AEGEAN AIRLINES H1 2020: Pandemic related headwinds are rapidly eroding equity

The firm (AEGN, last €3.25, market cap €231 mln), just released H1 2020 financial statements and Q2 2020 interim results. Operating under severe business restrictions and a very difficult environment, total flights were down 82% QoQ while passengers were down 92% QoQ. In fact, Q2 2020 was a quarter of inactivity Total passengers for H1 2020 amounted to 2.4 mln vs 6.5 mln in H1 2019. Turnover for Q2 amounted to €40.4 mln (down 88% QoQ) and for H1 2020 amounted to €187.4 mln (down 64% vs H1 2019). Losses for H1 amounted to  €158.8 mln vs losses of €13.0 mln in H1 2019.

Load factor for Q1 and Q2 of the current year was at 76.0% and 50.8% respectively. Expected load factor for Q3 is 55% with 50% less flights that usual. We note that Q3 has been always the strongest quarter. Q4 traffic is expected to be only 1/3 of the corresponding Q4 2019 traffic. Bookings do not exceed 20 days before flight.

The year 2020 is expected to be the most difficult one of the last many decades for global aviation. Aegean suffered a cash burning for H1 2020 which amounted to €110.0 mln while Q2 cash burning amounted to €65.0 mln. Total cash burning for the 9 months of 2020 is expected to amount to €160.0 mln. The company provided guidance for deep into red Q3 and Q4 net result (in the range of €25-30 mln per quarter). Equity capital on 30.6.20 amounted to €70.0 mln. Obviously the need for an increase of the share capital through a rights issue is approaching althought domestic systemic banks are providing short term liquidity. The total debt to equity ratio on 30.6.20 was standing above 15x (!!!) vs 4x on 31.12.19. In August, Aegean signed an indicative term sheet with them for the issuance of a 5-year corporate bond loan for the total amount of €150 mln. In addition, an existing working capital credit line of €120.0 mln with the 4 systemic banks will be converted to a syndicated revolving credit facility for the same amount with expiry date September 2022. A total of €92.0 mln of this facility has been already drawn.

Furthermore, during August the company agreed with Airbus to transfer the delivery of 7 A320 Neo aircrafts from the period 2022-2023 to the period 2025-2026. Pre-delivery payments for these aircrafts were transferred accordingly. The new total of deliveries now stands at 15 planes (5 already received during 2020, 4 expected within 2021 and 6 expected within 2022).

Stock chart

The weekly chart below presents the stock’s fluctuations since its IPO (July 2007) up to date. The rally that started at the historical low price of  €1.00 in the summer of 2012 ended with a multi-year diagonal triangle named ABCDE. The drop after point E resulted to the downward breakout from the formation. Typically, after the breakout one or two “tests” to the lower side of the triangle are following, a move that happened. The appearance of the pandemic and the financial turbulence that followed, accelerated the decline of the stock from the level of €9.0 to the current lows of €3.00 – €3.50 where it is trying to build a base.

The chart has been prepared with XSpot PRO terminal. XSpot PRO offers fast execution in 13,000+ investment products from 20+ major exchanges around the world.

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