Earnings Report /
Turkey

Turkish Airlines: 2Q22 review – Better-than-expected operating results and bottom-line

  • Turkish Airlines posted US$576mn net income in 2Q22, 30% higher than our est and 33% higher than cons.

  • The company recorded US$972mn EBITDA which was 16% above our expectation of US$840mn.

  • In 2Q22, THYAO recorded 21.4% EBITDA margin 265bps higher than our estimate of 18.8%.

Mustafa Bayram
Mustafa Bayram

Equity Research Analyst

Follow
ATA Invest
18 August 2022
Published byATA Invest

Turkish Airlines posted US$576mn net income in 2Q22, 30% higher than our estimate of US$444mn net income and 33% higher than consensus estimate of US$434mn net income. Higher than expected EBITDA and lower than expected tax expense were the reasons behind higher than expected net income in 2Q22.

The company recorded US$972mn EBITDA which was 16% above our expectation of US$840mn. In 2Q22, THYAO recorded 21.4% EBITDA margin 265bps higher than our estimate of 18.8%.

The company’s net debt decreased by 10% q/q to US$10.2bn, implying 2.5x Net Debt/EBITDA in 2Q22 compared to 3.12x in 1Q22. 

THYAO posted US$4,535mn consolidated revenue in 2Q22, 1% higher than our estimate of US$4,475mn. In 2Q22, passenger revenues surged by 3% y/y to US$3,375mn whereas cargo revenues decreased by 5% y/y to US$1,064mn during the same period.  Cargo revenues constituted 24% of total revenues in 2Q22, compared to 43% in 2Q21 and 32% in 1Q22.

In 2Q22, RASK was up by 30% y/y, while CASK was down by 3% y/y. Passenger RASK was up by 46% in 2Q22. Ex-fuel CASK was down by 28% y/y to US$4.24 in 2Q22. Personnel cost per ASK decreased by 14% y/y to US$0.98 in 2Q22.

Total PAX surged by 123% y/y to 18.2mn in 2Q22. On segmental basis, international and domestic PAX increased by 169% and 71% y/y, respectively, to 11.7mn and 6.5mn in 2Q22. Total ASK increased by 99.6% y/y in 2Q22. Total load factor was up by 17.37pts y/y to 79.6% in 2Q22. In 2Q22, international load factor increased by 18.72pts to 79.2% whereas domestic load factor increased by 10.06pts to 83.6% in the same period.

THYAO recorded US$972mn EBITDA in 2Q22, 16% higher than our expectation of US$840mn. In 2Q22, gross margin increased to 20.7% from 16.1% y/y, beating our estimates by 223bps. In 2Q22, OPEX/Sales decreased to 9.2% from 11.7% y/y, lower than our estimates by 7bps. 

The company’s net debt declined by 10% q/q to US$10.2bn in 2Q22 from US$11.4bn in 1Q22 mainly due to strong EBITDA. THYAO purchased 6 narrow body and 1 wide body aircrafts in 2Q22. In 2Q22, THYAO’s NWC requirement decreased by US$1,366mn q/q. Receivable days decreased by 7-days q/q, inventory days decreased by 3-days q/q and payable days increased by 1-days q/q in 2Q22. Cash conversion cycle decreased by 10-days q/q in 2Q22.

The company will hold an analyst teleconference today (11 August, 2022) at 17:00PM Istanbul time.