Edited Transcript of AGNr.AT earnings conference call or presentation 16-Sep-22 11:30am GMT

Q2 2022 Aegean Airlines SA Earnings Call 145 64, Kifisia Sep 16, 2022 (Thomson StreetEvents) -- Edited Transcript of Aegean Airlines SA earnings conference call or presentation Friday, September 16, 2022 at 11:30:00am GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Eftichios Theodoros Vassilakis Aegean Airlines S.A. - Executive Chairman ================================================================================ Conference Call Participants ================================================================================ * Achal Kumar HSBC, Research Division - Analyst * Natalia Svyrou Svyriadi Eurobank Equities Investment Firm S.A., Research Division - Research Analyst * Vijay Singh Fiera Capital (UK) Limited - Investment Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by. I'm Costantino, your Chorus Call operator. Welcome, and thank you for joining the Aegean Airlines Conference Call to present and discuss the first half 2022 financial results. (Operator Instructions) The conference is being recorded. (Operator Instructions) At this time, I would like to turn the conference over to Mr. Eftichios Vassilakis, Chairman. Mr. Vassilakis, you may now proceed. -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [2] -------------------------------------------------------------------------------- Good afternoon, everybody. Welcome to our 6 months call. We're happy to report that the second quarter of 2022 was a lot closer to normality and a lot closer to our regular performance than we've seen in the COVID years. Therefore, in the second quarter of the year, we approached the market with roughly 86% of our pre-COVID ASKs, and we achieved 94% of the revenue that we had in the same quarter in 2019, so an improvement in terms of how much we approached our pre-COVID numbers and revenues versus ASKs offered to the market. And of course, a very significant increase relative to an encumbered quarter of 2021 from EUR 108 million of revenue in the second quarter of '21 to EUR 327 million, just 6% below 2019 and 200% over 2021 on our second quarter. The corresponding results in terms of passengers, we're obviously in the same direction from 1.2 million last year to 3.2 million this year in this quarter, a very significant improvement towards normality in load factors, reaching 79.2% from only 66% the year before. And despite, of course, a highly inflationary environment in various elements of costs, including the dollar and most intensely than anything else, the fuel, we did manage to achieve a positive result in the second quarter of EUR 17.8 million pretax and EUR 11 million roughly post tax, which is 56% of the equivalent performance of 2019. But I think the most important thing to say considering the course of events of the year is that there was a very gradual and with an exception of about 4 weeks around the initiation of war in the Ukraine, a very gradual and consistent build of demand and bookings, which led us already in the second quarter of the year, while we still had flown revenues lower than 2019 -- and while the activity was lower than 2019 to have sold revenues, so basically cash inflow to the company, which relates to the potential and the value of the forward months to be actually quite a bit higher in the second quarter of '22 than this equivalent quarter even of 2019, which, of course, indicates not only strong cash flows, but more importantly, a strong quality of demand, both in terms of passenger count, but also in terms of yields for the summer. And indeed, since we are now in the -- towards the end of the third quarter, we can say that the third quarter performance has been very much in line and even ahead of our expectations in the beginning of the year and in the course of the second quarter, and therefore, that we think this has changed our expectation of profitability for the full year, strengthening our expectation for a positive result and indeed being in a position to predict that for the third quarter, which typically, for the company, the result of the third quarter is in excess in terms of profitability, in terms of the total result of the year, but the result of the quarter itself, the third quarter for 2022 will be certainly no less in revenue or indeed no less in profitability in terms of absolute number for the quarter than it was in 2019, which, of course, was our best year, including for the third quarter. So very much a positive trend, driven by several factors, driven, of course, by the worldwide and European-wide recovery of demand. The special, I would say, appeal of Greece, where we have seen flights to Greece recovering significantly more substantially, indeed. They are one of the few countries in Europe, the only country in Europe where EUROCONTROL reports more flights to for the summer months relative to 2019 and practically also the only country where the number of arrivals on a year-to-date basis by the end of August for the overall country are very, very close to 2019 levels despite, of course, the very heavy shortfall of the first quarter and the second quarter, which was made up in arrivals on the third quarter. So Greece, a very attractive location, of course, presenting us with an advantage and a disadvantage. Advantage in terms of customer demand, disadvantage in terms of the fact that many airlines, a low-cost network have actually flown Greece to Greece with significantly higher capacity than in 2019. So significantly over 100%, 120%, 130% of 2019, even though in their overall performance since 2019, they're actually lower in recovery than us, but a hell of a lot more investment to our country. And within that environment, which is strong in demand, but also very strong on competition, we're happy to say that we seem to be achieving very positive numbers that are significant enough and improvement in quality to compensate for the largest part of the significant increase in the various different kind of costs, which come with, of course, an unprecedented level of inflation, increasing dollar, increasing fuel and especially jet fuel, and of course, interest rates at the same time. So a very dynamic course for the year. We are happy that we have achieved actual growth over the levels of 2019 during the summer months relative to our performance from our bases in Heraklion and Thessaloniki, where the market in 1 case, in Heraklion is growing, but even the Thessaloniki the market is contracting relative to 2019, we're actually gaining in absolute numbers. In Athens, which is still, in a certain way, affecting our performance because Athens and Thessaloniki are the only places in Greece, the only main airports of Greece where we've got overall, as a country, lower numbers in 2019. In those -- in both of those airports and of course, in Athens, which is the most significant hub -- the only hub and the most significant base for us, there, the numbers are still lower than 2019, but recovering in a very strong direction. And there, we're retaining our share, while in Thessaloniki and Heraklion we are increasing our share. So overall, I would say that the status of Greece is a country that is appealing is up. The competition is significantly stronger than the past and still Aegean is performing very well and recovering quite well. I think this has to do, of course, with our relationship with customers and how we serve them. It has to do, of course, with the gradual increase of numbers of the new A320neo and then A321neos in our fleet. This year was a big year in arrival of aircraft. We were supposed to receive a total of 12 aircraft for the year. There have been delays, significant delays in the delivery of the aircraft, the entire logistics chain in production, in engines, in different areas of logistics, as you know, has been burdened by the recovery post COVID and by the resurgence of demand. Therefore, we were not able to achieve the expectation of the number that we were expecting and planes are typically delayed between 2 and 4 months. But their gradual entry into the fleet definitely gradually changes our economics and allows us to partially offset the inflationary pressures coming from the, what we call environmental parameters that affect all airlines and airlines in Europe, which, of course, unfortunately include the rate of the dollar relative to the euro. So our investment in aircraft is paying back. We were able, in the summer, to achieve a load factor of 84%, which is very close to the levels we were during 2019, about a couple of points below. But due to the average increase of the size of aircraft in terms of passengers per flight, especially in international flights, we are a little bit higher. Also, it's been, we have to say, an important year because we have effectively completed a very significant effort, which involved exiting from the type of the Q400 by Bombardier to enter into ATR 72-600. A large number of aircraft coming in, 9 aircraft in total, between November and June this year. A complete overhaul of, of course, of retraining our crews, retraining our technical staff in order to accommodate the new aircraft types. And I think a timely introduction from the point of view of the fact that these aircraft are significantly more efficient, fuel-efficient than the Q400, which is also a positive evolution for us. However, a difficult path to be performing in the face of the high number of acceptances of new aircraft and high number of rig deliveries of all their aircraft that we are going through due to our main A320neo delivery process. Now on the negative side, one, anybody involved in the airline business this summer is very aware and passengers are aware too, that there were problems across the entire chain in terms of the operation of airports, in terms of the speed of security, in terms of the amount, the number and the experience of handling agents around Europe, in terms of ATC delays because the space was jammed by the closure of Russia and Ukraine of airspaces, and therefore, more aircraft go through central corridors of Central Europe, causing more delays. All these things put together, together with logistics issues, we have to do with different suppliers and different production, have created certainly a very difficult operating environment. We're on the one side, we're very happy to see strong demand and indeed, demand that allows for yields to partially compensate for the fuel levels that we've been paying. But at the same time, not being able to serve our customers with the quality levels that we would have liked to have in terms of on-time performance and of course, their overall experience in airport, baggage handling and whatnot. This is something that all European airlines say. So I would like to say that Greece has been a couple of clicks better. And also Aegean has been a couple of clicks better than the average. We haven't had cancellations to a great extent because we made a significant investment in training people before COVID, especially pilots, and we were able to increase our headcount, again, after COVID in a much more efficient way than many of our competitors. And therefore, we were able to avoid cancellations, which are definitely the most frustrating thing for customers. However, the other elements of performance have also suffered. And as a result, we have been very active to be in contact with our customers and try to mitigate the effects of these different unpleasant experiences with communication, with small improvements in their loyalty program with small gifts in a way to show that our airline is always closest to the customer, even in times of significant difficulty in operations like this summer. Having said that, to a certain extent, some of these issues are to be expected when an overall European system goes from essentially idle to the sort of spring increase of return and then summer peak of return of demand. And it's good to note that from the end of July and on, we've been on a steady path of increase of all the elements of qualitative performance that affect customers. Also, we have been continuing our investments in deepening our loyalty program in terms of offer to our customers. We've introduced offers that allow our customers to bundle tickets on specific destinations and achieve lower prices. We've created -- we've invested in our lounges and continuing to invest in our lounges in renovation and expansion throughout the year. We are very eager to capture and take advantage of the qualitative shifts in the mix of people coming to Greece, and we're very eager to serve this, let's say, more demanding customer base, which is also able to pay a little more. We're very happy to note that our carbon class composition in traffic -- I'm sorry, [club] class composition of traffic has steadily increased, both for our domestic and international service, and this has been an important part of bringing up our revenues and our yields, and definitely, that's a direction we want to continue. And overall, certainly, it's been a very, I would say, encouraging return and reconditioning of our ability or reconfirmation of our ability to generate cash flows, revenues and profits, which, of course, we have to say as strong as it has been in the summer and as well as we see it continuing into September and October, we have to have a caveat of risk for the November, December, the part of winter, where we know that leisure demand towards Greece is very minimal and where we expect, of course, the effects of the high cost of energy to the consumer -- European consumer and the Greek consumer to be most, I would say, visible. Therefore, a very good performance and forecasted performance materially for the third quarter as we see today, but a significant question mark about the wait of winter. And of course, the way the things will normalize from the point of view of inflation, fuel levels and expectations of demand for next year, which is too early to gauge. The positive -- the 2 positive elements to keep, and I will stay there and then open the floor for questions, is that the country is performing very well as a destination, a; and B, despite significantly increased levels of competition exactly because the country is attractive, Aegean is very much holding its own in terms of revenue reconstitution and in terms of direction of profitability even within a very adverse fuel and U.S. dollar environment, and we hope that as our re-fleeting and overall reorganization effort continues, we will be able to strengthen our competitiveness and be able to take advantage of the shift of demand towards our country. And the fact that after all, our country, unlike Europe, had a very, very different last 10 years with very depressed consumer spending, very depressed real estate prices, very depressed employment levels. And these things are now recovering. So even within a weaker European environment because of energy, we expect Greece, both because of tourism demand, but also relative improvement of employment and real estate pricing and the investment [climate] relative to 4, 5, 6 years ago, to fare on a relative basis better. So this is my opening statement. Happy to take any questions, so we can clarify some things that I basically covered on a very basic direction and sense. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) The first question is from the line of Svyrou, Natalia with Eurobank Equities. -------------------------------------------------------------------------------- Natalia Svyrou Svyriadi, Eurobank Equities Investment Firm S.A., Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Yes. I was wondering if we could talk about a bit the fuel prices, the fuel cost increase and if you have a hedging for the next year? And if you believe this -- the increase in prices will actually manage to cover all -- with all the cost things going around? This is on the cost. And I was wondering also if you could give us -- you said that they have the delays and your re-fleeting schedule, if you could give us more details how many aircrafts you actually got or you're expecting until year-end on this basis? -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [3] -------------------------------------------------------------------------------- Okay. I will start from the end because that's the simplest one. We were supposed to receive 12 aircrafts for the year. Materially, 8 of them were supposed to be ahead of the season, meaning by the end of June. By the end of June, I believe we had received 4 aircraft. So more or less, we operated in the peak with 4 aircraft, 4 new aircraft less. We compensated by retaining some of the older aircraft, but we had 4 younger aircraft less than expected. These aircraft are being delivered these months in the -- so after the season to a great extent. For the overall year, the effect will be that from the 12 aircraft, we'll receive 10 of them. But as you understand well for the seasonality of demand to Greece, receiving aircraft in September, October, November is not very much used when you haven't used them in the summer. So in the overall year, only 2 aircraft will be pushed on to the next year. But unfortunately, we missed -- we operated in the summer with 4 aircraft -- 4 new aircraft less than we had expected. So we received -- by now, it's up to 8, I believe our acceptances. But we only flew the full summer with 4 of the new ones that we received this year. So this is not -- this is -- to be fair, this is -- if Airbus is performing at level 90, Boeing is performing at level 60, so in a way, we should be thankful that we have only the delays of Airbus, although if there are any people from Airbus on the phone, I will tell them it was a terrible effect to Aegean and to everybody else. So that's the part about the aircraft delays. Of course, it doesn't change the numbers that we eventually get just the arrival times and the repatriation, the reclaiming of our predelivery payments. So it affects our operating costs to some degree because we operate a lower mix of new aircraft, and it affects our cash flow because we get less of our money back or less -- we delayed to get some of our money back from the PDP payments. In terms of hedging, we -- I think you know that we've been around 45% to 50% month-by-month this year, and we are at 25% for next year. Of course, the levels where we are hedged for next year are lower than what the spot rate now, but higher than the rates that we had enjoyed in our hedging this year. 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. So I'm not going to say anything other than to say that what has affected us in the last 4 months more than the price of Brent has been the jet fuel crack spreads, which means that what's pushing up the cost for lower airlines, and there's been a lot of articles about that, is the shortfall -- relative shortfall of jet fuel production by various refineries in the European area and that's actually what has sustained jet fuel on a significantly -- today, we're paying the same jet fuel prices we're paying in March when the Brent was $114 and today, the brand is circa 1992, and we're paying the same jet fuel price, which means that the spreads of the refineries are significantly higher because the demand-supply equation leads it there. So that reconstitution of refineries shifting to jet fuel supply is equally important to us and all the other airlines as the reduction of the price of the Brent. I think that's all I can tell you on that direction. -------------------------------------------------------------------------------- Natalia Svyrou Svyriadi, Eurobank Equities Investment Firm S.A., Research Division - Research Analyst [4] -------------------------------------------------------------------------------- No, that was very clear... -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [5] -------------------------------------------------------------------------------- I'm sorry, and one more point. I think what's been established this year is that when you have a cost that is so common across markets, you see that airlines have to discipline their strategy in terms of what they charge because they have no other choice. And indeed, we have heard from many people in the industry, most famously the Chairman of Ryanair who, of course, as a company and as a person have championed in the past the super low fares, who was actually stated that we should expect fares will be going up for quite a bit because that's where inflation and that's where fuel and that's where the overall operating parameters within Europe lead. So it's clear that we're looking at that direction, and it's something that has to be applied by all airlines, at least in the next couple of years where we expect between inflation, commodity prices, interest rates, and everything that is constituting the cost base, including, of course, the rate of the dollar to be in disadvantageous levels. -------------------------------------------------------------------------------- Operator [6] -------------------------------------------------------------------------------- The next question is from the line of Kumar, Achal with HSBC. -------------------------------------------------------------------------------- Achal Kumar, HSBC, Research Division - Analyst [7] -------------------------------------------------------------------------------- I have a few questions, please. First of all, in terms of networking, so basically, of course, you've been consolidating in Athens, due to, of course, seasonality factor and the competition. But now given that the recovery actions has been slow, although the recovery in (inaudible) are quite rapidly -- quite fast, so do you think you will have some changes in your networking strategy and you will deploy more capacity in (inaudible) rather than Athens? And secondly, do you think this winter could be rather weaker winter as compared to the last winter, I mean, the pre-COVID levels because the recovery in Athens is going to be slower than pre-COVID, do you think? So that is my first question. -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [8] -------------------------------------------------------------------------------- Okay. So let me take that. It's true that starting from 2021, the recovery of the regions was higher than the recovery of Athens initially because people were concerned about basically large concentrations with people in cities and they preferred sort of less urban destinations. We have seen that trend gradually mitigate. But it's true that the increase of the resort, I would say, the island areas has been significantly higher. Now our ability to compete is related on network flows and it is related on a certain amount of balance between incoming and outgoing passengers because Athens and Thessaloniki are the 2 main cities of Greece, where you can expect to have, in international routes, a more decent balance between incoming and outgoing passengers, meaning leisure incoming and Greeks traveling for business or leisure themselves to a certain degree. Those are effectively the only 2 places where you can see that. They will always remain at the center of our strategy, and we will always attempt, first, to develop from these 2 areas. The other thing what we have seen is that, of course, it's better to concentrate your operation in -- by having more aircraft in more significant -- let's say, in more significant airports rather than trying to spread yourself too thin. So Heraklion has become -- which is the main airport of Crete, also with Chania another focal point of development. So what I can say about our network strategy going forward, you should expect to see our growth to come from [Mykonos], from Thessaloniki, from Heraklion and Chania, not from the smaller airports of the country. Regardless, if they are developing in a positive way or not, the reasons are because of the balance of incoming and outgoing to some degree and because of how different and how much better the seasonality, of course, is in Athens and Thessaloniki. So you -- if our operation is seasonal by a factor of 2, today, if we attempted to grow significantly more from the islands as opposed to from (inaudible) Thessaloniki. Our seasonality would become a factor of [4]. And that would make it very difficult to have a profitable operation. Therefore, I think you should consider that our network strategy will remain concentrated in Athens, Thessaloniki and Heraklion, and that the growth is going to come primarily from there and that the fact that 2 of these places haven't recovered yet to a full extent is just allows us some more opportunity for recovery, I hope, in the years to come, but we're not going to shift to a more island-based operation. -------------------------------------------------------------------------------- Achal Kumar, HSBC, Research Division - Analyst [9] -------------------------------------------------------------------------------- Right. And so are you expecting winters to be weaker than pre-COVID levels? -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [10] -------------------------------------------------------------------------------- Well, I would hope they should not because our winters in Greece were already extremely weak. In fact, in the past, in the winters, there was very little margin creation in the winter to support our fixed costs. And therefore, as you may recall, we would tend to lose something between 15 million and 17 million per month for the difficult months of winter and the worst months, of course, which are the Q1 months. So I would not expect our operations results to develop worse than that. But especially this year, because there is this whole financial and psychological, I would say, issue with what's going to happen with energy, gas supply, petrol supply, electricity costs, in the winter in Europe and because there is this measure of uncertainty, I think it's difficult to make predictions. Actually, I would expect things to gradually improve in winter because in the past, we had a low -- very, very low starting point. However, this year, I don't think anybody wants to make predictions for November, December or January because of the whole energy crisis situation. -------------------------------------------------------------------------------- Achal Kumar, HSBC, Research Division - Analyst [11] -------------------------------------------------------------------------------- Right. Fair enough. My next question is around your fleet strategy. So coming back to the last question and then you were discussing. In terms of fleet strategy, now, of course, there have been some delays, so my first -- I mean my couple of points here or the question is that, so are you going to -- are you going to extend some of the leases, which are going to expire next year? I mean because previously I think you were not very clear and it was left to the demand recovery. So now what are your views in terms of extension of the current leases? And secondly, because of the high energy prices, the demand for the secondhand aircraft is very low. So if you're going to hold the leases or extend the leases, what kind of option would you have to renegotiate the leases so that, that could offset the higher energy prices, please? -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [12] -------------------------------------------------------------------------------- Well, okay. First of all, the one thing that, again, this year has shown is that you do need to take certain precautions so that deliveries do not affect your ability to operate because when you have such a short season, effectively 4.5 months, 5 months to make the substance of your profitability and then you're facing very weak winters. It's very important that you are able to operate during this time with the right fleet and the right amount of fleet. Therefore, yes, you do become a little bit more reluctant to let things go unless you're absolutely certain that the delay issues are addressed. So I would expect, yes, to still allow a lot of the aircraft that expire to go, but certainly also to extend some. There is enough healthy competition there between the suppliers, which, as you correctly say, on principle would rather see their aircraft stay with you. So you can reduce a little bit the cost. However, we have to note that the main thing that will support you is the gradual increase of the components of the new aircraft in your fleet and the fact that gradually going forward by winter -- in the winter periods you use only your -- effectively only your new fleet or by 80%, 90% only your new fleet and the older part of the fleet, which is retained is flown for a few months in the summer to complement the additional capacity and as a result, when you fly an older aircraft less and you have significantly lower capital costs, then you have a decent balance. And if you recall in the past, Kumar, we've always said that it will always make sense for Aegean to have some older aircraft because unfortunately, we're not able to utilize our whole fleet around the year in a more or less even way, not even approaching some of our Northern Europe competitors. So yes, we will retain some of the aircraft expiring. We will be conservative to try to -- in retaining some aircraft. We've got enough choice so you can still negotiate down lease rates. However, the main mitigation of cost will be that gradually every month, our inventory of new aircraft builds, and therefore, every month, we improve a little bit or a lot, what percentage of our operations we performed with a higher fuel efficiency, higher seat count and lower maintenance cost aircraft. So I hope I've answered your question. Again, you will have seen statements by Airbus that some decisions like re-expanding their production that pushed back a little bit because they recognize they're not being able to do it. So I think everybody in the industry expect that the delays in producing aircraft will also be there to some extent in '23. So yes, we will be a little bit conservative and try to avoid some of the issues we had this year, where, for instance, we did have to do 2 wet leases from third parties that will have a net-net significant cost of around EUR 6 million, EUR 7 million of additional costs to what would have been there if we operated our own in the summer period. So we will certainly opt to have a few extra of the currently used aircraft around to cover any potential delays. We will not take the risk to be required to do wet leases, which are much more expensive as we had to do this summer. -------------------------------------------------------------------------------- Achal Kumar, HSBC, Research Division - Analyst [13] -------------------------------------------------------------------------------- Okay. The other thing I wanted to understand about your domestic economy, of course, as you rightly said, Greece domestic economy is doing wonderful, it is improving sharply. So do you expect that could result in a sharp recovery in the domestic demand? -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [14] -------------------------------------------------------------------------------- Well, first of all, I didn't use the word wonderful because that would sound too political from my (inaudible) 6 months. What I did say in its objective is that after going through a long period of crisis, 6, 7 years ago, 5 years ago, we had between 17% and 23% unemployment. Today, we've got around 10% unemployment. And I think that real unemployment is even lower than that. Therefore, if more people are working than 4 or 5 years ago, I do expect that our economy, on a relative basis, will perform better than the rest of Europe and also because -- and we have seen it both in countries like Greece, but also in Portugal, because prices, particularly of real estate, but also of cost of living, are lower than the rest of Europe, and they dropped back because of the crisis that these countries had the last 10 years. There is now a higher rate of resurgence in values, a higher migration of people from abroad that want [summer] homes or to live permanently taking advantage of working remotely in different European businesses, and also, of course, the pure tourism part. So yes, we do expect the economy to be a little bit better or a lot better than the average European economy, which was pretty much full employment up until a couple of years ago. Now whether that is going to be big enough to offset the effect of what it means to be paying a higher electricity bill for a Greek home, well, I cannot tell you that. I'm not a good enough macroeconomist. I would like to hope so, but I don't know. So I will leave it at that. -------------------------------------------------------------------------------- Achal Kumar, HSBC, Research Division - Analyst [15] -------------------------------------------------------------------------------- Okay. Sorry, last 2 questions, and I'm sorry, it's a long list. So one question is straightforward, do you have any capacity guidance for this year, given that we are already in September? So now what kind of capacity growth do you expect in terms of seats or ASK, whatever? And my second question is that given that, of course, you have portrayed July and August has a very strong demand, I mean, you can see good demand. But then given that Germany and U.K. are the 2 biggest source market, for the tourism and both are under tremendous pressure, U.K. in particular. So do you -- I mean what -- don't you think there any impact as such or do you see any impact as such? What -- how do you see that? I mean that's not reflecting in the sort of guidance for July either. -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [16] -------------------------------------------------------------------------------- First of all, in terms of ASK capacity, I believe, through the summer and the last part of the year, I think the months are all going to be between 94% and 98% of ASKs relative to 2019 with the delta effectively coming downward from domestic and slightly upward in terms of ASKs from international relative to 2019. So that's the capacity outlook. In terms of passenger outlook for the year, I expect us to be between 12 million and 12.5 million passengers for the full year. In terms of revenue for the year, I expect us to be between minus 5 -- let's say, minus 6 and minus 3 in a very good scenario, very close to 2019 for the overall year. So definitely, a significant recovery, but not a full one in terms of ASK or passengers. In terms of revenue, it's going to be a lot closer for the full year. And profitability, I already gave you a guidance, a very significant guidance for the third quarter, saying that I believe the third quarter will be no lower in absolute profit for the quarter than the profit of 2019 and that we have uncertainty, of course, for the performance of the fourth quarter. In terms of U.K. and Germany. U.K. is our smallest overall share. We have effectively, U.K. from the major markets is the only one where effectively we fly to London, Edinburgh and Manchester and only 3 cities and only from [Matan]. So in total, it's about 4 flights a day. Germany is about 20 flights a day or 24 flights a day at peak. So significantly higher exposure to Germany than the U.K. Also the U.K. for us, because it's mostly in London, it is also significantly dependent on Greeks traveling to London, not only Greeks coming to England because we don't have any exposure for the major leisure flows that go directly to Heraklion, to Crete, to Rhodes, to Corfu, Mykonos, Santorini from the U.K., we do from Germany and France and other markets. So I'm not so concerned for the U.K. due to the significance it has. Germany, of course, if there is a change, then that will affect us. However, what is being discussed in the market is that '23 is likely to be kind of a battle between slightly or significantly more restrictive house economics and residual pent-up travel demand. So we don't know where that balance will be. But certainly, if there is a significant shortfall in Germany, we would feel that. U.K. wouldn't make a big difference for us. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- The next question is from the line of (inaudible) Securities. -------------------------------------------------------------------------------- Unidentified Analyst, [18] -------------------------------------------------------------------------------- I have 2 questions. One regarding the current percentage of fuel hedging that you have, where does that stand right now as a percentage? I mean is it below or above 50%, let's say? And the second one has to do with your dividend policy. Supposing that for the full year, you turn net income positive, are you planning to resume with dividends distribution to shareholders? -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [19] -------------------------------------------------------------------------------- I have 2 definite answers for the last question. One, we are certain that we will be profitable this year. After all, if I told you that our quarter 3 is going to be no less than quarter 3 2019 as a quarter, that effectively secures a significant amount of profitability, one; two, no way we will distribute a dividend this year and very, very unlikely we would distribute the dividend even the year after that. It's very important to rebuild our capital base to a significantly higher level even than it was before the COVID crisis because we expect our balance sheet to expand as we are accessing new aircraft, and therefore, we also need a higher capital base. So no dividend expectation for this year, regardless of what -- how positive the results will be and very little possibility of distributing income from '23 into '24, unless '23 ends up being a very, very magic year. So I think that's a clear response to that. In terms of hedging for this year, we said that in the beginning, roughly speaking, we are at 50% for the remainder of this year at levels that are about $640, $650 per metric tonne for jet fuel. And for next year, we're around 24%, 25% at levels around $800 per metric tonne. Obviously, we have been significantly less aggressive in buying fuel forward for '23 because of the levels at both Brent, but more significantly, jet fuel cracks, jet fuel threads stand today. And which is why we are at the lower hedging level in '23 than we would typically be 6 months before the beginning of the next year or 5 months before the beginning of next year. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- The next question is from the line of Singh, Vijay with Fiera Capital. -------------------------------------------------------------------------------- Vijay Singh, Fiera Capital (UK) Limited - Investment Analyst [21] -------------------------------------------------------------------------------- I had a question on hedging, but it has been answered. So thank you very much. -------------------------------------------------------------------------------- Operator [22] -------------------------------------------------------------------------------- (Operator Instructions) Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Vassilakis for any closing comments. -------------------------------------------------------------------------------- Eftichios Theodoros Vassilakis, Aegean Airlines S.A. - Executive Chairman [23] -------------------------------------------------------------------------------- Thank you all for attending our call today. As I said, we're happy to report positive results and a very positive trend in the summer. Looking forward to talking to you again sometime early November when I hope we'll be publishing our 9 months trading update, and of course, then you will have a much, much clearer picture for the year, and of course, a first outlook about what we expect to do capacity-wise, destination-wise and how we feel about the overall demand situation for '23. So thank you very much, and have a nice weekend. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.