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- Pegasus Hava Taşımacılığı A.Ş.
AEROPARK Yenişehir Mah. Osmanlı Bulvarı No:11
TEL: +90 216 560 7000
FAX: +90 216 560 7400
- Main hub
- Istanbul Sabiha Gokcen Airport
- Business model
- Low Cost Carrier
- Domestic | International
- Association Membership
- Codeshare Partners
Azerbaijan Airlines AZAL
KLM Royal Dutch Airlines
Istanbul-based Pegasus Airlines is a privately-owned low-cost airline based at Sabiha Gökçen International Airport in Istanbul. Using a fleet of narrow-body Boeing737-800 aircraft, Pegasus operates an extensive network of domestic and regional services throughout Turkey, Europe and the Middle East.
Location of Pegasus Airlines main hub (Istanbul Sabiha Gokcen Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Pegasus Airlines fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
283 total articles
29 total articles
In CAPA’s report on Turkish Airlines’ 3Q2013 results, we highlighted that RASK growth failed to beat CASK growth for the first time this year and suggested management would want to demonstrate this was not the start of a new trend. The airline has now provided some reassurance on this.
Beyond this issue, CEO Temel Kotil used the recent Turkish Airlines’ investor day to reiterate his strategy of using the carrier’s Istanbul hub to attract global connecting traffic flows, leading to growth ahead of the market, albeit with an increased focus on frequencies rather than new destinations in future. This strategy has similarities with those of the Gulf carriers, but is also underpinned by the significant Turkish home market.
The Turkish market includes strong competition in the shape of LCC Pegasus, but the return to profitability of SunExpress, jointly owned by Turkish Airlines (THY) and Lufthansa, provides THY with another option for facing this competitive threat.
Turkish Airlines’ 3Q2013 net profit was level with the same period last year, but only thanks to non-operating items. The operating result for the quarter was below that of 3Q2012 as RASK growth failed to beat CASK growth for the first time this year. The carrier’s capacity and revenue growth continue at double digit rates, so maybe the occasional stumble is inevitable.
The brightest aspect of the 3Q results was what looks like the beginning of a rebound in cargo activity, which significantly outpaced the passenger business in terms of growth versus last year. Nevertheless, cargo is only 8% of revenues and the passenger operation business continues to be the major driver of the business.
Management will be looking to demonstrate that the weakening of unit revenue growth and strengthening of unit cost growth are not the start of new trends.
Pegasus is demonstrating strong profitability following its IPO in Apr-2013, since when its share price has doubled. It is now among Europe’s more profitable airlines and one of its lowest-cost practitioners. In 3Q2013, the underlying operating result of the core operation increased by 18% compared with last year and this result has more than doubled over the first nine months of the year.
However, net profit fell in 3Q2013 as the weakening Turkish lira led to adverse foreign exchange impacts on the profit and loss statement. In addition, the operating margin declined year-on-year in the quarter as RASK growth was outpaced by CASK growth. It is not time to take any drastic evasive action, but it seems even the more financially robust airlines cannot avoid some turbulence at times.
News that Nordic Office of Architecture has been awarded the right to design Istanbul’s new airport, following recent reports that construction may start in May-2014, refocuses attention on Europe’s fastest growing aviation market.
Ultra-LCC Pegasus Airlines and network carrier Turkish Airlines were, in 2012, respectively Europe’s second and fourth most profitable airlines (based on 2012 operating margin).
Air passenger numbers in Turkey have grown at double digit rates in five out of the past six years. The success of Turkey’s aviation sector has been built on healthy economic growth, a relatively productive and inexpensive workforce and Turkish Airlines’ use of its Istanbul hub to attract international transfer traffic.
Turkish Airlines once again grew its operating profit in 1H2013 and 2Q2013 and continued its double digit growth in traffic and revenues. However, its net result fell as a result of foreign currency movements and a higher tax bill. Foreign exchange markets and the taxman are non-operating items and should even out over time, but the improved underlying profits demonstrate the success of its transfer traffic-driven growth strategy.
One cause for concern in the operating result is that the first quarter’s growth in revenue per available seat kilometre turned into a decline in the second quarter. Only good cost control, which saw 2Q unit costs fall more than unit revenues, enabled the continued growth in operating profit. Unit revenues can fluctuate with market conditions, but the ability to keep CASK growth below RASK growth is one of the key skills for any airline management.
In 2Q2013, Pegasus Airlines’ core operations grew revenues by 30% and more than tripled the operating profit, continuing the strong earnings momentum developed in 1Q2013. Traffic grew strongly, load factor rose, RASK increased, CASK fell and cash increased sharply after a successful IPO in Apr-2013, since when its share price has gained 46%.
The only blot on the landscape was that ex fuel CASK increased a little in 2Q2013 as labour costs grew steeply, but the 1H2013 performance of both items was more favourable and so this may simply be a temporary issue.
Pegasus’ mission statement says: “We aim to combine the network benefits of full-service carriers, and the price benefits of LCCs, to provide inexpensive travel, on-time performance and new planes.” It does not mention profits, but, if it can continue to fulfil these aims, it seems that profit growth will also continue.
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