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.
Valuation
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
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