Aegean Airlines: High point on low ground (stays BUY)

We believe Aegean is better-positioned than its dismal share price performance (down 69% ytd, in line with the performance of AF-KLM and some 20% below Lufthansa’s) would suggest. We believe the weakness reflects that the general risks the industry is facing may be amplified for Aegean due to its single-country focus. If a local flare up of infections in Greece disrupts the next summer season, Aegean would be in serious trouble. On the other hand, we note that Aegean’s reliance on leisure tourism and European short-haul routes should mean that it would benefit from a swifter demand recovery than the FSC majors, which derive an important portion of profitability from business travel and long-haul. Aegean’s cash position is also substantially better: we estimate it has around EUR 600m of cash on the balance sheet currently, which should be enough to cover the cash burn (at the current rate of around EUR 30m/month), as well as pre-delivery payments for aircraft, up until spring 2022. Also, on a unit cost perspective, Aegean is closer to its LCCs than FSCs peers, operating with similar costs per ASK as easyJet. It is clear that the next few months will be extra challenging for the industry, and we believe the consensus 2021E estimates for Aegean are too optimistic. That said, we believe that Aegean offers an attractive risk-reward relative to the other European airlines. We maintain our BUY rating, while slashing our 12M price target (PT) to EUR 3.6/share, offering 39% upside.