Turkey’s Pegasus Airlines Posts Profit in Run Up to Share Sale

Turkish discount carrier Pegasus Airlines reported a full-year profit as it prepares for an initial public offering that will help fund the purchase of 75 single-aisle aircraft from Airbus SAS.

Istanbul-based Pegasus, which serves 39 foreign cities and 24 in Turkey, posted net income of 126.3 million liras ($70 million) in 2012, versus a 14.1 million-lira year-earlier loss, according to the IPO prospectus published on its website.

Pegasus will become the second carrier listed on the Istanbul stock exchange after Turkish Airlines (THYAO) when local private-equity firm Esas Holding AS cuts its stake. Originally founded by Irish airline Aer Lingus Group Plc (AERL), Silkar Investment and Turkish tourism group Net Holding AS (NTHOL) in 1990, the low-cost operator is looking to add more domestic services and routes to the Middle East and North Africa as demand for travel grows.

“Proceeds from the IPO will be used in part to finance new aircraft purchases and also to expand the network and strengthen liquidity,” Pegasus said in the sale prospectus. “The Turkish market is underpenetrated and offers room for good growth.”

Esas Holding, which owns 96.5 percent of Pegasus, with the rest held by the family that controls the investment firm, will sell 32.08 million shares, equating to a 31.4 percent stake, the prospectus reveals. That should lift the low-cost carrier’s capital to 102.3 million liras from 75 million liras.

Fleet Plan

Another 3.21 million shares could be made available should there be sufficient demand, it said. Esas, which bought Pegasus in 2005, has hired Barclays Plc (BARC) and Is Yatirim Menkul Degerler AS (ISMEN) to run the IPO, people familiar with the matter said Feb. 25.

Pegasus, which currently operates 42 Boeing 737 aircraft with five more due through 2015, ordered 57 A320neo and 18 A321neo planes from Airbus in December, with an option to buy 25 more for a total list price of $12 billion. Deliveries are planned from late 2015 through 2022.

The carrier’s passenger count rose 20 percent last year to 13.6 million, or about one-third of the near 39 million total at Turkish Airlines. Its load factor, a measure of seat occupancy, advanced 3.2 points to 78.1 percent in the 12 months.

Pegasus Hava Tasimaciligi AS, as the carrier is known in Turkey, boosted sales 30 percent to 1.92 billion liras in 2012 and had 1.42 billion liras of debt as of the year’s end, including 1.24 billion liras of long-term debt for financial leasing of aircraft. In addition to IPO proceeds it plans to tap export-credit agencies to fund the Airbus purchase.

Pegasus also owns 49 percent of Air Manas of Kyrgyzstan and a majority stake in Izmir, Turkey-based IzAir, after selling a 46.8 percent holding to Air Berlin Plc (AB1) in September, according to the prospectus. Esas in turn owns 12 percent of the German company, Europe’s third-biggest discount carrier.

To contact the reporters on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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