“A lot closer to normality,” is how Aegean Airlines Chairman Eftichios Vassilakis described the June quarter for the airline, both in terms of demand and financials.
Aegean reported Friday an $11 million net profit for the April-to-June period, driven by a strong recovery in inbound tourism to its home country, Greece. The Athens-based carrier’s operating margin was 7.5 percent, only about a point lower than what Ryanair managed in the second quarter.
Greece, by most measures, enjoyed one of Europe’s strongest tourism revivals this spring and summer. By June, according to the Airports Council International-Europe, Greece was one of just two European countries — the other being tiny Luxembourg — to have fully recovered to 2019 airport traffic levels. By contrast, June airport traffic in Portugal was down three percent from three years ago. Declines in other major countries were much steeper: Spain was down 11 percent, Italy 13 percent, France 18 percent, the UK 19 percent, and Germany 27 percent.
The Greek recovery was strongest across the country’s island resorts. Statistics from Fraport, which operates 14 Greek airports outside of Athens, show passenger volumes in Corfu, for example, were up 13 percent year-to-date through August compared to 2019. Corfu’s August volumes alone were up 20 percent. The increase year-to-date for Chania, on the island of Crete, was 9 percent. And Rhodes was up 5 percent.
By contrast, traffic still lags pre-crisis levels for Greece’s two largest business markets, namely Athens and Thessaloniki. Data from the Athens airport shows August traffic alone still down 6 percent from 2019. Fraport data show traffic down 8 percent at Thessaloniki in August.
For Aegean, generating profits during the spring and summer months was crucial. “In the past, there was very little margin creation in the winter to support our fixed costs,” Vassilakis said. Demand has been strong through the peak third quarter, or July through September, but the winter outlook remains uncertain given high fuel prices, the strong U.S. dollar, and Europe’s energy crisis, he said. Developments in Germany, Aegean’s most important foreign market, are most impactful. Even counting the airline’s second quarter profits, the company remains $24 million in the red for the first half, owing to heavy first quarter losses. Still, it’s hopeful it can achieve a full-year profit based on strength thus far in the September quarter. July and August are always Aegean’s busiest months.
Vassilakis expressed other frustrations and concerns during an investor call, including Airbus delivery delays and escalating competition as rivals look to capitalize on Greece’s recovery. Diio by Cirium data show Aegean offering about 3.6 million seats from Greece in the third quarter. That’s down 8 percent compared to 2019. Seats on Ryanair, by contrast, are up 36 percent, and on EasyJet 51 percent. Eurowings, Jet2, Transavia, TUI, Volotea, Wizz Air, and Greece’s own Sky Express are likewise much larger in Greece than they were three summers ago. Overall, total industry seats to Greece are up 10 percent year-over-three-years. And based on current schedules, they will be up 6 percent in the fourth quarter.
Tough competition notwithstanding, Vassilakis is pleased with Aegean’s cash flow, which reflects strong forward bookings. He said Greece has fared better than other European countries in terms of airport operational distress. The country is also seeing higher-income travelers, he added, and Aegean is adjusting service accordingly. Airfares across Europe, as even Ryanair has predicted, will likely rise to offset inflation. As for fuel prices, Vassilakis declined to give a forecast.
“In terms of predicting where the fuel will go, well, I’m sorry, but I would be doing a different job if I could do that well,” he said.