Pegasus Airlines: a true LCC growing traffic and earnings at a winged gallop

Shares in Turkish LCC Pegasus Airlines commenced trading on 26-Apr-2013 after an IPO that raised TRY649 million (EUR277 million). The IPO prospectus reveals that Pegasus is not only Europe's second most profitable airline (based on 2012 operating margin), but also one of its fastest growing (2008-2013 CAGR in passenger numbers of 33% p.a.). Its unit costs (CASK) place it with Wizz Air and Ryanair as one of Europe's three truly low-cost carriers.

Although Turkey was not immune to recession in 2009, air traffic continued to grow and Pegasus is still on a structural volume growth path not led by the economic cycle. Such a path does not guarantee earnings growth and Pegasus made a loss in 2011. Nevertheless, its low costs and strong presence in fast-growing Turkey and Central/Eastern Europe, should allow it to grow earnings in the future. Indeed, its breakeven operating result for the core business for the traditionally loss-making first quarter (reported 09-May-2013), with RASK up sharply and CASK falling, augurs well for FY2013.