EEMEA Airlines: Cruising altitude reached (upgrading Turkish Airlines to BUY, maintaining our BUY on Aegean Airlines, downgrading Wizz Air and Aeroflot to HOLD and Pegasus Airlines to SELL)
We believe the aviation market may soon reach its peak and, after four strong years, 2019E may be tougher for the sector, due to: 1) rebounding jet fuel prices; 2) USD appreciation; 3) growing employee deficits; and 4) growing US interest rates. Furthermore, we expect a negative supply shock, which may further spoil the party. Last year posted a record-high in terms of new aircraft deliveries and manufacturers’ guidance for this year is also very bullish. We advise becoming cautious towards the sector as a whole; however we still see some interesting investment opportunities in the region. We are turning positive on Turkish Airlines once more, as the new airport launch, recent cost-cutting, TRY weakening, and mostly fixed-rate debt may allow it to increase its competitive edge and regain share in the global market in 2019E. We also highlight Aegean Airlines as a safe haven for the cycle reversion, due to its good hedging policy, low leverage and high dividend. In contrast, we recommend reducing positions in Pegasus Airlines, due to its high leverage and negative exposure to the weak TRY and strong USD. We would also slowly take profits in Wizz Air, as its valuation becomes demanding. In addition, we turn less positive towards Aeroflot, as it seems that 2018E may be tougher than we expected, although we believe this is mostly priced in, after a strong correction.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.
PJSC Aeroflot Russian Airlines is an international air transport company which is engaged in operations in Russia. The principal activity of Co. is the provision of passenger and cargo air transportation services both domestically and internationally and other aviation services from its base at Moscow Sheremetevo Airport. Co. and its subsidiaries also includes activities comprising airline catering, the operation of a hotel and insurance services. Associated undertakings mainly comprise hotel and duty-free retail businesses. The principal business segments are airline operations, airline catering, hotel operations and other.
Pegasus Hava Tasimaciligi is a low-cost airline group based in Turkey. Co. provides reasonably-priced transportation opportunities on point-to-point basis in short and medium range flight lines on its domestic and international network. Co. primarily provides transportation opportunities from its main hub in Istanbul Sabiha Gokcen International Airport, but also offers scheduled flights from other domestic hubs, primarily in Adana, Antalya and Izmir. Co.'s fleet is composed of 49 airplanes in total. Co.'s flight network consists of 76 locations (45 abroad and 31 domestic flight locations in 30 countries). Co. also provides cargo services and provides various training services.
Turk Hava Yollari is engaged in the airline industry with the airline flying to 103 destinations, throughout Turkey and internationally. As of the year end, Co. maintains 66 aircrafts with a total seat capacity of 10,672, and leases a A300-200 cargo aircraft. Co. has various services for their customers which include: various ways of checking in and on-line ticket sales.
Wizz Air Holding is a European airline. As of Mar 31 2017, Co. provided more than 500 routes from 28 bases, connecting 141 destinations across 42 countries. Co. has two reportable segments: the airline and the tour operator business units, marketed under the Wizz Air and Wizz Tours brand names, respectively. Wizz Air sells flight tickets and related services to external customers and, to an extent, to Wizz Tours. Wizz Tours sells travel packages to external customers covering the network of Wizz Air.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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