Greece’s Aegean Airlines, riding a strong wave of inbound tourism, reported its third straight profitable quarter this week. For the three months ending in December, Aegean earned a 2 percent operating margin, a full point better than what it earned in the same quarter of 2019.
Greece is a highly seasonal airline market, and one typically defined by very strong profits in the summer but losses during the winter. Any fourth quarter profit is thus considered a victory. In Aegean’s case, its Q4 strength follows an extremely strong summer quarter, in which operating margin reached 29 percent, one of the highest figures for any airline worldwide. Only Ryanair and Turkey’s Pegasus did better that quarter.
In Athens, Greece’s busiest airline market and Aegean’s largest base of operations, fourth quarter airport volumes were still 2 percent off their 2019 levels. But the story was different at airports serving major Greek island resorts. Rhodes, the busiest of the island airports, saw fourth quarter traffic rise 14 percent above 2019 levels., according to the airport’s operator Fraport. Crete, Corfu, and Santorini airports saw double-digit gains as well. Data from Eurocontrol, which handles Europe’s air navigation, likewise show Greek flight activity well above 2019 levels. Aegean itself, however, scheduled about 3 percent fewer seats in fourth quarter 2022 than in fourth quarter 2019, according to Diio by Cirium data. The decrease in part reflects its exit from the Russian and Ukrainian markets.
The airline now says cheerfully that “the first indications for 2023 are particularly encouraging,” highlighting strong international bookings for the upcoming summer peak. The airline champions what it calls an “extrovert” strategy, targeting tourists based outside of Greece. During the pandemic, it was forced to rely more on domestic Greek travelers. But trends are reverting to pre-pandemic norms, in which roughly three-quarters of Aegean’s passengers were flying internationally.
The Greek market is competitive, with Sky Express a home-grown carrier that’s now expanding. The country’s busiest foreign carrier is Ryanair, which helpfully for Aegean shrank seat capacity 17 percent last quarter, relative to 2019. But other low-fare carriers like easyJet, Wizz Air, Jet2, and Lufthansa’s Eurowings grew their Greek presence. As a result, overall seat capacity from Greek airports grew about 5 percent from three years earlier.
A central plank in Aegean’s current business plan involves re-fleeting with Airbus Neos. As of December, it was expecting nine more to arrive this year, though delivery delays create uncertainty. The hope is to have 26 in service this summer, alongside 32 prior-generation Airbus narrowbodies. The longterm plan is to have 46 Neos in service by the end of 2026. It also operates ATR turboprops for routes with less demand. Management says the Neos offer lower operating costs, a better service product, more business class seats, and greater range. The latter benefit is not insignificant, given Greece’s favorable geography. Longer-distance A320s put Athens as well as the Greek islands within range of more cities in the Middle East, most notably. Aegean currently flies to Amman, Beirut, Jeddah, Riyadh, and Tel Aviv, offering connections to Europe via Athens.
The airline is separately investing in a new maintenance and training center, as first announced in December. It also wants to buy back all the ownership rights claimed by Greece’s government, which acquired them in exchange for pandemic-era financial assistance. As for loans it received from Greek banks during the crisis, Aegean this week repaid them in full, three years before their maturity.
In a release disclosing the fourth quarter financial results, management trumpeted its environmental achievements, noting a 9 percent reduction in CO2 emissions last year, versus 2019.
The big challenge in 2023, as always for Aegean, is making sure it earns hearty spring and summer profits, to protect against the likelihood of wintertime losses. Based on current schedules, its second quarter seats will be up 3 percent from second quarter, 2019.