Institutional Sign In


Aegean Airlines: Analysts underestimate benefit of Jet Fuel Price Drop!

Kalim Aziz
May 7, 2015
  • Decline in Jet Fuel prices and timely hedging for 2015 and 2016 suggest that the consensus earnings estimates is shy by EUR 30 mil
  • Company's fleet and destination expansion and tourists arrivals year to date signal strong revenue momentum in 2015
  • Aegean Airlines represent one of the cheapest growing airlines in the world

As at the end of 1Q2015, the Company has hedged 70% of fuel requirement for 2015 and 50% of fuel requirement for 2016, which is, in our view, the single most significant factor, putting the consensus estimates, at least EUR 30 mil lower than what we believe the airline will print for 2015

Chart 1: Revenue & Earnings Momentum

Source: Company data, Helgi Analytics calculation

...while capacity expansion adds momentum

The airline has increased its aggressiveness in terms of expanding its fleet, by adding 7 birds (A320 series) to its fleet and along with adding 16 destinations and increased level of frequency will add 15% RASK (revenue available seat capacity) in 2015. YTD arrivals in Greece as well as bookings is higher in 2015 vs. 2014 and with roughly 26% market share, Aegean is well positioned for growth:

Chart 2: Number Of Aircrafts

Source: Company data, Helgi Analytics calculation

Embedded Value in operating lease contracts is EUR 300 mil

Aegean Airline runs an asset light model, i.e. apart from 4 birds, all other aircrafts are on operating lease (8 year contracts!) with roughly 4 birds going out of contract on an annual basis (added back through additions or extensions). Considering the market cost of funding of Greek Government Bonds of around 11% for similar tenure, even if we consider market cost of funding of 7% for Aegean Airlines, there is significant embedded value due to low implied cost of funding in operating leases.

Our estimate is that this is around EUR 300 mil.


Aegean Airline, is by far, one of the cheapest airlines in the world with a positive growth outlook. On our numbers, it trades at a P/E of 5.1x 2015 estimates, Adjusted EV/EBITDAR multiple of 4x and Dividend yield of over 10% for the current year.

Table 1: Valuation

Source: Company data, Helgi Analytics calculation

Kalim Aziz
Kalim Aziz
Senior Analyst at Duet Asset Management LLP, London
Mr. Kalim Aziz spent more than 20 years analysing companies in the global emerging markets. Kalim served as a Head of EMEA Research managing over 30 analysts at ING Groep in London and later headed Equity Research of the EMEA Region at UniCredit Banca Mobiliare in London together with Centralny Dom Maklerski Pekao in Warsaw and Koc Yatirim in Turkey, altogether covering more than 100 companies in the region. In 2006, he moved to the buyside as a Co-fund Manager of Kairos Eurasian Fund with Guido Brera. Kalim now helps managing equity fund at Duet Asset Management in London. Besides, he owns a consultuancy company Kiradvisory Limited, an affiliate of Helgi Library on various analytical work.