AEGN.ATAEGN.AT
LOADING
|||
Operator: 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 2025 financial results. [Operator Instructions] The conference is being recorded. At this time, I would like to turn the conference over to Mr. Eftichios Vassilakis, Chairman of the Board of Directors. Mr. Vassilakis, you may now proceed.
Eftichios Vassilakis: Yes. Hello. Good afternoon, everybody, and welcome to our results presentation for the first 6 months of 2025. Just to remind that along with me, I have Mr. Kouveliotis, our Deputy CEO and CFO; Stella Dimaraki, our Treasurer and Investor Relations Director; and also Anthi Katelani, our Investor Relations Manager. So all 4 of us are here for you. Happy to answer any questions after my brief remarks. 2025, first half is, again, a quarter and 2 quarters where we had, I would say, modest growth driven by our particular restrictions in terms of how many of our neo aircraft are actually flying versus the ones grounded for GTF. And within the confines of those restrictions, the additional challenge of around 2 months in the second quarter where our important nearby markets, Israel, Lebanon, Israel, in particular, Lebanon and Jordan, we were not able to fly to due to the situation there, what's going on between Israel and Iran and the effect it had to the whole area and our inability to fly for around about 2, 2.5 months, which ended on the second week of July, if memory serves. So within the restrictions that we had, I think we've achieved a very strong set of results. We've managed to provide a revenue increase of 5%, which is 1% higher than the ASK, the ASK growth we put into the market, which was 4%, which meant that within an increasingly competitive environment, we have managed to actually increase our RASK marginally by 1%. This was done in both quarters in terms of growth, as you have already seen that the first quarter was significantly stronger in terms of ASK development versus the second. That is part of 2 things, one planned and one unplanned, first of all, we have indicated also in previous conversations and discussions with you that we see a gradual extension of the season. We also see an increasing pattern of Greeks traveling more. So within those 2 effects, we see ourselves operating growing more in what used to be referred to as the lowest months, so Q1 and Q4 relative to Q2 and Q3. That is also related to restrictions in ATC and airport capacities around our country. But that's the first part. The second part is, of course, what I referred to earlier, the fact that not being able to fly to Israel where at the peak of the season, we have around about 6 flights to 7 flights even a day from different places plus Jordan and Lebanon, that basically make the total amount of flights lost to be 9 for a period of 2, 2.5 months. This cost us around about 100,000 passengers on these routes. And on top of that, we lost around about 35,000 passengers on connecting routes. And in a way, the [ ConneX ] losses are more costly in the sense that those seats are not typically with the cancellation of flights close to departure, you're not able to redirect those lost [ ConneX ] seats route to other sources. So within the confines of that, achieving a revenue increase of 5% and achieving a significant increase in our bottom line and a modest increase in our EBITDA are, I think, significant positives as well as, of course, continuing to build -- to have extremely strong cash flows where despite a payout of dividends of circa EUR 70 million and an increase to our PDPs paid into Airbus by another EUR 40 million. So a total of EUR 110 million that have been spent this way. We still had an increase of circa EUR 60 million -- EUR 70 million, I'm sorry, in our available cash to EUR 840 million. And as we highlighted also on the report on the -- sorry, on the release, this is before, of course, the issuance of our early July bond of EUR 250 million that has further added in the middle -- beginning of July to our cash availability. It's fair to say, of course, that the development of -- the development in the same way that we lost passengers and capacity, both capacity and passengers and profitability in the second quarter due to the geopolitical problem. At the same token, we did have an advantage from the development of the euro and the development also of the fuel price. So there are effects both ways, positive and negative, which we can discuss in detail, if you like. But overall, we're happy what was done within the context of the restrictions that I previously announced or described. Within the difficulties that we're having with the fleet, the positive element is that gradually, we are flying more and more of the 321neo derivative. In particular, as you know, the big delta in seat capacity and in efficiency per seat comes from increasing the mix of those aircraft of the fleet due to the fact that they have a 220-seat capacity relative to 180 to the 320neo and 174 on the 320ceo. The important thing for the company is that going forward, all the remaining Airbus deliveries that we are to take are indeed of the 321neo type. So that is going to be building our efficiency going forward. And it's also important to understand that we are now in September of 2025, entering, I would say, the period for the next 12 to 14 months of maximum number of aircraft that will be on the ground awaiting these checks. Why? Because the aircraft that we have received up until the first quarter of 2024 were the ones affected with the initial defective or potentially defective part. As a result, those 28 aircraft that were accepted until April 2024 when they reach between 20 and 2,500 hours cycles they need to go for their preventive checks. And that maturity level is coming at its peak from what was basically last year 8 and what became 10 at the peak of this summer. Right now, we're at 11 to 12, and we will reach 14 -- between 12 and 14 for the next 12 to 14 months. So we're at the maximum part of the restriction in terms of how many aircraft will be on the ground. On the other hand, as we accept more aircraft gradually, we expect to have, of course, a higher number of flying neos and indeed a higher number of flying neo 321s, which will be contributing to our efficiency and to our competitiveness. I also need to say that I think there are adjustments that we've made in our network this year that have worked well and have allowed us to offset the effects of additional competition in several different markets and the consistent growth of the market to Greece in excess of the rate that Europe's overall shortfall is growing. So adjustments in the network have helped us retain profitability. And at the same time, I think many -- it's encouraging to continue to see that our business class product continues to have increasing penetration, still not at the level that one would like, but certainly much higher than in previous years and much, much higher than pre-COVID. So we've now -- I think this is an important aspect, especially as we're going towards the direction of introducing longer distance routes with the XLRs and the LRs that are coming forward. So we believe that this will also further help in this dimension and will have a reflection on what we should refer to as a traditional network as well. And another issue I would like to refer to is that certainly, there is no shortage of disruptions from air traffic control all over Europe, but also particularly in our country. We are significantly active in a hopefully constructive and consistent way over the last 4 or 5 years at least with our local authorities. And we hope that in the next months and years, the amounts that have been paid in by all airlines, including Aegean will finally be used in an effective way in our local market in order for the problem to be gradually mitigated because it is becoming significant for the quality of service that visitors to Greece overall experience. So we consider that a very important issue, which needs to be addressed, and we have highlighted that perhaps not in an equally aggressive way as others, but we have highlighted that consistently over the last 4 or 5 years. And we have made, I believe, specific suggestions on how parts of these issues could be mitigated. Finally, before we take questions, a word about our investment in Volotea. It's now been exactly a year since we started to invest in that company. I have reiterated that in the annual results, I said we got what we expected in terms of results from Volotea for 2024. I'm happy to report that it seems to be going positively and indeed in a more positive way for 2025. So we are significantly positive about the prospects of the company going forward. It is not yet beyond all possible risks and burdens because it was burdened during COVID by significant losses and significant debt. However, things seem to be evolving in a positive way. And we think that in the next 6 to 8 months, we will be called to make some decisions together with other shareholders about some additional injections of capital in a more significant way. And depending on what exactly the outcome of these conversations and the performance in the company in the meantime, we will also take our decisions about how to further proceed there. But overall, I think we're happy with the results. And we also think that it's possible in the future regardless of the amount of equity that we will now in the company to develop a somewhat complementary service to the regions of Greece. The reason it hasn't been done actually already is mostly because Volotea, much more than Aegean is restricted by the unavailability of aircraft in the market. We are restricted by our GTF Pratt & Whitney cycle. Therefore, we are both relatively conservative with our capacity development over the years. So we will need some more time to develop these particular commercial synergies. But overall, we're happy with the cooperation. So in a nutshell, also one more thing to say, expect our ASK development in the market to be somewhat higher, around about 3% in ASKs in Q3 and significantly higher than that between 9% and 10% of ASKs in Q4. I think it's fair to say that there is, again, a mix of factors going forward affecting our expectations. Demand is strong. Competition is also strong. There are fare pressures in different markets, not everywhere. Some markets are developing positively. I think in a great extent, what we have come to expect is an annual improvement year-on-year, particularly on the September to December period as opposed to the June to August period because, frankly, people are gradually changing their pattern of travel. And even though families will always need to travel for leisure at peak, the rest of customers seem to be modifying their behavior more. So we begin to see a spill of potentially positive results also in the latter part of the year. So I'll stop here and listen to your questions and hopefully, we'll give you a better idea of where we're at. Thank you.
Operator: [Operator Instructions] The first question comes from the line of Lobbenberg Andrew with Barclays.
Andrew Lobbenberg: Thank you so much for the clarity on capacity for the rest of this year. What's the right way to think about what we get in '26 given the more grounding but more deliberate? And then another question, could you perhaps give us more color on which markets are seeing the tougher competition and which are less? And you also spoke of doing some network adjustments that were positive. Can you remind us what those adjustments were?
Eftichios Vassilakis: Well, thank you for the question. Let me first say that I'm not going to ask specific network -- I'm not going to respond to specific network questions because if I respond on where our RASK is improving and where it's deteriorating, it's like guiding other people to go after that. It's a mixed bag, and we are very dynamic about it. I think all airlines have become significantly more dynamic about network adjustments. There are opportunities, and we tend to make, I would say, 2% to 3% -- 1% to 3% ASK differential shifts in our overall market within a 3-month cycle. And whether that's up or down and where exactly it goes is something that we look at diligently and on a continuous basis. And I think the process itself is what brings the improvement. It's not specific trends in specific markets. Again, if you are to look at most incoming markets, most international markets in Greece, you will find between a 4% and a 7% capacity growth in all of them. So you can just not look at capacity and competition and adjust in advance. Now in terms of the aircraft there, I can be much more specific. Today, we have taken delivery of 36 neos, out of which this summer, 10 were idled. So we had 26 aircraft flying. Last summer, we had, if memory serves, 8 to 9 groundings with a total of 33 deliveries. So there were actually only 33 minus 820 books, no it's wrong. It's 30 -- no, 30 minus 8. There were 22 aircraft flying. So there were 4 more neos flying this year than last year. And next summer in peak, we expect to have 45 minus 12, that makes it 33 aircraft flying. So basically, you see an evolution where 8 grounded becomes 10 grounded this year and 12 grounded next year at peak. But at the same time, you see 22 aircraft flying in '24 at peak, new aircraft, of course, 26 this year and 33 next year. And what is particularly relevant even more than the increase in this number is that this year, we had 12 A321neos flying. Next summer, we'll have between 18 and 90 A321neos flying. So 50% more of the larger derivatives at work, which is what we expect more than anything else to support our results. So I hope at least on that part, I have been specific enough for you.
Andrew Lobbenberg: That's helpful. Can I just come back on the network, and I appreciate the commercial sensitivities. But in that second quarter, we saw more growth on the domestic than on the international, which versus recent trends. So we meant -- I mean, what drove that? Was that really influenced by the Middle East? Or was that influenced by commercial decisions by...
Eftichios Vassilakis: I would say both. I mean, certainly, the reason that you didn't have growth on the international network was the Middle East. We were planning to have small growth in the second quarter and a little bit more on the third and more on the fourth. Actually, the peak -- the maximum growth quarters for international were Q1 and Q4 by design. The lowest was going to be Q2 and in the middle was going to be Q3. Why? Because last year in Q3, we were not flying to Israel again and Lebanon and Beirut on and off. So one of the things that confuses the comparisons is that if you have markets that you're coming in and out, not by choice, but rather by what's going on in geopolitics, that makes things more confusing. But no, if we look at the year overall, we were not planning to have more of an increase in domestic than international. We were planning for an equivalent level of capacity increase of both. It turned out to be a little bit different on Q2 due to what happened. Now what I can say about the network is that within the international network. Certainly, we have emphasized a little bit more shorter destinations. So we do have, even if you're looking at the pure international network, a little bit of a drop in the average distance that we cover when we fly internationally. So that's as specific as I can be in the view.
Operator: The next question comes from the line of Caithaml Jakub with Wood & Co.
Jakub Caithaml: Three questions also from my side. On pricing, I understand that you're pricing slightly more softly in the summer than last year. Any comments on the extent of the softness? And also, could you tell us how the pricing was evolving during the individual months of the third quarter? And maybe related to that, are you now and to what extent flying back to Israel?
Eftichios Vassilakis: Okay. Again, I'll start from the end because it's easier. Yes, we're flying back to Israel, and we're flying to Lebanon, and we're flying to Oman and Jordan. And we hope to increase our flying in the Middle East with some new destinations also in North Africa in the next 6 months. It is very important for us because we also sell connectivity through Athens to ensure that near destinations with a distance between 1.5 and 2.5 hours flying in particular, to our South and to our East are well connected and that Athens and the GN or GM and Athens are considered a valid route to the West, to the north, to the Balkans, at least even before we discuss flying further away like we plan to next year. So we are back and we are eager to expand our presence in different markets around there. But of course, I recognize that the stability of the region is not exactly stellar. And as we try to develop our network, we will have some instability depending on how conditions between the nations evolve. By the same token, I'm sure you understand that these markets are largely underserved. And therefore, when things are normal, you can expect a decent return, especially if you are positioned somewhere like Athens, which is convenient for these people either to come and visit for Greece and spend the holiday or business here or indeed just transit through Athens to another destination in Europe. So yes, these markets are important, and we'll continue to try to develop there, and we will accept that this might mean that sometimes we might have to stop for periods of time. And we, of course, are very careful to make sure we fly when other Western carriers fly and when our people are told that the situation is secure enough for us to fly. We don't take risks of that kind knowingly. And of course, #1 for everybody else is safe operation. For all of us, it's a safe operation. In terms of month-by-month evolution of -- I will say that international fares are somewhat lower, not in an alarming way. We are, at the same time, somewhat better 1 or 2 or 3 passengers more on average on people per aircraft. So that on passengers per aircraft, either because we're growing the aircraft or because we're getting small increases of load factors. So there is some measure of offset. And overall, the effect is there, but not super significant. So we'll have to wait a few more months to see how this evolves. At the rate that we are going now, we feel that it is likely to expect an improvement in our overall results for the year. But of course, one can never take this to the bank unless the whole year or most of the year is behind us. So that's the most I can give you in this direction.
Jakub Caithaml: A quick follow-up on the Middle East. In terms of scale of the return? I mean, by September, I mean, are you back to where you would have been in your original expectations fully?
Eftichios Vassilakis: Yes. In terms of capacity deployed, yes.
Jakub Caithaml: Understood. Then the second question also on growth and pricing in the fourth quarter, where you are guiding for brisk growth of 9%, 10%. What kind of yield or RASK implications do you think this will have? And can you comment on the competition schedules, how they are looking for the shoulder season in the winter?
Eftichios Vassilakis: The competition is also more or less applying higher increases in the winter than in the summer in terms of capacity. This is a pattern that we have seen for the last 3 years. So their capacity is higher also in winter, more so than in summer. And I don't have yet visibility on what the overall effect on RASK can be. But I would expect in terms of international fares, which is not necessarily RASK, the things to be a little bit softer again following the trend of the summer, I would consider that more likely than the reverse. But I have to say by the same token that we have seen and I've seen other airlines refer to that, an increasing trend of last-minute bookings. So it is becoming somewhat more difficult to be able to forecast exact RASK or exact load factor.
Jakub Caithaml: Got it. This is very helpful. Last question from my side on engines. You mentioned that if I understood correctly, the powder metal engine issue can be resolved in 24, 28 months. Just to confirm, is this referring to today? Or is this referring to end of June? And the broader question on engines, could you share anything at this point on your expectations regarding the availability of the HS+ section upgrades in '26, '27, how many of the engines may be able to get this that you will be sending for shop visits? Or is there anything that you could share on the advantage engines availability and time line?
Eftichios Vassilakis: Okay. First of all, I'm not sure I'm qualified to answer all of these questions, but I would at least answer the questions referring to the date and the significance of the number or the level of the number of the grounded aircraft. So as I said earlier in the discussion, the highest number, a number between 12 and 14, it will go up and down between those 2 figures will exist between September '25 and September, October '26. From October '26, we start having a decline, which will gradually lead to something like 7 aircraft in, I would say, September '27. And then between September '27 to March '28, it will probably go down to 0. Now this is -- takes into account what we have been promised in terms of slots for induction of engines for the next 12 months and then some expectation for -- in an equivalent fashion for '27. Unfortunately, these numbers are moving targets, but we believe that these numbers that we're giving are relatively conservative. We are continuously discussing and pushing Pratt & Whitney to give us priority in slots. And we, of course, have said many, many times that the compensation that we get does not fully cover the losses that we have from higher maintenance, a less efficient fuel consumption and of course, loss of seats per flight. The compensation barely covers the lease cost of the aircraft that is sitting down, but it is not covering the opportunity cost of not flying the improved aircraft, which is, of course, the reason why we made the investment. And on top of everything else, it makes our balance sheet more bloated because there are a significant number of idle leases, but we are not -- which are booked as a liability, but what we will receive as a compensation is not booked as an asset, not forward only once we receive it. Therefore, you have a level of inefficiency in your balance sheet. You have a level of inefficiency in your cost and you have a level of inefficiency in your utilization, which is, of course, the same thing as cost. And the 24 to 28 months is from the date of the announcement, meaning yesterday. So that's why I think the 28 months will expire around about early '28. I hope I have been thorough enough in the response.
Jakub Caithaml: This is helpful. So I understand that at this point, it doesn't make sense to discuss the potential engine upgrades from Pratt & Whitney where they may be replacing some of the parts in the hot section of the engine...
Eftichios Vassilakis: Mr. Kouveliotis would like to respond to that. Here he is.
Michael Kouveliotis: The Advantage engine, yes, as the specs presented by Pratt & Whitney are promising. And we are expecting when the time comes to have more durability on time on wing. But actually, it's quite early to have a clear opinion and view because we are expecting to deliver some -- the first engines of the Advantage within '26. But again, it's not something very firm. So we hope and we believe that this is going to be an improvement, but too early to have.
Eftichios Vassilakis: I mean in a nutshell, all of us knew that the Pratt & Whitney GTF engine was a new technology and that it presented potential benefits of evolution with versions coming out that would further improve mostly the fuel efficiency. So that was always the case there. Unfortunately, as you know, for the last 2 years already and for the next 2 years, as we've just said, this whole situation has been clouded by the problem regarding the early inspections and the effective grounded aircraft. So I think all of us need to get ourselves out of the first situation before we consider the second. But yes, we all think that there is potential for this engine to evolve in a positive way. But let's see the main problem we get out of the phase before we start counting what the benefit of that might be. And frankly, we are also all eager to make sure that we keep on the pressure to Pratt & Whitney to maximize either direct payouts for compensation, which are there, but they are inadequate or indeed to accelerate the availability of slots so that the program -- the problem can be dealt with more expediently.
Operator: The next question comes from the line of Kumar Achal with HSBC.
Unknown Analyst: I have 3 actually. So first of all, in terms of competitive landscape, so you mentioned that the increasing competitive environment. So just wanted to understand how the competitive environment looks like at Athens Airport versus the regional airports, the big cities. And especially, if I look at the table, it looks like the traffic growth at the airports operated by Fraport was quite slow, 1% flight growth and 2% passenger growth in the first half. So do you think with these kind of demand growth slowdown, the competitive environment could remain strong? Or do you think there is a possibility people could sort of take out the capacity? How do you see the demand versus supply going forward?
Eftichios Vassilakis: Well, certainly, the demand growth -- sorry, the supply growth has been slower overall in Greece than in the past 2 years, where we were in '23, still in the, let's say, recovery path post-COVID and '24 had a strong follow-on both for Athens and all the regions. This year, we're seeing certainly a resurgence of growth of capacity to the north, to the Thessaloniki market, still some significant growth in Athens, but Athens is beginning to be significantly restricted both by ATC issues and also by terminal issues. The airport became facilitated, which is Level 2 this year for the first time. It will be even, I would say, more effectively facilitated because the ATC restrictions have been better translated into the coordinators planning next year. So that should -- well, hopefully allow us to operate a little better and at the same time, make it a little bit more difficult for too many people to add capacity. I think Greece has had a very good run. in terms of capacity development and demand development. And I think we should all be a little bit more moderate on what we expect going forward. Now this is still early to talk about what will happen next year. The only thing that I am certain about is that there will be some capacity growth. I would expect it to be, again, somewhat at least 1% or 1.5% higher than whatever the average capacity growth to Europe is going to be. We are now based effectively in a material way in 4 airports, Athens, which, of course, is the core of the network and the provider of all the connectivity and the network synergies. Thessaloniki in the North, where we have significantly invested this year and where we expect to invest even more next year. Larnaca in Cyprus, where we also have invested this year, and we expect we will invest some more again next year. And Heraklion in Crete, which is a very important, the second airport in the country, but is -- has been restricted in terms of capacity for many years now due to the terminal basically the terminal, the airport and the terminal itself. Heraklion is going to be replaced by a new airport in Crete probably March '28, so 2.5 years from now. We have 2 more years of operation on Heraklion, and we certainly consider Heraklion and the new airport of Heraklion a potential area of growth for us in the future. So these are the 4 places out of which we will be developing our capacity. I would say, if I were to say what's going to have the highest growth into next year, possibly that would be Thessaloniki because Thessaloniki is among the main Greek airport, the one which has lagged behind in terms of recovery from post-COVID. The average in Greece today is about 30% higher capacity and passengers relative to COVID, 30%, 32%. Thessaloniki is, I believe, right now at 15% and has shown better recovery trends during the last 12 months. So I don't know, I don't know how much I have answered and how much more you need.
Unknown Analyst: No, perfect. And then you mentioned that Athens Airport remains constrained...
Eftichios Vassilakis: It's beginning to be partially constrained. It's not Heathrow, right? But certainly, there are now times in the day, and there are a lot of times in the day where there will be significant difficulties in increasing capacity for us and for others [indiscernible].
Unknown Analyst: But does that mean there will be more opportunity or better opportunity for you to sort of get better pricing out of Athens if the capacity remains high, do you think?
Eftichios Vassilakis: I promise to let you know as soon as I do, but I really don't know. I mean one would like to hope that. But in effect, what I'm mostly hoping for is that we reduced the number of operational -- the amount of operational problems that we are facing. Greece at this moment is not ranking well across Europe in delays, in ATC problems, we're ranking quite low. And it's impossible to escape the problems of your home country and of your hub if you are a carrier, particularly a carrier that does significant transfers in the airport. So what we're mostly concerned about is to improve -- that further improve the quality of our operation. The last 3 years have been very difficult in this direction for on-time performance due to these reasons. So we are more eager to see ATC problems and capacity problems expanded so that our operation regains both a certain amount of quality towards our customers, but also a lot of cost savings for us because delays in the air, delays on the ground, compensations for passengers, misconnections, all that stuff costs money and it costs to brand value. And those things are very important for us, and we hope this will be corrected. This will not be corrected next year and probably not the year after that. Will this create the adverse effect of somehow being able to support RASK? Possibly, but I don't know. I don't know.
Unknown Analyst: Right. My second question is around the cost. So I can see in the first half, many of your costs have increased significantly, like your handling cost was up 20%, catering cost was up 14%, employee cost, 13%, other operating costs, 17%, while the capacity was ASK is up only about 4%. What's going on there? And particularly handling charge has [indiscernible] gone up by almost 20%, as I said. So is that because the new airports are pretty more expensive? And if that is the case, do you think the low-cost carriers will find it hard to stay? How do you see that?
Eftichios Vassilakis: Let me say this. The -- well, certainly, the handling cost increase is the most important one, and that is related to basically increased labor costs in the country, new contract after 5 years, for the next 5 years, and that, in a great extent, has brought the increase in the handling cost. Catering is largely due to the higher amount of business class to some degree, but also to our effort to continue to provide a high-quality product. Perhaps we have overdone it a little bit there. The rest are not really significant. The part of the employees, the second -- the running rate as we go towards the year is actually at a much lower level. I would expect it to close the year between 9% and 10%, so significantly lower than 13%. Obviously, we were overstaffed and we were [ over planed ] as well in the second quarter relative to the capacity we actually displaced because, as I said, we didn't fly to 3 important markets. So that at least cost us 3% of our capacity for that quarter. Now also, you have to remember that we are continuing to beef up the staffing of our MRO. The MRO itself has added about 170 people in the last 18 months. And that is an effect on the payroll cost that is unrelated to the size of the operation. Therefore, I mean, to the size of the flight operation. So that is a factor there as well. I think that's what I have. I think the operating costs altogether did not have a very significant increase. The overall operating cost increase of the company was 5% in the first half. So this is the aggregate of everything -- that's excluding fuel. Including fuel. All right. So that includes fuel, which, of course, had a benefit, somewhat benefit because, of course, we were also hedged at the same time. But the overall expense was 5% for the operating expenses relative to a 4% increase in ASKs, right?
Unknown Analyst: Okay. My last question is around your long-haul network. So you've just started -- you've just decided to start the flight -- direct flights to India. And you mentioned you're going to increase the long-haul operation. So I just want to understand...
Eftichios Vassilakis: Longer haul, not long haul.
Unknown Analyst: Yes, yes, exactly. So do you -- I mean, apart from India, do you have any other countries in plan or in mind what countries you are thinking about? And then if you find these longer-haul operations more profitable, do you think you can expand it? Or you're sticking yourselves to 4 XLRs which are planned currently?
Eftichios Vassilakis: No. First of all, we don't have -- we have 2 XLRs and 4 LRs. So there are going to be, in aggregate, 6 aircraft that are competent to fly beyond 6 hours. Now we have told you in the past that we expect to invest these aircraft to a combination of routes that require the ability to fly further away, longer distance, but also to routes outside the EU that require a different aircraft configuration than the one that we're flying intra-Europe, which means a higher level business class because when we fly today to Saudi, as an example, or to Dubai, and we are -- we call ourselves a full-service carrier. We are competing with carriers on the routes to Athens as an example, to Riyadh or to Dubai where we have effectively an empty seat between 3 seats in business class, but other people have dedicated significantly more comfortable business class product. So the investment in the LRs and the XLRs is a combination of an effort to try to test longer distances, but also a recognition of the requirement to be able to serve customers outside the European Union in a product that looks more like the competitors that we have to face that don't call themselves low-cost carriers in these markets. So it's a combination of quality and ability to fly longer. Now our experience needs to be created out of the hopeful success of these initial efforts, be it how the improved product will be received in Dubai or be it how well we will do in the routes to India. So that's priority #1 for the next 2 years. And that's -- given we're getting 2 aircraft in '26, 2 aircraft in '27 and 2 aircraft in '28 out of these 6, as you might imagine, it will take us at least until the end of '27 to understand the initial response to these efforts. So beyond deploying these aircraft to India and beyond, which, by the way, India has got, as you know, many possible major destinations you can fly to. We're starting with Delhi and Mumbai. It doesn't mean that we'll be restricted to that if we seem to be doing well in that route. It's very important to note that just 2 days ago, we announced a signing of an MOU with IndiGo to develop code sharing to the Indian market. They will also be flying to Greece as of next year. But through their presence in India, we will have access and distribution to, of course, all the places within India that they fly to, and that's very important for us because Greece is small and India is big. So it's important to be known also in that country. So no, I don't have a particular idea of where beyond India. What I can say for sure is when and if Russia comes back in line, Russia is going to be served by some of these aircraft, mostly due to the comfort level and less so to the distance. The Indian market has got a lot of potential for development in the Middle East, whether it is Saudi Arabia, Dubai or some other potential destinations are going to take up capacity of the aircraft. So until the end of '27, I doubt very much we will see some other routes. Now if there appears to be some seasonal lags where we can try some long-haul leisure routes like Maldives or Seychelles in the winter for Greek people to fly out of Greece to go there, that will only happen if the seasonality pattern of usage of these longer distance aircraft seems to be such that it allows for idle capacity to go in those markets. We will not discontinue India to fly to -- for 3 months to the Maldives for a few Greeks to be able to go there directly, unless it doesn't make sense to fly to India in the winter. Our hope is that it will make sense to fly to these markets around the year. And our hope is that through flying to these parts of Asia that we can reach, we can further improve our seasonality because the pattern of travel of some of these nations is not exactly the same as Europeans. They tend to be a little bit less seasonal or place more -- some more interest in winter. And of course, whether that is with final destination Greece or somewhere in Europe, in both cases, it's interesting for us because we need the [ ConneX ] as well more in winter. So no, we don't have yet too many other ideas about where these aircraft might fly.
Operator: [Operator Instructions] The next question comes from the line of [ Karanika Savagillos ] with NBG Securities.
Unknown Analyst: Just a follow-up on unit costs for the second quarter. If my estimations are correct, there was around 7% increase in unit costs, excluding fuel at the operating level, EBIT so -- which seems a little bit high given the euro strength. Can you give us some more color behind this increase? And is it something that we could expect in the coming 2 quarters of the year? And also, if I may, perhaps some color on some big deviations in 2 expense lines, other operating expenses and leases?
Eftichios Vassilakis: Yes. Again, underutilization of aircraft will cause costs to go up. Q2, we had basically 3 aircraft that were supposed to be flying in those 8 to 9 daily 2.5 to be precise, of aircraft that were supposed to be flying to these routes that were discontinued due to the geopolitical part idled and also the people manning the aircraft, maintaining the aircraft, supporting the aircraft. So the loss of 2.5 or 3% of expected capacity does not bring you, excluding fuel, as you said, an equivalent amount of saving because a lot of the things there stay constant, the aircraft, the people, okay, and the infrastructure to support them. So that's the reason that you had this particular spike in the second quarter, which is not the case for the whole -- it is not the case for the full 6 months, and it will not be the case for Q3 or Q4. I said earlier on also that both employee expenses and some other expense will be mitigated. The ones that will continue to have a higher than the activity, let's say, increase are handling for sure, and to a certain degree, maintenance costs and catering. The reason for the increase in the maintenance cost is like mainly the fact that we do not operate -- that we continue to operate the older aircraft which are getting older due to the grounding of the -- some of the younger aircraft. And that's a problem that will be retained to some degree while we still have the GTF problem in the next 24 to 28 months, as I said earlier on. Now in terms of why there is a drop in the operating -- you call it in the leases, the leases refer to ACMI. They are not the long-term operating leases or finance leases, which are dealt in EBITDA or EBIT. Those leases were committed in 2024 used to cover charter operation, and we didn't use ACMI again this year. So that's why there is a big delta on that line, a positive big delta on that line.
Operator: Mr. Karas, have you finished with your questions?
Eftichios Vassilakis: Okay. Is there another question?
Operator: Ladies and gentlemen, no, there are no further questions at this time. I will now turn the conference over to Mr. Vassilakis for any closing comments. Thank you.
Eftichios Vassilakis: Thank you all for attending. I know you'll be eager to follow how we continue to do in the year. I think I have tried to pass on a cautious optimism for the overall year. Not saying that there are no challenges, but that we think between the advantages and the problems will come out ahead of where we were last year. And I think in an airline where you see the cash flows as positive as ours, you shouldn't be too worried. So having said that, enjoy the rest of your day, and I hope to talk to you again in a few months. Thank you.
Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.