Aegean Airls Sa Unsp/Adr

Ladies and gentlemen, thank you for standing by. I am Konstantinos, your course call operator. Welcome and thank you for joining the Aegean Airlines conference call to present and discuss the first half 2026 financial results. All participants will be listening only mode and the conference is being recorded. The presentation will be followed by a question and answer session. Should anyone need assistance during the conference call, you may signal an operator by pressing star and zero on your telephone. At this time, I would like to turn the conference over to Mr. Eftihios Vasilakis, Chairman of the Board of Directors. Mr. Vasilakis, you may now proceed.

Good afternoon, everybody. Just to say I'm joined here by our Deputy CEO, Michaelis Kouveliotis, our Deputy CFO, Stella Dimaraki, and our Investor Relations Manager, Faye. Welcome again to our six-month presentation. Clearly this year has shown for our industry and indeed the world many more challenges than anticipated, both in terms of geopolitical stability and particularly its translation to energy costs and jet fuel costs in our case. Within that context, AGM had what we believe is a reasonably successful second quarter of the year. where, despite these challenges, we have managed to retain, for the quarter, positive profitability, despite the disruption of having to grow part of our network in the Middle East, and more importantly, of course, or even more importantly, the dramatic increase in the jet fuel cost. I'll give you some of the basics, and then we can come back to questions. So, in the second quarter, our activity was increased in terms of revenue by 3%, with ASKs basically remaining stable. This comes from the imbalance of the cancellations of a significant number of routes in the Middle East that was well known to the market. And due to the flatness of the ASKs, the passenger number was only up by 1%. So 495, 496 million of revenue, 3% increase relative to last year, an EBITDA of 99 million, down 12% for the year, an EBITDA of 44 million, down 29% for the year, and a pre-tax level for the quarter of $23 million, down almost 70% for the year. This latter part is also materially affected by the valuation effects, which were heavy this year on the negative side, as opposed to quite positive on last year's side, so on the quarter that had a significant effect. Nevertheless, the quarter was positive. and also what's significant for us is that the RASC managed to stay on positive territory relative to the year before, something which seems to be reasonably good in comparison to short haul carriers that we have seen publish results in the industry. So despite our relative, I would say, proximity to the mid-leaf where a significant part of our network was affected, and a lot of our connectivity was affected as well as we lost part of the network that contributes to East to West for the period. Still, we managed to pull out a retention essentially of the RASC level with a marginal improvement which seems to be better than market for short-haul carriers for the period. Including the quarter itself, for the whole six months, We carried 7.8 million passengers. This is a 3% higher number than the year before, which is just about the same increase that we had in ASKs as well for the six months. In the six months, due to the imbalance of the second quarter, domestic traffic growth was higher than international, but this is This is momentary. This has been restored after Q2 once these routes were reconnected. And of course, with the inclusion of the second quarter with the positive but significantly reduced profitability to the total of the six months, we arrived to $817 million of revenue, 4% increase of revenue relative to last year. which is 7% lower than last year, but a 35% reduction in operating profitability, or EBIT, and a marginal loss after tax of $3.3 million relative to the $48 million of profit after tax of last year. Once again, part of that delta has to do with the financial valuation effect, which last year was quite positive during the period and this year negative. During this first six months of the year, we have taken delivery of five new A320 Marks. We have gone through the peak of the disruption in terms of grounded aircraft, which was around about between February and April. where we reached actually 14 to 15 aircraft grounded at the time. I'll remind you, last year in the summer we were at 10. But between the March-April peak of 14, 15 aircraft and the peak of this summer, we again were back down to 10 aircraft, and now we're clearly on the 10 aircraft being grounded, and now we're clearly on the declining side of this whole disruption. We're still in negotiations, pardon with me, for some items, conviction is that we will have a substantially lower level for next summer, and that by the end of the year of 27, we will be down to no further aircraft being grounded. It's already the case that we have accepted 43 aircraft, including the five that were accepted in the summer, and indeed, in this summer, 33 aircraft were flying, which is a significant increase relative to last year. 33 NEO aircraft were flying, a significant increase relative to the 26 that were flying the year before, due to the number of grabbings and the lower number of deliveries. So our schedule of accepting aircraft is moving forward with the planned pace. There's been no change with that. We're also quite gratified that the majority of the aircraft that we have accepted this year, four out of five, we did Sail Eastpac for one, we did a JOLCO for four. The difference is that Sail Eastpac is 100% fixed. JOLCO is part fixed, part floating. And so given the volatility and the upward trend in the interest environment, It's important to note that the vast majority of our fleet, we can give you precise numbers later, is on a fixed rate basis and not open to rate variation. In terms of liquidity, it's very important to note that the group has stayed very much on a very strong position. We have, as we note in the press release, 100 million more than last year. at the same time, or the same amount as we did on the end of 2025, which is circa 950, 956 million euro cash and cash equivalents. Having repaid our bonds, our first 200 million issue, seven year issue, 200 million bond in March of 2026, and also having paid a little bit over $80 million to our shareholders in dividend. So despite the $200 million repayment of the bond loan and the $80 million of dividend payment to our shareholders in May, the cash position of the company remains at $950 as at the end of last year, which shows that once again Aegean is in a significantly robust let's say capacity of absorbing volatility and risks as they may come from our environment. A couple of words for the summer, meaning Q3. In the summer, we've managed to increase again our ASKs after recovering, as I said earlier, our capacity from the Middle East. However, it should be noted that we have never recovered the full plan of 2026 as it was estimated. We had guided you before the year started and very much at the beginning of the year to a 7% to 9% ASK growth overall for the year and something like a 6% for the summer. Clearly, due to the circumstances both in terms of humidity but also in terms of jet fuel We have reduced that significantly, not only in the first half, but also in the second half. So in Q3, we're flying at an average of 2, 2.5% increase of ASKs. However, by the end of August, we have achieved a little bit shy of 5% in terms of passenger count. which means that we're able to take advantage of the larger capacity of our fleet 21 NEOs, which are now more numerous in our fleet. And also, again, we have a pretty decent indication, which is not a certificate today, but at least an indication, a strong indication that our revenue per ASK for the quarter will not be lower than last year. It will be somewhat, a little bit marginally is higher than last year, including September. And this is, I think, again, a positive indication of how successfully we have managed to balance our network in reaction to what's going on vis-a-vis what we're reading and hearing about around the market and also different, let's say, fare trackers that we have used also to see what's happening around us. So the summer quarter has been reasonably resilient in terms of demand. Of course, we did not expect the jet fuel situation to rebuild in terms of a level of where it stands today at 100% higher what was the beginning of the year. We had all hoped in June after that initial ceasefire agreement that there would be an abatement. This was only temporary, and now we're looking at a situation where it's clear to all of the markets that at least for the next, I would say, two, three quarters, it's likely that we'll be faced with a significant delta in the price of fuel to what we're accustomed to, possibly even twice what we used to pay a year or a year and a half before. Clearly, this means that our attitude towards capacity has to be completely different going forward, especially after Q3, where traditionally, especially in Greece, the revenue quality or the fare level begins to be significantly weaker than it is during Q3. So for sure, The maximum you should expect our capacity to range for Q4 is roundabout flat. It could be between minus one and plus one in ASK, but certainly no higher than that. And this is something that's going to be checked and rechecked every week with a much faster adjustment pattern than in the past. treating this situation very much as a very special cost situation-wise in which, depending on the particular demand and cost structure of every route, we might need to make adjustments particularly during the winter where DOC direct operating cost or variable cost becomes a much higher percentage of overall revenue. And we have to try to ensure that the great majority of what we fly continues to contribute towards our fixed expenses even in winter. So looking at what we aim to do in the next four, six, eight months, because I think by necessity the planning horizon becomes shorter in situations similar to this one. As I said, we do plan to have much more frequent reviews of the network to ensure that we're balancing our commercial requirements with the financial situation and costs as well as possible. We will continue to work with Pratt & Whitney and other entities in the market to accelerate to the degree possible the employment of our already delivered and partially in NEOS. We will refrain from extending any of the expiring jet aircraft. These are older aircraft and in this particular situation with the costs that we have today, it is important to let them go because the delta between using NEOs and older generation becomes much higher. And we are glad that we have the opportunity to receive early, starting first, second quarter of next year, the LRs in our fleet, not only because they're longer range, but more specifically because they will offer us an opportunity to upgrade the quality of service. We offer it to some of the routes who are already flying. And if I were to say two, three years ago when we took the decision to get into the that I would have expected, but a more comfortable business class, a more true business class product, would be as important as it seems to be today. I would not be telling the truth. It came to me that around the world and in Europe, airlines are actually pretty much heading in the way of upgrading the product offering because what they see is that the demand of the more demanding, more frequently flying customer is more resilient to basically macroeconomic shortfalls. And therefore, travel is getting more expensive no matter what we do on the choices of airlines, unlike what was happening in the 10 years or 20 years that preceded COVID. And therefore, we're very happy that we have the opportunity to offer to our customers as of next year in some of the routes that we'll select to fly these aircraft and upgrade the product. We're also moving in the direction of upgrading our services in other areas. We're building a couple of lounges. We are deepening the product offering of our mileage program, and we think that these things will become more relevant for customers going forward, as I said two minutes ago. We do think that whether it is by necessity or by choice, the next year, 2027, is going to be a year where all of us will have to concentrate much more on consolidating efficiency, consolidating quality, removing elements from our activity that don't make sense. Revaluating where we should invest more and make sure that we are doing it right because and at the same time give us a chance to catch our breath and Improve the training level the performance level the cooperation level and the culture of our people because in any situation where the market is challenged like the year we're having and possibly the year ahead and We know that what's very important is to be able to stay on track on your long-term direction and to ensure with your loyalty to your people and taking care of your customers that whenever the crisis abates, there'll be strength enough and momentum enough and capacity enough, whether it is financial, human, or otherwise in the company to keep growing forward once again in a more dynamic pace. But there's no mistake, we are definitely, whether because of the energy crisis, the disruption in the relationships and the geopolitics in our wider region towards the Middle East, or because of the yield environment, not in fares, but rather in bonds and interest rates and government debt, We are definitely in an environment where consumer capacity to spend and confidence to spend could be challenged, and that together with a higher jet fuel cost is a very difficult mix which an airline like us with a tradition of being prudent and being able to navigate through prices has to sail through very carefully. So that's what I wanted to say as an opening statement, and I'm glad to take questions by any of you, either me or my colleagues. I would ask only that things that are very granular be addressed, if possible, after the call directly to our investor relations or our treasury so we don't Getaway from the larger picture, which I think is more relevant in this particular time. Thank you.

Please use your handset when asking your question for better quality. Anyone who has a question, remember to star in one at this time. One moment for the first question please. The first question comes from the line-up of Natalia Zvidiada with Eurobond Equities. Please go ahead.