WOOD Flash – EMEA Airlines: 4Q24 traffic; could constrained capacity support fares in 2025E?
In 2024, European aviation capacity grew by around 9%. This was faster than the slow-growing economy could absorb, leading to fares underperforming expectations. For many carriers, we have also seen cost inflation. The lower fuel prices were an important tailwind, preventing margin erosion exceeding 1-2ppts (EBITDA) for the European carriers. Looking ahead, we expect capacity in Europe to grow by around a mid-single digit pace in 2025E, constrained by supply bottlenecks and engine durability issues. The key question is whether this will still prove too fast, against a backdrop of sub-1% Eurozone 2025E GDP growth. If so, we could see fares coming under pressure. If it remains cheap, jet fuel could help to offset prospective margin pressures, especially in the first half of the year. That said, fuel bills will be affected by the continued gradual internalisation of carbon costs, as well as minimum Sustainable Aviation Fuel (SAF) mandates, starting from 2025E. Additionally, the strong USD translates into higher ownership costs, as cash leasing payments and maintenance parts are both often dollar denominated. Against the backdrop of weak GDP growth, and a higher ex-fuel cost base, we are not sure how realistic the consensus expectations for European airlines are (with estimates looking for the EBITDA to outpace the ASK growth in 2025E materially, across the sector). Prospective positive catalysts include a full reopening of Israel and, potentially, Ukraine. Additionally, the material net cash position of some of the carriers under our coverage could offer some downside protection in the case of a market-wide sell-off.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.
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.
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