corporation.
Mr Franke has both undergraduate and law degrees from Stanford University and an honorary PhD from
Northern Arizona University.
József Váradi, Chief Executive Officer
Mr Váradi was one of the founders of Wizz Air in 2003. Mr Váradi worked at Procter & Gamble for ten years
between 1991 and 2001, and became sales director for global customers where he was responsible for major
clients throughout eleven EU countries. He then joined Malév Hungarian Airlines, the Hungarian state airline,
as chief commercial officer in 2001, before serving as its chief executive officer from 2001 to 2003. He has also
held board memberships with companies such as Lufthansa Technik Budapest (supervisory board, 2001–
2003) and Mandala Airlines (board of commissioners, 2007–2011). In 2007, Mr Váradi won the Ernst & Young
Hungary “Brave Innovator” award. Mr Váradi holds a master’s degree in economics from the Budapest
University of Economic Sciences and a master’s degree in law from the University of London.
Thierry de Preux, Non-Executive Director
Mr de Preux was a founding Shareholder of Wizz Air in 2003 and joined the Board in 2012. A qualified chemical
engineer, Mr de Preux completed his master of business administration at Harvard Business School and went
on to become a general manager at the Nestlé Group. He subsequently spent 17 years as the head of the Swiss
division of Korn/Ferry International, where he specialised in board consulting and recruitment. In 2008,
Mr de Preux founded the Swiss Board Members Forum, an association including board members of the
20 largest companies on the Swiss Market Index.
Wizz Air Holdings Plc Annual report and accounts 2017
36
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
The Board of Directors continued
Board membership continued
Guido Demuynck, Non-Executive Director
Mr Demuynck joined the Board in February 2014. Mr Demuynck spent more than 25 years with Koninklijke
Philips N.V., holding various roles including general manager, portable audio business line, general manager,
audio business group and Marantz, and chief executive, consumer electronics (as a member of the group
management committee of Royal Philips Electronics and senior vice president). He then held the positions of
board member, responsible for the mobile division, at KPN (Koninklijke) N.V. and chief executive of Kroymans
Corporation B.V. and Liquavista B.V.. Mr Demuynck was a member of the supervisory board and chairman of
the remuneration committee of TomTom N.V. and of Divitel Holding B.V.. He is a member of the board of
directors, member of the remuneration committee and chairman of the audit committee of Proximus N.V.
(previously Belgacom), a member of the supervisory board of Teleplan International N.V. and Aito B.V.. Mr
Demuynck has a master’s degree in applied economics (magna cum laude) from the University of Antwerp
and a master’s degree in marketing and distribution (magna cum laude) from the University of Ghent.
Simon Duffy, Non-Executive Director
Mr Duffy joined the Board in January 2014. Mr Duffy started his career at NM Rothschild & Sons Ltd and has
held positions at Shell International Petroleum Co, Bain & Co, Consolidated Gold Fields Plc, Guinness Plc, Thorn
EMI Plc (where he held the position of deputy chairman and group finance director), World Online International
B.V. (where he held the position of deputy chairman and chief executive), End2End AS (where he held the
position of chief executive), Orange SA (where he held the position of chief financial officer), NTL:Telewest
Inc. (where he held the position of executive vice chairman) and Tradus Plc (where he held the position of
executive chairman). Mr Duffy has extensive London Stock Exchange non-executive director experience. He
has sat on the board of, amongst others, Gartmore Plc, HMV Group Plc, GWR Group Plc and Imperial Tobacco
Plc. He is currently chairman of You View TV Ltd., which is a joint venture between British Telecom, TalkTalk
and all the leading broadcasters in the United Kingdom. He is a non-executive director of Oger Telecom and
of Millicom International Cellular, both telecommunications companies, and of Modern Times Group AB, one
of Europe’s largest broadcasting companies listed on the Stockholm Exchange, where he is chairman of the
audit committee. Mr Duffy has a BA in philosophy, politics and economics from Oxford University and an MBA
from Harvard Business School.
Susan Hooper, Non-Executive Director
Ms Hooper was appointed to the Board of Directors as a Non-Executive Director in March 2016 and serves on
Wizz Air's Audit and Remuneration Committees. A UK national, Ms Hooper was managing director of British
Gas Services, leading the service and repair, central heating installations, electrical services and Dyno-Rod
business units until November 2014. She joined British Gas from the Acromas Group, where she was chief
executive of the travel division, responsible for Saga holidays and hotels, Saga cruises, Spirit of Adventure
cruises, Titan Travel and the travel division of the AA. Previously, Ms Hooper held senior roles at Royal
Caribbean International, Avis Europe, PepsiCo International, McKinsey & Company and Saatchi & Saatchi.
During her time with PepsiCo International, Ms Hooper spent over five years based in Central and Eastern
European countries. She is currently a non-executive director of Affinity Water Ltd. and The Rank Group plc,
as well as being an advisory board member of LUISS Business School in Rome. Ms Hooper recently became
non-executive board member of the Department for Exiting the European Union (DExEU) of the UK. From
2011 to 2014 she was a non-executive director of Whitbread PLC and has held several other non-executive
directorships, including at First Choice plc, Transcom SA, Royal and Sun Alliance Group plc and Courtaulds
Textiles Plc.
Stephen L. Johnson, Non-Executive Director
Mr Johnson joined the Board in 2004, left the Board in 2009 and was re-appointed as a Non-Executive Director
in 2011. Mr Johnson is executive vice president, corporate affairs for American Airlines Group Inc. and its
principal subsidiary, American Airlines, Inc. Previously, Mr Johnson served as executive vice president,
corporate and government affairs for US Airways. Prior to joining US Airways in 2009, Mr Johnson was a
partner at Indigo from 2003 to 2009. Between 1995 and 2003, Mr Johnson held a variety of positions with
America West Holdings Corporation prior to its merger with US Airways Group, including executive vice
president, corporate. Prior to joining America West, Mr Johnson served as senior vice president and general
counsel at GPA Group plc, an aircraft leasing company, and as an attorney at Seattle-based law firm Bogle &
Gates, where he specialised in corporate and aircraft finance and taxation. Mr Johnson earned his MBA and
Juris Doctor from the University of California, Berkeley, and a bachelor of arts in economics from California
State University, Sacramento.
Wizz Air Holdings Plc Annual report and accounts 2017
37
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
The Board of Directors continued
Board membership continued
John McMahon, Non-Executive Director
Mr McMahon has been a member of the Board since 2012. He has more than 30 years of experience in
commercial aviation, initially with Aer Lingus, GPA Group and GE Capital Aviation Services, before later holding
senior management positions at debis AirFinance (now AerCap) and Lloyds TSB Bank. In 2006, he led the
initial public offering and New York Stock Exchange listing of Genesis Lease Limited, an aircraft leasing
company, where he served as chairman and chief executive officer until its merger with AerCap in 2010. Since
then, he has served as a consultant, director and lecturer. His non-executive directorships include Airspeed
Limited, BNP Paribas Ireland, Investec Aircraft Syndicate Limited, Turbine Engines Securitization Limited and
Waypoint Leasing Limited. Mr McMahon holds a bachelor of engineering degree from the National University
of Ireland, Galway, and post-graduate diplomas in accounting and finance (Association of Chartered Certified
Accountants) and computer modelling and simulation (Trinity College Dublin). He completed the Advanced
Management Program at Harvard Business School and is a Chartered Director of the Institute of Directors.
Wioletta Rosołowska, Non-Executive Director
Ms Rosołowska was appointed to the Board in 2016. A Polish national, Ms Rosołowska is the country manager
for L’Oréal in Poland. Having started her career at Saatchi & Saatchi, she then moved to Tchibo GmbH, initially
as a marketing specialist and then progressing over her 20-year career with the company to become a member
of its executive board with particular responsibility for the Central and Eastern Europe region as well as Turkey
and Israel. Ms Rosołowska has also had non-executive director experience on the Board of Bank Pekao S.A.,
part of the Unicredit group, and as a member of the bank’s nominations and compensation committees.
John R. Wilson, Non-Executive Director
Mr Wilson has been a member of the Board since 2005 and a principal of Indigo since 2004. Mr Wilson is a member
of the board of directors of Frontier Airlines, Inc., together with its holding companies, Frontier Airlines Holdings,
Inc. and Frontier Group Holdings, Inc. Mr. Wilson is also a member of the board of directors of JetSMART SpA.. Prior
to joining Indigo he served at America West Airlines from 1997 to 2004 as the vice president of financial planning
and analysis, vice president of operations finance and in other senior finance positions. From 1991 to 1997 he was
employed by Northwest Airlines where he last served as director of finance for Asian operations based in Tokyo,
Japan. Mr Wilson served on the board of Spirit Airlines Inc. from 2009 to 2013 and served on the board of Vuela
Compañía de Aviación, S.A.P.I. de C.V. from 2010 to 2012. Mr Wilson has an MBA from the Darden School of Business
at the University of Virginia and an undergraduate degree in finance from Texas Tech University.
Independence
The UK Corporate Governance Code recommends that at least half the members (excluding the chairman) of
the board of directors of a company with a premium listing should be non-executive directors, determined by
the board to be independent in character and judgment and free from relationships or circumstances which
are likely to affect, or could appear to affect, their judgment.
The Board has considered the independence of the Company’s Non-Executive Directors and has concluded that:
f) William A. Franke, the Chairman, does not meet the independence criteria set out in the Corporate
Governance Code, given that he is the managing partner of Indigo (a significant Shareholder). However,
given the benefits to the Company of his recognised experience in the airline industry, the Board believes
that it is in the Company’s best interest that Mr Franke should continue as Chairman of Wizz Air.
g) Stephen L. Johnson is not considered to be an independent Non-Executive Director given his past position
with Indigo.
h) John R. Wilson is not considered to be an independent Non-Executive Director as he is a principal of Indigo.
Other than William A. Franke, John R. Wilson and Stephen L. Johnson, the Company regards all of its
Non-Executive Directors, namely, Guido Demuynck, Simon Duffy, Thierry de Preux, Susan Hooper, John
McMahon and Wioletta Rosołowska, as independent Non-Executive Directors within the meaning of
“independent” as defined in the Corporate Governance Code and free from any business or other relationship
which could materially interfere with the exercise of their independent judgment. Accordingly, as an absolute
majority of the Directors are independent Non-Executive Directors, the Company complies with the
requirement of the Corporate Governance Code that at least half of the board (excluding the chairman) of a
company with a premium listing should comprise independent non-executive directors.
Senior Independent Non-Executive Director
The Corporate Governance Code recommends that the Board should appoint one of its independent
Non-Executive Directors as the Senior Independent Non-Executive Director. The Senior Independent
Non-Executive Director should be available to Shareholders if they have concerns that contact through the normal
channels of the Chairman or Chief Executive Officer has failed to resolve or where such contact is inappropriate.
John McMahon has been appointed as the Company’s Senior Independent Non-Executive Director.
Wizz Air Holdings Plc Annual report and accounts 2017
38
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Senior management team
The Chief Executive Officer and the senior management team are responsible for the management of the
Group’s business and implementation of the Group’s strategy on a day-to-day basis.
As at 24 May 2017, the Group’s senior management team, in addition to the Chief Executive Officer, is:
Name
Diederik Pen
See note below
Johan Eidhagen
Owain Jones
George Michalopoulos
József Ujhelyi
Position
Chief Operations Officer and
Executive Vice President
Chief Financial Officer*
Chief Marketing Officer
Chief Corporate Officer
Chief Commercial Officer
Chief Flight Operations Officer
* As announced by the Company on 13 December 2016, Sonia Jerez Burdeus left the Company on 13 March 2017 following a
change in personal circumstances. A search for her replacement, led by Korn/Ferry, is ongoing and, in the meantime, the
Chief Executive Officer has assumed direct responsibility for the Company’s Finance department.
Diederik Pen, Chief Operations Officer and Executive Vice President
Mr Pen joined Wizz Air in January 2013 as Chief Operations Officer, becoming Accountable Manager in
September 2013. He was promoted to Chief Operations Officer and Executive Vice President in April 2017.
He was formerly the chief executive officer and chief operating officer of Martinair Holland. Prior to joining
Martinair Holland in 2006, Mr Pen worked for Virgin Blue Airlines in Australia from 2002 to 2006 as head of
ground operations, for Brisbane Airport Corporation in Australia as general manager of commercial services
and for Amsterdam Airport Schiphol as manager of commercial services. Mr Pen has a master of business
administration in business economics from the University of Amsterdam.
Johan Eidhagen, Chief Marketing Officer
Mr Eidhagen joined Wizz Air in January 2015 as Head of Brand and Marketing and was appointed Chief
Marketing Officer effective 1 February 2016. Before joining Wizz Air Mr Eidhagen built an extensive sales and
marketing career at Nokia, holding several senior global and regional marketing positions. He joined Nokia in
1998 from a background in retail and was head of marketing for the Nordic region until 2004, when he moved
to Nokia HQ in Finland to run global marketing services for the entertainment category. Between 2005 and
2007 he was based in New York as the director of marketing for Nokia Multimedia in North America before
returning to Finland where he was director and head of marketing for the Nokia Nseries Category. In 2009 he
became country manager for Nokia in Sweden and was appointed as managing director for the Scandinavian
region in 2011. Mr Eidhagen is a native of Stockholm and is a DIHM marketing graduate from the IHM Business
School in Stockholm.
Owain Jones, Chief Corporate Officer
Mr Jones joined Wizz Air as General Counsel in 2010 and was promoted to Chief Corporate Officer in
June 2014. Mr Jones is a solicitor of the Supreme Court of England and Wales. Having trained at Nicholson
Graham & Jones (1994 to 1996), Mr Jones joined Wilde Sapte (now Dentons LLP) in 1996 as a solicitor in its
aviation group, specialising in finance and regulatory matters. He spent time in the firm’s Paris and Hong Kong
offices before being appointed a partner in 2006, following which he spent three years in the firm’s Abu Dhabi
office, becoming acting managing partner of the office. He left the firm in 2009 to spend 18 months training
for a frozen air transport pilot’s licence with CTC Aviation Training. Mr Jones holds a bachelor of laws degree
from University College London.
George Michalopoulos, Chief Commercial Officer
Mr. Michalopoulos joined Wizz Air in 2010 as Head of Pricing and Revenue Management and was then
promoted to Head of Network Development, Scheduling and Sales in May 2015. Prior to Wizz Air, Mr
Michalopoulos built an extensive commercial and revenue career at Flybaboo and Blu-Express. Mr
Michalopoulos holds both Bachelor and Master of Science degrees in Management Science and Engineering
from Stanford University.
József Ujhelyi, Chief Flight Operations Officer
Mr Ujhelyi joined Wizz Air in 2004 as Head of Purchasing and Commercial Partners, and has since been heading
various commercial departments in the organisation over the past twelve years. Mr Ujhelyi was the Head of
Airport Development since 2012 and was appointed Chief Flight Operations Officer on 1 July 2016. Prior to
Wizz Air, Mr Ujhelyi built an extensive commercial and management career at Malév Hungarian Airlines and
Procter and Gamble. Mr Ujhelyi holds a diploma in Traffic and Transportation Engineering from the Budapest
University of Technology and Economics.
Wizz Air Holdings Plc Annual report and accounts 2017
39
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Board Committees
The Directors have established an Audit Committee, a Remuneration Committee and a Nomination Committee. The
terms of reference of the Committees have been drawn up in accordance with the provisions of the Corporate
Governance Code. A summary of the terms of reference of the Committees is set out below.
Each Committee and each Director has the authority to seek independent professional advice where necessary
to discharge their respective duties, in each case at the Company’s expense.
Audit Committee
The Audit Committee’s duties, as set out in its terms of reference, include:
a) monitoring the integrity of the financial statements of the Company, including its annual and semi-annual
reports, interim management statements, preliminary results announcements and any other formal
announcement relating to its financial performance;
b) reviewing significant financial reporting issues and judgments which they contain having regard to matters
communicated to it by the auditors;
c) where requested by the Board, reviewing the content of the annual report and accounts and advising the
Board on whether, taken as a whole, it is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company’s performance, business model and strategy;
d) keeping under review the adequacy and effectiveness of the Company’s internal financial controls and
internal control and risk management systems;
e) reviewing the adequacy and security of the Company’s arrangements for its employees and contractors
to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters. The
Audit Committee shall ensure that these arrangements allow proportionate and independent investigation
of such matters and appropriate follow-up action;
f) monitoring and reviewing the effectiveness of the Company’s Internal Audit function in the context of the
Company’s overall risk management system;
g) considering and approving the remit of the Internal Audit function and ensuring it has adequate resources
and appropriate access to information to enable it to perform its function effectively and in accordance
with the relevant professional standards. The Audit Committee shall also ensure the Internal Audit function
has adequate standing and is free from management or other restrictions;
h) meeting the Company’s head of the Internal Audit function at least once a year, without management
being present, to discuss its remit and any issues arising from the internal audits carried out. In addition,
the Audit Committee shall ensure that the Company’s head of the Internal Audit function has the right of
direct access to the Chairman, the Audit Committee Chairman and the rest of the Audit Committee, and
is accountable to the Audit Committee;
i) considering and making recommendations to the Board, to be put to Shareholders for approval at the
annual general meeting, in relation to the appointment, re-appointment and removal of the Company’s
external auditors. The Audit Committee shall oversee the selection process for new auditors and if auditors
resign the Audit Committee shall investigate the issues leading to this and decide whether any action is
required;
j) overseeing the relationship with the external auditors including (but not limited to):
I.
II.
assessing annually their independence and objectivity taking into account relevant UK
professional and regulatory requirements and the relationship with the external auditors as a
whole, including the provision of any non-audit services; and
satisfying itself that there are no relationships (such as family, employment, investment, financial
or business) between the external auditors and the Company (other than in the ordinary course
of business) which could adversely affect the auditors’ independence and objectivity;
Wizz Air Holdings Plc Annual report and accounts 2017
40
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Board Committees continued
Audit Committee continued
k) meeting regularly with the external auditors, including once at the planning stage before the audit and
once after the audit at the reporting stage. The Audit Committee shall meet the external auditors at least
once a year, without management being present, to discuss their remit and any issues arising from the
audit;
l)
reviewing and approving the annual audit plan and ensuring that it is consistent with the scope of the
audit engagement having regard to the seniority, expertise and experience of the audit team; and
m) reviewing the findings of the audit with the external auditors. This shall include but not be limited to
the following:
I.
II.
III.
IV.
a discussion of any major issues which arose during the audit;
any accounting and audit judgments;
levels of errors identified during the audit; and
the effectiveness of the audit process.
The Corporate Governance Code recommends that the Audit Committee should comprise at least three
members, who should all be independent Non-Executive Directors, and that at least one member should have
recent and relevant financial experience. During the financial year ended 31 March 2017, the membership of
the Company’s Audit Committee comprised three members, namely Simon Duffy, Susan Hooper and
John McMahon, all of whom are independent Non-Executive Directors. No members of the Audit Committee
have links with the Company’s external auditors. Mr Duffy is considered by the Board to have recent and
relevant financial experience and is Chairman of the Audit Committee.
The Company therefore considers that it complies with the Corporate Governance Code recommendation
regarding the composition of the Audit Committee.
The Audit Committee formally meets at least three times per year and otherwise as required. The Chief
Executive Officer, other Directors and representatives from the Finance function of the Company may attend
and speak at meetings of the Audit Committee. The Company’s external auditors and the Chief Financial
Officer are invited to attend meetings of the Audit Committee on a regular basis. The Company’s Head of
Internal Audit, along with the retained external firm of internal auditors, also attend the Audit Committee’s
meetings to report on internal audit matters. Following each meeting, the Chairman of the Audit Committee
reports to the Board on the significant items discussed during the Audit Committee’s meeting. The Audit
Committee met on ten occasions during the 2017 financial year (including telephonic meetings). In addition to
the formal meetings, the Audit Committee is in regular contact with relevant management in connection with,
for example, the implementation of the Group’s hedging strategy.
Remuneration Committee
The Remuneration Committee is responsible for setting the Remuneration Policy for all Executive Directors and the
Chairman, including pension rights and any compensation payments, and recommending and monitoring the
remuneration of the senior managers. Non-Executive Directors’ fees are determined by the full Board.
The objective of the Company’s Remuneration Policy is to attract, retain and motivate executive management
of the quality required to run the Company successfully without paying more than is necessary, having regard
to the views of Shareholders and other stakeholders.
The Remuneration Committee is also responsible for making recommendations for the grants of awards under the
Company’s share option schemes. In accordance with the Remuneration Committee’s terms of reference, no Director
may participate in discussions relating to his own terms and conditions of remuneration.
The Corporate Governance Code provides that the Remuneration Committee should comprise at least three
members, all of whom should be independent Non-Executive Directors. During the financial year ended 31
March 2017, the membership of the Company’s Remuneration Committee comprised three members, namely
Guido Demuynck, Susan Hooper and Thierry de Preux, all of whom are independent Non-Executive Directors.
The Chairman of the Remuneration Committee is Mr Demuynck.
The Company therefore considers that it complies with the Corporate Governance Code recommendations
regarding the composition of the Remuneration Committee.
The Remuneration Committee meets formally at least twice each year and otherwise as required. There were
six meetings of the Remuneration Committee during the 2017 financial year.
Wizz Air Holdings Plc Annual report and accounts 2017
41
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Board Committees continued
Nomination Committee
The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of
the Board. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and
experience on the Board, the size, structure and composition of the Board, and retirements and appointments
of additional and replacement Directors, and will make appropriate recommendations to the Board on such
matters. While a number of Directors were initially appointed to the Board under investor appointment rights,
the most recent appointments of Simon Duffy, Guido Demuynck, Susan Hooper and Wioletta Rosołowska
were conducted through Korn/Ferry, which has no other connections with the Company.
The Corporate Governance Code provides that a majority of the members of the Nomination Committee
should be independent Non-Executive Directors. The Company’s Nomination Committee is comprised of three
members, namely William A. Franke, John McMahon and Simon Duffy. The Chairman of the Nomination
Committee is Mr Franke. The Company therefore considers that it complies with the Corporate Governance
Code’s recommendations regarding the composition of the Nomination Committee.
The Company recognises the importance to the Company of diversity, including gender equality. The
Company’s Code of Ethics is unequivocal that discriminatory practices will not be tolerated and that people
will be judged on the basis of their performance and ability to do their jobs and not on any other basis. The
Nomination Committee will work further to ensure that, when the opportunity presents itself, diversity is
properly reflected in the Board and in the Company’s senior management. The Company believes that this
commitment is demonstrated by recent appointments at both Director and senior management level.
The Nomination Committee is scheduled to meet formally at least twice a year and otherwise as required.
There were six meetings of the Nomination Committee during the 2017 financial year and, in between these
meetings, members of the Nomination Committee advised senior management on the appointment of an
additional Non-Executive Director and on various senior management appointments, including the Group’s
Chief Financial Officer. Interviews of candidates for each of these positions were also conducted by the
members of the Nomination Committee. Candidates for the Group’s Chief Financial Officer position as well as
the additional Non-Executive Director were interviewed by the members of the Nomination Committee.
Attendance at Board meetings
The following table sets out the attendance by Director at the Board and Committee meetings held during the
2017 financial year.
Board
attended/total
Audit
attended/total
Remuneration
attended/total
Nomination
attended/total
Executive Director
József Váradi
Non-Executive Directors
William A. Franke
Guido Demuynck
Simon Duffy
Thierry de Preux
Susan Hooper
Stephen L. Johnson
John McMahon
John R. Wilson
Wioletta Rosolowska**
7/7
7/7
6/7
6/7
7/7
6/7
5/7
7/7
6/7
5/6
9/10*
6/6*
6/6*
-
-
10/10
-
-
10/10
10/10
-
-
-
6/6
-
6/6
6/6
-
-
5/6
-
6/6
-
6/6
-
-
-
6/6
-
-
*
The Executive Director was invited to attend these various Committee meetings in order to discuss certain matters but did
not have a vote. Occasionally also Non-Executive Directors attend meetings of Committees that they are not a member of –
these cases are not reflected in this table.
** Wioletta Rosolowska was appointed to the Board with effect from 1 June 2016.
Wizz Air Holdings Plc Annual report and accounts 2017
42
GOVERNANCE
MANAGEMENT OF THE COMPANY CONTINUED
Board procedures
At least six Board meetings are scheduled during each financial year. At these meetings, the Directors meet
with Senior Executives to receive detailed updates on Wizz Air’s business and operations and to discuss the
Company’s strategy. Prior to these meetings, each Director receives an information pack containing a
comprehensive review of the Company’s business as well as detailed proposals for approval of transactions
and developments falling within the Board’s remit. The Company believes that this enables each Director
properly to discharge his or her responsibilities. At each Board meeting, Directors who have a conflict of
interest in any agenda item declare that interest and are not entitled to vote on that agenda item.
A number of key strategic and commercial decisions require Board approval and, as and when any such
decision is needed outside the scheduled meeting cycle, an ad hoc telephone Board meeting may be arranged.
In general, therefore, it is anticipated that there will be around ten Board meetings in total during each
financial year.
Newly appointed Non-Executive Directors meet with the Company’s senior management and visit Wizz Air’s
operational headquarters to ensure that they have a thorough understanding of the Company’s business.
Wizz Air maintains directors’ and officers’ liability insurance. This insurance covers any claim that may be
brought against the Directors in the exercise of their duties.
The Company has adopted a Share Dealing Policy that reflects and incorporates the provisions of the UK
Listing Authority’s Model Code. As a consequence, the Directors as well as certain designated employees must
obtain clearance from the Company’s Chairman before dealing in the Company’s shares and are prohibited
from dealing at all during certain periods as set out in the Model Code. The Share Dealing Policy was updated
to reflect the requirements of the EU Market Abuse Regulation which came into effect on 3 July 2016.
Finally, it is proposed that, in accordance with the recommendations of the UK Corporate Governance Code,
all Directors will offer themselves for re-election at the 2017 annual general meeting.
Wizz Air Holdings Plc Annual report and accounts 2017
43
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE AUDIT COMMITTEE
Wizz Air has grown significantly and successfully as a result, in part, of constantly re-examining the way it does
things and ensuring that its business is run to the best possible standards. The work of the Audit Committee
during the 2017 financial year reflects this philosophy. As well as the continued engagement on day-to-day
financial issues, including further discussion on hedging strategy and approval of hedging transactions, the
Audit Committee has worked closely with the Company’s Internal Audit function together with external
advisers to run an effective programme of internal audits and to overhaul completely the Company’s system
for enterprise risk management (ERM), to ensure that the Company’s risk management processes continue to
provide a strong foundation for its future growth.
Main activities of the Audit Committee during the 2017 financial year
Risk management
The Audit Committee is tasked with ensuring that the Board has adequate oversight of risk management and
that it deems the controls sufficient and effective.
The Company’s Internal Audit function conducts an annual risk assessment exercise involving senior
management from the level of heads of function upwards. Following implementation of the new ERM framework,
the assessment of each risk involves consideration of the inherent risk, existing mitigating measures and residual
risk, along with a determination of how that risk should be dealt with in accordance with the Company’s risk
appetite. The resulting risk register is then used to prepare a principal risk report. A new, internal Risk Council,
comprising the Company’s senior management team as well as a number of other senior members of
management, reviews the risk register and the principal risk report at least once a quarter. The Risk Council then
reports to the Audit Committee on, among other things, changes to be made to the principal risk report. The
principal risk report, once approved by the Audit Committee, is delivered to the Board.
The risk register is also used to develop an Internal Audit plan for the upcoming year, which is approved by the Audit
Committee. Internal audits are performed by Ernst & Young and the Head of Internal Audit, who has direct responsibility
to the Chairman of the Audit Committee as well as a reporting line to the Company’s Chief Executive Officer.
Following completion of an Internal Audit, a report is compiled which sets out the findings, makes
recommendations for control improvement and presents the improvement actions undertaken by
management. Internal audit reports are submitted and presented to the Audit Committee for approval. The
Chairman gives a report of the Internal Audit reports completed in a particular period to the full Board.
Internal Audit then verifies that actions have been taken and controls implemented and reports back to the
Audit Committee on the status. The Audit Committee will work to ensure that the Company continues to
develop effective risk assessment and management processes.
More information on risk management within the Company is set out on pages 26 to 30 of this annual report.
Financial information
The Audit Committee reviews and approves all interim and final financial statements, as well as the content of
the Company’s annual report. The Company’s external auditors provide the Audit Committee with a briefing
on any issues arising. The Audit Committee also reviews and approves any regulatory announcements that
are made in connection with such financial information. It is only after the Audit Committee’s approval that the
statements are put to the Board for approval.
Relationship with external auditors
The Audit Committee has approved the fees to be paid and the external audit plan for the 2017 financial year
and reviewed the reports of the auditors on the half-year review and the annual audit performed.
Taking into account the above, and the result of the AQR review (see later), the Audit Committee was satisfied
with the performance of the external auditors and with the effectiveness of the external audit process. The audit
of the 2017 financial statements and of this annual report, and the review of the half-year financial report, were
all completed in time and in good quality, addressing the key issues.
The Audit Committee will consider the appointment of external auditors for the financial year ending 31 March
2018 and the Directors will propose a resolution in this respect for the forthcoming annual general meeting of
the Company. Should the Directors later decide to appoint a firm other than the current auditor
PricewaterhouseCoopers, the Directors would ask the shareholders to ratify the appointment of the new
auditor at the 2018 annual general meeting.
The Audit Committee ensures the independence of the Company’s external auditors. The Audit Committee
reviewed the independence letter of the auditors and considered in particular the non-audit fees paid to the external
auditors during the year (see Note 6 to the financial statements). While fees paid on tax and other advisory services
were higher in 2017 than the audit fees, the Audit Committee was satisfied that this did not compromise the
objectivity and independence of the auditors, mainly because: (i) the engagement leaders from the relevant
Wizz Air Holdings Plc Annual report and accounts 2017
44
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE AUDIT COMMITTEE
CONTINUED
Main activities of the Audit Committee during the 2017 financial year continued
Relationship with external auditors continued
advisory departments are not part of the audit team; and (ii) no such services were ordered by the Company that
carried self-review threat for the auditor.
Significant matters relating to the annual report
In the course of the preparation of the Company’s financial statements, the following issues were considered
by the Audit Committee:
Maintenance accounting: As part of reviewing the reports from management and the auditor on the half-
year and the year-end accounts, the Audit Committee satisfied itself that the policy and the procedures
applicable to this complex area were followed in the year consistently, including the regular updates to
estimates and judgments and the maintenance of the system supporting the calculations.
Membership revenues: Until 2016 the Group recognised membership revenues arising from the Wizz
Discount Club (WDC) customer loyalty program on a straight-line basis over the twelve-month period of
the membership. During the year management presented its analysis showing that the actual pattern of
customers taking benefit of the program is different from being straight line, and proposed that going
forward membership revenues would be better recognised based on the actual historic usage pattern.
The Audit Committee approved this change in estimate for the purposes of accounting for membership
revenues, on the condition that management should review the applicability of the pattern at least once
every year (see Note 4 for more information).
Segment reporting: The Audit Committee satisfied itself that starting from the 2017 financial year it was
appropriate to introduce separate presentation for the results of the airline and the online tour operator
business units of the Group. This applies both for segment reporting disclosures under IFRS 8 and for the
business analysis of revenues, operating expenses and certain KPIs in the Strategic Report.
At the request of the Board, the Audit Committee also considered whether the annual report taken as a whole
was fair, balanced and understandable and whether it provided the necessary information for Shareholders to
assess the Group’s position and performance, business model and strategy. The Committee is satisfied that
the annual report meets these criteria.
Other matters considered during the year
FRC AQR review: During the year the Audit Quality Review (AQR) team of the UK Financial Reporting
Council (FRC) reviewed the audit of the 2016 financial statements of the Group, that had been performed
by PricewaterhouseCoopers LLP UK. The AQR team monitors the quality of the audit work of statutory
auditors and audit firms in the UK, that audit Public Interest Entities (PIEs) and certain other entities. The
overall assessment of the audit found that there were no significant areas of concern. The report from the
AQR was received and reviewed by the Audit Committee and the Committee was satisfied with the good
result of the review. The recommendations from the review have been incorporated into the audit of the
2017 financial statements.
New accounting standards: There were important developments during the year in relation to three new
IFRSs that will have a material impact on the financial statements of the Group. In order of importance:
IFRS 16 Leases: The standard is awaiting endorsement by the EU, that is currently expected by the
end of 2017. The Committee has not taken a position whether to adopt the standard early (from 1
April 2018) or from the date required by the standard (1 April 2019). The Committee has reviewed
management’s preliminary analysis of the potential impacts of the standard on the financial
statements of the Group and approved the related disclosure – see Note 2 (Accounting policies) to
the financial statements.
IFRS 9 Financial instruments: The Committee supported management’s proposal to early adopt IFRS
9 starting from 1 April 2017. IFRS 9 enables the Group to eliminate the impact on earnings resulting
from changes in the time value of hedges. The change in the time value of hedges was the last
transaction of recurring nature that the Group classified as exceptional item in its financial statements.
Therefore the adoption of IFRS 9 means that, commencing from the 2018 financial year, it is expected
that the Group will not have any exceptional items and therefore it can discontinue the presentation
of underlying earnings which differ from IFRS earnings.
IFRS 15 Revenue from contracts with customers: The Committee reviewed management’s preliminary
assessment for the implications of this standard and supported management’s recommendation to
adopt it from the standard date, that is 1 April 2018.
Wizz Air Holdings Plc Annual report and accounts 2017
45
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE AUDIT COMMITTEE
CONTINUED
Main activities of the Audit Committee during the 2017 financial year continued
Other matters considered during the year continued
Hedging Policy update: In January 2017 management proposed and the Committee approved the
following changes to the Groups’ Hedging Policy:
The maximum hedge coverage levels allowed by the Policy were increased by 10 per cent. both on jet
fuel and on FX hedges. This means moving from 60 to 70 per cent. on a rolling twelve-month basis,
and moving from 50 to 60 per cent. on a rolling 18-month basis. For the closest quarter the maximum
level allowed by the Policy was increased from 75 to 85 per cent..
Implement new hedging instruments for short dated exposures, particularly fuel and FX swaps with a
tenure of 1-3 months.
Introduce FX hedging for the GBP/EUR currency pair, with a view to the significant GBP long position
of the Group and the increased volatility of GBP FX rates following the Brexit vote.
Tendering statutory audit services for the Group: The EU Competition and Market Authority’s (“CMA”)
Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive
Tender Processes and Audit Committee Responsibilities) Order 2014 (the “CMA Order”) defines
requirements for mandatory tendering of statutory audit services, and the responsibility of audit
committees in this respect. It applies to EU-incorporated companies in FTSE 350 companies for financial
years beginning on or after January 1, 2015. The CMA Order technically does not apply to the Group given
that its holding entity is incorporated outside the EU. At the same time, while the ‘comply-or-explain’
provision in the UK Corporate Governance Code on audit tendering continues to apply to the Company
for the current year it has been withdrawn in the version of the Corporate Governance Code which applies
to the 2018 financial year. Nevertheless, the Audit Committee confirms that the Group is willing to
voluntarily comply with the Order. The Audit Committee also confirms that the Group complied with the
provisions of the CMA Order in its 2017 financial year. PricewaterhouseCoopers have been the auditors
since 2007 and audit services were last tendered in 2011. Management proposed and the Committee
approved the plan that during the 2018 financial year the statutory audit services for the Group will be
tendered. The tendering process will also ensure that audit and non-audit services will be properly
separated. The Committee trusts that these measures will overall support the independence, objectivity
and value for money of the audit process.
Tax matters: The Committee reviewed management’s analysis (i) of the significant developments in the
international tax environment in the last 1-2 years (including the OECD BEPS measures), and (ii) of the Swiss
‘Corporate Tax Reform III.’ initiative, which has since then been suspended in its current form as a result of a
public referendum in Switzerland. The Committee is satisfied that currently there are no explicit impacts of
these changes on the tax position of the Group and therefore that immediate changes are not required.
However, together with management the Committee will continue to monitor developments closely.
Simon Duffy
Chairman of the Audit Committee
Wizz Air Holdings Plc Annual report and accounts 2017
46
GOVERNANCE
REPORT OF THE CHAIRMAN OF THE NOMINATION COMMITTEE
Wizz Air’s Nomination Committee is comprised of three members, namely John McMahon, our Senior
Independent Non-Executive Director, Simon Duffy and me.
The Nomination Committee assists the Board in discharging its responsibilities relating to the composition of
the Board. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and
experience on the Board, the size, structure and composition of the Board, and retirements and appointments
of additional and replacement Directors, and will make appropriate recommendations to the Board on
such matters.
The Company’s success to date has been achieved by ensuring that it appoints people of the highest calibre,
whether as Directors, management or employees. While the key selection criterion is to ensure that people
are appointed on their ability to do their jobs, the Company and the Nomination Committee recognise the
importance to the Company of diversity, including gender equality, and the appointments on which the
Nomination Committee has advised during the 2017 financial year demonstrate that the Company is
committed to this principle in practice as well as theory.
Main activities of the Nomination Committee during the 2017 financial year
During the 2017 financial year, the Nomination Committee worked on a number of key appointments for the
Company.
Having reviewed its composition, the Board decided that it was an appropriate time to add an additional
independent non-executive director. The Nomination Committee worked with Korn/Ferry and senior
management on the search process and members of the Nomination Committee conducted a number of
interviews with candidates. The final candidate, Ms Wioletta Rosołowska, was recommended to the Board for
appointment by the Nomination Committee.
The Nomination Committee, along with other Directors, has also assisted senior management and the Board
with a review of the structure of the Company’s senior executive management and its succession planning.
Following the departure of the Company’s Chief Financial Officer, the Nomination Committee is working with
management on the appointment of a new Chief Financial Officer. Reflecting the importance of the Company’s
Operations function to the ongoing success of the Company, Mr Diederik Pen was promoted, with the support
of the Nomination Committee, to the position of Executive Vice President and Chief Operations Officer.
The Nomination Committee’s ongoing work
The Nomination Committee will continue to work with the Board to ensure that it has the appropriate balance
of skills, knowledge and experience and that, where the opportunity presents itself, appointments are made
which reflect not only the Company’s requirement to retain the best people for a particular role but also the
Company’s values, including ensuring diversity within the Board and the Company’s senior management.
The Nomination Committee and the Board also recognise the importance of ensuring that succession of
Directors and senior management is properly managed, to ensure that the Company has the right people
available as needed. The Nomination Committee will continue to work with the Board and the Company’s
senior management to develop and refine succession plans, encouraging and facilitating internal talent
development where necessary.
William A. Franke
Chairman of the Nomination Committee
Wizz Air Holdings Plc Annual report and accounts 2017
47
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT
Report of the Chairman of the Remuneration Committee
Wizz Air’s second full financial year as a listed company was more challenging than the first. While demand
remained strong, the lower fuel price and increased competition fed through to lower fares and, in June 2016,
the United Kingdom voted in a referendum to withdraw from its membership of the European Union, causing
a significant fall in the value of the British Pound, which accounts for approximately 20 per cent. of the
Company’s revenues. The operating environment was equally challenging, with the Company having to deal
with unusually severe winter weather in Eastern Europe and a massive increase in disruption caused by
industrial action by various air traffic control and airport organisations throughout the year. Nonetheless,
during the 2017 financial year the Company delivered industry-leading passenger growth of 18.9 per cent. and
increase of total revenue of 9.9 per cent., translating to underlying net profits of €225.3 million. At the same
time, the Company remained extremely cost-focused, with its operating unit cost falling by 7.8 per cent. The
relative strength of Wizz Air’s performance against its peers was reflected in a share price which, as at 31 March
2017, remained some 43 per cent. higher than the offering price in the Company’s initial public offering. Over
the year, therefore, the Directors and senior management have ensured that the Company’s business has
continued to deliver results that have significantly increased Shareholder value, despite the challenging
industry conditions.
The Remuneration Committee remains committed to ensuring that the Company’s Remuneration Policy
remains an effective way to align the interests of the Directors and senior management with those of the
Company’s Shareholders and that it provides appropriate incentivisation to continue to deliver Shareholder
value. However, the Remuneration Committee also remains focused on the Company’s ultra-low-cost business
model, and the governing principle that will continue to be applied is that remuneration must be competitive
whilst not being more than is necessary to attract, retain and motivate executive management of the quality
required to continue to run the Company successfully, and that a significant proportion of remuneration
remains performance based. Indeed, this is a principle which is applied consistently throughout the Company
for almost all employees.
As a company, we value our Shareholders’ feedback, including on remuneration matters. I was pleased that
last year’s Annual Report on Remuneration received a vote in favour from our Shareholders of 99.3 per cent.
As contemplated in the approved Directors’ Remuneration Policy, successful Company performance is
reflected in the remuneration of the Executive Director and senior management. Under our Short-term
Incentive Plan, performance against the four measures of underlying profit after tax, ex-fuel cost per available
seat kilometre (CASK), on-time performance and individual performance assessment resulted in an average
payout equivalent to 84.9 per cent. of the target payout.
The first award under the approved Long-term Incentive Plan was made during the 2016 financial year (in July
2015) to officers and to heads of function. This award is due to vest in July 2018 with level of vesting for the
major part of the award based on a combination of relative total shareholder return (TSR) performance
compared to selected European airlines and fully diluted earnings per share growth. The second award was
made during the 2017 financial year (in June 2016) with similar performance conditions to that of the 2016
award. This award is due to vest in June 2019. Further details of the performance conditions attached to these
awards are provided on page 55.
Following a review of the Company’s Remuneration Policy during the year, the Remuneration Committee
agreed that it remains appropriate and is aligned with the overall strategy of the Company and, therefore, no
changes will be made in the year ahead. We last increased the base salary for the CEO in the 2016 financial
year following a comprehensive market review. The Committee has determined that the CEO’s base salary
remains competitive and therefore no changes were proposed for the 2017 financial year and are not proposed
for the 2018 financial year.
Whilst the Company is incorporated in Jersey, we have chosen voluntarily to comply in all material respects
with the provisions of the UK Companies Act 2006 and related regulations in respect of the Directors’
Remuneration Report and Remuneration Policy, underlining the Company’s commitment to adopt UK
corporate governance best practice. The Directors’ Remuneration Policy was approved by Shareholders at the
Company’s annual general meeting in September 2015 with the intention that it should apply for three years.
Therefore, we will not be asking Shareholders to vote on the policy at this year’s annual general meeting,
although there will be an advisory vote on the Annual Report on Remuneration. In line with the reporting
requirements, our Remuneration Policy will be put forward to a binding Shareholder vote at the 2018 AGM
following a comprehensive review and consultation with Shareholders.
Wizz Air Holdings Plc Annual report and accounts 2017
48
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Report of the Chairman of the Remuneration Committee continued
In conclusion, I would reiterate that Wizz Air continues to be proud of the strong results delivered in the 2017
financial year against a challenging industry background. We remain committed to ensuring that our
Remuneration Policy continues to incentivise delivery of outstanding results in the future, but in a way that
appropriately aligns the interests of the Directors and senior management with those of the Company’s
Shareholders. We believe that the approved Directors’ Remuneration Policy does this in a way which is
consistent with the Company’s current growth phase and its desire to bring simplicity to all areas of its
operation. Simplicity of process and practice reflects the Company’s strategy to focus on achieving the lowest
possible unit operating cost while improving customers’ experience.
We look forward to the continued support of our Shareholders and welcome any questions or suggestions
that you may have to further align our Remuneration Policy with the interests of our investors.
Guido Demuynck
Chairman of the Remuneration Committee
Wizz Air Holdings Plc Annual report and accounts 2017
49
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Introduction
The Directors’ Remuneration Policy was approved by Shareholders at the annual general meeting held on 29
September 2015. The intention is that the policy, as approved, will apply until the annual general meeting to
be held in 2018. This Directors’ Remuneration Report sets out the remuneration earned for the 2017 financial
year in accordance with the approved Directors’ Remuneration Policy (pages 50 to 54) and the planned
application of our Remuneration Policy for the 2018 financial year (pages 58 and 59).
The report has been prepared in accordance with the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 as amended (the Regulations), which the Company has chosen to
comply with in all material respects as a matter of best practice.
For transparency, we have included the approved Directors’ Remuneration Policy in full in this report (with
some minor updates to wording to provide clarification and an updated scenario chart), although there will
not be a vote on the Directors’ Remuneration Policy at this year’s annual general meeting. The definitive
Remuneration Policy approved by Shareholders is outlined in the Company’s annual report for the 2015
financial year and is available to view at corporate.wizzair.com.
Remuneration Policy
Introduction
Our principal consideration when determining the Remuneration Policy is to ensure that it supports our
company strategy and business objectives, as well as to attract, retain and motivate executive management
of the quality required to run the Company successfully without paying more than is necessary.
In the selection of performance measures for both the annual performance bonus and the Long-term Incentive
Plan the Remuneration Committee takes into account the Group’s strategic objectives and short and long-term
business priorities. The performance targets are set in accordance with the Group’s annual operating plan and
are reviewed annually to ensure that they are sufficiently stretching. In selecting the targets the Remuneration
Committee also takes into account analysts’ forecasts, economic conditions and the Remuneration
Committee’s expectation of performance over the relevant period.
The aim of the Remuneration Policy is to:
attract, retain and motivate executive management without paying more than is necessary;
incentivise the successful execution of the Company’s business strategy; and
align the Executive Directors’ long-term interests with those of Shareholders.
Executive Director remuneration
The Chief Executive Officer is currently the Company’s sole Executive Director. The Remuneration Committee
believes that the Company’s Remuneration Policy supports the Company’s ultra-low-cost business model by
incentivising senior management, including the Chief Executive Officer, to continue to strive to increase the
Company’s cost advantage while improving the customers’ experience. The Chief Executive Officer currently
receives a base salary and is eligible for an annual performance bonus of up to 200 per cent. of base salary
and a long-term incentive award of up to 250 per cent. of base salary, with payments being dependent on the
Company achieving certain financial and operational targets.
In deciding appropriate remuneration levels, the Remuneration Committee takes into account, among other
things, the levels paid at competitor low-cost carriers.
Wizz Air Holdings Plc Annual report and accounts 2017
50
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Executive Director remuneration continued
Future policy table: Executive Directors
Element
Base salary
Purpose and link to strategy Operation and opportunity
To provide the core
reward for the role.
To attract, retain and
motivate executive
management without
paying more than
necessary.
Salaries will be reviewed
annually, with any increase
being awarded at the discretion
of the Remuneration Committee.
The Executive Director’s salary
for the 2017 financial year is
detailed in the Annual Report
on Remuneration.
The Remuneration Committee
may take into account a
number of factors in deciding
whether an increase should be
made, including benchmarking
against selected airlines.
Executive Directors are
covered by the Company’s
group personal accident and
life assurance cover, which is in
place for all employees
(2x salary).
The Company does not provide
a pension scheme for the
Executive Directors (unless
contributions are required
by law).
Payments under the Short-term
Incentive Plan are made in
cash, subject to certain
specified performance
requirements as determined by
the Remuneration Committee
being met and up to a
maximum bonus set as a
percentage of base salary by
the Remuneration Committee.
The maximum bonus for the
Chief Executive Officer is 200
per cent. of base salary.
Currently, these performance
requirements relate to
Company profitability, on-time
performance, operating cost
and personal performance.
Each year, performance shares
may be granted. Awards
normally vest over a three-year
period, subject to the
achievement of performance
targets. The maximum face
value of annual awards will be
250 per cent. of base salary for
the Chief Executive Officer and
the Executive Director must
remain in office when the
performance shares vest.
Framework used to assess performance
and provisions for the recovery of
sums paid
The Remuneration Committee
will consider the individual
salary of Executive Directors at
a meeting each year.
There are no provisions for the
recovery of sums paid or the
withholding of any payment
relating to base salary.
There are no provisions for the
recovery of sums paid or the
withholding of any payments
relating to benefits.
Not applicable.
Performance requirements
are determined by the
Remuneration Committee
annually. They are intended to
align the performance of the
Executive Directors with the
Group’s near-term objectives of
delivering against its strategy.
In particular, the performance
requirements incentivise the
Executive Directors to focus
on cost control to achieve
profitability targets, while
delivering a reliable service
to customers.
There are no provisions for the
recovery of sums paid pursuant
to the Short-term Incentive Plan.
Performance targets
are determined by the
Remuneration Committee and
vesting of the performance
shares is subject to performance
targets being met over the
performance period.
If a participant’s employment
ends before the end of the
performance period, any vested
and unvested options will
normally lapse, save in certain
“good leaver” scenarios.
Benefits
Pension
Short-term
Incentive
Plan
To attract, retain and
motivate executive
management without
paying more than
necessary.
To attract, retain and
motivate executive
management without
paying more than
necessary.
To incentivise the
successful execution
of the Company’s
business strategy.
To reward the
achievement of
annual financial and
operational goals.
Long-term
Incentive
Plan (LTIP)
(operating
for the first
time in the
2016
financial
year)
To align the Executive
Directors’ long-term
interests with those of
Shareholders.
To reward strong
financial performance
and sustained
increase in
Shareholder value.
Wizz Air Holdings Plc Annual report and accounts 2017
51
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Difference in Remuneration Policy for Executive Directors and employees
Remuneration of the Company’s senior management team follows a similar pattern to that of the Executive
Directors, although amounts for each component may vary. Other employees receive remuneration judged by
senior management to be appropriate for their position and experience.
Non-Executive Director remuneration
The Non-Executive Directors are only paid fees.
Framework used to assess performance
and provisions for the recovery of
sums paid
Not applicable; there are no
provisions for the recovery
of sums paid or the withholding
of any payment relating to fees.
Element
Fees
Purpose and link to strategy Operation and opportunity
To remunerate Non-
Executive Directors
to reflect their level
of responsibility.
Non-Executive Directors are paid
a basic fee, plus an additional
amount for each Board meeting
attended. Additional fees are
paid for the role of Chairman of
the Audit Committee, Chairman
of the Remuneration Committee
and Chairman of the Board. Fees
for Non-Executive Directors,
other than the Chairman, are
determined by the Board. Fees
for the Chairman are determined
by the Remuneration Committee.
The Remuneration Committee, in
relation to the Chairman, and the
Board, in relation to the other
Non-Executive Directors, retain
the flexibility to increase fee
levels to ensure that they
continue to appropriately reflect
the experience of the individual,
time commitment
of the role and fee levels in
comparable companies.
The fees paid to the Chairman
and other Non-Executive
Directors for the 2017 financial
year are set out in the Annual
Report on Remuneration.
Illustration of the application of the Remuneration Policy
The bar chart below sets out the annual remuneration package of the Chief Executive Officer, at a minimum,
as a reasonable expectation and as a possible maximum (in Euro):
All amounts are determined in Swiss Francs (CHF) that for the purposes of this chart were converted into Euro at the rate of
1.070 CHF for Euro (rate at 31 March 2017).
The remuneration receivable under the LTIP as shown in the table (i) does not assume any share price appreciation between
grant and vesting; and (ii) for the sake of illustration it assumes that no shares would vest in the minimum scenario, 50 per cent.
of shares would vest in the expected scenario and all shares would vest in the maximum scenario.
Fixed remuneration is base salary (May 2017 level annualised, being €637,383). The annual bonus amount is
zero at minimum, €637,383 at the expected level (50 per cent. of maximum opportunity of 200 per cent.) and
€1,274,767 at maximum (200 per cent. of base salary). The long-term incentive amount is zero at minimum,
€796,729 at the expected level (50 per cent. of maximum opportunity of 250 per cent.) and €1,593,458 at
maximum (250 per cent. of base salary).
Wizz Air Holdings Plc Annual report and accounts 2017
52
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Recruitment remuneration
The remuneration package for an incoming Executive Director would reflect the principles set out above,
although relocation expenses or allowances (such as school fees) for an Executive Director recruited from
abroad may be paid as appropriate.
For the appointment of a new Chairman or Non-Executive Director, fee arrangements will be made in line with
the policy as set out above.
Policy on payment for loss of office
In the event of termination of a service contract or letter of appointment of a Director, contractual obligations
will be honoured in accordance with the service contract or letter of appointment. The Remuneration
Committee will take into consideration the circumstances and reasons for departure, health, length of service
and performance. Under this policy, the Remuneration Committee may make any statutory payments it is
required to make. In addition, the Remuneration Committee may agree to payment of outpatient counselling
costs and disbursements (such as legal costs) if considered to be appropriate and dependent on the
circumstances of departure.
There are no pre-determined contractual provisions for Directors regarding compensation in the event of loss
of office save for those listed in the table below.
Details of provision
Notice period
Executive Director
Six months’ notice by either party.
Termination payment
Post-termination
covenants
The employing company may terminate the
Executive Director’s employment with immediate
effect by payment in lieu of notice.
The Executive Director will be paid a sum equal to six
months’ base salary if the employing company
chooses to enforce the restrictive covenants
referenced below.
Upon termination of employment other than for cause,
the Executive Director is entitled to a severance
payment equal to six months’ salary in addition to any
notice pay or payment in lieu of notice.
Post-termination restrictive covenants apply for
a period of one year following termination
of employment.
Non-Executive Directors
One month’s notice
by either party.
Fees and expenses
accrued up to
termination only.
Not applicable.
No such payment for loss of office was made by the Group in the year or the prior year. No payments of any
nature were made to past directors.
Discretion, flexibility and judgment of the Remuneration Committee
The Remuneration Committee operates the Short-term Incentive Plan and the Long-term Incentive Plan, which
include flexibility in a number of areas. These include:
the timing of awards and payments;
the size of an award, within the maximum limits;
the participants of the plan;
the performance requirements and maximum percentages of salary to be used for the Short-term
Incentive Plan and the Long-term Incentive Plan from year to year;
the performance conditions, performance periods and vesting periods for awards under the Long-term
Incentive Plan from year to year;
the assessment of whether performance requirements and/or conditions have been met;
the treatment to be applied for a change of control or significant restructuring of the Group;
the determination of a good/bad leaver for incentive plan purposes and the treatment of awards
thereof; and
the adjustments, if any, required in certain circumstances (e.g. rights issues, corporate restructuring,
corporate events and special dividends).
Wizz Air Holdings Plc Annual report and accounts 2017
53
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration Policy continued
Legacy arrangements
In approving this policy, authority is to be given to the Company to honour commitments paid, promised to
be paid or awarded to (i) current or former Directors prior to the date of this policy being approved or (ii) to
an individual (who subsequently is appointed as a Director of the Company) at a time when the relevant
individual was not a Director of the Company and, in the opinion of the Remuneration Committee, was not in
consideration of that individual becoming a Director of the Company, even where such commitments are
inconsistent with the provisions of this policy.
Outstanding awards under the Company’s previous 2009 international employee share option plan remain
eligible for vesting and exercise in accordance with their terms.
Consideration of Shareholder views
The Remuneration Committee and the Board will consider Shareholder feedback received in relation to the
annual general meeting each year at a meeting immediately following the annual general meeting and any
action required will be incorporated into the Remuneration Committee's business plan for the ensuing period.
This, and any additional feedback received from Shareholders from time to time, will then be considered by
the Remuneration Committee and as part of the Company's annual review of remuneration arrangements.
Specific engagement with major Shareholders may be undertaken when a significant change in Remuneration
Policy is proposed.
Annual Report on Remuneration
The members of the Remuneration Committee were Guido Demuynck (Chairman), Thierry de Preux, and Susan
Hooper.
The Remuneration Committee is responsible for setting the Remuneration Policy for all Executive Directors
and the Chairman, including pension rights and any compensation payments, and recommending and
monitoring the remuneration of the senior managers. Non-Executive Directors’ fees are determined by the full
Board. A summary of the Remuneration Committee’s terms of reference can be found on our corporate
website, corporate.wizzair.com. Further details about the Remuneration Committee are set out on page 41 of
the Corporate Governance Report.
József Váradi, the Chief Executive Officer, and Owain Jones, the Chief Corporate Officer, attend meetings by
invitation and assist the Remuneration Committee in its deliberations as appropriate, though they are not
present when their own compensation is discussed.
The Remuneration Committee is advised by Willis Towers Watson, which was selected following a competitive
tender process led by the Chairman of the Remuneration Committee in 2015. Willis Towers Watson attends
Committee meetings as and when required. During the 2017 financial year, Willis Towers Watson received fees
totalling GBP 101,496 for advice related to Remuneration Policy, governance, developments in executive pay,
benchmarking and performance analysis.
Willis Towers Watson is a member of the Remuneration Consultants Group and, as such, voluntarily operates
under the Remuneration Consultants Group Code of Conduct in relation to executive remuneration consulting
in the UK. The Remuneration Committee is satisfied that Willis Towers Watson offers impartial and objective
advice and brings a high degree of expertise to the Remuneration Committee’s discussions.
Shareholders’ vote on remuneration
At the 2016 annual general meeting the Annual Report on Remuneration was put forward for an advisory vote.
Details of the voting outcomes are provided in the table below:
Votes for
Votes against
Total
Votes withheld
Remuneration Policy
(2015 AGM)
Annual Report on Remuneration
(2016 AGM)
38,578,768
141,517
38,720,285
773,017
99.63%
0.37%
40,227,451
278,241
40,505,692
236,259
99.31%
0.69%
Wizz Air Holdings Plc Annual report and accounts 2017
54
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Executive Director’s remuneration
Full details of the Chief Executive Officer’s remuneration are set out below (in Euros):
Single total figure of remuneration table – audited
József Váradi
Fees and
salary
629,622
Benefits
-
Bonus
611,191
2017
2016
LTIP
-
Pension
-
Total
1,240,812
József Váradi
1,812,883
Salary and bonus were paid/are payable in Swiss Francs and were converted into Euros at the average rate
applicable for the year (salary) or the rate applicable at the end of the financial year (bonus).
Benefits
-
Bonus
1,185,436
LTIP
-
Pension
-
Total
Fees and
salary
627,447
Base salary for the CEO remained unchanged for 2017 at CHF 682,000.
There were no benefits provided to the Chief Executive Officer other than six free return tickets usable on the
route network of the Group, the value of which is estimated to be €800 altogether.
Bonus is linked to three important financial and operational KPIs of the Company and to individual
performance. The measures, target performance and actual performance for 2017 were the following:
Measures
Profit (underlying, €m)
CASK ex-fuel (€c/ASK)
On-time performance
(delay <15 mins)
Individual performance rating
Aggregate payout ratio
Weight
67%
11%
11%
11%
Target performance
Threshold*
214.0
2.38
76.0%
2
Target**
252.0
2.32
80.0%
2+
Maximum***
290.0
2.26
Actual
performance
225.3
2.25
84.0%
1
78.13%
1
Payout
ratio
65%
200%
77%
200%
96%
*
There is no payment if the performance is worse than the “Threshold”. At “Threshold” there is 50 per cent. payment of the
target
** At “Target” there is 100 per cent. payment (being equal to twelve months’ salary in the case of the CEO).
*** If the “Maximum” is reached or exceeded then there is 200 per cent. payment of the target.
As outlined earlier, the first award under the LTIP (of 250 per cent. of base salary) was made to the Chief
Executive Officer during the 2016 financial year (July 2015). The award included 73,805 Performance Options,
valued at GBP 15.72 per option share, that was the market price of the Company’s shares at the date of grant.
The exercise price of the options is nil.
Vesting is due in July 2018 subject to meeting the following performance criteria:
a) relative total shareholder return (TSR) growth versus selected European airlines (50 per cent. weighting); and
b) absolute fully diluted earnings per share (EPS) growth of the Company (50 per cent. weighting).
The TSR group consists of the following entities: Ryanair and EasyJet (50 per cent. weighting); AirFrance-KLM,
Air Berlin, Deutsche Lufthansa, Finnair, Flybe, IAG and SAS (50 per cent. weighting). Aer Lingus has been
removed from the group following acquisition by IAG and subsequent delisting in September 2015.
25 per cent. of the award will vest for median performance and 100 per cent. of the award will vest for
performance equal to or exceeding the upper quartile. There will be no vesting for performance below median
and linear interpolation will apply for performance between the median and upper quartile.
With respect to the EPS growth measure, 25 per cent. of the award will vest for threshold average annual
growth of 14 per cent., 50 per cent. will vest for target average annual growth of 17 per cent. and 100 per cent.
will vest for maximum average annual growth of 20 per cent. Linear interpolation will apply for performance
between threshold and target and target and maximum.
A second award under the LTIP (of 250 per cent. of base salary) was made to the Chief Executive Officer
during the 2017 financial year (June 2016). This award included 85,270 Performance Options, valued at GBP
14.80 per option share at date of grant. Vesting is due in June 2019 and is subject to the same performance
criteria as the first award. However, the EPS threshold, target and maximum average annual growth rates were
revised slightly versus the July 2015 grant to 14.2 per cent., 17.2 per cent. and 20.2 per cent. respectively.
No remuneration is shown for LTIP options in the table above for “single total figure of remuneration”, because
– as explained above – final vesting of these options is not determined as a result of achievement of
performance targets relating to the 2016 financial year or 2017 financial year.
Wizz Air Holdings Plc Annual report and accounts 2017
55
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Executive Director’s remuneration continued
As outlined in the 2015 annual report, 1,920,075 share options were issued to the Chief Executive Officer during
the 2005–2011 calendar years from the previous long-term incentive plan (ESOP) of the Company. Of these,
1,755,075 were exercised during the 2015 financial year. The remaining 165,000 (vested) options had not been
exercised as at 31 March 2016 and are exercisable any time until April 2021.
The following performance graph shows the Company’s total shareholder return compared to the FTSE 250
index for the last two financial years following IPO. TSR is defined as share price growth plus reinvested dividends.
Source: DataStream Return Index
1 Growth in the value of a hypothetical £100 holding over three years FTSE 250 comparison based on one month average of
trading day values. Source: DataStream.
In the tables below we provide a five-year overview of the Chief Executive Officer’s remuneration and the
change in the Chief Executive Officer’s remuneration compared to that of all employees.
Five-year overview of Chief Executive Officer remuneration
Financial year
2013
2014
2015
2016
2017
Single figure
of total
remuneration
Euro
533,398
1,462,212
1,607,587
1,812,883
1,240,812
Performance
bonus
achieved
against
maximum
possible
-
97%
91%
95%
48%
LTIP shares
vesting
against
maximum
possible*
N/A
N/A
N/A
N/A
N/A
*
Share options were last issued to the CEO in the 2012 financial year. The vesting period was three years but there were no
performance conditions other than being in employment during the vesting period.
Change in the remuneration of the Chief Executive Officer compared to that of all other employees
Salary and fees
Benefits
Bonus
Total remuneration
Chief Executive Officer
2017
629,622
-
611,191
1,240,812
2016
627,447
-
1,185,436
1,812,883
Change
+0.3%
N/A
-48.4%
-31.6%
Total employees
Change**
+1.9%
-55.8%
-63.7%
-2.9%
* Benefits represented an insignificant part, approximately only 1 per cent., of the employee pay in these two years.
** Per employee, excluding the Chief Executive Officer.
Wizz Air Holdings Plc Annual report and accounts 2017
56
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Executive Director’s remuneration continued
Change in the remuneration of the Chief Executive Officer compared to that of all other employees
continued
In 2017 the lower level of payout on the bonus (Short-term Incentive Plan) caused the decrease in the total
remuneration both for the Chief Executive Officer and for other employees. This impact was stronger for other
employees than for the Chief Executive Officer because (i) two Officer positions were unfilled at the end of
the year hence no bonus was payable for these; and (ii) not only the aggregate amount of the bonus got lower
but also the total number of employees increased during the year, most of whom are not entitled for bonus.
Total employee remuneration changed from €68.6 million in the 2016 financial year to €77.9 million in the 2017
financial year (see Note 7 to the financial statements), being a 13.5 per cent. increase year-on-year. This was
driven also by the 21.1 per cent. increase in employee numbers (excluding rented pilots).
There were no dividends or share buybacks either in the 2017 financial year or the 2016 financial year, and
therefore disclosure of ‘relative importance of spend on pay’ has not been included.
Non-Executive Director remuneration
The Chairman and Non-Executive Directors are paid only Directors’ fees, full details of which are set out below:
Single total figure of remuneration table – audited
Fees and
salary
€
67,500
37,500
40,000
42,500
42,500
58,750
52,500
40,000
33,333
414,583
Fees and
salary
€
77,500
45,000
52,500
52,500
52,500
72,895
65,000
2,083
419,978
2017
Bonus
-
-
-
-
-
-
-
-
-
Benefits
-
-
-
-
-
-
-
-
-
-
-
2016
Benefits
-
-
-
-
-
-
-
-
-
Bonus
-
-
-
-
-
-
-
-
-
LTIP
-
-
-
-
-
-
-
-
-
-
LTIP
-
-
-
-
-
-
-
-
-
Pension
-
-
-
-
-
-
-
-
-
-
Pension
-
-
-
-
-
-
-
-
-
Total
€
67,500
37,500
40,000
42,500
42,500
58,750
52,500
40,000
33,333
414,583
Total
€
77,500
45,000
52,500
52,500
52,500
72,895
65,000
2,083
419,978
William A. Franke
Stephen L. Johnson
John R. Wilson
Thierry De Preux
John McMahon
Simon Duffy
Guido Demuynck
Susan Hooper
Wioletta
Rosołowska*
Total
*
Joined on 1 June 2016.
William A. Franke
Stephen L. Johnson
John R. Wilson
Thierry De Preux
John McMahon
Simon Duffy
Guido Demuynck
Susan Hooper*
Total
*
Joined on 1 March 2016.
Total Directors’ remuneration (Executive and Non-Executive) (audited)
Total remuneration of Directors for the period was €1,655,395 (2016: €2,232,861). This is the sum of the two
single figure tables set out above.
Our Conflict of Interest policy prohibits any other employment (for all employees) on top of the employment
at Wizz. Therefore in case of the Chief Executive Officer any additional directorship would require specific
permission of the Chairman of the Board. The Chief Executive Officer is not a member of any other board.
Wizz Air Holdings Plc Annual report and accounts 2017
57
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Directors’ shareholdings
The Chief Executive Officer holds a significant shareholding in the Company through a family trust and is also
eligible to participate in the Company’s Long-term Incentive Plan.
Each of the Non-Executive Directors, other than Susan Hooper and Wioletta Rosołowska, is also a Shareholder
in the Company, following awards made under a historic non-executive share scheme and/or the purchase of
shares with the relevant Director’s own cash. No new share plan awards have been made since July 2013 or
will be made in the future under this historic share scheme.
The Company therefore believes that the interests of the Directors are well aligned with those of the
Shareholders. Full details of the Directors’ and their connected persons’ interests in the Company’s shares as
at 31 March 2017 are set out below:
Directors and connected persons’ interests in shares – audited
Director
William A. Franke(1)
József Váradi (2)
Thierry de Preux
Guido Demuynck
Simon Duffy
Stephen L. Johnson
John Mc Mahon
John R. Wilson
Direct
ownership
Interests
Number of
Ordinary
Shares
82,917
10,500
66,384
5,250
5,250
52,750
14,750
59,083
Number of
Ordinary
Shares
10,815,383
2,020,500
-
-
-
-
-
-
Number of
Convertible
Shares
44,830,503
-
-
-
-
-
-
-
Total
Ordinary
Share
interests
10,898,300
2,031,000
66,384
5,250
5,250
52,750
14,750
59,083
(1) Mr Franke is deemed to be interested in all of the Ordinary Shares and Convertible Shares held by Indigo Hungary LP, Indigo
Maple Hill LP, Indigo Hungary Management LLC and Bigfork Partners LLC for the purposes of section 96B of the Financial
Services and Markets Act 2000. Indigo Hungary LP and Indigo Maple Hill LP also hold Convertible Notes that, subject to
certain conditions, are convertible to Ordinary Shares of the Company.
(2) Mr Váradi is deemed to be interested in the Ordinary Shares held by his family trust companies. Mr Váradi’s family trust
company also holds 165,000 vested share options with an exercise price of GBP1.90 per share.
There has been no change to the interests of each of the Directors set out above since 31 March 2017 to the
date of the notice of the 2017 annual general meeting.
Application of the Remuneration Policy in the 2018 financial year
a) Chief Executive Officer’s base salary
The Committee has determined that the CEO’s base salary remains competitive and, therefore, no changes
are proposed for the 2018 financial year.
b) Short-term Incentive Plan
The Chief Executive Officer is eligible to receive a cash bonus of up to 200 per cent. of base salary in respect
of the 2018 financial year. The actual cash bonus received will depend on the achievement of certain
performance criteria including underlying profit after tax (67 per cent.), on-time performance (11 per cent.), ex-
fuel cost per available seat kilometre (11 per cent.) and personal evaluation (11 per cent.).
The Remuneration Committee believes that the specified performance criteria are sufficiently challenging
compared to the Company’s business plan. The annual bonus targets are commercially sensitive and therefore
will be disclosed in the 2018 Remuneration Report following the completion of the financial year provided that
they are no longer commercially sensitive.
c) Long-term Incentive Plan
An award of performance shares of up to 250 per cent. of base salary will be made to the Chief Executive
Officer around June 2017 and after the date of this report. Awards will vest following a three-year performance
period and be subject to the same type of performance criteria as the 2016 award, and details will be confirmed
after the date of grant.
Wizz Air Holdings Plc Annual report and accounts 2017
58
GOVERNANCE
DIRECTORS’ REMUNERATION REPORT CONTINUED
Annual Report on Remuneration continued
Application of the Remuneration Policy in the 2018 financial year continued
d) Chairman and Non-Executive Directors’ fees
There will be no increases to fees for our Chairman and Non-Executive Directors during the financial year
ending 31 March 2018.
As outlined in the 2015 financial year annual report, the Non-Executive Directors receive a fee of €25,000 per
annum, plus €2,500 for each full Board meeting attended. Simon Duffy, as Chairman of the Audit Committee, receives
an additional fee of €18,750 per annum for taking on that role. Guido Demuynck, as Chairman of the Remuneration
Committee, receives an additional fee of €12,500 per annum for taking on that role. William A. Franke, as Chairman,
receives an additional fee of €25,000 per annum for taking on that role. The Non-Executive Directors will also be
reimbursed for all proper and reasonable expenses incurred in performing their duties.
Other disclosures
Directors’ service agreement and letters of appointment
Executive Director
The Chief Executive Officer entered into a new service agreement with the Geneva branch of Wizz Air Hungary
Ltd. (WAHL) on 15 December 2015, for a period of five years, subject to earlier termination upon six months’
notice by either party. WAHL also has the right to terminate Mr Váradi’s employment with immediate effect
by payment in lieu of notice. The service agreement contains post-termination restrictive covenants
preventing Mr Váradi from competing with WAHL or any of its business partners in the EU as well as those
non-EU countries where WAHL operates, for a period of one year following the termination of his employment.
Mr Váradi will be paid a sum equal to six months’ base salary if WAHL chooses to enforce these restrictive
covenants. Upon termination of employment other than for cause, Mr Váradi is entitled to a severance payment
equal to six months’ salary in addition to any notice pay or payment in lieu of notice.
Non-Executive Directors
The Company entered into letters of appointment with each of its Non-Executive Directors on 4 June 2014, which
became effective on completion of the IPO for a term of three years. Each Non-Executive Director’s appointment
may be terminated by the Company or the Non-Executive Director with one month’s written notice. Continuation
of the appointment is contingent on continued satisfactory performance and re-election at the Company’s annual
general meetings and the appointment will terminate automatically on the termination of the appointment by
the Shareholders or, where Shareholder approval is required for the appointment to continue, the withholding of
approval by the Shareholders. Re-appointment will be reviewed annually.
In accordance with the terms of the letters of appointment, each of the Non-Executive Directors is required to
allocate sufficient time to discharge their responsibilities effectively. Each letter of appointment contains
obligations of confidentiality which have effect both during the appointment and after termination.
On behalf of the Board
Guido Demuynck
Chairman of the Remuneration Committee
24 May 2017
Wizz Air Holdings Plc Annual report and accounts 2017
59
GOVERNANCE
CORPORATE RESPONSIBILITY
OUR APPROACH
Wizz Air is the largest low-cost airline in Central and Eastern Europe. That means that we play a large part in
the lives of many people – whether our customers or our colleagues – as well as being important to the
communities which we serve. We appreciate and value that position, but that means that we appreciate that
we must ensure that our business approach not only provides the opportunity to travel to more and more
people but also takes account of economic, environmental and social developments affecting our communities
and our people.
Responsibility for the environment
Wizz Air believes that our industry has to be responsible for the environments in which we operate. We also
believe that there are many things that we can do that are not only good for business, but also good for the
environment. That’s why we are always looking at opportunities to use the latest, innovative technologies that
not only deliver operational efficiencies but also reduce our environmental footprint.
Operating the most modern, most efficient aircraft
One of the cornerstones of Wizz Air business model has always been the operation of the latest technology,
most efficient aircraft. We currently, as at 31st March 2017, operate a fleet of 79 Airbus A320 and Airbus
A321ceo aircraft, with an average age of just 4.4 years – one of the youngest in Europe. The Airbus A321ceo, a
type of which we currently operate 16 with a further 15 to be delivered before the end of 2018, is already today’s
most efficient single-aisle aircraft. All of our new-delivery aircraft are equipped with sharklets, which deliver an
average 3.9% in-flight fuel saving compared to standard wing-fence aircraft. However, in 2019, we will receive
the first of the 110 Airbus A321neo aircraft which we have on order, equipped with next- generation Pratt &
Whitney PW1100G geared turbofan engines. The technology in these engines is new and disruptive to the
market and according to manufacturer’s estimates, should deliver the lowest specific fuel consumption in its
category and a reduction of 15 percent in fuel burn compared to today’s single aisle aircraft, as well as lower
CO2 emissions and lower noise levels.
Fuel saving initiatives
Wizz Air currently has over 60 fuel saving initiatives which are either in the research and development phase
or are already embedded in our operations, such as cost index optimisation or the use of thrust reversers.
What’s good for business is good for the environment – less fuel consumed means fewer emissions.
Contributing to the economy
Wizz brings the opportunity to travel at the lowest fares to its millions of passengers. Giving affordable access
to our customers to explore the wider world, or to travel quickly and cheaply to see friends and relatives or to
develop their careers abroad, improves lives. But more than this, Wizz Air is often the first airline at an airport
to offer international flights connecting cities throughout Europe. And that, in turn, means more visitors,
boosting both local tourism as well as business links.
As a result, Wizz Air does not only provide job opportunities to each of the more than 3,000 aviation
professionals already working in the Wizz team, but through our continuously developing network and
operations we support numerous workplaces at our 141 destinations.
Indeed, based on the research of ACI Europe, every 1 million carried passengers per year supports 750 local
jobs, meaning that the 24 million passengers we carried in the 2017 financial year Wizz supported over 18,000
jobs.
Responsibility for our colleagues and our community
It may sound a cliché, but we know that at Wizz Air it’s true: our people are the most important element of
Wizz Air’s success. We support our colleagues with new, outstanding career opportunities in this exciting
industry. We are immensely proud of the diverse Wizz team and ensure that we engage with and take
feedback from our colleagues, to increase our already high employee satisfaction rate. For our customers, we
are continuously developing our services to enhance the WIZZ customer experience.
Wizz Air Holdings Plc Annual report and accounts 2017
60
GOVERNANCE
CORPORATE RESPONSIBILITY CONTINUED
Responsibility for our colleagues and our community continued
Wizz promotes an active lifestyle
Wizz Air, as the largest low-cost airline in Central and Eastern Europe, is proud to promote an active lifestyle.
Since our very first flight in 2004, Wizz Air has been democratising air travel. Our motto back in 2004 was
that “Now We Can All Fly” – and we believe that, just as with air travel, an active lifestyle should also be
available for everyone. That’s why Wizz announced its title sponsorship of the Budapest Half Marathon, Skopje
Marathon and Kyiv Marathon in 2014 and added the Cluj-Napoca Marathon to its sponsored sports events in
2016. In April 2017, we announced that we would be sponsoring the Sofia Marathon. The number of participants
in the events has been continuously increasing, with more and more runners coming from all over the world –
including an ever increasing number of Wizz colleagues.
Wizz supports communities
Wizz knows that the opportunity for more and more people to afford to fly is changing the world for the
better. But we also know that we can do more to support the communities that we serve! That’s why we
support charity activities, initiated by our cabin crew, to support their local communities. These activities range
from helping struggling families in Poland, supporting children’s medical services in Hungary, creating better
educational conditions in Romania and Latvia or giving presents to orphans in Macedonia.
The care and attention of our cabin crews is making life better – not just above the clouds!
Diversity and equal opportunities
Wizz Air is an equal opportunity employer. We are committed to treating our potential and current employees fairly,
regardless of race, gender, age, marital status and anything else not related to our employees’ ability to do their jobs.
This principle is enshrined in our code of ethics, The Wizz Way. Compliance with The Wizz Way is expected of all
colleagues in the Wizz team. By way of example, we value diversity and employ more than 3,000 colleagues of
39 nationalities.
The male to female ratio is balanced. We currently have 1,838 women and 1,495 men working at Wizz.
Male/female ratio within Wizz
Male/female ratio – function head level
m:1,495 / f:1,838
m:20 / f:4
Male/female ratio within the management team and
the Board of Directors
Management team: m:26 / f:4
Board: m:8 / f:2
Employee relations
Wizz feedback survey
Wizz Air is a people business. We know that our people are the backbone of our business and it is their
dedication, day in, day out, that allows us to deliver our low-cost, quality service. But we know that we cannot
take our people for granted and that competition for the high quality people whom we seek is keen and may
become even more so.
Wizz Air has always valued genuine engagement with employees. We believe that this engagement is self-
evident in the commitment shown by colleagues day-in, day-out – whether it’s office colleagues going the
extra mile or the passion for outstanding service of our cabin crew. In May 2016 Wizz Air conducted the Wizz
Feedback Survey to measure the satisfaction level of its employees and ask for their feedback on the major
employment topics. The survey confirmed that our colleagues are highly engaged and consider Wizz as an
employer of choice.
The general satisfaction of the Wizz team is 85 percent, which is 25 percent higher than the average
engagement rate measured in Europe and 20 percent higher compared to the global results.2
Recruitment and career
As a fast-growing company Wizz Air is continuously recruiting to find new colleagues passionate about the
aviation industry, whether they are talents early in their career or experienced professionals with significant
expertise and successful track records.
The Company recruits an average of 500 new employees each year. We also pride ourselves on the possibility for
internal career development for colleagues and the number of promotions within the Company last year once again
demonstrated that commitment, dedication and hard work are recognised in the best ways possible – career and
personal development.
2 Based on the 2016 Trends in Global Employee Engagement report by Aon.
http://www.aon.com/attachments/human-capital-consulting/2016-Employee-Engagement-Trends-Infographic.pdf
Wizz Air Holdings Plc Annual report and accounts 2017
61
GOVERNANCE
CORPORATE RESPONSIBILITY CONTINUED
Employee relations continued
Company events
Wizz Air believes that the engagement of its employees is key to keep on achieving outstanding business
results. Thus, besides providing motivating tasks and professional challenges daily, the airline puts a great
emphasis on building a community.
Some events recently enjoyed by the Wizz team include:
A Wizz Christmas party, which was attended by over 1,000 colleagues.
Visits by senior management to each of our operating bases, with an opportunity for feedback to be given
by colleagues.
Team building events to develop co-operation within departments and between different functions.
Running events
It is an old saying that a healthy body helps a healthy mind, but it’s something that we certainly believe at
Wizz. That’s why we encourage our employees to lead a healthy lifestyle – including participating in a number
of running events sponsored by WIZZ. These include the Budapest Half Marathon, Kyiv City Marathon and
Skopje Marathon, and they are also provided with the opportunity of taking part in the Budapest Runway Run
and Kosice Runway Run, two of the most unusual running events for aviation enthusiasts.
Representing the Wizz brand
At Wizz we believe that all of our employees represent the Company, every day.
That’s why we are delighted that Wizz Air has a strong brand which all members of the Wizz team can be proud
of.
However, we also need a team of people who represent the very best of the Wizz spirit. These people are the
WIZZ Ambassadors. The Wizz Ambassador programme programme was launched in 2011 and currently, 24
colleagues from cabin operations elected through a public Facebook vote represent Wizz at schools, events,
press conferences, recruiting trips and more. They represent their base, their country and the Company as the
face of Wizz.
Wizz Air Holdings Plc Annual report and accounts 2017
62
GOVERNANCE
DIRECTORS’ REPORT
The Directors present their report and the audited consolidated financial statements for Wizz Air Holdings plc
(“the Company”) and its subsidiaries (“the Group”) for the year ended 31 March 2017.
Results and dividend
The results for the year are shown on page 76.
The Directors do not recommend the payment of a dividend (2016: nil).
Directors
The Directors of the Company who were in office during the year and up to the date of signing the financial
statements are listed below:
József Váradi
William A. Franke
John R. Wilson
Stephen L. Johnson
John McMahon
Thierry de Preux
Simon Duffy
Guido Demuynck
Susan Hooper
Wioletta Rosolowska (appointed with effect from 1 June 2016)
Going concern
Wizz Air’s business activities, financial performance and financial position, together with factors likely to affect
its future development and performance, are described in the Strategic Report on pages 4 to 25. Principal
risks and uncertainties facing the Group are described on pages 27 to 30. Note 3 to the accounts sets out the
Group’s objectives, policies and procedures for managing its capital and provides details of the risks related
to financial instruments held by the Group.
At 31 March 2017, the Group held cash and cash equivalents of €774.0 million while net current assets were
€434.5 million. Other than convertible debt with a balance of €27.1 million the Group has no significant
external borrowings.
The Directors have reviewed financial forecasts including plans to finance future aircraft deliveries. After
making enquiries, the Directors have satisfied themselves that the Group is expected to be able to meet its
commitments and obligations for at least the next twelve months from the date of signing this report.
Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
Viability
In accordance with provision C.2.2 of the UK Corporate Governance Code (2014), the Directors have assessed
the prospects and the viability of the Group over a three-year period to March 2020. The Directors have
determined that the three-year period was the appropriate period because (i) Wizz Air has a fast expanding
business which gives less certainty of certain key forecasting assumptions over a longer period; and (ii) the
Group’s strategic planning process traditionally covers three years.
Assessment of prospects
The Group’s prospects are assessed by management and the Board primarily through the strategic planning
process. This three-year plan takes into account the current position of the Group, includes the fully detailed
annual operating plan for the financial year starting (in this case for the year ending March 2018) and then,
building on it, a sufficiently detailed bottom-up forecast for further two financial years. The Board participates
fully in the process by aligning the key assumptions and the topline financial targets, reviewing and approving
the annual operating plan, and reviewing and acknowledging the three-year plan.
The plan takes into account the existing aircraft order book of the Group that defines a programmed growth
for several years ahead. Financing of future aircraft deliveries is already secured with lease contracts until the
end of 2018. The Directors believe that the growth assumptions are justified also from the demand side, as the
Group continues to execute its core strategy, that is to have lower cost than any of its competitors, and with
low prices stimulate further demand for its services both in existing and new markets.
Wizz Air Holdings Plc Annual report and accounts 2017
63
GOVERNANCE
DIRECTORS’ REPORT CONTINUED
Viability continued
Assessment of viability
Although the strategic plan reflects management and the Directors’ best estimate of the future prospects of
the business, they have also tested the resilience of the business to unfavorable deviations of certain key
variables from the base case scenario. In defining these scenarios the Directors took into account the principal
risks that could prevent the Group from delivering on its strategy and financial targets, as summarised on
pages 27 to 30 in the Strategic Report.
As part of this assessment, the Directors made the following key assumptions / caveats:
there will not be a prolonged grounding of a substantial portion of the aircraft fleet; and
with regards to the expected departure of the UK from the European Union, the terms of exit will be such
that will allow the Group to continue to operate broadly the same network to/from the UK as at present.
The Directors assessed the potential financial impacts of severe but plausible scenarios that the Group could
experience. The scenarios included significant increase in jet fuel prices, significant strengthening of the
US Dollar and weakening of the British Pound to the Euro, decreasing unit revenues, increasing crew costs,
potential delays in the supply of the new A320neo aircraft family from Airbus, and a combination of these
factors. While several risks can impact revenues, increased competition in key markets was considered the
most important risk both in terms of likelihood and potential impact.
The results of the testing showed that, due to the strong competitive position, operating cash flows and
existing reserves of the Group, it would be able to withstand the impact of these scenarios over the period of
the financial forecasts.
Viability statement
Based on this assessment, the Directors have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period to March 2020.
Disclosure of information to auditors
The Directors at the date of approval of the financial statements confirmed that, so far as they are aware, there
is no relevant audit information of which the Company's auditors are unaware, and they have taken all the
steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit
information and to establish that the Company's auditors are aware of that information.
Independent auditors
A resolution for the appointment of the auditors of the Company for the financial year ending 31 March 2018
is to be proposed by the Directors at the forthcoming Annual General Meeting.
Indemnities
Wizz Air maintains directors’ and officers’ liability insurance. This insurance covers any claim that may be
brought against the Directors in the exercise of their duties. Wizz Air has also provided customary third-party
indemnities to its Directors, to the extent permitted under Jersey law.
Political donation and expenditure
Wizz Air works constructively with all levels of government across its network, regardless of political affiliation.
Wizz Air believes in the right of individuals to engage in the democratic process; however, Wizz Air itself does
not make any political donations and does not incur any political expenditure.
Capital structure
As at 31 March 2016, the Company had 57,404,971 Ordinary Shares of £0.0001 each in issue, each with one vote,
and 44,830,503 Convertible Shares, which do not entitle the holder to voting rights save in very limited
circumstances. There were no shares held in treasury at that date. The rights and obligations attaching to the
Company’s shares are set out in the articles of association. Holders of Ordinary Shares have the following rights:
a) subject to any rights or restrictions as to voting attached to any Ordinary Shares, on a show of hands, each
Shareholder present in person shall have one vote, and on a poll each Shareholder present in person or by
proxy shall have one vote for every Ordinary Share of which he is the holder;
Wizz Air Holdings Plc Annual report and accounts 2017
64
GOVERNANCE
DIRECTORS’ REPORT CONTINUED
Capital structure continued
b) a certificated share may be transferred by means of an instrument in writing, either by the usual transfer
form or in any other form that the Board approves, signed by or on behalf of the person transferring the
Ordinary Shares and, unless the Ordinary Shares are fully paid, by or on behalf of the person acquiring the
Ordinary Shares. Ordinary Shares in uncertificated form may be transferred by means of the relevant system;
c) the right to receive dividends on a pari passu basis; and
d) on a winding-up, the liquidator may divide amongst the members in specie the whole or any part of the
assets of the Company.
During the 2017 financial year 482,800 new Ordinary Shares were allotted for cash, all on a non-pre-emptive
basis. These were allotted pursuant to the exercise of share options by the employees of the Group.
The aggregate nominal value of the Ordinary Shares allotted for cash in the 2017 financial year was £48.
The aggregate cash consideration received by the Company for the allotment of the Ordinary Shares was
£1.0 million.
Corporate governance statement
The corporate governance statement, prepared in accordance with rule 7.2 of the UK Listing Authority’s
Disclosure Guidance and Transparency Rules sourcebook, can be found in the Wizz Air Holdings Plc Corporate
Governance Report on page 33. The Wizz Air Holdings plc Corporate Governance Report forms part of this
Wizz Air Holdings plc Directors’ Report and is incorporated into it by this reference.
Information required by Listing Rule LR 9.8.4C
In compliance with Listing Rule 9.8.4C, the Company discloses the following information:
Listing Rule
9.8.4(1)
9.8.4(2)
Information required
Interest capitalised by the Group
Unaudited financial information as required (LR 9.2.18)
9.8.4(4)
Long-term incentive plans (LR 9.4.3)
9.8.4(5)
9.8.4(6)
9.8.4(7)
Directors’ waivers of emoluments
Directors’ waivers of future emoluments
Non-pro-rata allotments of equity for cash (the Company)
Relevant disclosure
N//A
Unaudited financial
information was
published by the
Group in its interim
management
statements (for Q1 and
Q3) and in its half-year
results. There have
been no changes to
the unaudited
information previously
published.
See Directors’
Remuneration Report.
N/A
N/A
See paragraph headed
“Capital structure” in
this report.
9.8.4(8)
9.8.4(10)
9.8.4(11)
9.8.4(12)
9.8.4(13)
9.8.4(14)
Non-pro-rata allotments of equity for cash (major subsidiaries) N/A
N/A
Contracts of significance involving a Director
N/A
Contracts of significance involving a controlling shareholder
N/A
Waivers of dividends
N/A
Waivers of future dividends
See Corporate
Agreement with a controlling shareholder (LR 9.2.2.AR(2)(a))
Governance Report.
For and on behalf of the Board
József Váradi
Chief Executive Officer
24 May 2017
Wizz Air Holdings Plc Annual report and accounts 2017
65
GOVERNANCE
COMPANY INFORMATION
Registered number
103356
Registered office
44 The Esplanade
St Helier
Jersey
JE4 9WG
Secretary
Elian Corporate Services (Jersey) Limited
44 The Esplanade
St Helier
Jersey
JE4 9WG
Independent auditors
PricewaterhouseCoopers LLP, Chartered
Accountants and Statutory Auditors
1 Embankment Place
London WC2N 6RH
United Kingdom
Principal bankers
Citibank
Citigroup Centre
25 Canada Square
Canary Wharf
London E14 5LB
United Kingdom
Share registrar
Computershare Investor Services (Jersey)
Limited
Queensway House
Hilgrove Street
St Helier
Jersey
JE1 1ES
Financial public relations
FTI Consulting
200 Aldersgate Street
London EC1A 4HD
United Kingdom
Principal legal advisers
Latham and Watkins (London) LLP
99 Bishopsgate
London EC2M 3XF
United Kingdom
Joint corporate brokers
Barclays Bank PLC
1 Churchill Place
London E14 5HP
United Kingdom
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
Wizz Air Holdings Plc Annual report and accounts 2017
66
GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the annual report and the financial statements in accordance with
applicable law and regulations.
The Companies (Jersey) Law 1991 requires the Directors to prepare financial statements for each financial year.
Under that law the Directors have prepared the Group financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the Directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of the
state of affairs of the Group and of the profit or loss of the Group for that period. In preparing these financial
statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgments and accounting estimates that are reasonable and prudent;
state whether applicable IFRSs as adopted by the European Union have been followed, subject to any
material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Company and the Group and enable them to ensure that the financial statements comply with the Companies
(Jersey) Law 1991 and the Directors’ Remuneration Report complies with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in
Jersey and the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary for Shareholders to assess the Company’s position
and performance, business model and strategy.
Each of the Directors, whose names and functions are listed on pages 36 to 38 confirm that, to the best of
their knowledge:
the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the
EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and
the Strategic Report contained in the annual report includes a fair, balanced and understandable review
of the position and performance of the business and the position of the Group, together with a description
of the principal risks and uncertainties that it faces.
On behalf of the Board
József Váradi
Director
24 May 2017
Wizz Air Holdings Plc Annual report and accounts 2017
67
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC
Report on the group financial statements
Our opinion
In our opinion, Wizz Air Holdings plc’s group financial statements (the “financial statements”):
give a true and fair view of the state of the group’s affairs as at 31 March 2017 and of its profit and cash
flows for the year then ended;
have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as
adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991.
What we have audited
The financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:
the Consolidated Statement of Financial Position as at 31 March 2017;
the Consolidated Statement of Comprehensive Income for the year then ended;
the Consolidated Statement of Cash Flows for the year then ended;
the Consolidated Statement of Changes in Equity for the year then ended; and
the notes to the financial statements, which include a summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to the
financial statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs
as adopted by the European Union, and applicable law.
Our audit approach
Overview
Materiality
Overall group materiality: €12.7 million which represents 5% of profit before
income tax.
Audit scope
The group financial statements are a consolidation of Wizz Air Holdings plc,
the trading subsidiaries Wizz Air Hungary Kft, Wizz Tours and a number of
insignificant intermediate holding, small trading, dormant and ceased
operation companies.
The accounting for these entities and the group consolidation is largely
centralised in Hungary where the majority of our audit work was performed.
Our audit scope comprised an audit of Wizz Air Holdings plc and the complete
financial information of Wizz Air Hungary Kft, being the significant component.
Areas of focus
Aircraft maintenance provisioning.
Hedge and derivative accounting.
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK
& Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example
in respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our
resources and effort, are identified as “areas of focus” in the table below. We have also set out how we tailored
our audit to address these specific areas in order to provide an opinion on the financial statements as a whole,
and any comments we make on the results of our procedures should be read in this context. This is not a
complete list of all risks identified by our audit.
Wizz Air Holdings Plc Annual report and accounts 2017
68
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC CONTINUED
Report on the group financial statements continued
Our audit approach continued
The scope of our audit and our areas of focus continued
Area of focus
Aircraft maintenance provisioning
How our audit addressed the area of focus
We evaluated the integrity of the maintenance
provision system (MPS) and tested the calculations
therein. This included assessing the process by
which the variable factors within the provision were
estimated, evaluating the reasonableness of the
assumptions, testing the
input data and re-
performing calculations. We found no significant
issues in the MPS input data or the calculated
maintenance assets and provisions. The basis for
these calculations was found to be consistent with
prior periods and in line with the detailed accounting
policy set out in Note 2.
We compared the cost assumptions in the MPS to
recent invoices, inspected future flight schedules
and approved maintenance plans as well as
validated current flight hours and flight cycles to
non-financial data sources. We found no material
exceptions from these procedures and estimates.
We read new or amended aircraft lease contracts and
validated the updated MPS input data. We found no
material exceptions from these procedures.
from
The group operates aircraft, which are held under
operating lease arrangements, and incurs liabilities
for maintenance during the term of the lease.
Provisions arise
legal and contractual
obligations relating to the condition of the aircraft
when it is returned to the lessor. The risk is that with
the
judgement
required in calculating the amount of provision
together with the complexity of the calculation of a
number of variable factors and assumptions, the
provision may be understated.
level of management
inherent
Maintenance provisions of €111.8 million for aircraft
maintenance costs in respect of operating leased
aircraft are recorded in the financial statements at
31 March 2017 (refer to note 29 to the financial
statements).
For aircraft held under operating lease agreements,
the group is contractually committed to either return
the aircraft in a certain condition or to compensate
the lessor based on the actual condition of the aircraft
and its major components upon return.
Provision is made for the minimum unavoidable
costs of specific future obligations created by the
lease at the time when such obligation becomes
certain. This
is when the respective aircraft
component no longer meets the lease re-delivery
conditions. Commonly there is a warranty period for
components at the start, during which no obligation
arises; provisioning only commences after this
warranty period.
At each balance sheet date, the calculation of the
maintenance provision, derived from the maintenance
provision system (MPS), includes a number of variable
factors and assumptions including: likely utilisation of
the aircraft; the expected cost of the heavy
maintenance check and the time it is expected to
occur; the condition of the aircraft; and the lifespan of
life-limited parts.
The provision booked by Management was
considered appropriate in the Directors’ view.
Wizz Air Holdings Plc Annual report and accounts 2017
69
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC CONTINUED
Report on the group financial statements continued
Our audit approach continued
The scope of our audit and our areas of focus continued
Area of focus
Hedge and derivative accounting
The group uses derivative financial instruments
(options) to hedge transaction currency (comprising
fuel, leasing and maintenance US dollar payments)
and jet fuel price risks. The risk is that because of their
materiality to the financial position of the Group and
the level of manual input in monitoring open, closed
and settled derivatives and the complexity of the
requirements in order to apply hedge accounting
(e.g. timely tailored documentation, including details
of how hedge effectiveness is monitored both
prospectively and retrospectively), an error could
result in a material misstatement to the financial
statements.
At 31 March 2017, derivative financial assets
amounted to €10.1 million and derivative financial
liabilities were €1.8 million. Further details are set out
in notes 2, 3 and 20 to the financial statements.
The Directors’ review concluded that the amounts
booked at 31 March 2017 are not materially misstated.
How our audit addressed the area of focus
We evaluated the processes, procedures and
controls in respect of the group’s treasury and other
management functions which directly impact the
relevant account balances and transactions. We
tested
account
reconciliation process, including cut-off procedures.
management’s
year-end
The results of this work allowed us to focus on
substantiating the year-end positions recorded in the
financial statements. We independently obtained
direct confirmations from each of the counterparties
to test the cut-off at the year end. We found no
material exceptions from these confirmations.
adequate
We assessed
the appropriateness of hedge
accounting for the derivative financial instruments
and
and
effectiveness testing was found to be in place. We
tested, using independent data-feeds, the fair values
being ascribed to those instruments at the year end
and noted no significant exceptions.
documentation
hedge
We also assessed the appropriateness of the
disclosures in the financial statements in respect of
derivative financial instruments. We did not identify
any significant issues with the measurement or
presentation of the group’s derivative financial
instruments.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on
the financial statements as a whole, taking into account the geographic structure of the group, the accounting
processes and controls, and the industry in which the group operates.
The Group has two reporting segments which comprise the airline and tour operator businesses. The airline
segment consists of Wizz Air Holdings plc and its trading subsidiary Wizz Air Hungary Kft, which includes
branch operations in base countries. The Tour reporting segment consists of the Wizz Tours operations which
sells travel packages to external customers. The airline segment contributes over 98% of profit before income
tax. Therefore, our audit scope comprised an audit of Wizz Air Holdings plc and the complete financial
information of Wizz Air Hungary Kft, being the only significant components. The accounting for these entities
and the group consolidation is centralised in Hungary.
The audit is performed by a single engagement team comprising individuals based in the UK and in Hungary.
The operations are audited by applying their collective knowledge and understanding of the Group and its
financial reporting processes and controls.
In addition to the standard audit work performed by the engagement team based in Hungary, the UK team
members visited the Budapest’s management team three times during the audit cycle. These visits involved
discussing the audit approach, areas of focus and issues arising from our work. The UK team members also
attended the local clearance meeting in Hungary and all Audit Committee meetings in Switzerland, either in
person or via telephone call. This gave us the evidence we required for our opinion on the group financial
statements as a whole.
Wizz Air Holdings Plc Annual report and accounts 2017
70
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC CONTINUED
Report on the group financial statements continued
Our audit approach continued
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and on the financial statements as
a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as
follows:
€12.7 million (2016: €10.1 million).
Overall group materiality
5% of profit before income tax.
How we determined it
Rationale for benchmark applied We believe that profit before income tax is the primary measure used
by shareholders in assessing the performance of the Group.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit
above €0.6 million (2016: €0.4 million) as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
Going concern
The Directors have complied with provision C.1.3 of the UK Corporate Governance Code (‘the Code’) and
provided a statement in relation to going concern, set out in the Directors’ report. The Directors have
requested that we review the statement on going concern as if the Company were a UK registered company.
We have nothing to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw
attention to in relation to the directors’ statement about whether they considered it appropriate to adopt the
going concern basis in preparing the financial statements. We have nothing material to add or to draw
attention to.
As noted in the Directors’ statement, the directors have concluded that it is appropriate to adopt the going
concern basis in preparing the financial statements. The going concern basis presumes that the group has
adequate resources to remain in operation, and that the directors intend it to do so, for at least one year from
the date the financial statements were signed. As part of our audit we have concluded that the directors’ use
of the going concern basis is appropriate. However, because not all future events or conditions can be
predicted, these statements are not a guarantee as to the group’s ability to continue as a going concern.
Other required and voluntary reporting
Consistency of other information
Opinion on Strategic report and Directors’ report
The Directors voluntarily prepare a Strategic report and Directors’ report in accordance with the provisions of
the United Kingdom Companies Act 2006. The Directors have requested that we express an opinion on the
consistency of that information with the financial statements in accordance with the United Kingdom
Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
report and the Directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements.
Wizz Air Holdings Plc Annual report and accounts 2017
71
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC CONTINUED
Other required and voluntary reporting continued
Consistency of other information continued
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
information in the Annual Report is:
We have no
exceptions to report.
We have no
exceptions to report.
• materially inconsistent with the information in the audited financial
statements; or
•
apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the group acquired in the course of performing our audit; or
• otherwise misleading.
the statement given by the Directors on page 67, in accordance with provision
C.1.1 of the UK Corporate Governance Code (the “Code”), that they consider the
Annual Report taken as a whole to be fair, balanced and understandable and
provides the information necessary for members to assess the group’s position
and performance, business model and strategy is materially inconsistent with
our knowledge of the group acquired in the course of performing our audit.
the section of the Annual Report on pages 44 to 46, as required by provision
C.3.8 of the Code, describing the work of the Audit Committee does not
appropriately address matters communicated by us to the Audit Committee.
We have no
exceptions to report.
The Directors’ assessment of the prospects of the Group and of the principal risks that
would threaten the solvency or liquidity of the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw
attention to in relation to:
the Directors’ confirmation on pages 26 and 27 of the Annual Report, in
accordance with provision C.2.1 of the Code, that they have carried out a robust
assessment of the principal risks facing the group, including those that would
threaten its business model, future performance, solvency or liquidity.
We have nothing
material to add or to
draw attention to.
the disclosures in the Annual Report that describe those risks and explain how
they are being managed or mitigated.
the Directors’ explanation on page 63 and 64 of the Annual Report, in accordance with
provision C.2.2 of the Code, as to how they have assessed the prospects of the group,
over what period they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a reasonable expectation that
the group will be able to continue in operation and meet its liabilities as they fall due
over the period of their assessment, including any related disclosures drawing attention
to any necessary qualifications or assumptions.
We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.
Wizz Air Holdings Plc Annual report and accounts 2017
72
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC CONTINUED
Other required and voluntary reporting continued
The Directors’ assessment of the prospects of the group and of the principal risks that
would threaten the solvency or liquidity of the group continued
Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and the Directors’ statement in relation to the longer-term viability
of the Group. Our review was substantially less in scope than an audit and only consisted of making inquiries and
considering the directors’ process supporting their statements; checking that the statements are in alignment with
the relevant provisions of the Code; and considering whether the statements are consistent with the knowledge
acquired by us in the course of performing our audit. We have nothing to report having performed our review.
Adequacy of information and explanations received
Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion, we have not
received all the information and explanations we require for our audit. We have no exceptions to report arising
from this responsibility.
Directors’ remuneration
The Directors voluntarily prepare a Directors’ Remuneration Report in accordance with the provisions of the
United Kingdom Companies Act 2006. The Directors have requested that we audit the part of the Directors’
Remuneration Report specified by the United Kingdom Companies Act 2006.
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in
accordance with the United Kingdom Companies Act 2006.
Corporate governance statement
Under the Listing Rules we are required to review the part of the Corporate Governance Statement relating to
ten further provisions of the Code. We have nothing to report having performed our review.
The Corporate Governance Statement includes the information with respect to internal control and risk
management systems and about share capital structures required by the Disclosure Guidance and
Transparency Rules sourcebook of the Financial Conduct Authority. The directors have requested that we
report on the consistency of that information with the financial statements.
Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 67, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law
and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards
for Auditors.
This report, including the opinions, has been prepared for and only for the Company’s members as a body in
accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report
is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient
to give reasonable assurance that the financial statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the group’s circumstances and have been consistently
applied and adequately disclosed;
the reasonableness of significant accounting estimates made by the directors; and
the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence,
forming our own judgements, and evaluating the disclosures in the financial statements.
Wizz Air Holdings Plc Annual report and accounts 2017
73
GOVERNANCE
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF WIZZ
AIR HOLDINGS PLC CONTINUED
Responsibilities for the financial statements and the audit continued
What an audit of financial statements involves continued
We test and examine information, using sampling and other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
David Snell
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Recognised Auditor
London, United Kingdom
24 May 2017
Wizz Air Holdings Plc Annual report and accounts 2017
74
ACCOUNTS
AND OTHER
INFORMATION
Wizz Air Holdings Plc Annual report and accounts 2017
75
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2017
Continuing operations
Passenger ticket revenue
Ancillary revenue
Total revenue
Staff costs
Fuel costs
Distribution and marketing
Maintenance materials and repairs
Aircraft rentals
Airport, handling and en-route charges
Depreciation and amortisation
Other expenses
Total operating expenses
Operating profit
Financial income
Financial expenses
Net foreign exchange gain/(loss)
Net exceptional financial income/(expense)
Net financing income/(expense)
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income – items that may be subsequently
reclassified to profit or loss:
Net movements in cash flow hedging reserve, net of tax
Currency translation differences
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Earnings per share (Euro/share)
Diluted earnings per share (Euro/share)
Note
5
5
5
6
10
10
10
9
11
12
12
2017
€ million
915.5
655.7
1,571.2
(112.9)
(375.2)
(27.9)
(74.7)
(233.9)
(390.0)
(57.6)
(52.4)
(1,324.5)
246.7
0.6
(13.0)
2.6
18.8
9.1
255.8
(9.8)
246.0
15.5
-
15.5
261.6
4.30
1.95
2016
€ million
894.9
534.2
1,429.1
(101.4)
(401.5)
(23.5)
(77.5)
(176.2)
(343.1)
(28.8)
(41.7)
(1,193.6)
235.5
2.0
(8.0)
(11.8)
(16.3)
(34.1)
201.4
(8.5)
192.9
33.2
-
33.2
226.1
3.62
1.54
The notes on pages 81 to 119 are internal part of these financial statements.
Wizz Air Holdings Plc Annual report and accounts 2017
76
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 MARCH 2017
Note
2017
€ million
2016
€ million
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Restricted cash
Deferred tax assets
Deferred interest
Derivative financial instruments
Trade and other receivables
Total non-current assets
Current assets
Inventories
Trade and other receivables
Financial assets available for sale
Derivative financial instruments
Deferred interest
Restricted cash
Cash and cash equivalents
Total current assets
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Share premium
Reorganisation reserve
Equity part of convertible debt
Cash flow hedging reserve
Retained earnings
Total equity
Non-current liabilities
Borrowings
Convertible debt
Deferred income
Deferred tax liabilities
Derivative financial instruments
Provisions for other liabilities and charges
Total non-current liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Convertible debt
Derivative financial instruments
Deferred income
Provisions for other liabilities and charges
Total current liabilities
Total liabilities
Total equity and liabilities
13
14
22
15
21
20
18
17
18
19
20
21
22
28
28
28
28
28
23
24
26
15
20
29
25
23
24
20
26
29
505.7
10.3
154.7
-
4.7
0.1
67.3
742.7
24.9
141.4
1.0
10.0
1.2
1.2
774.0
953.7
1,696.3
-
378.2
(193.0)
8.3
2.6
756.4
952.5
5.3
26.8
107.9
6.5
0.8
77.5
224.7
197.7
2.4
0.6
0.3
1.1
280.9
36.2
519.1
743.8
1,696.3
353.6
5.7
100.0
0.2
6.0
-
71.2
536.8
17.6
126.5
1.0
1.7
1.2
1.6
645.6
795.1
1,331.8
-
377.0
(193.0)
8.3
(13.0)
509.4
688.8
5.9
26.9
96.6
4.9
1.2
41.2
176.7
177.3
3.2
0.5
0.3
16.4
225.0
43.7
466.4
643.1
1,331.8
The notes on pages 81 to 119 are integral part of these financial statements.
The financial statements on pages 76 to 119 were approved by the Board of Directors and authorised for issue
on 24 May 2017 and were signed on behalf of the Board.
József Váradi
Chief Executive Officer
Wizz Air Holdings Plc Annual report and accounts 2017
77
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2017
Note
Balance at 1 April 2016
Comprehensive income
Profit for the year
Other comprehensive
income
Hedging reserve
Total other comprehensive
income
Total comprehensive
income for the year
Transactions with owners
Proceeds from shares issued
(Note 28)
Share based payment charge
(Note 27)
Total transactions
with owners
Balance at 31 March 2017
Share
capital
€ million
28
-
Share
premium
€ million
28
377.0
Reorganisation
reserve
€ million
28
(193.0)
Equity part
of
convertible
debt
€ million
Cash flow
hedging
reserve
€ million
Retained
earnings
€ million
Total
equity
€ million
8.3
(13.0)
509.4
688.8
-
-
-
-
-
-
-
-
-
-
-
-
1.2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
246.0
246.0
15.5
15.5
-
-
15.5
15.5
15.5
246.0
261.6
-
-
-
1.0
1.2
1.0
1.2
378.2
-
(193.0)
-
8.3
-
2.6
1.0
756.4
2.2
952.5
The notes on pages 81 to 119 are integral part of these financial statements.
Wizz Air Holdings Plc Annual report and accounts 2017
78
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2016
Note
Balance at 1 April 2015
Comprehensive income
Profit for the year
Other comprehensive
income
Hedging reserve
Total other comprehensive
income
Total comprehensive
income for the year
Transactions with owners
Proceeds from shares issued
(Note 28)
Share based payment charge
(Note 27)
Total transactions
with owners
Balance at 31 March 2016
Share
capital
€ million
28
-
Share
premium
€ million
28
375.4
Reorganisation
reserve
€ million
28
(193.0)
Equity part
of
convertible
debt
€ million
Cash flow
hedging
reserve
€ million
Retained
earnings
€ million
Total
equity
€ million
8.3
(46.1)
315.3
459.9
-
-
-
-
-
-
-
-
-
-
-
-
1.6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
192.9
192.9
33.2
33.2
-
-
33.2
33.2
33.2
192.9
226.1
-
-
-
1.2
1.6
1.2
1.6
377.0
-
(193.0)
-
8.3
-
(13.0)
1.2
509.4
2.8
688.8
The notes on pages 81 to 119 are integral part of these financial statements.
Wizz Air Holdings Plc Annual report and accounts 2017
79
ACCOUNTS AND OTHER INFORMATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2017
Note
2017
€ million
2016
€ million
Cash flows from operating activities
Profit before tax
Adjustments for:
Depreciation
Amortisation
Financial income
Financial expense
Share based payment charges
Changes in working capital (excluding the effects of
exchange differences on consolidation)
Increase in trade and other receivables
Increase in restricted cash
Decrease in deferred interest
Increase in inventory
Increase/(decrease) in provisions
Increase in trade and other payables
Increase in deferred income
Cash generated by operating activities before tax
Income tax paid
Net cash generated by operating activities
Cash flows from investing activities
Purchase of aircraft maintenance assets
Purchases of tangible and intangible assets
Advances paid for aircraft
Refund of advances paid for aircraft
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from the issue of share capital
Interest paid
Commercial loan repaid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash and
cash equivalents
Cash and cash equivalents at the end of the year
13
14
7
255.8
55.0
2.6
(21.6)
13.0
1.0
305.8
(7.6)
(52.4)
1.3
(7.3)
0.7
21.9
57.6
319.9
(9.0)
310.9
(77.7)
(38.1)
(172.7)
108.7
0.2
(179.7)
1.2
(2.4)
(0.5)
(1.8)
129.4
645.6
(1.0)
774.0
201.4
26.8
2.0
(2.0)
47.3
1.2
276.8
(32.0)
(31.7)
1.5
(8.8)
(0.4)
47.1
45.0
297.5
(8.6)
288.9
(42.7)
(12.4)
(116.7)
80.9
0.2
(90.6)
1.6
(2.8)
(0.4)
(1.7)
196.5
448.6
0.5
645.6
The notes on pages 81 to 119 are integral part of these financial statements.
Wizz Air Holdings Plc Annual report and accounts 2017
80
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
1. General information
Wizz Air Holdings plc (“the Company”) is a public company incorporated in Jersey under the address
44 The Esplanade, St Helier, Jersey JE4 9WG. The Company is managed from Switzerland. The Company and
its subsidiaries (together referred to as “the Group” or “Wizz Air”) provide low-cost, low-fare passenger air
transportation services on scheduled short-haul and medium-haul point-to-point routes across Europe and
the Middle East.
2. Accounting policies
The principal accounting policies applied in the presentation of these consolidated financial statements are set
out below.
Basis of preparation
These consolidated financial statements consolidate those of the Company and its subsidiaries. The consolidated
financial statements have been prepared and approved by the Directors in accordance with International
Financial Reporting Standards as adopted by the EU (“Adopted IFRSs” and IFRS IC interpretations).
Based on the exemption provided in Article 105 (11) of the Companies (Jersey) Law 1991 the Company does
not present its individual financial statements and related notes.
The financial statements are presented in Euros, which is the functional currency of all companies in the Group
(other than two dormant entities).
The consolidated financial statements have been prepared under the historical cost convention, as modified
by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including
derivative instruments) at fair value through profit or loss.
The preparation of the consolidated financial statements in conformity with IFRS legislates the use of certain
critical accounting estimates and requires management to exercise judgments in the process of applying the
Group's accounting policies. The areas involving a high degree of judgment or complexity or areas where
assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 4.
New standards and interpretations
a) Standards, amendments and interpretations effective and adopted by the Group
The following new IFRSs and amendments are mandatory for financial periods beginning on or after
1 January 2016 and have therefore been adopted by the Group as of 1 April 2016.
Amendment to IFRS 11, Joint Arrangements – accounting for acquisitions of interests in joint operations.
Amendment to IAS 16 and IAS 38, Property, Plant and Equipment and Intangible Assets – clarifications
of acceptable methods of depreciation and amortisation.
Annual improvements to IFRS 2012–2014 cycle – requires disclosure of the judgments made by
management in aggregating operating segments and clarifies that a reconciliation of segment assets must
only be disclosed if segment assets are reported.
Amendment to IAS 1, Presentation of Financial Statements – disclosure initiative.
Amendment to IAS 7, Statement of Cash Flows – disclosure initiative.
Wizz Air Holdings Plc Annual report and accounts 2017
81
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
New standards and interpretations continued
b) Standards early adopted by the Group
There are no standards early adopted by the Group.
c) Interpretations and standards that are not yet effective and have not been early adopted by the Group
IFRS 9, Financial Instruments – addresses the classification, measurement and recognition of financial
assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the
guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9
retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through other comprehensive income or expense
and fair value through profit or loss. IFRS 9 allows changes in the time value of options to be recognised
in other comprehensive income, as opposed to the statement of comprehensive income under IAS 39. For
financial liabilities there were no changes to classification and measurement except for the recognition of
changes in own credit risk in other comprehensive income, for liabilities designated at fair value through
profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge
effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument
and for the “hedged ratio” to be the same as the one management actually uses for risk management
purposes. Contemporaneous documentation is still required but is different to that currently prepared
under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018 with
early adoption permitted.
The Group is adopting IFRS 9 from 1 April 2017. The key impact of the adoption will be that changes in the
time value of hedges will be recognised in other comprehensive income as opposed to the statement of
comprehensive income. Changes in the time value of hedges were material in last two financial years and,
given the volume of hedging activity of the Group, are expected to be material also in the future. However,
the size and the direction of these changes will depend on changes in market prices; therefore, it is not
possible to make an estimate for the expected impact.
IFRS 15, Revenue from Contracts with Customers – deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements about the nature, amount, timing
and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is
recognised when a customer obtains control of a good or service and thus has the ability to direct the use
and obtain the benefits from the good or service. The standard replaces IAS 18, Revenue and IAS 11,
Construction Contracts and related interpretations. The standard is effective for annual periods beginning
on or after 1 January 2017 and earlier application is permitted.
The Group will adopt IFRS 15 from 1 April 2018. Based on the preliminary assessment of management,
under IFRS 15 some ancillary revenue types will need to be recognised on the date of flight rather than the
date of sale, as currently, which will result in a one-off reduction of revenues in the range of €6–7 million
in the year of adoption.
IFRS 16, Leases (effective for the accounting periods beginning on or after 1 January 2019) – addresses
the classification, measurement and recognition of leases with the objective of ensuring that lessees and
lessors provide relevant information that faithfully represents those transactions. The standard supersedes
IAS 17, Leases and is subject to EU endorsement.
The Group currently leases all of its aircraft under operating leases; therefore, IFRS 16 brings a very
significant change for the Group. The standard is not yet endorsed by the EU and therefore only a
preliminary modelling assessment has been performed by management.
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82
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
New standards and interpretations continued
c) Interpretations and standards that are not yet effective and have not been early adopted by the
Group continued
The following key issues were considered for the modelling:
Year of adoption:
Whether early adoption (from 1 April 2018) will be an option available for the Group will depend on the timing
of the EU endorsement. In the current modelling, early adoption was not assumed. The assumed date of
application is 1 April 2019. That is the date required by the standard.
Existing leases:
The Group expects that all of its operating leases that will exist at the date of initial application would need to
be reclassified under the new rules. Considering all variations, the standard allows three methods for
implementing the new rules for existing leases:
a full retrospective approach, as per paragraph C5(a) of the standard; and
modified retrospective approaches, as per paragraph C5(b) of the standard, with further variations
permitted for the determination of the initial amount of the right-of-use asset, as per paragraphs C8(b)(i)
and C8(b)(ii), respectively.
These three methods were each modelled, assuming a consistent application to all leases existing at the date
of initial application (1 April 2019).
Future aircraft:
New aircraft scheduled to arrive from the beginning of 2019 are not yet financed. For the purposes of this
modelling it was assumed that aircraft deliveries in 2019 and beyond will also be financed in the form of
operating leases and under terms similar to those that the Group most recently entered into.
Foreign exchange:
Calculations were performed assuming an EUR/USD FX rate of 1.08 for the date of initial application and not
assuming any change to this rate during the year of initial application (ending 31 March 2020).
Incremental rate of borrowing:
The current incremental rate of borrowing of the Group for aircraft financing is estimated to be 4 per cent, and
this rate was assumed also in these calculations (in the second and third scenarios) for the date of initial
application.
The impact in the year of initial application can be summarised as follows:
right-of-use assets would be recognised in the amount of €1.2–1.4 billion at the date of initial application,
depending on the transition method used. By the end of the year of initial application (31 March 2020) the
balance would increase to €1.4–1.6 billion;
lease liabilities would be recognised in the amount of €1.4–1.5 billion at the date of initial application,
depending on the transition method used. By the end of the year of initial application the balance would
increase to €1.7–1.8 billion;
retained earnings would be decreased by the range of €100 million maximum – this applies both at the
date of initial application and at the end of the year of initial application; and
the impact on profits for the year of initial application will be a loss ranging between €5-30 million,
depending on the transition method used. In 2019–2020 the average age of the Group’s fleet
(approximately five years) will be around half of the average lease tenure of the fleet (approximately ten
years), which makes the earnings impact for the year of initial application relatively limited (€10 million or
below) in two of the three transition scenarios.
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83
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Basis of consolidation
Subsidiaries are all entities controlled by the Company. Control exists when the Group has the power, directly
or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that are currently exercisable or convertible are taken
into account. The financial statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases.
The results of all the subsidiaries are consolidated up to 31 March, which is the financial year end of
the Company.
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group
transactions are eliminated in preparing the consolidated financial statements.
Going concern
The financial statements have been prepared on a going concern basis which assumes that the Group will
continue in business for the foreseeable future. This assumption is based on the Directors’ assessment of the
Group’s financial performance and position to date, together with a review of its forecasts, in light of the risks
to which the Group is exposed.
Foreign currency
The Group’s presentational currency is the Euro. The functional currency of all the Group entities with the
exception of Dnieper Aviation LLC and Wizz Air Ukraine Airlines LLC is the Euro. Transactions in foreign
currencies are translated into functional currency at the exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date
are translated into Euros at the exchange rate ruling at that date. Foreign exchange differences arising on
translation are recognised in the statement of comprehensive income as financial income or expense.
Non-monetary assets and liabilities denominated in foreign currencies and which are recognised at their
historical cost are translated into Euros at the exchange rate at the date of the transaction. Non-monetary
assets and liabilities denominated in foreign currencies and which are stated at fair value are translated into
Euros at exchange rates ruling at the dates the fair value was determined.
The functional currency of Dnieper Aviation LLC and Wizz Air Ukraine Airlines LLC is the Ukrainian Hryvnia
(UAH). The results and financial position of all the Group entities that have a functional currency different from
the presentational currency are translated into the presentational currency as follows:
assets and liabilities for each statement of financial position presented are translated at the closing rate at
the date of that statement of financial position;
income and expenses for each statement of comprehensive income are translated at monthly average
exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and expenses are translated at the rate on the
dates of the transactions); and
all resulting exchange differences are recognised as a separate component of equity (cumulative
translation adjustments).
The below exchange rates were used for the translation of UAH into Euros in the respective financial years:
Closing rate
Average rate for the year
2017
28.96
28.42
2016
29.69
29.26
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ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Financial assets and liabilities
The Group classifies its financial assets and liabilities – in line with IAS 39, Financial Instruments: Recognition
and Measurement – into the following categories:
Description in the statement of financial position
Non-current assets
Restricted cash
Trade and other receivables
Current assets
Trade and other receivables
Financial assets available for sale
Derivative financial instruments
Restricted cash
Cash and cash equivalents
Non-current liabilities
Borrowings
Convertible debts
Current liabilities
Trade and other payables
Borrowings
Convertible debt
Derivative financial instruments
Category
Loans and receivables
Loans and receivables
Loans and receivables
Available-for-sale assets
Fair value through profit or loss
Loans and receivables
Loans and receivables
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Other financial liabilities measured at amortised cost
Fair value through profit or loss
The classification of financial assets depends on the purpose for which the assets were acquired. Management
determines the classification of its financial assets at initial recognition.
a) Financial assets and liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is
classified in this category if acquired principally for the purpose of selling in the short term. Assets in this
category are classified as current assets. Derivatives (assets or liabilities) are also categorised as held for
trading unless they are designated as hedges.
b) Loans and receivables
These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for maturities greater than twelve months after the
statement of financial position date, which are classified as non-current assets. The Group’s loans and
receivables comprise trade and other receivables, cash and cash equivalents and restricted cash in the
statement of financial position.
c) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not
classified in any of the other categories. They are included in non-current assets unless management intends to
dispose of the investment within twelve months of the statement of financial position date. Available-for-sale
financial assets are subsequently carried at fair value.
d) Other financial liabilities measured at amortised costs
Other financial liabilities are non-derivative financial liabilities with fixed or determinable payments that are not
quoted in an active market. They are included in current liabilities, except for maturities greater than twelve
months after the statement of financial position date that are classified as non-current liabilities. The Group’s
other financial liabilities comprise trade and other payables and interest-bearing loans and borrowings
(including convertible debt) in the statement of financial position.
The Group invests excess cash in a conservative way, primarily in short-term time deposits and money market
funds. Management does not, in the short term, plan to have held-to-maturity investments. The recognition
and measurement criteria are described in the relevant accounting policy section.
Wizz Air Holdings Plc Annual report and accounts 2017
85
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Financial assets and liabilities continued
Derivative financial instruments and hedging
Derivative financial instruments
Derivative financial instruments are recognised initially at fair value. The gain or loss on remeasurement to fair
value is recognised immediately in the statement of comprehensive income within financial income or
expenses. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss
depends on the nature of the item being hedged (see below). The Group enters into foreign exchange and jet
fuel price hedging transactions to minimise the impact of fluctuations in foreign exchange rates and fuel price
on the Group. Both types of hedging transactions are cash flow hedges under IAS 39.
Cash flow hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised
asset or liability, or a highly probable forecast transaction, the effective part of any unrealised gain or loss on
the derivative financial instrument is recognised directly in the hedging reserve within other comprehensive
income. Any ineffective portion of the hedge is recognised immediately in the statement of comprehensive
income as financial income or expenses.
The associated cumulative gain or loss on the effective part is removed from other comprehensive income
and recognised in the statement of comprehensive income in the respective operating expense line(s) in the
same period or periods as the hedged forecast transaction. When a hedging instrument expires or is sold,
terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast
transaction is still expected to occur, the cumulative gain or loss at that point remains in other comprehensive
income and is recognised in accordance with the above policy when the hedged transaction is recognised in
the statement of comprehensive income. If the hedged transaction is no longer expected to take place, the
cumulative unrealised gain or loss recognised in other comprehensive income is recognised in the statement
of comprehensive income immediately, net of tax, within the cash flow hedging reserve.
Before expiry, the fair value of an option comprises: i) its intrinsic value, being a function of the difference
between contracted and market (or spot) prices; and ii) its time value, being the difference between the fair
value and the intrinsic value at any point in time. Subject to hedge effectiveness, any increase or decrease in
the intrinsic value of the hedging instrument is taken to equity within other comprehensive income or expense.
However, any increase or decrease in the time value of the hedging instrument is recognised immediately in
the statement of comprehensive income as financial income or expense. This reflects the fact that variations
in the time value of an option are required to be excluded from the hedge relationship in accordance with IAS
39, Financial Instruments: Recognition and Measurement.
Accordingly:
Initial recognition: the open position on the derivative hedging instrument is recorded as an asset or
liability in the statement of financial position at fair value.
Subsequent remeasurement of unexpired options: (i) the effective portion of changes in the intrinsic
element of the fair value is recorded in other comprehensive income, (ii) changes in the time value element
of the fair value, or the ineffective portion, if any, are recorded as financial income or expense in the
statement of comprehensive income.
The realised gains or losses on the hedging instrument are recorded against the respective operating
expense line(s) in the statement of comprehensive income.
The ineffective portion is determined in line with IAS 39, applying the 80–125 per cent. rule. The ineffective
part of changes in fair value, if any, is recorded as financial income or expense in the statement of
comprehensive income.
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86
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Financial assets and liabilities continued
Derivative financial instruments and hedging continued
Hedging with non-derivatives
The Group uses its selected financial assets denominated in US Dollars to hedge highly probable future
expenses in US Dollar. The Group applies hedge accounting to part of its non-derivate financial assets, in the
interest of reducing the amount of unrealised foreign exchange gains or losses resulting from the periodic
revaluation of these assets.
The accounting treatment of non-derivatives designated as hedging instruments is identical to cash flow
hedges with derivatives, that is:
the unrealised gains or losses on hedging instruments are recorded as an asset or liability in the statement
of financial position at fair value, and the effective portion of changes in the fair value is recorded in other
comprehensive income; and
the realised gains or losses on the hedging instruments are recorded against the respective expense line(s)
in the statement of comprehensive income.
Trade and other receivables
Trade and other receivables are stated at their amortised cost using the effective interest rate method less
impairment losses.
The carrying amount of the asset is reduced through the trade and other receivables account, and the amount
of the loss is recognised in the statement of comprehensive income within other expenses. Subsequent
recoveries of amounts previously written off are credited against other expenses in the statement of
comprehensive income.
Other receivables also comprise insurance claims related to events that are covered by insurance contracts.
The Group recognises the income in the financial statements only from those insurance claims which, based
on management’s judgment, are virtually certain to be received by the Group.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits repayable on demand or which mature
within three months of inception, less any overdrafts repayable on demand. Cash held in money market funds
is also included in cash and cash equivalents. Cash and cash equivalents do not include restricted cash. Cash
and cash equivalents are netted only when right of offset has been obtained.
Restricted cash
Restricted cash represents cash deposits held by the banks that cover letters of credit, issued by the same
bank, to certain suppliers. Restricted cash is split between non-current and current assets depending on the
maturity period of the underlying letters of credit.
Trade and other payables
Trade and other payables are stated at amortised cost using the effective interest rate method. Trade and
other payables comprise balances payable to suppliers, authorities and employees.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at fair value less directly attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference
between cost and redemption value being recognised in the statement of comprehensive income as a financial
expense over the period of the borrowings on an effective interest rate basis. Financial expenses also include
withholding tax paid on the interest if according to the loan agreement the payment of withholding tax is the
liability of the Group.
Convertible debt
Convertible debt instruments that can be converted to share capital at the option of the holder, where the
number of shares issued does not vary with changes in their fair value, are accounted for as compound
instruments. Transaction costs that relate to the issue of a compound instrument are allocated to the liability
and equity components in proportion to the allocation of proceeds. The liability component is recognised
initially at the fair value of a similar liability that does not have an equity conversion option. The equity
component of the compound instrument is calculated as the excess of the issue proceeds over the value of
the liability component.
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87
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Financial assets and liabilities continued
Classification of compound instruments issued by the Group
Compound instruments issued by the Group are treated as equity (i.e. forming part of Shareholders’ funds)
only to the extent that they meet the following two conditions:
a) they include no contractual obligations upon the Company (or Group as the case may be) to deliver cash
or other financial assets or to exchange financial assets or financial liabilities with another party under
conditions that are potentially unfavourable to the Company (or Group); and
b) where the instrument will or may be settled in the Company’s own equity instruments, it is either a
non-derivative that includes no obligation to deliver a variable number of the Company’s own equity
instruments or it is a derivative that will be settled by the Company exchanging a fixed amount of cash or
other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met the proceeds of issue are classified as a financial liability. Where
the instrument so classified takes the legal form of the Company’s own shares, the amounts presented in these
financial statements for called up share capital and share premium account exclude amounts in relation to
those shares.
Where a compound instrument that contains both equity and financial liability components exists these
components are separated by recognising the liability at fair value and accounted for individually under the
above policy. The finance cost on the financial liability component is correspondingly higher over the life of
the instrument.
Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance
payments associated with compound instruments that are classified in equity are dividends and are recorded
directly in equity.
Impairment of financial assets
Impairment losses are recognised on financial assets carried at amortised cost where there is objective
evidence that a loss has been incurred. The amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of future cash flows, discounted at the original effective
interest rate.
If, subsequently, the amount of the impairment loss decreases, and the decrease can be related objectively to
an event that occurred after the impairment was recognised, the appropriate portion of the loss is reversed.
Both impairment losses and reversals are recognised in the statement of comprehensive income as
components of financial income or expenses, except in the case of impairment of available-for-sale financial
assets where the impairment and its reversal may be charged to other comprehensive income under
certain circumstances.
Current trade and other receivables are discounted where the effect is material.
Non-financial assets and liabilities
Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
Depreciation is charged to the statement of comprehensive income on a straight-line basis to write off cost to
residual value over the estimated useful economic lives of each part of an item of property, plant and
equipment. In the case of certain aircraft maintenance assets, the useful economic life of the asset can be
defined in terms of flight hours or flight cycles, and in this case the depreciation charge is determined based
on the actual number of flight hours or flight cycles. The estimated useful lives of the relevant asset categories
are as follows:
Land and buildings
Aircraft maintenance assets
Aircraft parts
Fixtures and fittings
three to five years, being the shorter of useful economic life
and the lease term
two to seven years, being the shorter of useful economic life
and the lease term
seven years
three years
The residual values and useful lives are re-assessed annually.
Wizz Air Holdings Plc Annual report and accounts 2017
88
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Non-financial assets and liabilities continued
Assets received free of charge
In certain cases the Group receives assets free of charge. These are treated as non-cash items in the statement
of cash flows.
Advances paid for aircraft – pre-delivery payments (PDP)
Pre-delivery payments (PDP) are paid by the Group to aircraft and engine manufacturers for financing the
production of the ordered aircraft or spare engine as determined by the contractual terms. Such advance
payments for aircraft or spare engines are recognised at cost and classified as property, plant and equipment
in the statement of financial position. The amount is not depreciated.
The Group may enter into sale and leaseback arrangements with lessors to finance future aircraft or spare
engine deliveries. These arrangements are structured such that the right and the commitment to purchase the
aircraft or spare engine are assigned to the lessor only on the date of delivery (a “delivery date assignment”);
as such, the recognition and classification of the PDP balance does not change when the sale and leaseback
contracts are signed. On the delivery of the aircraft or spare engine the lessor pays the full purchase price of
the asset to the manufacturer and the Group receives from the manufacturer a refund of the PDPs paid. At
this moment the fixed asset is de-recognised from the statement of financial position and any gain or loss
arising is transferred to the statement of comprehensive income as an operating income or expense.
In some instances PDPs are paid – in the name of the Group – by the lessors directly to the aircraft
manufacturer. These PDPs are also recognised by the Group in the statement of financial position as advances
paid for aircraft and as received loans until the delivery of the aircraft. In the statement of cash flows these
PDPs and loans are treated as non-cash items and are eliminated both from advances paid for aircrafts/refunds
of advances paid for aircraft and commercial loan lines.
Advances paid for aircraft maintenance assets – engine fleet our agreements (FHA)
Advances paid for aircraft maintenance assets represent advance payments made in relation to heavy
maintenance scheduled to be performed in the future (for the definition of heavy maintenance see the
accounting policy section on maintenance). Such advance payments are made by the Group particularly to the
engine maintenance service provider under fleet hour agreements (FHA). The balance of such assets is
re-categorised into aircraft maintenance assets at the time when the aircraft maintenance asset is recognised
in respect of the same component and the same heavy maintenance event. This is when the component no
longer meets the conditions set out in the lease agreement. Advances paid for aircraft maintenance are
not depreciated.
In the statement of cash flows the FHA payments are shown under the purchase of maintenance assets line
together with other aircraft maintenance asset purchases.
Intangible assets
Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and
impairment losses.
Web development costs are capitalised to the extent they are expected to generate future economic benefits
and meet the other criteria described in IAS 38, Intangible Assets.
Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed
as incurred.
Amortisation is charged to the statement of comprehensive income on a straight-line basis over the estimated
useful economic lives of intangible assets. Intangible assets are amortised from the date they are available for
use. The estimated useful lives are as follows:
Software licences
three to eight years
Web and other software development costs
three to five years
Inventories
Inventories (mainly spares) are purchased for internal use and are stated at cost unless impaired or at net
realisable value if any items are to be sold or scrapped. Net realisable value is the estimated selling price in the
ordinary course of the business less the estimated selling expense. Cost is based on the average price method
and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and
condition.
Wizz Air Holdings Plc Annual report and accounts 2017
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ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Non-financial assets and liabilities continued
Emissions Trading Scheme
As of 1 January 2012 the scope of the EU Emissions Trading Scheme 2008/101/EC (EU ETS) covers airlines.
The Group is required to formally report its annual emissions to the relevant authorities and surrender emission
allowances (EUAs) equivalent to the emissions made during the year. Surrendered allowances are a
combination of the free allowances granted by the authorities and allowances purchased by the Group from
other parties. The Group follows the “cost method” of booking the allowances: the free allowances have nil-
cost value so therefore are not recognised as an asset; and allowances purchased in the market are recorded
at the purchase price in inventory. The Group is given free allowances by the competent authorities, and the
net economic impact to the Group is therefore represented by the shortfall between the actual carbon emitted
and the free allowances given to the Group for that period. The shortfall is recorded at forward prices as a cost.
Application of this accounting treatment means that the statement of comprehensive income and the
statement of financial position reflect the net economic impact and are not grossed up to reflect the
full obligation.
Deferred interest
The Group enters into sale and leaseback agreements to finance future aircraft or spare engine deliveries. In
some cases it also enters into arrangements to finance the PDPs of such deliveries. Interest accrued on loans
to finance the PDPs on aircraft or spare engines is initially recognised under property plant and equipment
(advances paid for aircraft). When the leased aircraft or spare engine is delivered, the PDP interest balance is
reclassified within the statement of financial position from property, plant and equipment into deferred
interest. From this point forward the interest is amortised to the statement of comprehensive income during
the term of the respective lease contract.
The Group recognises in the deferred interest line also the effect of the discounting adjustment of
non-current receivables.
Impairment of non-financial assets
The carrying amounts of the Group’s assets are reviewed at each statement of financial position date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable
amount is estimated. The recoverable amount is the higher of an asset’s fair value less costs to dispose and
value in use. An impairment loss is recognised whenever the carrying amount of an asset or cash-generating
unit exceeds its recoverable amount. Impairment losses are recognised in the statement of comprehensive
income.
Employee benefits
Share based payment transactions
The Group operates an equity-settled share option programme that allows Group employees to acquire shares
in the Company. The options are granted by the Company. The fair value of options granted is recognised as
an employee expense with a corresponding increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become unconditionally entitled to the options. The fair
value of the options granted is measured using an option valuation model, taking into account the terms and
conditions upon which the options were granted. The amount recognised as an expense is adjusted at any
measurement date so that the cumulative expense to date reflects the actual number of share options that are
expected to vest.
The share award programme allows the Directors of the Company to acquire shares in the Company at nominal
value. The fair value of the awards granted is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread over the period during which there are
restrictions in place in respect of the transfer of the award shares by the Directors.
Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or
constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will
be required to settle the obligation.
If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax
rate that reflects current market assessments of the time value of money and, where appropriate, the risks
specific to the liability (please see further details of aircraft maintenance provisions in the accounting policy
section on maintenance).
Wizz Air Holdings Plc Annual report and accounts 2017
90
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Revenue
Revenue comprises the invoiced value of flight seats and ancillary revenues.
Passenger ticket revenue arises from the sale of flight seats and is recognised net of government taxes in the
period in which the service is provided, that being when the airplane has departed. Where charges levied by
airports or government authorities on a per passenger basis represent a government tax in fact or in substance,
then such amounts are presented on a net basis in the statement of comprehensive income (netted between
revenue and airport, handling and en-route charges lines). Unearned revenue represents flight seats sold but not
yet flown and is included in deferred income. Refunds made to passengers are recorded as reductions in revenue.
Ancillary revenue arises from the sale of other services made by the Group and from commissions earned in
relation to services sold on behalf of other parties. Revenues from other services comprise mainly baggage
charges, booking/payment handling fees, airport check-in fees, fees for various convenience services (priority
boarding, extended legroom and reserved seats), loyalty programme membership fees, and hotel and other
services sold by the tour operator unit of the Group. Commission revenue arises in relation to the sale of on-
board catering, accommodation, car rental, travel insurance, bus transfers, premium calls and co-branded
credit cards. Ancillary revenues are recognised as revenue on the date that the right to receive consideration
occurs, which is the date when the underlying service was provided. This, depending on the type of service,
might be either the date of sale, the date of flight or (in the case of membership fees) over the period when
customers take benefit of a paid membership.
Leases
Finance leases
If the risks and rewards incidental to ownership of an asset are substantially transferred to Wizz Air then it is
accounted for as a finance lease. The following five criteria can indicate such situation:
there is transfer of ownership of the asset at the end of lease term;
there is option to purchase the asset at sufficiently below fair value; therefore, it is reasonably certain that
the option will be exercised;
the lessee holds the assets for the major part of the assets' economic life;
the asset is so special that it can be used only by the lessee; and
the present value of minimum lease payments is substantially all of the fair value of the asset.
Management uses the above criteria as guidelines for its analyses; however, the substance of a transaction is
always considered during the assessment.
Management assesses each leasing contract individually at initial recognition based on the above discussed criteria.
Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased asset
and the present value of the minimum lease payments.
Operating leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are
classified as operating leases. Payments made under operating leases are recognised in the statement of
comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are
recognised in the statement of comprehensive income as an integral part of the total lease expense.
Sale and leaseback transactions
The Group enters into transactions whereby it assigns to a third party the right to acquire new aircraft or spare
engines. On delivery of the aircraft or spare engine, the Group will lease the aircraft or spare engine back
through an operating lease from the same party. Any gain arising on disposal, where the price that the aircraft
is sold for is above fair value, is recognised initially in deferred income and then amortised on a straight-line
basis over the lease term of the asset.
Maintenance
Aircraft maintenance provisions
For aircraft held under operating lease agreements, the Group is contractually committed to either return the
aircraft in a certain condition or to compensate the lessor based on the actual condition of the aircraft and its major
components upon return. Provision is made for the minimum unavoidable costs of specific future obligations
created by the lease at the time when such obligation becomes certain. This is when the respective aircraft
component no longer meets the lease re-delivery conditions. The provision is used through the completion of a
maintenance event such that the component again meets the re-delivery conditions.
Wizz Air Holdings Plc Annual report and accounts 2017
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ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Maintenance continued
Aircraft maintenance assets
Heavy maintenance relates to the overhaul of engines and associated components, the replacement of life
limited parts, the replacement of landing gears and the non-routine airframe inspection and rectification works.
Under normal operating conditions heavy maintenance relates to work expected to be performed no more
frequently than every two to four years.
The cost of heavy maintenance is capitalised and recognised as a tangible fixed asset (and classified as “aircraft
maintenance assets”) at the earlier of: (a) the time the lease re-delivery condition is no longer met (see above
under aircraft maintenance provisions); or (b) when maintenance, including enhancement, is carried out. Other
maintenance costs are expensed as incurred.
Such maintenance assets are depreciated over the period the Group benefits from the asset which is the
shorter of: (a) the estimated period until the next date when the lease re-delivery condition is no longer met;
or (b) the end of the asset’s operational life; or (c) the end of the lease.
For engines and associated components, depreciation is charged on the basis of flight hours or cycles, while
for other aircraft maintenance assets depreciation is charged evenly over the period the Group expects to
derive benefit from the asset.
Components of newly leased aircraft such as life limited parts and engines are not accounted for as separate
assets, and the inherent benefit of these assets which are utilised in the period from inception of the lease until
the time the assets no longer meet the lease re-delivery condition is reflected in the payments made to the
lessor over the life of the lease.
Aircraft maintenance assets are non-monetary items. Non-Euro amounts are translated on inception to Euro
and are not retranslated.
The recognition of aircraft maintenance assets against provisions for other liabilities and charges in the
statement of financial position is a transaction not involving cash flows. In the statement of cash flows the
spending on these assets is presented as “purchase of aircraft maintenance assets” in the period when cash
actually flows out of the Group. This can happen either before or after the recognition of the asset, depending
on the exact facts and circumstances associated with the relevant asset or assets.
Please refer also to the property, plant and equipment section of accounting policies.
Other receivables from lessors – maintenance reserve
Payments for aircraft and engine maintenance, as stipulated in the respective operating lease agreements, are
made to the lessors as a security for the performance of future heavy maintenance works. The payments are
recorded as receivables from the lessors until the respective maintenance event occurs and the reimbursement
with the lessor is finalised. Any payment that is not expected to be reimbursed by the lessor is recognised
within operating expenses (aircraft rentals) in the statement of comprehensive income.
Other
The Group enters into agreements with maintenance service providers that guarantee the maintenance of
major components at a rate defined in the contract, the prime example being fleet hour agreements (FHAs)
for aircraft engines. Such FHAs cover the cost of both scheduled and unscheduled engine overhauls. FHA
payments are accounted for as follows:
Payments for scheduled maintenance work are recognised as advances paid for aircraft maintenance
assets until the maintenance asset for the respective engine overhaul is created. After this point any further
FHA payments are either used to settle previously established aircraft maintenance provisions (to the
extent a provision for the respective FHA contract exists) or, in the absence of a provision, are added to
the amount previously capitalised within property, plant and equipment as advances paid for aircraft
maintenance assets.
Payments that are made to provide guaranteed coverage for the performance of unscheduled
maintenance events are considered as insurance payments and are expensed as incurred.
Please refer to the property, plant and equipment section of accounting policies.
Wizz Air Holdings Plc Annual report and accounts 2017
92
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Supplier credits
The Group receives certain assets (cash contributions or aircraft spares) for nil consideration in connection
with its acquisition of aircraft and of major aircraft parts.
Cash contributions or aircraft spares received are recognised as an asset in the statement of financial position.
The corresponding credits are recognised as income, spread equally across the shorter of useful economic life
and the lease term of the respective aircraft.
In certain cases the concessions receivable from a component manufacturer are linked to the Group’s
commitment to purchase a number of new aircraft with the manufacturer’s components installed on those. In
such case, in substance, the right to the concessions is earned by the Group through the delivery of the
respective aircraft. In certain cases the concessions might be delivered by the component manufacturer later
than the date when the respective aircraft is taken by the Group. If so, then the right earned for the concession
is recognised at the date of the aircraft delivery as part of trade and other receivables, with a corresponding
credit to deferred income. Following this, the credits are amortised on a straight-line basis over the lease term
of the respective asset, decreasing aircraft rental expenses.
Net financing costs
Net financing costs comprise interest payable, finance charges on finance leases, interest receivable on funds
invested and foreign exchange gains and losses that are recognised in the statement of comprehensive income.
Interest income and interest payable are recognised in the statement of comprehensive income using the
effective interest method.
Non-cash elements of financial income and expenses are eliminated from the statement of cash flows as an
adjusting item whereas cash elements, e.g. realised foreign exchange gains and losses, are included in the
statement of cash flows.
Share capital
Ordinary Shares are classified as equity. Qualifying transaction costs directly attributable to the issuing of new
shares are debited to equity, reducing the share premium arising on the issue of shares.
Taxation
Taxation on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the
statement of comprehensive income except to the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the
statement of financial position date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. The following temporary
differences are not provided for: the initial recognition of goodwill; the initial recognition of assets or
liabilities that affect neither accounting nor taxable profit other than in a business combination; and
differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted
at the statement of financial position date.
A deferred tax asset is recognised to the extent that it is probable that sufficient future taxable profits will be
available against which the asset can be utilised.
Wizz Air Holdings Plc Annual report and accounts 2017
93
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
2. Accounting policies continued
Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group. They are material items of income or expense
that are shown separately due to the significance of their nature or amount.
Underlying profit after tax is a non-statutory profit measure introduced by the Company to help investors
better understand the trading performance of the Group. It is a measure used by the Company also in
determining the variable remuneration of senior management (see Short-term Incentive Plan or annual bonus
in the Directors’ Remuneration Report). Underlying profit excludes the effect of exceptional items and of
unrealised foreign exchange gains and losses. These items, for various reasons, had significant impact
particularly during the 2015-2017 financial years. Going forward the Company expects that it will not incur
exceptional items of recurring nature so there would be no difference between IFRS and underlying earnings.
Segment reporting
Operating and reportable segments
The Group has two reportable segments: the airline and the tour operator business units, marketed under the
Wizz Air and Wizz Tours brand names, respectively. Wizz Air sells flight tickets and related services to external
customers and, to a smaller extent, to Wizz Tours. Wizz Tours sells travel packages to external customers
covering the network of Wizz Air.
Management information is provided to the senior management team, which (in the context of IFRS 8
‘Operating segments’) is the Group’s Chief Operating Decision Maker (CODM). Resource allocation decisions
are made by the CODM for the benefit of the route network as a whole, rather than for individual routes within
the network. The performance of the network is assessed primarily based on the operating profit or loss for
the period.
3. Financial risk management
Financial risk factors
The Group is exposed to market risks relating to fluctuations in commodity prices, interest rates and currency
exchange rates. The objective of financial risk management at Wizz Air is to minimise the impact of commodity
price, interest rate and foreign exchange rate fluctuations on the Group's earnings, cash flows and equity. To
manage commodity and foreign exchange risks, Wizz Air uses various derivative financial instruments,
including foreign currency and commodity zero-cost collar contracts.
Risk management is carried out by the treasury department under policies approved by the Board of Directors.
The Board provides written principles for overall risk management, as well as written policies covering specific
areas, such as foreign exchange risk, fuel price risk, credit risk, use of derivative financial instruments,
adherence to hedge accounting, and hedge coverage levels. The Board has mandated the Audit Committee
of the Board to supervise the hedging activity of the Group and the compliance with the policies approved by
the Board.
Risk analysis
Market risks
Foreign currency risk
The Group is exposed to foreign currency risk on sales, purchases and commitments that are denominated in
a currency other than the Euro. The foreign currency exposure of the Group is significant for two reasons: (i)
only a small portion of the Group’s revenues are denominated in or linked to the US Dollar while a significant
portion of the Group’s expenses are US Dollar denominated, including fuel, aircraft leases, maintenance
reserves and aviation insurance; and (ii) there are various currencies in which the Group has significantly more
revenues than expenses, primarily the British Pound (GBP) and – to a smaller extent - the Polish Zloty (PLN).
The Group chooses the Euro/USD foreign currency rate as the major underlying foreign currency pair in its
foreign currency rate hedging strategies. The main objective is to cover the Group’s ongoing US Dollar cash flow
requirements. The Group’s maximum hedge coverage level is 85 per cent. of the total anticipated US Dollar
purchases hedged by the time the respective quarter on a monthly rolling forward basis is reached. This
maximum target hedge coverage level was 75 per cent. until January 2017 when it was increased to 85 per cent.
as a result of the revision of the Group’s Hedging Policy in January 2017. These levels were not always reached
during the current or prior years.
The new Hedging Policy defines also the hedging of the GBP/Euro foreign currency rate exposure, as a new
measure of risk management. The Group’s maximum target coverage on this currency pair is 60% on a rolling
twelve-month basis, but no transaction was made until 31 March 2017.
Wizz Air Holdings Plc Annual report and accounts 2017
94
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Risk analysis continued
Market risks continued
Foreign currency risk continued
The table below analyses the financial instruments by the currencies of future receipts and payments as follows:
At 31 March 2017
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Total financial liabilities
At 31 March 2016
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Total financial liabilities
EUR
€ million
USD
€ million
Other
€ million
55.0
-
-
757.8
154.7
967.5
5.9
27.1
135.6
-
168.6
138.0
-
10.1
0.4
0.9
149.4
-
-
35.6
1.9
37.5
15.7
1.0
-
15.8
0.3
32.8
-
-
26.5
-
26.5
Total
€ million
208.7
1.0
10.1
774.0
155.9
1,149.7
5.9
27.1
197.7
1.9
232.6
EUR
€ million
USD
€ million
Other
€ million
Total
€ million
65.9
-
-
615.0
100.6
781.5
6.4
27.2
138.2
-
171.8
121.0
-
1.7
6.2
0.9
129.8
-
-
18.8
17.6
36.4
10.8
1.0
-
24.4
0.1
36.3
-
-
20.3
-
20.3
197.7
1.0
1.7
645.6
101.6
947.6
6.4
27.2
177.3
17.6
228.5
As explained in the paragraph on foreign currency in the accounting policy, monetary assets and liabilities
denominated in foreign currencies (that is currencies other than the Euro) are translated into Euros at the
statement of financial position date at the exchange rates ruling at that date, and foreign exchange differences
arising on the translation are recognised in the statement of comprehensive income as financial income of
expense. If the net balance of monetary assets and liabilities denominated in foreign currencies is high then
this translation process can result in material volatility to financial income and expense, and thus to earnings.
Historically the Group had a high balance of net monetary assets denominated in US Dollars and this resulted
in significant unrealised foreign exchange gains (as in 2015) and losses (as in 2016). By the end of the 2016
financial year the US Dollar monetary asset-liability position of the Group became materially balanced;
therefore, starting from financial year 2017 there are no material foreign exchange gains or losses incurred by
the Group. This balanced position is not visible from the table above that shows a net asset balance of US
Dollar denominated financial instruments of €111.9 million in 2017. The two positions can be reconciled as
follows:
the 2017 balance of trade and other receivables denominated in US Dollars includes €22.1 million that has
been designated for hedge accounting and therefore its foreign currency revaluation is not impacting
financial income or expenses – see under ‘foreign exchange hedge with non-derivatives’ later in this Note
3; and
at 31 March 2017 the Group had provisions of €84.5 million denominated in US Dollars (as part of the total
€113.7 million balance reported in Note 29). Provisions are not financial instruments and therefore their
balance is not included in the table above but are subject to foreign currency revaluation.
Wizz Air Holdings Plc Annual report and accounts 2017
95
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Risk analysis continued
Market risks continued
Interest rate risk
The Group has future commitments under certain operating lease contracts that are based on floating interest
rates. The floating nature of the interest charges on the operating leases exposes the Group to interest rate risk.
Interest rates charged on convertible debt liabilities and on short and long-term loans to finance the deposits of
aircraft are not sensitive to interest rate movements as they are fixed until maturity. See Notes 23 and 24.
The Group is also exposed to interest rate risk in relation to the valuation of financial instruments as they are
carried at fair value.
The Group has not used financial derivatives to hedge its interest rate risk during the year. The Directors may
in the future consider hedging interest rate risk to reduce the potential Group earnings volatility arising from
fluctuations in interest rates.
Commodity risks
One of the most significant costs for the Group is jet fuel. The price of jet fuel can be volatile and can directly impact
the Group’s financial performance. The Group’s maximum hedge coverage is 70 per cent. on a rolling twelve-month
basis and 60 per cent. on a rolling 18-month basis. These represent 10 percentage point increase versus earlier levels
as a result of the revision of the Group’s Hedging Policy in January 2017. The average hedge coverage in F17 was 51
per cent. and 38 per cent. respectively.
Hedge transactions during the periods
The Group uses non-derivatives and zero-cost collar instruments to hedge its foreign exchange exposures and uses
zero-cost collar and outright cap instruments to hedge its jet fuel exposures. The time horizon of the hedging
programme with derivatives is usually up to a maximum of 18 months; however, this horizon can be exceeded at the
Board’s discretion. The volume of hedge transactions that expired during the periods was as follows:
a) Foreign exchange hedge (USD versus EUR):
US$333.5 million (2016: US$339.0 million).
b) Fuel hedge:
475,000 metric tons (2016: 439,500 metric tons).
Hedge year-end open positions
At the end of the year and the prior year the Group had the following open hedge positions:
a) Foreign exchange hedge with derivatives:
The fair value of the open positions was a €5.8 million gain (2016: €4.8 million) recognised within other
comprehensive income, current assets or current liabilities, respectively.
The notional amount of the open positions was US$297 million (2016: US$313.5 million).
b) Foreign exchange hedge with non-derivatives:
The notional amount of the open positions was US$238.5 million (2016: US$190.5 million).
Non-derivatives are existing financial assets that hedge highly probable foreign currency cash flows in the
future and therefore act as a natural hedge. At the end of the year out of its non-derivative financial assets
position the Group had US$23.6 million designated for hedge accounting (2016: US$34.5 million). The rest
of the open positions relate to expected PDP refunds (2017: US$214.9 million; 2016: US$156.0 million) for
which no hedge accounting is applied.
c) Fuel hedge:
The fair value of the open positions was a €2.5 million gain (2016: €11.4 million loss) recognised within
other comprehensive income and current assets or liabilities, respectively.
The notional amount of the open positions was 598,000 metric tons (2016: 449,000 metric tons).
In relation to these open hedge positions the cash flows will occur and the hedge relationships will impact the
statement of comprehensive income during the year ending 31 March 2018.
Hedge effectiveness
During the year covered by these financial statements, based on the evaluation of the Group, the hedging
transactions did not give rise to material ineffectiveness under IAS 39. As explained below in the credit risk
section, in the opinion of the management none of the hedge counterparties had a material change in their
credit status that would have influenced the effectiveness of the hedging transactions.
Wizz Air Holdings Plc Annual report and accounts 2017
96
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Risk analysis continued
Market risks continued
Sensitivity analysis
The table below shows the sensitivity of the Group’s profits to various markets risks for the current and the prior year.
Fuel price sensitivity
Fuel price $100 higher per metric ton
Fuel price $100 lower per metric ton
FX rate sensitivity (USD/EUR)
FX rate 0.05 higher (meaning EUR stronger)
FX rate 0.05 lower
FX rate sensitivity (GBP/EUR)
FX rate 0.03 higher (meaning EUR stronger)
FX rate 0.03 lower
FX rate sensitivity (PLN/EUR)
FX rate 0.15 higher (meaning EUR stronger)
FX rate 0.15 lower
Interest rate sensitivity (EUR)
Interest rate is higher by 100 bps
Interest rate is lower by 100 bps
2017
Difference in
profit after tax
(in € million)
2016
Difference in
profit after tax
(in € million)
-67.0
+67.0
+29.8
-29.8
-7.7
+7.7
-4.1
+4.1
+2.7
-2.7
-56.6
+56.6
+28.0
-28.0
-8.6
+8.6
-4.1
+4.1
+2.3
-2.3
The interest rate sensitivity calculation considers the effects of varying interest rates on the interest income
on bank deposits and on the expense from floating lease rentals.
The impact of these macro-economic variables on equity is the same as the impact on profit after tax, except
for the fuel price and for the USD/EUR FX rate variables where the equity impact would also include the
change in the fair value of the derivative financial instruments that are open at the year end. The fair value of
these instruments was provided by the hedge counterparties and management has not calculated the
theoretical value of these instruments for other scenarios.
Liquidity risks
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding. The Group has an
adequate liquidity position. In previous years, the Group invested excess cash (EUR) in a conservative way, primarily
in AAA-rated money market funds and also in short-term time deposits with high quality bank counterparties. In F17,
as EUR yields went deeper into negative territory, management – supported by the Board – decided to withdraw all
funds from money market funds and placed it in plain vanilla deposit structures with various counterparties.
The table below analyses the Group’s financial assets and liabilities (receivable or payable either on cash base
or net-settled derivative financial assets and liabilities) into relevant maturity groupings based on the
remaining period at the statement of financial position date to the contractual maturity date.
The amounts disclosed in the table below are the contractual undiscounted cash flows except for derivatives
where fair values are presented. Therefore, for certain asset and liability categories the amounts presented in
this table can be different from the respective amounts presented in the statement of financial position.
At 31 March 2017
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Financial guarantees
Total financial liabilities
Within three
months
€ million
Between three
months
and one year
€ million
Between one and
five years
€ million
More than five
years
€ million
124.8
1.0
2.8
774.0
0.1
902.7
0.3
-
197.7
0.1
645.6
843.7
11.8
-
7.2
-
1.0
20.0
0.8
2.1
-
0.9
-
3.8
69.9
-
0.1
-
48.9
118.9
4.0
29.5
-
0.9
-
34.4
4.5
-
-
-
105.9
110.4
3.3
-
-
-
-
3.3
Wizz Air Holdings Plc Annual report and accounts 2017
Total
€ million
211.0
1.0
10.1
774.0
155.9
1,152.0
8.4
31.6
197.7
1.8
645.6
885.1
97
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Liquidity risks continued
At 31 March 2016
Financial assets
Trade and other receivables
Financial assets available for sale
Derivative financial assets
Cash
Restricted cash
Total financial assets
Financial liabilities
Borrowings
Convertible debt
Trade and other payables
Derivative financial liabilities
Financial guarantees
Total financial liabilities
Within three
months
€ million
Between three
months
and one year
€ million
Between one and
five years
€ million
More than five
years
€ million
104.3
-
0.8
645.6
0.9
751.6
0.3
-
177.3
12.6
711.2
901.4
22.2
1.0
0.9
-
0.7
24.8
0.8
2.1
-
3.8
-
6.7
72.3
-
-
-
18.6
90.9
4.0
31.7
-
1.2
-
36.9
0.7
-
-
-
81.4
82.1
4.3
-
-
-
-
4.3
Total
€ million
199.5
1.0
1.7
645.6
101.6
949.4
9.4
33.8
177.3
17.6
711.2
949.3
The Group has obligations under financial guarantee contracts as detailed in Note 31.
The Company provided guarantees to third parties to guarantee the performance of its airline subsidiary in
relation to aircraft lease contracts on a regular basis, and from 2017 also in relation to a contract for the
provision of public services in Hungary. These possible obligations are disclosed in the table above, with the
shortest maturity under the financial guarantees line. Management does not expect that any payment under
these guarantee contracts will be required by the Company.
Other financial guarantee contracts relate to hedging, and convertible notes. The respective liabilities are
reflected under the appropriate line of the financial liabilities part of the table above. Since the liability itself is
already reflected in the table, it would not be appropriate to include also the financial guarantee provided by
another Group entity for the same obligation.
Credit risk
The Group’s exposure to credit risk from individual customers is limited as the large majority of the payments
for flight tickets are collected before the service is provided.
However, the Group has significant banking, hedging, aircraft manufacturer and card acquiring relationships
that represent counterparty credit risk. The Group analysed the creditworthiness of the relevant business
partners in order to assess the likelihood of non-performance of liabilities due to the Group. The credit quality
of the Group’s financial assets is assessed by reference to external credit ratings (published by Standard &
Poor’s or similar institutions) of the counterparties as follows:
At 31 March 2017
Financial assets
Trade and other receivables
Derivative financial assets
Financial assets available for sale
Cash and cash equivalents
Restricted cash
Total financial assets
At 31 March 2016
Financial assets
Trade and other receivables
Derivative financial assets
Financial assets available for sale
Cash and cash equivalents
Restricted cash
Total financial assets
AAA
€ million
AA
€ million
A
€ million
A-
€ million
Other
€ million
Unrated
€ million
Total
€ million
-
-
-
0.5
-
0.5
-
-
1.0
-
-
1.0
1.6
6.5
-
622.5
155.9
786.4
-
2.1
-
100.0
-
102.1
2.0
1.5
-
50.7
-
54.2
205.1
-
-
0.3
-
205.4
208.6
10.0
1.0
774.0
155.9
1,149.6
AAA
€ million
AA
€ million
A
€ million
A-
€ million
Other
€ million
Unrated
€ million
Total
€ million
-
-
-
547.5
-
547.5
-
-
1.0
-
-
1.0
-
1.6
-
96.8
101.0
199.4
-
0.1
-
-
-
0.1
18.6
-
-
-
-
18.6
179.1
-
-
1.3
0.6
181.0
197.7
1.7
1.0
645.6
101.6
947.6
Wizz Air Holdings Plc Annual report and accounts 2017
98
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
3. Financial risk management continued
Credit risk continued
The “Other” column in 2017 includes €52.2 million balance (out of which €50.0 million is bank deposit) with
one of the banking partners of the Group, that has BBB rating.
The analysis demonstrates the shift in the Group’s cash management strategy from money-market funds
(MMF) towards bank deposits during the 2017 financial year. While at the beginning of the year most of Group’s
free cash was held in AAA-rated MMFs, by the end of the year due to pressures in the yield-environment these
funds were fully moved into bank deposits, most of these being A-rated.
From the unrated category within trade and other receivables the Group has €110.3
million (2016: €97.3 million)
receivables from different aircraft lessors in respect of maintenance reserves and lease security deposits paid
(see also Note 18). However, given that the Group physically possesses the aircraft owned by the lessors and
that the Group has significant future lease payment obligations towards the same lessors (see Note 32),
management does not consider the credit risk on maintenance reserve receivables to be material.
Based on the information above management does not consider the counterparty risk of either party being
material and therefore no fair value adjustment was applied to the respective cash or receivable balances.
Fair value estimation
The Group classifies its financial instruments based on the technique used for determining fair value into the
following categories:
Level 1: Fair value is determined based on quoted prices (unadjusted) in active markets for identical assets
or liabilities.
Level 2: Fair value is determined based on inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly.
Level 3: Fair value is determined based on inputs that are not based on observable market data (that is, on
unobservable inputs).
The following table presents the Group’s financial assets and liabilities that are measured at fair value at
31 March 2017.
Assets
Financial assets available for sale
Derivative financial instruments
Liabilities
Derivative financial instruments
Level 1
€ million
Level 2
€ million
Level 3
€ million
Total
€ million
1.0
-
1.0
-
-
-
10.1
10.1
1.9
1.9
-
-
-
-
-
1.0
10.1
11.1
1.9
1.9
Financial assets available for sale represents a unit-linked insurance invested in government bonds by the
insurer. These government bonds are traded in an active market; therefore, it falls into the Level 1 category.
The Group measures its derivative financial instruments at fair value, calculated with a technique by the banks
involved in the hedging transactions that falls into the Level 2 category.
All the other financial assets and financial liabilities are measured at amortised cost.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern in order to provide returns for Shareholders, to provide benefits for other stakeholders and to maintain
an optimal capital structure to reduce the cost of capital.
The capital structure of the Group consists of financial liabilities, cash and cash equivalents and equity. Financial
liabilities primarily consist of commercial loans relating to aircraft financing and convertible debt as disclosed
in Notes 23 and 24 respectively. Equity comprises issued capital, reserves and retained earnings as disclosed
in the statement of changes in equity. Since the financial year beginning on 1 April 2007, the Group’s growth
has been financed entirely out of cash from operations and commercial debt with financial institutions. The
overall capital risk management strategy remains unchanged from prior years.
Management reviews the Group’s cost of capital on an ongoing basis as well as the risks associated with each
capital instrument and makes recommendations to the Board for approval.
Wizz Air Holdings Plc Annual report and accounts 2017
99
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
4. Critical accounting estimates and judgments made in applying the Group’s accounting policies
a) Maintenance policy
For aircraft held under operating lease agreements, provision is made for the minimum unavoidable costs of
specific future obligations created by the lease at the time when such obligation becomes certain. The amount
of the provision involves making estimates of the cost of the heavy maintenance work that is required to
discharge the obligation, including any end of lease costs.
The cost of heavy maintenance is capitalised and recognised as a tangible fixed asset (and classified as an
“aircraft maintenance asset”) at the earlier of: (a) the time the lease re-delivery condition is no longer met; or
(b) when maintenance, including enhancement, is carried out. The calculation of the depreciation charge on
such assets involves making estimates for the future utilisation of the aircraft and in the case of engines also
of the future operating conditions of the engine.
b) Hedge and derivative accounting
Fair value of derivatives (namely the open position of cash flow hedges) is determined by the contracting
financial institutions as per their industry practice. As required, the fair values ascribed to those instruments are
verified also by management using high-level models. Further, the effectiveness of hedges is tested both
prospectively and retrospectively to determine the appropriate accounting treatment of hedge gains and losses.
c) Net presentation of government taxes and other similar levies
The Group’s accounting policy stipulates that where charges levied by airports or government authorities on
a per passenger basis represent a government tax in fact or in substance, then such amounts are presented
on a net basis in the statement of comprehensive income (netted between the revenue and the airport,
handling and en-route charges lines).
Management reviews all passenger-based charges levied by airports and government authorities to ensure
that any amounts recovered from passengers in respect of these charges are appropriately classified within
the statement of comprehensive income. Given the variability of these charges and the number of airports and
jurisdictions within which the Group operates, the assessment of whether these items constitute taxes in nature
is an inherently complex area, requiring a level of judgment.
d) Accounting for membership fees
The Group operates the Wizz Discount Club (WDC) loyalty program for its customers. Under this program
customers can pay an annual membership fee, with the key benefit that during most of the twelve-month
membership period they get access to special fares that are lower than the standard ticket prices.
The Group recognises the revenue from the membership fees following the pattern of customers taking
benefits from the program. This pattern is determined by management once a year, on the basis of the actual
distribution of member flights in the preceding twelve months, and then applied prospectively. It is unlikely
that there would be a material change in the pattern within one year, because the underlying fact patterns (for
customers to buy membership, to buy tickets and then to fly those tickets) are reasonably stable.
The WDC program was introduced by the Group in 2012 and had insignificant impact initially. Management
used to recognise membership revenues on a straight-line basis in the twelve-month membership period. In
the last few years the number of members and thus also the level of membership revenues picked up, and it
also became visible that the actual pattern how customers take the membership benefits is significantly
different from the straight-line method. Therefore, starting from 2017 management started to apply a revenue
recognition pattern matching the historic pattern of how customers were taking the benefits of the program.
This change in estimates, combined with some other changes related to this area, resulted in €7.9 million
additional revenue for 2017.
Wizz Air Holdings Plc Annual report and accounts 2017
100
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
5. Segment information
Reportable segment information
The ‘chief operating decision maker’ (CODM) of the Group, as defined in IFRS 8 ‘Operating segments’ is the
senior management team of the Group.
The Group has two reportable segments: the airline and the tour operator business units, marketed under the
Wizz Air and Wizz Tours brand names, respectively. Wizz Air sells flight tickets and related services to external
customers and, to a smaller extent, to Wizz Tours. Wizz Tours sells travel packages to external customers
covering the network of Wizz Air.
The Group classified the tour operator business as a separate reportable segment starting from 1 April 2016.
The Wizz Tours brand was launched already in 2013 but initially the travel packages were sold by a third-party
tour operator partner. During this period the financial impact of the tour operator activity was insignificant.
The Group started its own tour operator activity in October 2015. Therefore, no comparative information is
reported for the prior period.
Total revenue
Less: inter-segment revenue
Revenue from external customers
Operating expenses
Operating profit/(loss)
Profit/(loss) after tax
Underlying profit/(loss) after tax
2017
Airline
€ million
1,562.0
(8.8)
1,553.1
1,314.5
247.4
246.7
226.1
2017
Tour operator
€ million
18.1
-
18.0
18.9
(0.8)
(0.9)
(0.9)
2017
Group
€ million
1,581.0
(8.8)
1,571.2
1,324.5
246.7
246.0
225.3
Financial income, financial expenses, depreciation and amortisation, and income tax expenses reported for the
Group in the period are all related to the airline business, except for an aggregate of €54,000 of financial
expenses and income tax expense incurred by the tour operator business, which explains the €0.1 million
difference between operating loss and loss after tax in the table. There were no material non-cash items in the
period for the tour operator business.
Entity-wide disclosures
Products and services
Revenue from external customers can be analysed by groups of similar services as follows:
Airline passenger ticket revenue
Airline ancillary revenue
Tour operator package revenue
Total revenue from external customers
2017
€ million
909.3
643.9
18.1
1,571.2
2016
€ million
894.9
534.2
-
1,429.1
Airline ancillary revenues arise mainly from baggage charges, booking/payment handling fees, airport check-
in fees, fees for various convenience services (priority boarding, extended legroom and reserved seats), loyalty
programme membership fees, and from commission on the sale of on-board catering, accommodation, car
rental, travel insurance, bus transfers, premium calls and co-branded cards, all directly attributable to the low-
fare business.
Geographic areas
Revenue from external customers can be analysed by geographic area as follows:
Jersey (country of domicile)
EU
Other (non-EU)
Total revenue from external customers
2017
€ million
-
1,421.3
149.9
1,571.2
2016
€ million
-
1,322.9
106.2
1,429.1
Revenue was allocated to geographic areas based on the location of the first departure airport on each ticket
booking.
Major customers
The Group derives the vast majority of its revenues from its passengers and sells most of its tickets directly to
the passengers as final customers rather than through corporate intermediaries (tour operators, travel agents
or similar). Therefore, the Group does not have any major corporate customers.
Wizz Air Holdings Plc Annual report and accounts 2017
101
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
6. Operating profit
Auditors’ remuneration
Fees payable to Company’s auditors for the audit of the parent company and
consolidated financial statements
Fees payable to the Company’s auditors and their associates for other
services
Audit of financial statements of subsidiaries pursuant to legislation
Other services relating to taxation
Audit-related assurance and transaction services
All other services
Total remuneration of auditors
2017
€’000
251
39
446
-
-
736
2016
€’000
225
39
436
-
18
718
Inventories
Inventories totalling €3.3 million were recognised as an expense in the year (2016: €3.8 million).
7. Staff numbers and costs
The average monthly number of persons employed during the year, including Non-Executive Directors but
excluding subcontracted staff such as rented pilots, analysed by category, was as follows:
Number of persons
Non-Executive Directors
Crew and pilots
Administration and other staff
Total staff number
The aggregate compensation of these persons was as follows:
Wages and salaries
Pension costs
Social security costs other than pension
Share based payments
Subtotal
Subcontracted staff costs (rented pilots)
Total staff costs
8. Directors’ emoluments
Salaries and other short-term benefits
Social security costs
Share based payments
Directors’ services and related expenses
Total Directors’ emoluments
Directors receiving emoluments
The number of Directors who in respect of their services received LTIP share
options under long-term incentive schemes during the year
2017
9
2,481
235
2,725
2017
€ million
77.9
4.5
10.5
1.0
93.9
19.0
112.9
2017
€ million
1.5
0.1
0.4
0.2
2.2
2017
10
1
2016
7
2,028
215
2,250
2016
€ million
68.6
4.2
8.4
1.2
82.4
19.0
101.4
2016
€ million
2.1
0.2
0.3
0.2
2.8
2016
9
1
Wizz Air Holdings Plc Annual report and accounts 2017
102
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
9. Exceptional items and underlying profit
Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group. They are material items of income or expense
that have been shown separately due to the significance of their nature or amount. In the 2017 and 2016
financial years all items classified by the Group as exceptional related to financial income or expenses.
In the 2017 financial year the Group had a net exceptional income of €18.8 million, consisting of: (i) exceptional gain
of €14.3 million relating to the change in time value of open hedge positions, particularly on fuel caps; and (ii)
exceptional income of €4.5 million relating to closing of fuel cap deals. According to the contracts the fuel caps had
their expiry dates in the second half of the financial year (October 2016 to February 2017) however they were sold
in order to enable the Group to enter into new deals (zero cost collars) at more favourable rates, without breaching
the fuel hedge coverage limits set in the Hedging Policy of the Group. The net €4.5 million gain consisted of time
value gain of €16.8 million (coming from the reversal of time value losses previously accumulated on these
instruments), the writing off of option fee costs of €12.4 million, and sale proceeds of €0.2 million.
In the 2016 financial year the Group had an exceptional expense of €16.3 million, consisting of: (i) exceptional
expense of €25.0 million relating to the change in time value of open hedge positions, particularly on fuel caps;
and (ii) exceptional income of €8.7 million relating to a realised foreign exchange gain arising on a one-off
replacement of US$75.6 million bank deposits behind collaterals with Euro deposits.
These items were used by management in the determination of the non-GAAP underlying profit measure for
the Group – see below.
Underlying profit
Profit for the period
Adjustments (exclusions):
Unrealised foreign exchange (gain)/loss
Exceptional items net (gain)/loss
Sum of adjustments
Underlying profit after tax
2017
€ million
246.0
(1.9)
(18.8)
(20.7)
225.3
2016
€ million
192.9
14.7
16.3
31.0
223.9
On top of the exceptional items explained above, unrealised foreign exchange gains and losses are also excluded
from the calculation of underlying profit. These are non-cash translation differences that arise primarily on the
revaluation of the net US Dollar monetary asset position of the Group, that used to be material until 2016.
The unrealised loss of €14.7 million in 2016 related primarily to the conversion of US$75.6 million collaterals into Euros.
This transaction alone resulted in an €8.7 million realised foreign exchange gain on one hand (explained above among
exceptional items) and a €12.4 million unrealised foreign exchange loss on the other hand (the latter being the reversal
of the unrealised gains recognised on these assets since their initial recognition). That is, the net foreign exchange
impact of this conversion in 2016 was a €3.7 million loss – all included in the adjustments in the table above.
By the end of the 2016 financial year the US Dollar monetary asset-liability position of the Group became
materially balanced; therefore, starting from financial year 2017 there are no material movements in this area.
The tax effects of the adjustments made above are insignificant.
10. Net financing income and expense
Interest income
Ineffective hedge gain
Financial income
Interest expense
Convertible debt
Finance lease
Other
Premium of expired fuel cap deals
Financial expenses
Foreign exchange gain/(loss)
Realised
Unrealised
Net foreign exchange gain/(loss)
Net exceptional financial income/(expense) (Note 9)
Net financing income/(expense)
Wizz Air Holdings Plc Annual report and accounts 2017
2017
€ million
0.3
0.3
0.6
(1.2)
(0.5)
(2.3)
(9.0)
(13.0)
0.7
1.9
2.6
18.8
9.1
2016
€ million
1.0
1.0
2.0
(1.6)
(0.4)
(0.7)
(5.3)
(8.0)
2.9
(14.7)
(11.8)
(16.3)
(34.1)
103
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
10. Net financing income and expense continued
Interest income and expense contain interest on financial instruments and, under the ‘Other’ category the
effect of the initial discounting of long-term deposits and the later unwinding of such discounting.
The fuel caps premium of €9.0 million in 2017 and €5.3 million in 2016 relate to the option fees for fuel caps
expired in the periods – these were paid in the 2015 financial year.
Out of the unrealised foreign exchange loss of €14.7 million in 2016 €12.4 million was caused by the
replacement of US Dollar bank deposits behind collaterals with Euro deposits. This is because the unrealised
foreign exchange gain recognised on these assets until March 2015 had to be reversed due to their de-
recognition – see also in Note 9.
11. Income tax expense
Recognised in the statement of comprehensive income
Current year corporate tax
Other income based taxes
Deferred tax
Total tax charge
2017
€ million
2.6
5.6
1.6
9.8
2016
€ million
2.3
5.4
0.8
8.5
The Company has a tax rate of 7.8 per cent. (2016: 7.8 per cent.). The tax rate relates to Switzerland, where
the Company is tax resident.
The current tax charge for the year is different to the standard rate of corporation tax of 7.8 per cent.
(2016: 7.8 per cent.). The difference is explained below.
Reconciliation of effective tax rate
Profit before tax
Tax at the corporation tax rate of 7.8 per cent. (2016: 7.8 per cent.)
Effect of different tax rate of subsidiaries versus the parent company
Other income based foreign tax
Total tax charge
Effective tax rate
2017
€ million
255.8
20.0
(15.8)
5.6
9.8
3.8%
2016
€ million
201.4
15.7
(12.6)
5.4
8.5
4.2%
The Company had no taxable income. Substantially all the profits of the Group in 2017 and 2016 were made
by Wizz Air Hungary Kft, the airline subsidiary of the Group, and substantially all the tax charges presented in
this Note were incurred by this entity.
Other income based foreign tax represents the “innovation contribution” and the local business tax payable in
Hungary in 2017 and 2016 by the Hungarian subsidiaries of the Group, primarily Wizz Air Hungary Kft.
Hungarian local business tax and innovation contribution are levied on an adjusted profit basis.
Recognised in the statement of other comprehensive income
Current year corporate tax
Other income based taxes
Deferred tax
Total tax charge
2017
€ million
-
-
-
-
2016
€ million
-
-
0.1
0.1
Wizz Air Holdings Plc Annual report and accounts 2017
104
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
12. Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by
the weighted average number of Ordinary Shares in issue during each period.
Profit from the year, € million
Weighted average number of Ordinary Shares in issue
Basic earnings per share, EUR
2017
246.0
57,254,581
4.30
2016
192.9
53,344,145
3.62
There were also 44,830,503 Convertible Shares in issue at 31 March 2017 (see Note 28). These shares are
non-participating, i.e. the profit attributable to them is €nil. Therefore, these shares are not included in the
basic earnings per share calculation above.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average number of Ordinary Shares in issue
with the weighted average number of Ordinary Shares that could have been issued in the respective year
as a result of the conversion of the following convertible instruments of the Group:
Convertible Shares (see Note 28);
Convertible Notes (see Note 24); and
employee share options (see Note 27) (vested share options are included in the calculation).
The profit for the year has been adjusted for the purposes of calculating diluted earnings per share in respect
of the interest charge relating to the debt which could have been converted into shares.
Profit for the year, € million
Interest expense on convertible debt (net of tax), € million
Profit used to determine diluted earnings per share, € million
Weighted average number of Ordinary Shares in issue
Adjustment for assumed conversion of convertible instruments
Weighted average number of Ordinary Shares for diluted earnings per share
Diluted earnings per share, EUR
2017
246.0
1.2
247.2
57,254,581
69,514,785
126,769,366
1.95
2016
192.9
1.6
194.5
53,344,145
73,208,656
126,552,801
1.54
Proforma earnings per share
The proforma earnings per share is a fully diluted non-IFRS measure defined by the Company, calculated
as follows:
Underlying profit for the year, € million
Interest expense on convertible debt, € million(1)
Profit used to determine proforma earnings per share, € million
Number of shares in issue at year end(2)
Adjustment for assumed conversion of convertible debt instruments(3)
Adjustment for assumed conversion of employee share options
Fully diluted number of shares for proforma earnings per share
Proforma earnings per share, EUR
2017
225.3
1.2
226.5
102,235,474
24,246,715
288,700
126,770,889
1.79
2016
223.9
1.6
225.4
101,752,674
24,246,715
765,390
126,764,779
1.78
(1)
Interest expense on convertible debt is lower in 2016 because of the refund of interest withholding tax incurred in earlier periods.
(2) The issued share number includes also the 44.8 million Convertible Shares in issue at 31 March 2017 (2016: 44.8 million). See Note 28 for
share capital.
(3)
Interest outstanding on Convertible Notes in issue at year end is not taken into account for conversion because it is more likely to be paid
in cash than converted into shares (as it was the case also in the past).
Wizz Air Holdings Plc Annual report and accounts 2017
105
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
12. Earnings per share continued
Proforma earnings per share continued
The calculation of the proforma underlying EPS is different from the calculation of the IFRS-diluted EPS
measure in the following:
for earnings, the underlying profit for the year was used (see Note 9), as opposed to the statutory (IFRS)
profit for the year; and
for the fully diluted number of shares the year-end position was taken rather than the weighted average
for the year.
The proforma EPS measure was introduced by the Company to better reflect the underlying earnings and the
underlying equity structure, particularly to remove the distortion caused by the special conversion restrictions
existing for convertible debt until the IPO in March 2015. The latter issue was relevant last in 2015. Since the
2016 financial year the same instruments were in place both during the year and at the end of the year;
therefore, the fully diluted share number was materially the same in the diluted and proforma EPS calculations.
13. Property, plant and equipment
Land and
buildings
€ million
Aircraft
maintenance
assets Aircraft parts
€ million
€ million
Fixtures and
fittings
€ million
Advances paid
for aircraft
€ million
Advances paid
for aircraft
maintenance
assets
€ million
Total
€ million
-
6.2
-
9.6
-
69.5
-
256.0
5.0
2.7
-
-
-
7.7
1.9
-
-
16.1
16.2
-
-
5.0
1.0
(1.0)
-
45.9
37.5
-
10.5
(0.1)
32.2
37.3
-
-
300.9
215.2
(85.8)
-
122.4
41.1
(3.9)
(10.5)
106.5
116.7
(80.9)
-
-
5.0
1.4
(0.2)
-
-
93.9
32.6
-
(51.8)
-
149.1
69.9
(14.8)
51.8
(0.1)
430.2
315.8
(123.7)
-
-
142.3
172.7
(108.7)
-
Cost
At 1 April 2015
Additions
Disposals
Transfers
Foreign exchange
differences
At 31 March 2016
Additions
Disposals
Transfers
Foreign exchange
differences
At 31 March 2017
Accumulated
depreciation
At 1 April 2015
Depreciation
charge for the
year
Disposals
Foreign exchange
differences
At 31 March 2016
Depreciation
charge for the year
Disposals
Foreign exchange
differences
At 31 March 2017
Net book amount
505.7
At 31 March 2017
353.6
At 31 March 2016
Additions to aircraft parts were €37.3 million (2016: €16.2 million). Most of this increase was related to the
delivery of various spare engines from IAE.
-
206.3
206.3
142.3
-
622.3
55.0
(15.0)
47.0
(14.8)
22.9
(3.9)
160.1
85.4
-
116.6
26.8
(4.0)
0.6
(0.1)
0.5
(0.2)
-
95.9
54.6
24.1
-
74.7
74.7
93.9
-
76.6
-
14.9
-
63.7
0.5
-
2.8
-
-
2.0
2.4
1.5
7.6
6.4
-
3.8
0.7
-
6.8
-
-
3.5
-
8.1
-
1.3
44.7
53.8
-
-
-
-
-
-
-
-
0.8
3.0
5.3
-
-
-
-
-
-
-
-
-
-
Additions to aircraft maintenance assets were €69.9 million (2016: 41.1 million). The increase is due to the fact
that there were significantly more engine-related new assets created in 2017 because: (i) there were more
engines becoming out of condition for LLP replacement than in 2016; (ii) in 2016 the Company revised its
engine maintenance plan combined with a new IAE FHA agreement (see the 2016 report for details) and as a
result only a few engines became out of condition for shop visit in that period – instead most of these became
out of condition in 2017; and (iii) the Group has a few engines that require second shop visit and these all
became out of condition (and partly already went through the shop visit) in 2017.
Wizz Air Holdings Plc Annual report and accounts 2017
106
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
13. Property, plant and equipment continued
Land and buildings includes the following amounts where the Group is a lessee under a finance lease:
Cost from capitalised finance lease
Accumulated depreciation
Net book amount
14. Intangible assets
Cost
At 1 April 2015
Additions
Disposals
At 31 March 2016
Additions
Disposals
At 31 March 2017
Accumulated amortisation
At 1 April 2015
Amortisation charge for the year
Disposals
At 31 March 2016
Amortisation charge for the year
Disposals
At 31 March 2017
Net book amount
At 31 March 2017
At 31 March 2016
15. Tax assets and liabilities
Deferred tax liabilities recognised
At 1 April 2015
Charged/(credited) to:
Profit or loss
Other comprehensive income
At 31 March 2016
Charged/(credited) to:
Profit or loss
Other comprehensive income
At 31 March 2017
Less than one year
Greater than one year
Deferred tax assets recognised
At 1 April 2015
Charged to:
Profit or loss
Other comprehensive income
At 31 March 2016
Charged to:
Profit or loss
Other comprehensive income
At 31 March 2017
Less than one year
Greater than one year
Wizz Air Holdings Plc Annual report and accounts 2017
Provisions for
other liabilities
and charges
€ million
1.7
Property, plant
and equipment
€ million
1.3
Advances paid for
aircraft maintenance
assets
€ million
0.7
0.4
-
2.1
0.1
-
2.2
-
2.2
0.1
-
1.4
1.1
-
2.5
-
2.5
0.7
-
1.4
(0.2)
-
1.2
-
1.2
Other
€ million
0.4
(0.4)
-
-
0.6
-
0.6
0.6
-
Hedging reserve
recognised in OCI
€ million
0.7
-
(0.5)
0.2
-
(0.2)
-
-
-
2017
€ million
7.5
(1.8)
5.7
2016
€ million
7.5
(1.2)
6.3
Software licences and
web development
€ million
8.5
4.6
(0.6)
12.5
7.2
(0.9)
18.8
5.3
2.0
(0.5)
6.8
2.6
(0.9)
8.5
10.3
5.7
Total
€ million
4.1
0.8
-
4.9
1.6
6.5
0.6
5.9
Total
€ million
0.7
-
(0.5)
0.2
-
(0.2)
-
-
-
107
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
15. Tax assets and liabilities continued
Unrecognised deferred tax assets
Until 31 March 2010 Wizz Air Hungary was Hungarian tax resident and up to this date had accumulated a €30.0 million
tax loss in Hungary. This balance remained unchanged at 31 March 2017. This loss can be utilised only to offset profits
generated under Hungarian tax residency. The Group does not expect to have profit generated under Hungarian tax
residency in the foreseeable future and therefore no deferred tax asset is recognised in this respect.
16. Subsidiaries
The Group has the following subsidiaries:
Subsidiary undertakings
Wizz Air Hungary Kft
Cabin Crew Professionals Sp. z o.o.
Wizz Air Bosnia
Wizz Air Polska Sp. z o.o.
Wizz Air Netherland Holding B.V.
Dnieper Aviation LLC
Wizz Air Ukraine Airlines LLC
Wizz Tours Kft.
Wizz Aviation Professionals
Country of
incorporation
Principal activity
Class of
shares held
Percentage
held
Financial
year end
Airline operator Ordinary
Crew company Ordinary
Crew company Ordinary
Hungary
Poland
Bosnia and
Herzegovina
Dormant Ordinary
Poland
Dormant Ordinary
Netherlands
Dormant Ordinary
Ukraine
Ukraine
Dormant Ordinary
Hungary Online tour operator Ordinary
Crew company Ordinary
Moldova
31 March
100
100 31 December
100 31 December
100
31 March
31 March
100
100 31 December
100 31 December
100
31 March
100 31 December
Wizz Air Polska Sp. z o.o. has been under solvent liquidation since 2012.
Wizz Air Ukraine Airlines LLC discontinued airline operations in 2015.
Wizz Aviation Professionals was registered in January 2017. Its purpose is to provide crew services to Wizz Air
Hungary in the territory of Moldova.
Certain subsidiaries have a financial year end different from the Group’s financial year due to the requirements
of local legislation.
17. Inventories
Aircraft consumables
Emission trading scheme purchased allowances
Total inventories
2017
€ million
13.0
11.9
24.9
2016
€ million
10.6
7.0
17.6
During the year remnant stock with the book value of €0.2 million was written off to maintenance expenses
(2016: nil).
18. Trade and other receivables
Non-current
Receivables from lessors
Other receivables
Non-current trade and other receivables
Current
Trade receivables
Other receivables from lessors
Other receivables
Total current other receivables
Less: provision for impairment of other receivables
Other current receivables net
Prepayments, deferred expenses and accrued income
Current trade and other receivables
Total trade and other receivables
2017
€ million
2016
€ million
67.3
-
67.3
48.5
44.6
2.5
47.1
-
47.1
45.8
141.4
208.7
68.6
2.6
71.2
57.5
28.7
4.6
33.3
-
33.3
35.7
126.5
197.7
Receivables from lessors (both current and non-current) represent the deposits provided by Wizz Air to
lessors as security in relation to the lease contracts and in relation to the funding of future maintenance events.
Wizz Air Holdings Plc Annual report and accounts 2017
108
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
18. Trade and other receivables continued
Impairment of trade and other receivables
Impaired receivables
– other receivables
Allowances on impaired receivables
– other receivables
2017
€ million
2016
€ million
-
-
-
-
After considering all of the available objective evidence, the Group made full impairment for all receivables
that are overdue by more than 60 days. All receivables are due within 60 days.
19. Financial assets available for sale
Unit-linked insurance serving as security deposit
Total financial assets available for sale
2017
€ million
1.0
1.0
2016
€ million
1.0
1.0
Financial assets available for sale represent a unit-linked insurance product which is invested in government
bonds by the insurer. This insurance serves as a security for the acquirer bank which collects card payments
for the Group. The Group was required to place a security deposit of 300 million Hungarian Forints
(approximately one million EUR) behind this insurance.
20. Derivative financial instruments
Assets
Non-current derivatives
Cash flow hedges
Current derivatives
Cash flow hedges
Total derivative financial assets
Liabilities
Non-current derivatives
Cash flow hedges
Current derivatives
Cash flow hedges
Total derivative financial liabilities
2017
€ million
2016
€ million
0.1
10.0
10.1
(0.8)
(1.1)
(1.8)
-
1.7
1.7
(1.2)
(16.4)
(17.6)
The derivative financial instruments represent cash flow hedges (see also Note 3). The full value of a hedging
derivative is classified as a current asset or current liability if the remaining maturity of the hedged item is less
than twelve months.
The cash flow hedges expiring in 2017 had an ineffective portion of €0.3 million (2016: €1.0 million).
The net position of assets and liabilities does match the cash flow hedging reserve in the statement of financial
position because: (i) the hedging reserve does not include the time value of open options, only the intrinsic
value; and (ii) hedging with non-derivatives has an impact on the hedging reserve.
Wizz Air Holdings Plc Annual report and accounts 2017
109
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
21. Deferred interest
Non-current
Deferred PDP interest
Deferred interest expense
Current
Deferred PDP interest
Total deferred interest
2017
€ million
2016
€ million
2.6
2.1
4.7
1.2
5.9
3.7
2.3
6.0
1.2
7.2
Deferred
non-current receivables.
interest expense represents the deferred
initial discount adjustments calculated
for
Deferred PDP interest is the deferred part of PDP interest expenses incurred on leased aircraft or spare
engines. Such interest relates to aircraft or spare engine PDP payments financed by third parties, and is initially
recognised under property, plant and equipment (advances paid for aircraft). When the leased aircraft or spare
engine is delivered, PDP interest is reclassified to deferred interest expense. It is then amortised on a
straight-line basis over the lease term of the respective asset and the amortisation charge is recognised in the
statement of comprehensive income as aircraft rental expense.
22. Restricted cash
Non-current financial assets
Current financial assets
Total restricted cash
2017
€ million
154.7
1.2
155.9
2016
€ million
100.0
1.6
101.6
Restricted cash comprises cash in bank, against which there are letters of credit issued or other restrictions in
place governing the use of that cash, resulting from agreements with aircraft lessors or other business partners.
Restricted cash is excluded from cash and cash equivalents in the cash flow statement. The increase versus 2016
was related to letters of credit issued to lessors for maintenance reserves and lease security deposits.
Restricted cash during the 2017 financial year was held mainly on current account in Euros, earning no interest.
23. Borrowings
Non-current liabilities
Finance lease liabilities
Total non-current borrowings
Current liabilities
Finance lease liabilities
Total current borrowings
Total borrowings
2017
€ million
2016
€ million
5.3
5.3
0.6
0.6
5.9
5.9
5.9
0.5
0.5
6.4
Finance lease liabilities relate to an aircraft flight simulator asset and a maintenance hangar building leased by the
Group.
Gross finance liabilities – minimum lease payments
No later than one year
Later than one year and no later than five years
Later than five years
Future finance charges on finance lease liabilities
Present value of finance lease liabilities
Present value of finance liabilities
No later than one year
Later than one year and no later than five years
Later than five years
Present value of finance lease liabilities
Wizz Air Holdings Plc Annual report and accounts 2017
2017
€ million
2016
€ million
1.0
4.0
3.3
8.3
(2.4)
5.9
1.0
4.0
4.3
9.3
(2.9)
6.4
2017
€ million
2016
€ million
0.6
0.6
4.7
5.9
0.5
2.5
3.4
6.4
110
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
24. Convertible debt
Non-current financial liabilities
Current financial liabilities
Total convertible debt
2017
€ million
26.8
0.3
27.1
2016
€ million
26.9
0.3
27.2
Convertible debt is Convertible Notes held by Indigo Hungary LP and Indigo Maple Hill LP (“Indigo”).
Principal and any accrued interest on the Convertible Notes are convertible into Ordinary Shares in Wizz Air
Holdings Plc at conversion factors in the range of €1.0–1.5 for one share. Such Ordinary Shares issued as a
result of conversion in certain cases might be subject to restrictions on voting and dividend rights. Until the
notes are converted, interest on the notes is payable in cash with a coupon rate of interest of 8 per cent. per
annum, twice a year in February and in August.
Convertible Notes are guaranteed by Wizz Air Hungary Kft – see Note 31.
For more information about the Group’s exposure to interest rate risk, see Note 3.
25. Trade and other payables
Current liabilities
Trade payables
Other trade payables
Accrued expenses
Total trade and other payables
26. Deferred income
Non-current financial liabilities
Deferred income
Current financial liabilities
Unflown revenue
Other
Total deferred income
2017
€ million
2016
€ million
72.1
7.2
118.4
197.7
46.2
6.4
124.7
177.3
2017
€ million
2016
€ million
107.9
260.0
20.9
280.9
388.8
96.6
207.7
17.3
225.0
321.6
Non-current deferred income represents the value of benefit for the Group coming from concessions (cash
credits and free aircraft components) received from aircraft and certain component suppliers, that will be
recognised as a credit (an aircraft rentals expenses decreasing item) on a straight-line basis over the lease
term of the respective asset.
Current deferred income represents the value of tickets paid by passengers for which the flight service is yet
to be performed and the current part of the value of supplier credits received.
27. Employee benefits
Share based payments
The share based payment charge in the financial statements for the year relates to three types of instruments
that are in issue at 31 March 2017: share awards issued to Directors of the Board during 2006-2013, and employee
share options issued (i) during 2005-2015 under the 2005 International Employee Share Option Plan (‘ESOP’)
and (ii) in July 2015 and 2016 under the 2014 Employee Long Term Incentive Plan (‘LTIP’) of the Group.
The awards and options are classified as equity-settled share based payments. The Company issues new
shares for any options exercised, irrespective of the method of exercise. The fair value of the awards and
options is recognised as staff cost over the estimated vesting period with a corresponding charge to equity.
Wizz Air Holdings Plc Annual report and accounts 2017
111
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
27. Employee benefits continued
Share based payments continued
The expenses (other than social security) recognised in relation to these instruments were the following:
Director share awards
ESOP options
LTIP options
Total share based payments charge
Long-term Incentive Plan (LTIP)
Share options issued during the financial year
Terms and conditions:
Number of options
Exercise price
Vesting period
Termination
2017
€ million
-
0.4
0.6
1.0
2016
€ million
0.1
0.4
0.7
1.2
Restricted
Options
30,000
nil
3 years
10 years
Performance
Options
218,770
nil
3 years
10 years
There are no individual performance conditions set for the employees to exercise their options after the three-
year vesting period other than that the employee must be in employment with one of the Group entities until
and on the date of exercise of the options.
For the Performance Options the performance conditions are set as follows, with 50 per cent. weighting for each:
total shareholder return (TSR) of the Group relative to the TSR of certain selected European airlines over
the three-year period following the award; and
absolute growth in underlying, fully diluted earnings per share of the Group, measured over the period
from 1 April 2016 to 31 March 2019.
The percentage of Performance Options that will vest will be determined on a pro-rata basis (“payout rate”)
to the extent that the target levels for these performance conditions will be met by the Group.
The fair value of options granted was determined by using the Black-Scholes model, resulting in €17.89 per
share. The total cost of the grant was determined based on: (i) the fair value of options; (ii) the number of
options expected to vest; and (iii) the estimated payout rate for Performance Options.
Share options in issue
The number of LTIP share options in issue at year end is as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
Restricted
Options
30,750
30,000
-
(5,500)
55,250
-
Performance
Options
201,648
218,770
-
(95,845)
324,573
-
Employee Share Option Plan (ESOP)
Share options issued during the financial year
There were no share options issued either during the year or in the prior year. The last options under the ESOP
were issued in January 2015.
There are no individual performance conditions set for the employees to exercise their options after the three-
year vesting period other than that the employees must be in employment with one of the Group entities until
and on the date of exercise of the options.
Wizz Air Holdings Plc Annual report and accounts 2017
112
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
27. Employee benefits continued
Share based payments continued
Employee Share Option Plan (ESOP) continued
Share options in issue
The number and weighted average exercise prices of share options are as follows:
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the end of the year
Exercisable at the end of the year
2017
Weighted
average
exercise price
€
5.15
-
2.76
2.00
7.41
2.55
2017
Number
of options
1,025,390
-
(482,800)
(13,890)
528,700
288,700
2016
Weighted
average
exercise price
€
4.11
-
2.51
-
5.15
2.74
2016
Number
of options
1,667,446
-
(642,056)
-
1,025,390
765,390
The range of exercise prices on options outstanding at the year end was €2.50–€13.68 (2016: €2.00–€13.68).
At the end of the financial year, the outstanding options had a weighted average outstanding contractual life
of two years and eight months (2016: four years and seven months).
Non-Executive Director share award programme
371,832 shares were awarded to Directors during 2006–2013. Of these shares 174,082 were granted to persons
who were no longer a Director of the Company at 31 March 2017.
The shares were awarded subject to restrictions such as the Directors may not sell, assign, transfer, pledge,
exchange, encumber or dispose of any of the award shares for a period of three years or until an IPO, whichever
is later. These restrictions expired for all award shares by July 2016.
Taxation
Under the terms of each of the three programmes all taxes payable on share options and awards are the
liability of the recipients of these benefits. However, in certain cases the Company or one of its subsidiaries has
a legal obligation to pay the employer social security on the income realised by the recipients. To the extent
the additional social security obligations can be estimated, the Group makes a provision for these already
during the vesting period of the instruments.
28. Capital and reserves
Share capital
Number of shares
In issue at beginning of the year
Issued during the year for cash
Converted during the year from bonds
In issue at end of the year – fully paid
Ordinary Shares
Convertible Shares
2016
2017
101,110,618
101,752,674
642,056
482,800
-
-
101,752,674
102,235,474
56,922,171
57,404,971
44,830,503 44,830,503
2017
£
2017
€
2016
£
2016
€
Authorised
Equity: 170,000,000 (2016: 170,000,000) Ordinary
Shares of £0.0001 each and 80,000,000 (2016:
80,000,000) non-voting, non-participating
Convertible Shares of £0.0001 each
Allotted, called up and fully paid
Equity: 102,235,474 (2016: 101,752,674) shares of
£0.0001 each
Ordinary Shares
Convertible Shares
25,000
34,415
25,000
34,415
10,223
5,740
4,483
13,721
7,704
6,017
10,175
5,692
4,483
13,661
7,642
6,019
During both 2017 and 2016 the increase in the total number of issued shares was due to the exercise of certain
employee share options.
Wizz Air Holdings Plc Annual report and accounts 2017
113
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
28. Capital and reserves continued
Ordinary Shares
The holders of Ordinary Shares are entitled to receive dividends as declared and are entitled to one vote per
share at meetings of the Company.
Convertible Shares
In March 2015, linked to the listing of the Company’s shares on the London Stock Exchange, certain convertible
loans and notes (including accrued interest) were converted into non-voting non-participating Convertible
Shares of the Company. There were 44,830,503 Convertible Shares in issue at 31 March 2017, all fully paid
(2016: 44,830,503). The Convertible Shares are held by Indigo and can be converted into Ordinary Shares of
the Company by Indigo on the condition of meeting certain criteria post-conversion regarding the overall
shareholding structure of the Company.
Capital reserves
Share premium
Share premium has two main components. €207.2 million was recognised as a result of the Group
reorganisation in October 2009. It represents the estimated fair value of the Group at the date of the
transaction. The remaining €171.0 million (as at 31 March 2017) was recognised as a result of new share issues
made since October 2009. These new share issues comprised the primary offering on the initial public offering
of the Company’s shares on the London Stock Exchange in March 2015, the conversion of some of the
convertible debt instruments into shares and the conversion of certain employee share options into shares.
Within this, during the 2017 financial year €1.2 million increase was recorded in the share premium, all related
to conversion of employee share options.
Reorganisation reserve
Reorganisation reserve of €193.0 million was recognised as a result of the Group reorganisation in October
2009. It is equal to the difference between the fair value of the Group at the date of reorganisation
(€209.0 million) and the share capital of the Group at the same date (€16.0 million).
Equity part of convertible debt
The equity part of convertible debt in equity comprises the equity component of compound instruments
issued by the Company. The amount of the convertible debts classified as equity of €8.3 million
(2016: €8.3 million) is net of attributable transaction costs of €0.5 million.
Share based payment charge
The share based payment balance of €3.9 million credit (2016: €2.9 million) corresponds to the recognised
cumulative charge of share options and share awards provided to the employees and Directors under long-
term incentive schemes. This balance is recognised directly in retained earnings.
Cash flow hedging reserve
The hedging reserve comprises the effective portion of the cumulative unrealised net change in the intrinsic
part of the fair value of cash flow hedging instruments related to hedged transactions that have not
yet occurred.
29. Provisions for other liabilities and charges
At 1 April 2015
Capitalised within property, plant and equipment
Charged to comprehensive income
Used during the year
At 31 March 2016
Non-current provisions
Current provisions
Capitalised within property, plant and equipment
Charged to comprehensive income
Used during the year
At 31 March 2017
Non-current provisions
Current provisions
Wizz Air Holdings Plc Annual report and accounts 2017
Aircraft
maintenance
€ million
50.6
Other
€ million
1.8
Total
€ million
52.4
41.0
-
(7.9)
83.7
41.2
42.5
67.9
-
(39.8)
111.8
77.5
34.3
-
0.8
(1.4)
1.2
-
1.2
-
1.2
(0.5)
1.9
-
1.9
41.0
0.8
(9.3)
84.9
41.2
43.7
67.9
1.2
(40.3)
113.7
77.5
36.2
114
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
29. Provisions for other liabilities and charges continued
Non-current provisions relate to future aircraft maintenance obligations of the Group on leased aircraft and
spare engines, falling due beyond one year from the balance sheet date. Current aircraft maintenance
provisions relate to heavy maintenance obligations expected to be fulfilled in the coming financial year. The
amount of provision reflects management’s estimates of the cost of heavy maintenance work that will be
required in the future to discharge obligations under the Group’s operating lease agreements (see Note 4).
Maintenance provisions in relation to engines covered by FHA agreements are netted off with the FHA
prepayments made to the engine maintenance service provider in respect of the same group of engines.
The increase in current maintenance provisions from 2016 to 2017 relates primarily to new provisions made for
engine Life Limited Part (LLP) replacements.
Other provisions relate to future liabilities under the Group’s customer loyalty programme, all within one year.
30. Financial instruments
Fair values
The fair values of the financial instruments of the Group together with their carrying amounts shown in the
statement of financial position are as follows:
Trade and other receivables due after more
than one year
Restricted cash
Financial assets available for sale
Derivative financial assets
Trade and other receivables due within one year
Cash and cash equivalents
Trade and other payables due within one year
Derivative financial liabilities
Convertible debt
Borrowings
Net balance of financial instruments (asset)
Carrying amount
2017
€ million
Fair value Carrying amount
2016
€ million
2017
€ million
Fair value
2016
€ million
67.3
155.9
1.0
10.1
141.4
774.0
(197.7)
(1.9)
(27.1)
(5.9)
917.1
67.3
155.9
1.0
10.1
141.4
774.0
(197.7)
(1.9)
(27.1)
(5.9)
917.1
71.2
101.6
1.0
1.7
126.5
645.6
(177.3)
(17.6)
(27.2)
(6.4)
719.1
71.2
101.6
1.0
1.7
126.5
645.6
(177.3)
(17.6)
(27.2)
(6.4)
719.1
The fair value of financial instruments that are not traded in an active market (such as long-term deposits
among the non-current other receivables) is determined by estimated discounted cash flows.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate
their fair values due to the short-term nature of trade receivables and payables. Long-term financial assets and
liabilities which are classified as fair value through profit and loss are recognised on fair value.
Trade and other receivables due after more than one year are almost exclusively maintenance reserves, with
an average term of approximately four years. The fair value of these assets is determined by discounting at a
rate of interest of four-years’ US Dollar swap rate prevailing on the last day of the financial year.
The fair value of derivative financial instruments is based on their actual mark-to-market evaluation of the
financial institutions.
During the year a €24.5 million loss (2016: €71.0 million) was realised on derivative financial assets and liabilities
in the income statement.
During the year a €16,000 gain (2016: €48,000 loss) was realised on financial assets available for sale.
Wizz Air Holdings Plc Annual report and accounts 2017
115
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
30. Financial instruments continued
Effective interest rates analysis
Interest-bearing financial liabilities
The following table indicates the effective interest rate of the interest-bearing liabilities of the Group on the
statement of financial position date and the periods in which they mature. Convertible loans and notes are
denominated in EUR, while the other short-term loans are denominated in US Dollars.
Effective
interest
rate
7.4%
8.4%
7.4%
Total
€
million
27.1
3.4
2.5
Within
one
year
€
million
0.3
0.5
0.1
2017
One to
two
years
€
million
-
0.5
0.1
Two to
five
years
€
million
26.8
1.7
0.5
Above
five
years
€
million
-
0.7
1.8
Effective
interest
rate
7.4%
8.4%
7.4%
Total
€
million
27.2
3.8
2.6
Within
one
year
€
million
0.3
0.4
0.1
2016
One to
two
years
€
million
-
0.4
0.1
Two to
five
years
€
million
26.9
1.6
0.4
Above
five
years
€
million
-
1.4
2.0
Convertible Notes
Finance lease liability 1
Finance lease liability 2
Interest earning financial assets
The Group invests excess cash in a conservative way, primarily in in short-term time deposits on market rate
at major banking groups.
31. Financial guarantees
The Company has provided parent guarantees to certain lessors of its aircraft fleet, to guarantee the
performance of its airline subsidiaries under the respective lease contracts.
The Company has provided parent guarantee to the Hungarian Government, to guarantee the performance
of its airline subsidiary in relation to a public services contract for the scheduled transport of passengers
between Hungary and five West-Balkan countries.
The Company has provided parent guarantees to certain hedging counterparties, to guarantee the
performance of Wizz Air Hungary Kft, under the respective hedge contracts.
The note purchase agreement (for Convertible Notes) contains a guarantee and indemnity, pursuant to which
Wizz Air Hungary Kft, inter alia, guarantees to Indigo Hungary LP and Indigo Maple Hill LP the punctual
performance by the Company of its obligations under the note purchase agreement.
32. Lease commitments
The total future minimum lease payments under non-cancellable operating lease rentals are as follows:
Payments due:
Within one year
Between one and five years
More than five years
Total operating lease commitments
2017
€ million
309.7
1,269.5
831.1
2,410.3
2016
€ million
244.8
950.1
563.5
1,758.3
The majority (99 per cent.) of the commitments relate to aircraft operating lease contracts. The above table
includes also the lease costs of those aircraft that are not yet delivered but for which the lease contract was
already signed before the statement of financial position date.
The lease payments are not subject to future escalation, but nine of the aircraft lease contracts are on a floating
rate and thus the lease payments for these vary with the US Dollar market rates of interest.
Wizz Air Holdings Plc Annual report and accounts 2017
116
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
33. Capital commitments
At 31 March 2017 the Group had the following capital commitments:
a commitment to purchase 133 Airbus aircraft of the A320 family in the period 2017–2024. Of the 133
aircraft 23 relate to the “ceo” version of the A320 family (from purchase orders placed prior to 2015) while
the remaining 110 relate to the “neo” version (from the purchase order placed in June 2015). The total
commitment is valued at US$16.5 billion (€15.4 billion) at list prices in 2017 US Dollar terms (as at 31 March
2016: US$17.5 billion (€15.5 billion), valued at 2016 list prices). As at the date of approval of this document
23 of the 133 aircraft are covered by a sale and leaseback agreement; and
a commitment to purchase 18 IAE spare aircraft engines in the period 2017–2024. Of the 18 engines
two relate to the “ceo” version of the IAE engines (from purchase orders placed prior to 2015) while
the remaining 16 to the “neo” version. With regards to the “neo” engines, the Group in July 2016
entered into an engine selection agreement with Pratt & Whitney that, among other matters, included
a commitment for the Group to purchase 16 spare engines starting from 2019. The total commitment
is valued at US$146.4 million (€136.9 million) at list prices in 2017 US Dollar terms (as at March 2016:
US$63.8 million (€56.2 million), valued at 2016 list prices, related to six engines at the time). As at the
date of approval of this document the 18 engines are not yet financed.
34. Contingent liabilities
Legal disputes
European Commission state aid investigations
Six of the European Commission’s ongoing state aid investigations which are in their formal phase concern
arrangements between Wizz Air and certain airports to which it flies, namely, Timişoara, Cluj-Napoca,
Târgu Mureş, Beauvais and Girona. Wizz Air has submitted its legal observations and supporting economic
analyses of these arrangements to the European Commission. Ultimately, an adverse decision by the European
Commission could result in a repayment order for the recovery from Wizz Air of any amount determined by
the European Commission to be illegal state aid. None of these ongoing investigations are expected to lead
to exposure that is material to the Group.
The European Commission has given notice that the state aid investigations involving Wizz Air will be assessed
on the basis of new “EU Guidelines on State aid to airports and airlines” which were adopted by the European
Commission on 20 February 2014. Where relevant, Wizz Air has made further submissions to the European
Commission in connection with this notification.
Claims by Carpatair
Carpatair, a regional airline based in Romania, started a number of cases in the Romanian courts during 2012
and 2013 which relate to Carpatair’s allegations that Timişoara airport granted unlawful state aid to Wizz Air
pursuant to an agreement between the parties or by virtue of the publicly available scheme of charges
published by Timişoara airport. Wizz Air is intervening in the defence of these claims, either in its own right or
in support of Timişoara airport. One of these cases determined that state aid existed in the 2010 scheme of
charges, but failed to substantiate that decision or to quantify the amount involved. Following this decision,
Carpatair began a case in which both Timişoara airport and Wizz Air are named as defendants and, pursuant
to which, Carpatair aims to have the alleged state aid under the 2010 scheme of charges quantified and a
repayment order issued. Wizz Air understands that the Romanian Chamber of Accounts has issued a decision
requiring Timişoara airport to recover from Wizz Air an amount of approximately €3 million in respect of the
state aid attributable to the 2010 and 2011 scheme of charges despite there having been no expert
quantification of the amount and the airport has now started proceedings which Wizz Air is defending.
In January 2016 Carpatair filed a new legal action – registered with the Bucharest Tribunal – against Timişoara
airport, the Romanian Ministry of Transports, the Ministry of Public Finances representing the Romanian State
and Wizz Air. By the said legal action Carpatair asked the court to order the four defendants to pay, jointly, to
Carpatair damages preliminarily estimated to amount to €92 million and interest related to the said amount,
resulting from alleged state aid granted by Timişoara airport to Wizz Air, from the existence of a marketing
agreement between Timişoara airport and Wizz Air and from an abuse of dominant position on the part of
Timişoara airport.
Wizz Air Holdings Plc Annual report and accounts 2017
117
ACCOUNTS AND OTHER INFORMATION
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
34. Contingent liabilities continued
Legal disputes continued
Claims by Carpatair continued
The court’s decision delivered on 20 December 2016 upheld the objection raised by the Company that the
Bucharest Tribunal lacked jurisdiction to hear the case and that the case should be heard by the Administrative
Litigation Section of the Bucharest Court of Appeals. The case was therefore forwarded to the Bucharest Court
of Appeals – Administrative and Fiscal Litigation Section where a hearing is scheduled on 18 May 2017.
Management estimates that the maximum potential exposure for these cases could be in the region of
€113 million (including the €3 million and the €92 million specifically mentioned above). No provision has been
made by the Group in relation to these issues because there is currently no reason to believe that the Group
will incur charges from these cases.
35. Subsequent events
There were no matters arising, between the statement of financial position date and the date on which these
financial statements were approved by the Board of Directors, requiring adjustment or disclosure in
accordance with IAS 10, Events after the reporting period.
36. Related parties
Identity of related parties
Related parties are:
Indigo Hungary LP and Indigo Maple Hill LP (collectively referred to as “Indigo” here), because it appointed
three Directors to the Board of Directors (all in service at 31 March 2017);
key management personnel (Directors and Officers); and
Éden Rent Kft., one of the logistics suppliers of the Group, because one of the Officers of the Group due
to equity investment has joint control over this entity.
Indigo, Directors and Officers altogether held 23.3 per cent. of the voting shares of the Company at 31 March 2017
(2016: 24.7 per cent.).
Transactions with related parties
There were no transactions with related parties during the fiscal year except as indicated below.
Transactions with Indigo
At 31 March 2017 Indigo held 10,740,633 Ordinary Shares (equal to 18.7 per cent. of the Company’s issued
share capital) and 44,830,503 Convertible Shares of the Company (2016: 10,740,633 Ordinary Shares and
44,830,503 Convertible Shares).
Indigo has interest in convertible debt instruments issued by the Company (see Note 24). The Company’s liability
to Indigo, including principal and accrued interest, was €27.1 million at 31 March 2017 (2016: €27.2 million).
During the year ended 31 March 2017 the Company entered into transactions with Indigo as follows:
the Company recognised interest expense on convertible debt instruments held by Indigo in the amount
of €2.0 million (2016: €2.0 million); and
fees of €0.1 million (2016: €0.1 million) were paid to Indigo in respect of the remuneration of two of the
Directors who were delegated by Indigo to the Board of Directors of the Company.
Wizz Air Holdings Plc Annual report and accounts 2017
118
Accounts and other information
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
CONTINUED
36. Related parties continued
Transactions with related parties continued
Transactions with key management personnel
Officers (members of executive management) and Directors of the Board are considered to be key
management personnel. The compensation of key management personnel, including Non-Executive Directors,
is as follows:
Salaries and other short-term employee benefits
Social security costs
Share based payments
Amounts paid to third parties in respect of Directors’ service
Total key management compensation expense
2017
€ million
4.3
0.7
0.6
0.2
5.7
2016
€ million
6.6
1.3
0.9
0.2
9.1
The total key management compensation expense was lower than in 2016 primarily because under the Short-
term Incentive Plan there was significantly lower payout to Officers in 2017 than in 2016.
Transactions with Éden Rent Kft.
During the year ended 31 March 2017 the Group recognised operating expenses in the amount of €3.0 million
in relation to services provided by Éden Rent Kft. (2016: €2.4 million).
The Group had trade liabilities towards Éden Rent Kft. in the amount of €0.2 million at 31 March 2017
(2016: €0.1 million).
The contract with Éden Rent Kft. for transportation services has six months termination notice. Assuming normal
operations of the Group, this is equivalent to approximately €1.5 million purchase commitment existing at 31
March 2017 (2016: €1.2m).
The relationship with Éden Rent Kft. is subject to the Group’s Conflict of Interest policy and, in accordance with
that policy, the relevant Officer is excluded from all discussions and decisions related to this supplier.
37. Ultimate controlling party
In the opinion of the Directors there is no individual controlling party in relation to the Company's issued
Ordinary Shares.
As at 28 April 2017 approximately 51.6 per cent. of the Ordinary Shares in the Company were owned by
Qualifying Nationals. Shareholders and potential investors are reminded that the Group’s Hungarian operating
licence depends, inter alia, on Qualifying Nationals owning more than 50 per cent. of the Ordinary Shares. The
Company’s articles of association enable the Directors to take action to ensure that the amount of Ordinary
Shares held by Non-Qualifying Nationals does not reach a level that could jeopardise the Group’s entitlement
to continue to hold or enjoy the benefit of any operating licence that benefits the Group.
Qualifying Nationals include: (i) EEA nationals, (ii) nationals of Switzerland and (iii) in respect of any
undertaking, an undertaking that satisfies the conditions as to nationality of ownership and control of
undertakings granted an operating licence contained in Article 4(f) of the Air Services Regulation, as such
conditions may be amended, varied, supplemented or replaced from time to time, or as provided for in any
agreement between the EU and any third country (whether or not such undertaking is itself granted an
operating licence).
A Non-Qualifying National is any person who is not a Qualifying National in accordance with the
definition above.
Wizz Air Holdings Plc Annual report and accounts 2017
119