Aegean Airlines: Equity injection on the horizon? (downgraded to HOLD)
Following the local news reports regarding a possible capital increase at Aegean, we have downgraded the stock to HOLD, setting our 12M price target (PT) at EUR 4.2/share. The company did confirm that it is talking with the authorities about a possible aid package, but will not share any details before the deal is finalised and approved. This means that we were wrong when we assumed that, as long as next summer proves more permissive for air travel, and Greece manages to avoid an outbreak, which would disrupt its tourism season, Aegean should be able to survive without raising capital. That said, we maintain our view that, even without the capital increase, Aegean has a better liquidity profile than most European carriers. Also, considering that Aegean is managed by its controlling shareholder, the likelihood that the capital increase (and/or the state aid) will be very significantly dilutive for the existing shareholders should be relatively limited, in our view. However, without any clarity on the shape, form and pricing of prospective state aid and the capital increase, we believe that we cannot maintain our constructive view on the stock, considering that the total volume of the capital injection mentioned in the press reports (EUR 120m of state aid, plus a EUR 60m capital increase by the existing shareholders) is substantial, accounting for around two-thirds of Aegean’s current market cap. We note that, even following yesterday’s (23 November) correction, the stock is up some 50% since our November update.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.
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