Aegean Airlines | Ready to re-spread its wings
In our new note on Aegean we reinstate coverage with a Buy and a new (post-money) PT of €6.70 per share. Despite limited visibility with regard to the pace of return to normality, we believe Aegean is well placed to capitalize on Greece’s re-opening theme, with its outlook looking much brighter than that of other EU airlines given its lean cost structure, the skew towards leisure travel (c90% of the mix) and, primarily, the strong liquidity position (€480m gross cash as of Dec’20). The latter will be further bolstered by the €120m grant and the €60m capital raising, thereby providing the group with enough headroom to withstand the effects of the ongoing 3rd wave and to comfortably absorb a further operational cash burn of €70m incorporated in our numbers for 2021. Aegean also enjoys flexibility on deployed capacity levels, as a result of 18 jet-lease expirations by the end of 2022 and just 7 new aircraft additions (leases) expected in the same period.Operationally, we expect 2021 revenues to rebound to 54% of 2019 levels assuming capacity at 65% of pre-crisis levels. We see Aegean returning to underlying profitability in 2022 with EBITDA 30% below 2019 levels, driven by a pick-up in traffic (c70% of 2019 levels) and load factors (-9pps lower than 2019). Flexing our FY22e revenues by some 10%, would translate into a c€76m change in our operating profit estimates.
The stock remains almost 40% below its Feb’20 levels, having retraced just 43% of its COVID-induced plunge vs. c61% for EU airlines (mainly underpinned by low cost carriers). Factoring in our model the grant and the €60m capital raising, we set our PT at €6.7, predicated on c6x 2023 EV/EBITDAR, at the high end of the usual long run average range as we believe that investors will be more keen to attach to Aegean a slightly higher valuation than in the past, due to the prospects for a fast bounce-back of profitability and returns, which could again lead the group to industry-leading margins. In our view, the group’s solid fundamental position and liquidity will help it leverage returns upon recovery, despite the limited short term visibility.
Aegean Airlines is an airline carrier based in Greece. Co. is engaged in aviation transportation, providing services that concern the transportation of passengers and commodities in the sector of public aviation transportation inside and outside Greece, conducting scheduled and unscheduled flights. Co. provides full service, premium quality short and medium haul services. Co. maintains a network of 145 destinations, 111 international in 45 countries and 34 domestic destinations. Co. is a member of global airline network, the Star Alliance network.
Eurobank Equities is a Greek-based firm offering research, sales and trading services to institutional, corporate and private clients. The company is wholly owned by Eurobank, one of the 4 systemic banks in Greece.
Research is the backbone of Eurobank Equities' platform, with a team of 4 professionals committed to generating actionable investment ideas by providing timely research products. We are committed to offering value-added services to clients by filtering market noise and providing insights on the multiple sectors that we cover. Our universe includes 26 - large, medium and small cap - companies whose market capitalization amounts to 80-85% of the total market capitalization of the Athens Stock Exchange. Our research team also maintains the capacity to generate ad-hoc research for micro-cap listed companies.
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