Turkish Government is reportedly considering the construction of a third airport in Istanbul, to meet growing passenger traffic (Bernama, 01-Nov-2009). The government is also planning to construct a second runway at Istanbul Sabiha Gokcen International Airport, with another four airports identified for refurbishment projects. The government has invited local and foreign firms to continue to take part in the development projects. Malaysia Airport Holdings Bhd is considering another business agreement with Turkey’s Limak Group and India’s GMR Group to bid for the projects, including the construction of a third terminal at Istanbul Sabiha Gokcen Airport, following the opening of airport’s second terminal on 31-Nov-2009, constructed by the consortium (Bernama, 02-Nov-2009).
Turkish Government considering construction of third airport in Istanbul
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A series of geopolitical events has weighed heavily on demand for air travel in Turkey, particularly in international travel. Weak trading conditions have also prompted the market leaders – national airline Turkish Airlines and LCC Pegasus – to halt their own rapid growth. Onur Air is bigger in the domestic market than it is in the international market, but much of its 2016 expansion was driven by international growth, particularly to Germany.
Onur's network faces strong competition on almost every route, particularly on international routes, and this has clearly posed a severe challenge in the face of falling demand.
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Pegasus Airlines is having a difficult year. Its 2Q2016 results revealed a year on year widening of its operating loss for the third successive quarter. A series of geopolitical and terrorist events in Turkey have weighed on demand for international travel in particular.
Although Pegasus slowed its capacity growth in 2Q, this did not arrest the trend of plunging unit revenue. In spite of low fuel prices, Pegasus has not been able to match the fall in RASK with a sufficient reduction in its unit cost.
In response to its weak 2Q and 1H results, Pegasus has issued a profit warning, lowering its guidance for FY2016 and implying an operating loss for the year. After a number of years of double digit passenger growth, it now targets an increase of only 5%-7% this year (it previously expected 13%-15%). A more cautious approach to growth makes sense in the current environment.