Aegean Airlines Ord

Ladies and gentlemen, thank you for standing by. I'm Konstantinos, your course call operator. Welcome and thank you for joining the Aegean Airlines conference call to present and discuss the first half 2024 financial results. At this time, I would like to turn the conference over to Mr. Kouveliotis Mihalis, Deputy CEO, CFO. Mr. Kouveliotis, you may now proceed.

Good afternoon everybody and welcome to our first semester and second quarter call for 2024. Let me first say that I'm with our Deputy CFO and Executive Board Member, Mrs. Stella Dimaraki, and our Investor Relations Manager, Mrs. Amthika Telani. So we all welcome you to our call and we are all here for your questions. Let us get with our initial comments, which are not going to be very detailed. I prefer to keep them relatively short in order to give space and time for Q&A, which I believe is much more efficient for this call. So, Aegean, for one more time, has reported strong performance in the seasonally weak first half of the year in terms of growth in passenger numbers, in revenues, in flight activity, a number of flights, and in terms of developing its investment towards the MRO and the training facility, and of course, in terms of profitability. We are very happy with the performance of the Q2 and the Q1 overall. as both has exceeded very close or been very close to the previous record year. Regarding the passengers and the revenue, I would like to comment that in the first half of the year has carried 7.3 million passengers that represent 9% increase compared to the same period of last year. The growth has been balanced between international passenger traffic recording an increase of 9% which have international passengers have reached 2.6 million. and in parallel domestic passenger traffic, recording an increase of 8% to 1.8 million passengers. Load factors have reached 81.2%. The balance growth in passenger traffic mainly comes from the increased traffic at the international Athens International Airport, which the increase has reached 13%, and Thessaloniki Airport, which also has shown an increase of 12%. Aegean has increased during the first half frequencies on flights to and from London Heathrow, which from three have gone to four daily, from two and from Istanbul up to four daily flights, and other main European capitals like Paris, Rome, Frankfurt, from Athens and Thessaloniki, Barcelona, Madrid, and Cyprus. Overall, the market in Greece has been increased by 11%. And this shows quite a strong demand for Athens and for Greece overall as a destination. But still, Athens also has reached even higher levels of growth to 15%. Aegean, in line with the market in the first half, has expanded capacity of 11%. And we are continuing to be among the few carriers that were above the 2019 levels of capacity by 17%. Revenues have reached almost 750 million, which are 10% higher than half 1.23, with RASC and yield remaining at the same levels as last year. EBITDA stood at 147.6 million, which is 6% higher than half 1, keeping a steady EBITDA margin of 20%, which still remains one of the strongest EBITDA margins in the sector. Profit before taxes in half 1.24 amounted to $31.6 million compared with $48.7 million in 2023. Profit after taxes stood at $22.9 million from $37.1 million in half 1.23. So all these remain strong numbers bearing in mind that different aspects that affect year-over-year comparisons. Regarding our cost structures, The main issue and the main element that has affected our excellent performance in the half one of 2024 is still remaining the GTF engine issue, which we have explained to you during our previous call quite specifically and in further detail the nature of the issue, which still remains visible and is affecting our core structure in 2024. It is important to know that the non-scheduled mandatory engine inspections and repairs, which started in October 2023, which require a grounding of significant part of our new aircraft fleet, significantly impact our cost structure in terms of fuel, maintenance, and aircraft lease costs. As of today, actually on average for the first half of 2024, An average of eight aircraft were not available, were grounded, so they were not operational, which have caused quite a significant impact in our plans and our operations. In order to minimize the capacity impact caused by the GPF engines, we have extended lease contracts of aircraft expiring, all the technology aircraft which were expiring in Q1 and Q2 2024. and since the previous year, which were not planned to be extended. Additionally, we have adjusted flight operations by reallocating capacity previously deployed to third-party operations abroad, and we have redeployed them and brought them back to our main bases in Athens and Thessaloniki. As we have already informed you, we have agreed with a compensation structure and package with Pat and Whitney, with the manufacturer, which is already going on and being executed. The compensation, although it covers a significant portion of the burden that we are suffering from this issue with the GTF engine, it does not fully cover and offset the cost impact of the effect of the ground with aircraft. So it's the cost plus the additional, the shift that we are missing from the NEOS versus the CEOS. Moreover, the burden of increased CO2 purchases have a significant impact on our costs too, given the ongoing and the three-year phasing out, the period of the historical free CO2 allowances in the airline sector. And finally inflationary pressures keep affecting together with higher flight activity, 11% more in terms of flights at the airport, handling and over flight expenses. Even though even the above issues that are impacting our cost structure, our unit costs are still remain very competitive versus our peers and have won. To be more specific, in half one, our cost, our unit, our task, excluding EDT level, excluding fuel costs, has increased by 5% versus half one, 2023. The US dollar exchange rate movement since the beginning of the year has also affected the valuation of the assets and liabilities denominated in dollars. resulted to an FX loss of the valuation of almost $4 million in half one 2024 compared to the gains of almost $9 million in the similar period in half one 2023. So the overall impact is $12 million mainly coming from the valuations. That's why in the operating, in that level, we are very, very close to our last year. But in EBT level, we are lacking. We are having this gap mainly is coming from the valuations effect and impact of the US dollar movement. Overall, we feel very good about achieving these levels. Needless to mention that we have managed to leave behind the years where until 2019, Aegean's first half period results were loss-making. We continue to be profit-making, profit-generating. And in terms of some other elements that are worth noticing is We are also very proud and very happy that our cash generation still from operating activities is still very strong. Just to give you an example with the figures, cash at the end of the year was $706 million and after the repayment of the warrants and the dividend payout, which both of them resulted to almost $150 million, Our cash at the end of the half one of June 30th has reached to 814 million euros. So this means that the strong cash generation remains and the strong actually assisted us each and every half of the first half of the year from the strong pre-sales. The CAPEX also we would like to mention that In the first half of the year, we had some capex amounting to $36 million, which also is included in the figures that we have mentioned before. $36 million mainly invested in spare engines in our MRO investment, which is coming to the end of its first phase, and in lounges. So, okay, this is today. Our cash balance stands at $750 million after the investment of Volotea of $25 million, which we have announced last week. Regarding the aircraft, our fleet, in the first half we are taking delivery of three new NEO aircraft, bringing the total number of NEO fleet of 31 aircraft. which consists of 18 A320 and 14 A321 aircraft, with two more aircraft to come before the end of the year. From 2025 onwards, we have five aircraft to be delivered in 2025, 2026 and 2027. This is the current schedule with Airbus, which is expected to be executed. We are very happy to have secured our first JOLCO transaction. in June, which brings us both diversification into sources of funding as well as tapping the Japanese investor market, bringing both 100% financing for our fleet at a very attractive cost and also meeting a strategy to increase the number of aircraft that will eventually be owned by us. We have two more Zorco transactions to complete before the end of the year and Zorco financing we are interested to increase eventually ownership of aircraft and balancing exposure between euro and dollar. So, people's development, I would like to have to mention some additional comments regarding our people. This year, we will start maturing our pilot academy, Rational and Investment. So, the first pilot which will graduate from This pilot academy will be inducted in our personnel and which shows the – actually it's very timely because there is scarcity out there in the market for trained pilots. And it's supposed the gradual development is very complemented by our own facility and not only that, we have done more or less the same structure for our technical academy people which are going to be added to our family and employees in the coming two years. We have added the trainees very early. We have started this initiative quite early and we are one of the first lines in our industry and in our territory that we have started this initiative and we feel very happy and very on time to have this initiative to mature and support and upgrade the development of our MRO unit, which is an important part of our company. This is more or less what I would like to have as an introductory comment. So I would like to give you some time now. We are starting to Q&A phase.

The first question comes from . Please go ahead.