ΑΕ GEAN AIRLINES S.A.

GENERAL COMMERCIAL

REGISTRTY 1797901000

ANNUAL FINANCIAL

REPORT

FOR THE FISCAL YEAR 2022

In accordance with art. 4 of Law 3556/2007 and the Board of

Directors’ Resolutions of the Hellenic Capital Market Commission

1. Statements of the Board of Directors' Members

(in accordance with art. 4 paragraph 2 of Law 3556/2007)

It is hereby stated that, to the best of our knowledge, the Annual Financial statements of Aegean Airlines S.A. for the period 1 January 2022 to 31 December 2022, which were prepared in accordance to the International Financial Reporting Standards as adopted by EU, truly reflect all Assets, Liabilities and Shareholders’ Equity along with the Income Statement of the Company, as well as of the companies included in the consolidation.

It is also declared that, to the best of our knowledge, the Board of Directors’ Annual Report truly reflects the business developments, the performance and the position of the Company, as well as of the companies included in the consolidation, including the key risks and uncertainties they are facing.

2.1 Report of the Board of Directors

Introduction

The Board of Directors’ report of the company “AEGEAN AIRLINES S.A.” (hereinafter called the “Company” or “AEGEAN”) covers the twelve-month period ending 31.12.2022 and has been published on the Company’s website under the European Single Electronic Format – «ESEF», in accordance with the provisions of Law 3556/2007. The content of this report has been prepared in accordance with the provisions of articles 150-154 of L. 4548/2018, article 4 of L.3556/2007 and decision 8/754/14.4.2016 of the Hellenic Capital Markets Commission.

The Consolidated and Parent Company Financial Statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as endorsed by the European Union.

This report contains financial and non-financial information of AEGEAN and its fully owned subsidiaries Olympic Air S.A. (100% ownership), Aegean Cyprus Limited (100% direct and indirect ownership), Hellenic Aviation Maintenance Center S.A. (100% ownership) and its subsidiary Animawings Aviation Srl. (51,00% ownership), (hereinafter the subsidiaries jointly with the Company, called the “Group”), description of significant events that took place during the current financial year, description of anticipated significant risks and uncertainties for the following financial year, disclosure of material transactions that took place between the Company and the Group and their related parties, presentation of qualitative information and estimates relating to the development of operations of the Company and the Group for the following financial year, as well as presentation of the most significant non-financial information that has an impact on the Company and the Group.

The Company and the Group operate in the aviation sector, providing services of air transportation for passengers and cargo with domestic and international, scheduled and non-scheduled flights, in short and medium haul destinations. Moreover, they offer airlines-related services, aircraft technical support and ground handling services.

Olympic Air and Aegean Cyprus Limited are wholly owned subsidiaries (100% direct and indirect ownership) of the Company. AEGEAN also owns a 51,00% stake of its subsidiary AnimaWings Aviation Srl.

On 15.10.2022 the Company has established a company under the name Hellenic Aviation Maintenance Center Single Member S.A which is a 100% subsidiary company of the Group.

On 09.11.2022, the Company has established the company with the name "Aegean Airlines Executive Sole Proprietorship S.A.", which is also a 100% subsidiary company of the Group.

The parent company Aegean Airlines S.A. is listed on the Athens Stock Exchange. AEGEAN’s bond loan is also listed on the Athens Stock Exchange.

The Ordinary General Meeting held in July 2022 has approved the change of the Company’s Head office from the Municipality of Kifissia to the Municipality of Spata.

The Company has branches and offices in Greece and abroad. The majority of the administrative staff, the flight and technical operations center are based at the Headquarters of the Company, in Athens International Airport “Eleftherios Venizelos” Building 57, while the Customer Service and the Call Center departments are located at the Branch of the Company, in Kifissia.

The Company’s business activities include, among others, the following:

services related to the transportation of passengers and cargo, with domestic and international, scheduled and non-scheduled flights;

airline services of all kinds;

aircraft technical support and ground handling services;

participation in domestic or foreign companies with similar activities (related in the tourism sector);

establishment of subsidiaries and agencies;

import, trade and leasing of aircraft and spare parts.

Mission

The Group’s mission is to provide high quality services across all travel stages, via an extensive network of domestic and international destinations. Key pillars in the Groups’ mission implementation consist of the investment in training and continuous development of its employees and the customer- centric approach.

Vision

The Group’s vision is to operate responsibly, contributing to the sector and economy development, creating value to all stakeholders.

Corporate Values

The Group’s operation is governed by ethical and professional standards and the values that stem from its mission and vision. They constitute the foundations of the Group’s growth and are focused on the “continuous development, quality service & reliability” approach.

Continuous Development

- Investment in innovation, aiming at the continuous improvement of its services and the enhancing of passenger travel experience;

- Investment in employees training and development;

- Sustainable growth with multiplier benefits to the tourism sector, the economy and all stakeholders;

Quality Services

- Customer-centric approach and authentic high-quality passenger service culture;

- Support and development of Greek tourism product;

- Partnership with key sector stakeholders, targeting at the promotion of Greek tourism;

Reliability

- Conduct business in a responsible and respectful way towards the environment, its employees, passengers, suppliers and local communities;

- Best representation of Greece abroad;

- Support of the local communities.

Strategic Priorities

In an industry characterized by intense seasonality, cyclicality and increasing competition the strategic priorities are the following:

- Efficient commercial policy, focusing on network planning and revenue management, efficiently adapting in the volatile market conditions;

- Maintaining competitive unit costs, focusing on the fixed and variable costs related to the aircraft fleet, following the recent investment in the Airbus A320neo family fleet, as well as on the distribution costs;

- Investing in further development and exploitation of the loyalty program;

- Integration of modern technologies and their application into efficient solutions for the passengers, improvement of the travel experience and the Group’s business needs;

- Exploiting the opportunities offered from the new fleet, targeting the improvement of the passengers services, the reduction of CO2 emissions and enhancement of the Group’s competitiveness overall;

- Investing in training, aiming to skills and talents development;

- Creation of a Maintenance, Repair and Overhaul Facility and a Simulator and Training Center for pilots and cabin crew members;

- Strategic partnerships with key sector stakeholders, promoting the Greek tourism product and its quality characteristics.

Macroeconomic Conditions Overview

-Global economy faced major challenges in 2022

After a strong recovery in 2021, global economy faced serious challenges in 2022. The economic consequences of the war in Ukraine combined with soaring prices on energy, raw materials and food, eroded global economy’s growth rate, accounting for the slowdown in the growth of international trade. China’s ongoing lockdowns further disrupted global supply chain. Despite rising cost of living, private consumption showed resilience, on the back of savings built up during the pandemic and fiscal support measures, as pandemic restrictions abated.

-Restrictive monetary policy by the Central Banks

The Central Banks in USA and EU proceeded with interest rate increases, in an effort to contain inflation. ECB raised its interest rate on the main refinancing operations (MRO) from -0.50% to 2.50% in 5 consecutive meetings since July 2022. ECB estimates that interest rates have to continue increasing at a steady pace until they reach at levels that are sufficiently restrictive to ensure a timely return of inflation to its 2% medium-term target.

-Greek economy showed resilience despite the increased uncertainty

Greek economy in 2022 continued its good performance, growing at a steady pace while benefiting from private consumption, investments and the revival of tourism which is closely tied with country’s economic recovery and growth. Private consumption pick-up is consistent with triggering spending among households that had been postponed during the pandemic. The economic climate index in 2022 showed resilience, falling by only 0.9 points (to 105.7 in 2022 against 106.6 points in 2021), when correspondingly in the Eurozone the drop was 9.3 points (to 101.5 from 110.8 units in 2021). Inflation rose significantly mainly due to soaring energy and food prices, affecting the real disposable income.

- GDP growth rate is expected to decelerate mainly due to economic activity slowdown in the Eurozone and the weakening in household consumption on the back of heightened inflationary pressures. Prudent use of available funds from Recovery and Resilience Fund will allow the country to become more resilient in a slowdown.

- In January 2023 Fitch Ratings has upgraded Greece's Long-Term Foreign-Currency Issuer Default Rating (IDR) to 'BB+' from 'BB', similar to S&P rating, one notch below investment grade.

Data: IMF, European Commission

-High volatility in oil price and the euro dollar exchange rate

Russia’s invasion in Ukraine and the ensuing EU and US oil sanctions against Russia caused high volatility in the price of crude oil in 2022. The price of crude oil in 2022 followed an upward trend from $77,78/bbl on 31/12/2021 to $85,91/bbl on 31/12/2022, with the average price reaching $99,04/bbl from $70,95/bbl in 2021. Crude oil price spiked to $125/bbl in 2021.

The average price of jet fuel (JET FOB MED) increased by 80% in 2022 compared to 2021. The jet fuel crack spread increased significantly, reaching an all-times high level.

USD appreciation during 2022 disrupted international trade denominated in USD. Euro currency appreciated in the last quarter of 2022 following rising interests’ rates by the ECB and the subsequent implementation of quantitative tightening policies by the authorities. USD strengthened against the Euro with the exchange rate standing at 1,0666 on 31/12/2022 compared to 1,1326 on 31/12/2021. The average euro/dollar exchange rate in 2022 stood at 1,0532 compared to 1,1827 in 2021.

-Passenger traffic recovered over the course of the year

Aviation industry recovered a significant part of its losses, caused by the pandemic outbreak due to strong demand. The first couple of months were greatly affected by the highly contagious Omicron variant, while Russian invasion in Ukraine at the end of February, created only a short-term instability in the outlook for the summer period. Global air passenger traffic regained momentum and continued to recover from May onwards. After two years, which were heavily affected by the pandemic, the accumulated desire for travelling, combined with the lifting of travel restrictions, low unemployment rates and the significant increase in households savings during the previous years contributed to a significant recovery in total passenger traffic and strong pre-sales of tickets for the summer period.

-Global air traffic exceeded two-thirds of the respective pre-pandemic levels

Airline sector in 2022 showed a significant recovery in total capacity offered, reaching 71,9% of 2019 Available Seat Kilometers, a 39,8% increase compared to 2021. Global air traffic, as measured in Revenue Passenger Kilometers, in 2022 reached 68,5% of the respective pre-pandemic levels, 64,4% higher compared to 2021, according to IATA. Load factor reached 78,7%, 3,9 percentage points lower compared to 2019.

Within this complex business environment, according to IATA's latest forecast, the industry is expected to narrow its losses to $6,9 billion from $42 billion losses recorded in 2021. The yield increased by 8,4% compared to 2021. EBIT margin is estimated at -1,3%.

European airline sector is expected to record losses, totaling $3,1 billion in 2022, with EBIT margin close to -1,3%. ASKs reached 82% while RPKs reached 78% of the pre-pandemic levels.

According to IATA estimates, in 2023 the industry is expected to return to profitability amounting to $4,7 billion, recording a marginal EBIT margin of 0,4%. Marginal profitability of $0,6 billion is expected for European airline sector, with an EBIT margin of 0,6%.

-Flight activity in Greece during the summer period exceeded 2019 levels

Flight activity at all airports in Greece recovered at a faster pace compared to the rest European airports. According to Eurocontrol data, Greece was the only Mediterranean country where total flights exceeded pre-pandemic levels, with the rest of the Mediterranean countries standing at an average rate of 9% lower compared to 2019 flight activity. In August 2022 total flights to and from Greece were 6% higher compared to August 2019, with the rest of the countries in Europe either returning to pre-pandemic levels (Croatia and Portugal) or falling short by an average rate of 8% compared to August 2019.

According to Hellenic Civil Aviation Authority total flights increased by 0,6% compared to 2019.

Within this complex environment, Greece managed to gain market share against competing countries by recording higher international passengers’ traffic during the summer period, which continued with increased dynamics in the fourth quarter as well.

Domestic and international traffic for the country reached 63,5 mil. in 2022, marginally lower compared to 2019. International traffic recovered faster, reaching 47,3 mil. passengers, marginally higher than 2019. Domestic passenger traffic reached 16,1 million, covering 95% of 2019 passenger traffic.

Athens International Airport’s traffic reached 22,7 million passengers, exceeding the respective 2021 levels by 84,1% but still below the 2019 levels by 11,1%. Domestic passengers exceeded 2021 levels by 60,3% and international passengers by 98,3%, while compared to 2019 levels, domestic passengers were below by 4,7% and international passengers by 13,9%.

Regional destinations recorded the highest recovery in international traffic, during the summer months. The airports with the highest tourist traffic recovery are Aktion, Paros, Santorini, Skiathos, Corfu, Mykonos, Rhodes, Kefalonia and Chania compared to 2019. Thessaloniki Airport recovered 88% of 2019 passenger traffic in 2022. During the first nine months of 2022, according to Bank of Greece data, arrivals from Germany and Great Britain were at the top of total incoming passenger arrivals, followed by arrivals from France, the Netherlands and Austria.

Business Developments

Robust demand combined with network expansion and fleet growth, following the new aircraft deliveries, contributed to a gradual increase in capacity offered and thus to passenger traffic recovery.

The year started with relatively lower activity and load factors in the first quarter due to Omicron variant and high seasonality. When all the COVID-19 prevention measures were lifted during the second quarter, the Group was able to restore its capacity, thus recorded an improvement in its load factor. Due to strong demand for leisure travelling to Greece, the Group was able to record further improvement in its load factor, exceeding 83% in the third, and seasonally strongest, quarter. Total capacity offered reached 93% of pre-pandemic levels, measured in available seats. The positive momentum has continued in the fourth quarter as well.

In 2022 the Group offered 15,8 million seats, 42% higher compared to 2021, flying 36% more sectors compared to 2021. The load factor stood at 79,8%, 14 percentage points higher than 2021.

The Group carried 12,5 mil. passengers, 73% more compared to 2021, having regained 83% of pre-pandemic levels, 81% in the domestic and 84% in the international flights.

-Fleet renewal contributes to increasing efficiency and strengthening competitiveness

The Group has delivered 10 new Airbus A320 neo family aircraft in 2022, having taken delivery of a total of 19 new Airbus A320 neo family aircraft since 2019.

Fleet modernization contributed to cost reduction, while further strengthening Group’s competitiveness by upgrading passenger services.

On 31.12.22 the Group's fleet totaled 69 aircraft (of which 55 jets and 14 turboprops).

As part of AEGEAN’s continued efforts to develop service offering for passengers, in 2022 the Group enhanced its onboard travel experience by offering its passengers high-speed inflight internet access, and a rich entertainment platform through its new digital portal, thus further exploiting new fleet’s technological capabilities.

-Establishment of an Aircraft Maintenance, Repair and Overhaul facility and a Flight Training Center

In 2022, AEGEAN has announced the establishment of a Maintenance, Repair and Overhaul facility and a Flight Training Center which will be based in Building 56 of Athens International Airport. The main activities include:

• The Maintenance, Repair and Overhaul facility (MRO), with the development of a technical base of up to 10 bays for various types of aircraft

• The Flight Training Center for pilots and cabin crew members, utilizing up to 7 state-of-the-art full flight simulators for various aircraft types as well as facilities for carrying out special cabin crew training.

The new investment further enhances Group’s competitiveness and technical capabilities, bringing a vast range of services that up to date have been performed abroad whereas at the same time, and upon maturity, it creates a new dynamic and full potential for offering MRO & Flight training to third parties. The investment has a strong “green” footprint, is fully harmonized with the company’s wider sustainability roadmap, but also has a strong social, environmental and national impact.

Impact of COVID-19 pandemic, measures and planning

COVID-19 affected the activity of the Group to a lesser extent, mainly during the 1st quarter of the year where the Omicron variation prevailed. The easing of the pandemic during 2022 along with the extensive vaccinations permitted the lifting of restrictive measures and thus capacity recovery. After two years of various travel restrictions and pandemic containment measures, there was an accumulated desire for travel which has not been realized due to the pandemic. As conditions for travelling improved, demand for travelling increased and thus a significant recovery in passenger traffic and pre- bookings in the industry for the summer season was recorded.

Future resurgence of the outbreak in connection with new variants and mutations and the re-introduction of some or all of the restrictive measures on travel withing the European Union will affect Group’s activity. Moreover, any possible outbreaks of epidemiological data in combination with other exogenous factors may drastically change the demand for travelling.

Geopolitical events

The Russian invasion of Ukraine at the end of February has temporarily interrupted the strong course of pre- bookings that started in the beginning of the year. The strong desire for leisure travel, as recorded during the summer season of 2022, was not affected by geopolitical events. The Russian invasion to Ukraine has caused the cancellation of all flights from / to these countries, nevertheless their contribution in the overall flight activity is not considered as material for the Group (less than 3% in total passenger traffic) and the whole market (2% of total passengers’ arrivals).

The indirect consequences, however, led the oil price to record high volatility due to geopolitical instability and EU and US sanctions on oil imports from Russia. The sharp increase in fuel costs affected Group's results, from the second quarter of the year, with the fuel price in 2022 being 77% higher compared to 2021 and 82% higher compared to 2019. Part of the fuel cost increase was offset by derivative products agreed by the Group.

The aviation industry is significantly affected by geopolitical developments which might adversely affect demand and fuel costs and thus flexibility and adaptability to market conditions remain strategic priorities for the Group.

Issues related with climate

The Group, in line with the aviation sector, remains committed towards the sustainability targets that have been set, despite the strong effect of the pandemic during the last 2 years. However, there are several challenges associated with “Green” transitioning.

Within the Fit-for-55 framework, regarding net greenhouse gas emission (GHG) reduction of 55% by 2030, the EU is considering 3 measures in order to reduce aviation C02 emissions. These measures are:

-Revision of the EU ETS (Emissions Trading Scheme), that aims at the gradual and eventually full phase-out of carbon allowances (EU-ETS Allowances), as well as for EU-ETS to continue to apply to Intra-European flights.

-Refuel EU Aviation, which sets specific targets for the use of Sustainable Aviation Fuel (SAF) within the EU (from 2% in 2025 up to 63% in 2050).

-Energy Taxation Directive, that will impose a tax on kerosene (over a transition period up to 2033).

The Group believes that these measures may impact the cost of air travel to a large extent and may have a negative competitive effect to destinations like Greece, which borders and competes with countries that are not being affected by European law.

The above measures, do not take in consideration the overall negative impact on the competitiveness of economies with strong dependence on tourism and seasonality.

The proposal regarding the establishment of a SAF Allowance Mechanism will moderate the increase in fuel costs that will be seen initially, but is not sufficient.

In addition, there is no clarity regarding any measures that would be necessary to address the significant fuel cost increase for member-states with many islands.

The following tables present the financial results of the Group, the Alternative Performance Indicators and the Operating Performance Indicators, which were calculated based on the consolidated financial statements for the years 2022 and 2021.

The Group analyzes the main financial data using Alternative Performance Measures (based on the ESMA Guidelines) used. In addition, the Group evaluates the efficiency of its activity by measuring among others, the Operating Performance Indicators which are used globally in the aviation industry.

Performance metrics should not be construed as substituting for other figures calculated under IFRS, as well as other historical financial ratios.

RASK increased significantly due to the increased contribution of last-minute bookings as well as the sales mix differentiation with higher contribution of business and comfort flex fares. RASK stood at € 8,25 cents in 2022, significantly higher than 2021, as well as from € 7,14 cents in 2019, an increase of 16%. Yield was also significantly improved and reached € 10,37 cents from € 9,71 cents in 2021 and € 8,42 cents in 2019.