WOOD Flash – Aegean Airlines: 3Q21 beat on stronger revenue, balance sheet boosted by equity raising and state aid

Aegean’s 3Q21 results exceeded our estimates on stronger revenue, driven mainly by better volumes. We maintain our constructive view on the stock, despite the challenging near-term outlook. We see the current share price weakness as a buying opportunity for longer-term orientated investors. Since the start of the pandemic, the entire European airline universe has continued to trade on headlines and the very near-term outlook continues to affect the share prices quite significantly. We believe there is a good chance that the sentiment around the sector will be, again, markedly better by summer 2022E. The near term remains challenging, however, as the seasonally weak period is being made more difficult by the excess capacity, combined with weak demand on the back of the latest COVID-19 wave, exacerbated further by elevated fuel costs. We expect Aegean to burn cash in both 4Q21E and 1Q22E, and we pencil in the operational cash burn at around EUR 10-20m per month, plus c.EUR 125-130m in pre-delivery payments to be covered during 4Q21-1Q22. With the balance sheet strengthened by the EUR 60m capital increase and the subsequent EUR 120m of state aid, Aegean ended September with a comfortable cash position of EUR 544m. It should have no problem covering the upcoming outflows, while the accelerated re-fleeting into neos should ensure it remains competitive on a unit-cost basis. With its efficient cost base and focus on short-haul leisure routes, Aegean seems to be well-positioned for a fast recovery of earnings relative to the remaining European FSCs, in our view. At around 4.0-4.5x 2022E EV/EBITDA, it is also cheaper than its FSC peers, which are trading at 5-7x, on the Bloomberg consensus 2022E.