Turkish Airlines: 3Q underlying profit back on upward path after four falling quarters

With its 3Q2014 results, Turkish Airlines (THY) has returned to a path of improving underling profitability after four quarters of year on year declines. Not only did RASK growth turn positive once more (after falling for five quarters), but also CASK was held flat.

The better RASK trend appears to reflect slightly slower capacity growth. THY has also recently lowered its FY2014 growth plan, which should be positive for unit revenues. Although 9M underlying operating profit was slightly down year on year, the return to profit growth in 3Q raises the prospect of THY's recording an increase in its FY2014 result.

THY is more profitable (by pre-exceptional operating margins so far in 2014) than any of Europe's Big Three legacy airline groups. It has developed a hub strategy that allowed it to carry more international to international transfer passengers in 2013 than Etihad carried on its entire network, with particular strength in attracting European passengers into its Asia, Middle East and African networks. Complemented by a sizeable domestic and point to point international market, THY is certainly capable of delivering annual profit growth.