Turkish Airlines CEO Temel Kotil said during CAPA’s 'Airlines in Transition CEO Summit' last week that he expects the first phase of Istanbul’s new airport to open in 2016. Mr Kotil says construction of the new airport is slated to start later this year on a greenfield site. The new airport is being designed to handle up to 150 million passengers p/a. Mr Kotil says the Government is willing to invest in the new airport, which will replace Turkish’s congested hub at Istanbul Ataturk Airport, because the benefit to Turkey’s overall economy benefit clearly outweighs the cost. “Investment of the airport is very tiny compared to the benefit,” he says.
Turkish Airlines expects new Istanbul airport to open in 2016
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Turkish Airlines suffered a wider operating loss in the 1Q2016. Its capacity growth, consistently at double-digit rates, is accelerating in 2016 as it pursues new markets and increases frequencies – particularly in the US and Africa. However, its load factor slipped by 2.9ppts and its total revenue per ASK fell by 17.2%.
Demand was weakened by the aftermath of geopolitical events but there are also gathering macroeconomic uncertainties in Turkish Airlines' markets, which increasingly embrace the globe. This highlights the risks associated with very high capacity growth when the robustness of demand is faltering. Although its unit cost also fell (thanks to lower fuel prices), this was not sufficient to offset the drop in unit revenue.
Turkish Airlines strategy of high growth, based on the geographic advantage offered by its Istanbul hub in attracting global transfer traffic, now ranks it among the world's leading airlines. Although the seasonally weak 1Q may not be a reliable guide to FY2016, the airline will need to generate improved trends in load factor, RASK and margins over the rest of the year if it is to assuage concerns that it is pursuing growth at the expense of profitability.
Turkish Airlines and Pegasus to take unprecedented capacity decisions as Turkey air traffic slumps
Until 2014 Turkey was one of the most reliably fast-growing air traffic markets in Europe. In 2015 passenger numbers levelled off, and in 2016 traffic is set to decline. The impact of geopolitical events, including a series of terrorist attacks, the civil war in neighbouring Syria and the failed coup attempt in Jul-2016, has weighed heavily on demand for international travel to/from Turkey.
Foreign airlines switched capacity away from Turkey in summer 2016, but the country's two largest operators – Turkish Airlines and Pegasus Airlines – continued to grow. However, following years of double-digit growth by both, Turkish Airlines and Pegasus Airlines are taking unusual steps this winter. According to data from OAG, Turkish looks set to implement year-on-year capacity cuts, while Pegasus appears to be planning flat capacity for the period from Nov-2016 to Mar-2017. It seems likely that both airlines will again cut their growth targets for 2016.
Moreover, Pegasus is seeking wet-lease customers for six of its current fleet of 73 aircraft. Perhaps more significantly, Turkish is to reschedule 165 aircraft deliveries planned for 2018-2022, cutting its planned fleet size in 2021 from 439 to 400.