WOOD Flash – EMEA airlines: January traffic, valuations vs. vaccinations
As of the last week of February, all the airlines under our coverage had reported their traffic results for January 2021. Here, we review the traffic dynamics, and highlight some of our thoughts on the valuations following the recent rally, especially against the backdrop of the vaccination progress. Following the recent acceleration of the pace of vaccinations, Turkey is already well ahead of the EU, and the gap is likely to continue to widen in the near term. Turkey has a lower share of elderly population compared to other Mediterranean destinations. Combined, these factors put it in an advantageous position ahead of the summer, we believe. This is encouraging for Pegasus and Turkish Airlines, in our view. Recent comments regarding a surge in bookings and strong pricing by easyJet and others fuelled last week's rally. Following the constructive tone of our flash note, published in January, we are more cautious now. We believe the market is pricing in a fairly optimistic outlook currently, and a slower rollout of vaccines, localised spikes in the number of cases, or a more restrictive traffic environment in general could trigger a correction in the near term, we believe. We see Aeroflot as good value at the current levels. We would consider taking profits in Wizz Air, following the rally (albeit we remain bullish in the long term, and note that the CEO’s USD 9m stake purchase last week (in the last week of February) sends a strong signal to the market). We remain on the side lines with Aegean, waiting for more clarity on the pricing of the capital increase. We remain cautious on Turkish Airlines, as we see a risk of a capital increase, on the back of the high leverage. That said, the impressive ramp up of the cargo operation is helping the results, and Turkey’s progress in vaccinations could support the near-term momentum in the stock.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.
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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