The Wizz Air Holdings (LSE:WIZZ) share price climbed after the result of the US election on Wednesday (6 November). But the company’s H1 earnings have sent the stock back down. 

Nonetheless, the issues the business has been dealing with are familiar ones and there are clear reasons for optimism. So is the stock too cheap to ignore?

Results

In general, there are two things that airlines don’t like. The first is running flights with unused capacity and the other is having aircraft that aren’t being used at all. 

Over the six months between April and September, Wizz has been dealing with both. As a result, it’s not a big surprise that the latest trading update wasn’t especially positive. 

Revenues increased slightly compared to the previous year, but operating profits fell 33%. Yet to some extent, investors shouldn’t have been surprised by this. 

The firm’s engine issues were already known about and the airline releases its passenger data monthly. More importantly though, there are positive signs going forward.

Reasons for optimism

Wizz isn’t responsible for the engine issues that meant 41 of its 220 or so aircraft were out of service at the end of September. And it is entitled to compensation for this. 

So far, that hasn’t offset the reduction in operational capacity. But the company is looking to renegotiate its settlement with Pratt & Whitney, which manufactures the engines for its planes.

On top of this, load factors – the percentage of available seats that are sold – improved during October. Wizz managed around 93% capacity, which is much closer to normal levels.

Both of these are reasons for thinking the business might be through the worst of the recent challenges. So should investors consider this a potential buying opportunity?

A buying opportunity?

The Wizz share price is near its 52-week low, but I don’t see this as a particularly attractive stock. I think the business is facing too many challenges that are out of its control.

The conflict in the Middle East is a good example. Wizz has been trying to innovate with low-cost flights to the region recently, but the political situation has been weighing on demand.

There’s not much the firm can do about this. And the impact that reduced passenger numbers can have on airline profits makes this a bigger concern than it might otherwise have been.

It’s natural to think that things are set to improve from this point – and that might be true. But over the long term, I think the risks outweigh the rewards from an investment perspective.

Short interest

One last thing is worth mentioning. Wizz shares have been attracting the attention of short-sellers recently, especially after the weak load factor data from September. 

This means the stock could climb sharply if things improve – a rising share price might force short-sellers to close their positions. That’s worth noting, but it’s not enough for me to buy.