Aegean Airlines: en route to the best year on record, by far (stays HOLD)

We have updated our forecasts for Aegean Airlines (Aegean) ahead of its 3Q23 results (due on 14 November). In our previous update, in November 2022, we were concerned about the demand in the winter period, and thought 2022 may be setting a high bar to clear. So far this year, Aegean has delivered far better results than we expected originally. Currently, we expect the company to deliver EBITDAR of over EUR 400m in 2023E, the highest result on record, and almost 50% above the 2019 level. Going forward, the supply chain problems (in particular, the P&W engine issues) could limit capacity and translate into yet another year of high fares across Europe, as demand appears robust so far. That said, we have little visibility on the 2024E pricing and bookings. We also need more clarity on how Aegean may be affected by the P&W engine issues, in terms of its capacity, unit costs, and the volume and timing of any compensation. The continued popularity of Greece among travellers, the extension of the summer holiday season and the recovering outbound demand – reflecting the improving purchasing power of Greeks – are all supportive factors. The ongoing re-fleeting into neos should ensure Aegean will be able to maintain its competitive unit costs, going forward. We adjust our 12M price target (PT) to EUR 12.5/share, in line with our materially increased forecasts, and – for now – remain HOLDers of the stock. We will revisit our forecasts and 12M PT once we have more visibility on the 2024E bookings, and the impact of the engine issues.