Aegean Airlines: increasing our 2022E on strong summer traffic (stays BUY)

The 2022 tourism season seems to be exceeding even our elevated initial expectations, with Greece leading the recovery. The number of passengers at Athens Airport has trailed the 2019 levels by only c.5-7% during the summer months, and some of the islands are seeing a higher numbers of tourists than in 2019. Aegean is a major beneficiary of this trend, and we expect the airline to generate EBITDA of around EUR 140-150m in 3Q22E alone. Barring any COVID-19 induced restrictions on flying, we believe Aegean should end the year in the black. The re-fleeting into Airbus neos is continuing and, aside from fuel efficiency, should also translate into lower maintenance and depreciation unit costs. Having entered the pandemic with a robust, net cash balance sheet, which was boosted further by the EUR 120m State aid and EUR 60m equity raising, we believe Aegean is well-positioned to navigate what could be a lean winter ahead. We believe that many of the smaller carriers in Europe could face financial difficulties in the coming months, which could result in a more benign competitive environment next summer. Although we have increased our 2022E earnings estimates, following the strong traffic in 2Q and 3Q22E, we have reduced our 2023E revenues and EBITDA forecasts by about 10%, to try to account for the weaker macro and deteriorating purchasing power both during and after the coming winter. This has driven the reduction of our 12M price target (PT) to EUR 6.0/share, which still offers 20% upside from the current levels, and we keep our BUY on the stock. Positive triggers include strong 2Q and 3Q22E earnings, a drop in oil prices, the end of the war in Ukraine, and stronger-than-expected pricing and pax volumes.