Turkey’s Pegasus Airlines to raise $320mn in debt issuance

Pegasus Airlines (PC, Istanbul Sabiha Gökcen) is set to issue debt securities worth up to TRY2.5 billion lira (USD320.6 million) following a board decision on December 3. According to a stock market filing, the carrier has applied to the Capital Markets Board of Turkey for approval for the plan which, if approved, will be issued to domestic investors in one or more tranches. Pegasus Airlines is Turkey’s second-largest carrier by passenger throughput and revenue after Turkish Airlines (TK, Istanbul New). It is 62.91% owned by the Sabanci family’s Esas Holding A.S while 34.53% is floated on the Borsa Istanbul. The remainding 2.56% is held by four individuals. As with other carriers not only in Turkey but around the world, Pegasus Airlines has suffered greatly as a result of the COVID-19 pandemic. To manage its way through the crisis, management has initiated a cocktail of measures that have reduced cash-based fixed costs by 59% year-on-year resulting in operating costs declining 63% year-on-year despite a 48% contraction in total available seat kilometres (ASKs). In spite of its commitment to a “no-lay-off strategy”, Pegasus Airlines’ personnel costs were 63% lower year-on-year with unpaid leaves and government wage support. However, although it posted a net profit of EUR27 million (USD32.7 million) for the third quarter of the year, buoyed by a reversal from charges incurred for ineffective fuel hedges and net foreign currency gains stemming from higher EUR/USD parity on US dollar-based liabilities, revenue inflows fell 72% with the decline in passengers (-51% year-on-year) and lower yields per passenger (domestic Lira-denominated fell 12% YoY while Euro-denominated international revenue fell 32% YoY). In October, chief executive Mehmet Nane said Pegasus was in line to secure a USD300 million loan from the UK Export-Import Bank to fund its fleet renewal drive.