On Wednesday, Barclays (LON:BARC) initiated coverage on Aegean Airlines SA (AEGN:GA), awarding the stock an Overweight rating and setting a price target of €12.50. The new coverage reflects confidence in the airline's business model and its effective management of industry challenges.
Aegean Airlines has been recognized for its robust profitability track record and strategic execution, which has capitalized on the cost revenue opportunity available to destination country airlines. The Greek carrier is currently reaping the benefits of a strong inbound market and a stable local economy. Despite a cautious approach to core growth plans, Aegean has expanded its operations to include flight training and MRO services, catering not only to its needs but also to those of third parties.
The airline's future expansion plans include the introduction of A321LR aircraft aimed at serving regions such as South Asia, the Middle East, and East Africa starting in 2026. These routes are expected to present new growth opportunities along with operational risks. Barclays' Overweight rating and price target are based on a three-stage DCF model, which assumes a conservative mid-term EBIT margin of 9.3%, compared to Barclays' forecasted average of 11.5% over the period from 2024 to 2026.
Aegean is set to report its FY24 results on March 13, 2025. The strength of air demand to Greece has been evident in the monthly traffic data coming from Greek airports. While Aegean has not disclosed specifics about its compensation deal with Pratt & Whitney regarding the GTF engine groundings, Barclays notes that the airline is handling the situation more adeptly than many of its competitors.
The analyst highlights that any developments around the GTF program could act as further catalysts for Aegean's stock, potentially impacting it positively or negatively. The €12.50 price target by Barclays indicates a positive outlook for the airline's financial performance and stock value in the coming period.
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