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Turkish Airlines: Better than expected results

  • THYAO posted US$61mn net income in 1Q21, better than our estimate of US$41mn net income and cons. of US$32mn net loss.
  • The company recorded US$348mn EBITDA which was 48% above our expectation of US$235mn
  • The company’s net debt decreased by 4% q/q to US$14.2bn, implying 10.4x Net Debt/EBITDA in 1Q21

Turkish Airlines posted US$61mn net income in 1Q21, better than our estimate of US$41mn net income and the consensus estimate of US$32mn net loss. The positive impact of US$122mn higher than expected EBIT and US$36mn higher than expected tax income offset by the negative impact of US$156mn lower than expected net financial income. The deviation was mainly due to US26mn higher than expected investment income and US$8mn lower than expected equity pickup profit.

The company recorded US$348mn EBITDA which was 48% above our expectation of US$235mn but 11% below the consensus estimate of US$391mn in 1Q21.

The company’s net debt decreased by 4% q/q to US$14.2bn, implying 10.4x Net Debt/EBITDA in 1Q21 compared to 13.2x in 4Q20.

THYAO posted US$1,796mn consolidated revenue in 1Q21 which was 4% higher than our estimate of US$1,728mn but 2% below the consensus estimate of US$1,825mn. In 1Q21, passenger revenues are down by 55% y/y whereas cargo revenues increased by 77% to US$824mn in 1Q21.  Cargo revenues constituted 46% of total revenues in 1Q21, compared to 18% in 1Q20.

RASK was up by 8% y/y in 1Q21, whereas CASK was up by 25% y/y during the same period. Passenger RASK was down by 14% in 1Q21. International passenger RASK was down by 13% y/y in 1Q21, whereas domestic passenger RASK was down by 22% y/y in 1Q21. Ex-fuel CASK was up by 35% y/y to US$7.2 in 1Q21 which was 15% above our estimate. Personnel cost per ASK increased by 18% to US$1.5 in 1Q21.

Total PAX was down by 52% y/y in 1Q21. On a segmental basis, international and domestic PAX declined by 57% and 45% y/y in 1Q21. Total ASK declined by 47% y/y in 1Q21. Total load factor was down by 1,339bps y/y to 62.6% in 1Q21 driven by 1,462bps and 732bps deterioration in international and domestic load factors, respectively.

THYAO recorded US$348mn EBITDA in 1Q21, 48% higher than our expectation of US$235mn. The deviation was mainly due to US$104mn higher than expected gross profit.

The company’s net debt decreased by 4% q/q to US$14.2bn in 1Q21 from US$14.9bn in 4Q20 mainly due to strong operating performance and lower capital expenditures. THYAO purchased 2 wide body aircrafts in 1Q21, compared to 3 wide body and 4 narrow-body aircraft in 4Q20. In 1Q21 THYAO’s NWC requirement decreased by US$22mn y/y. Receivable days increased by 4-days q/q, inventory days decreased by 2-days q/q and payable days decreased by 9-days q/q in 1Q21. The cash conversion cycle increased by 10-days q/q in 1Q21. THYAO managed to decrease its NWC requirement by an increase in total deferred income to US$899mn in 1Q21 from US$723mn in 4Q20.

After the withdrawal of 2020E guidance in 1Q20, no guidance is given with the 1Q21 results about 2021E.

The company will hold an analyst teleconference today (4 May, 2021) at 17:00PM Istanbul time. (14:00PM UK time)


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