Sabiha Gökçen: growth to continue
ISTANBUL SABIHA GÖKÇEN Airport (SAW) has grown passenger numbers at an average of 25% pa since 2008, compared with 9% pa for the larger Atatürk Airport. Primarily a low cost airport (it is Europe's fifth biggest for LCC seats) and the main hub of ultra LCC Pegasus Airlines, SAW also serves as an overspill base for flag carrier Turkish Airlines. Both airports have capacity constraints.
The opening of Istanbul New Airport in Oct-2018, followed by the phased reduction of operations at Atatürk, will ease the pressure on Istanbul's airport system and give Turkish Airlines a new hub with vast expansion potential. It should also allow SAW to focus on its main role as a low cost point-to-point base.
After handling 31 million passengers in 2017, SAW is already well advanced with plans to increase its capacity to 63 million by 2020.
- Istanbul Sabiha Gökçen Airport (SAW) has experienced consistent passenger growth, averaging 25% per year since 2008.
- SAW serves as the main hub for Pegasus Airlines, with a seat share of 63.2%, followed by Turkish Airlines with 32.3%.
- The airport's network is focused on short and medium-haul routes, with a majority of seats in the domestic market and international seats to Europe, the Middle East, Central Asia, and North Africa.
- SAW's cargo traffic has been volatile, with a decline in 2017, but it grew by 7.9% in August 2018.
- The airport's charges are significantly lower than Istanbul Atatürk Airport, making it an attractive option for airlines.
- SAW has plans for expansion, with a target to increase its capacity to 63 million passengers by 2020 and expects to handle 45 million passengers by 2022.
Summary
- Sabiha Gökçen's passenger traffic grew by 11.3% in 8M2018 and at an average of 25% pa from 2008 to 2017.
- Sabiha Gökçen is the main hub for Pegasus Airlines, which has a seat share of 63.2%. Turkish Airlines is number two, with 32.3%.
- SAW's network is all short/medium haul, with 61.7% of seats in the domestic market and all international seats to Europe, Middle East, Central Asia and North Africa.
- Istanbul New Airport is scheduled to operate its first flights at the end of Oct-2018. Pegasus has said that it is considering operating some services from Istanbul New Airport, but Sabiha Gökçen will remain its main base.
- SAW should benefit from being a stable element of the Istanbul airport system during the transition between Atatürk and the new airport.
Passenger traffic grew by 11.3% in 8M2018
SAW has enjoyed at least 10 successive years of growth in passenger numbers. From 2008 to 2017 passenger numbers grew by more than seven times, from 4.2 million to 31.4 million (a compound average growth rate of 25% pa).
SAW's 2017 passenger count ranked as the 13th largest in Europe (between Paris Orly and Moscow Domodedovo) and the second largest in Turkey, after Istanbul Atatürk's 63.7 million. SAW is on the Asian side of the city, while Atatürk is on the European side.
In recent years, the annual growth rate has slowed from more than 26% in 2013 and 2014 to less than 6% in 2016 and 2017, but accelerated in the first eight months of 2018 to reach 11.3%.
International passenger traffic fell by 1.6% in 2016 - the only year of negative growth in the past decade - but has since recovered strongly, with growth of 9.1% in 2017 and 12.9% in 8M2018.
In 2016, international travel to/from Turkey was hit by the impact of a series of geopolitical events, including terrorist attacks, the civil war in neighbouring Syria and a failed coup attempt in Jul-2016. Pegasus Airlines held its capacity almost flat in the northern winter of 2016/2017, before resuming growth as demand picked up.
SAW has said that it expects to handle 34 million passengers in 2018, which would represent growth of 8% year-on-year.
Istanbul Sabiha Gökçen Airport: Annual Passenger Numbers and Growth
Cargo traffic grew in Aug-2018 for the first time in 12 months
Cargo traffic volume growth has been more volatile. After flatlining in 2012, cargo tonnes grew at double digit rates in 2013-2015, but then growth slowed to 3.6% in 2016 and reversed to -3.0% in 2017. The decline started in Aug-2017, after positive growth in the first seven months.
In the first eight months of 2018 cargo volume fell by 10.5%, led by the international market, where tonnage fell by 20.8%. Growth picked up to +7.9% in Aug-2018, possibly stimulated by the fall in the Turkish lira (which may have boosted exports).
Sabiha Gökçen is the main hub for Pegasus Airlines
SAW is the main hub for the ultra LCC Pegasus Airlines, the airport's biggest airline with 63.2% of seats in the seasonal peak week of 03-Sep-2018. Turkish Airlines is number two, with 32.2% of seats, giving the two leading airlines almost a duopoly (95.4% of seats between them).
In spite of Pegasus' significantly lower unit cost, the two Turkish rivals have both enjoyed strong growth over the past several years and appear to follow the same profit cycle.
Aside from Pegasus, other LCCs have only a small share of seats at SAW. SunExpress, flynas, flydubai, Air Arabia and Air Arabia Maroc have 1.6% of seats between them (source: OAG, week of 03-Sep-2018).
A further low cost operator entered the airport on 21-Sep-2018, when Aeroflot's LCC subsidiary Pobeda launched a daily service from Moscow Vnukovo.
Ranked by LCC seats (in the week of 03-Sep-2018), SAW is Europe's fifth largest LCC airport (after Barcelona, London Gatwick, London Stansted and Palma de Mallorca).
SAW's network is all short/medium haul
SAW's network consists entirely of short/medium haul routes, reflecting its main role as a low cost, point-to-point airport.
According to OAG data for the week of 03-Sep-2018, almost two thirds (61.7%) of its seat capacity is in the domestic Turkish market (by contrast with Atatürk, where only 27% of seats are domestic).
SAW's international schedule contains no real long haul destinations, but concentrates mainly on Europe and the Middle East.
Europe accounts for 67.8% of international seats (Western Europe 45.8% and Eastern/Central Europe 21.9%) and the Middle East for 29.3%. Only a small share of international seats are to Central Asia (1.5%) and North Africa (1.4%).
SAW's airport charges are much lower than Atatürk's
Sabiha Gökçen's airport charges are substantially lower than at Istanbul Atatürk, the main hub for Turkish Airlines. According to data from Air Transport Research Society, Sabiha Gökçen's combined landing/terminal charges for a Boeing 737-800 and for an Airbus A320 are approximately one third of Atatürk's.
The level of airport charges at Istanbul New Airport, due to begin operations at the end of Oct-2018, is not yet known. However, it is likely to be noticeably higher than at Sabiha Gökçen.
Turkish Airlines thought to be considering majority stake
SAW is 100% owned by Malaysia Airports Holdings Berhad (MAHB) and operated by a consortium of TAV and MAH under a 20 year lease from 2008.
Turkish Airlines (THY) is thought to be considering purchasing a majority stake in Istanbul Sabiha Gökçen Airport from MAHB for USD1.2 billion, according to a number of media reports in Aug-2018.
However, Turkish Airlines CEO İlker Aycı has said that the airline is in fact interested in buying a stake in an airport operator, but that no specific airport has yet been targeted.
Although THY has a presence at SAW - indeed, it is the airport's number two airline - a stake would not appear to fit with the carrier's core business. Not only is airport ownership a divergence from its core activity but also, SAW's focus on low cost operations deviates from THY's full service/premium positioning.
That said, the national flag carrier has grown its seat share at SAW to almost one third this summer from less than one sixth in summer 2012. Atatürk is expected to continue operating for at least five years but as it winds down. THY's presence at SAW may give it more flexibility in its schedule and greater bargaining power with Istanbul New Airport (although a stake in SAW would not seem to be necessary).
Istanbul Sabiha Gökçen Airport: Airlines by Share of Seats*
| Rank | Airline | Share of seats |
| 1 | 63.2% | |
| 2 |
32.2% |
|
| 3 | 1.0% | |
| 4 |
0.6% |
|
| 5 |
0.5% |
|
| 6 |
0.5% |
|
| 7 |
0.4% |
|
| 8 |
0.3% |
|
| 9 | 0.3% | |
| 10 | 0.3% | |
| 11 | 0.2% | |
| 12 | 0.2% | |
| 13 | 0.2% | |
| 14 | 0.0% |
SAW has strong growth plans
Both Atatürk and SAW are close to full, but SAW has significant growth ambitions.
Eurocontrol's Performance Review Commission (PRC) said in Jul-2018 that the two airports "operate close to the peak declared arrival capacity during most of the day". Despite a substantial improvement, the two Istanbul airports still accounted for 32% of all capacity attributed to airport arrival ATFM delays in 2017.
Istanbul New Airport is scheduled to operate its first flights at the end of Oct-2018 and will have an initial capacity of 90 million passengers pa, rising to 120 million by 2022 and eventually to 200 million.
Istanbul Sabiha Gökçen Airport and Istanbul Atatürk Airport: Combined Landing/Terminal Charges*
It should help to ease the capacity constraints in the Istanbul airport system, rather than threaten SAW. Indeed, Pegasus has said that it is considering operating some services from Istanbul New Airport, but Sabiha Gökçen will remain its main base.
Istanbul Sabiha Gökçen Airport: international seats by region
SAW should benefit from being a stable element of the Istanbul airport system during the transition between Atatürk and the new airport. SAW expects its passenger count to grow by almost one third - from 34 million in 2018 to at least 45 million by 2022, representing a CAGR of 7.3% pa.
At the end of Jul-2018 the airport's new domestic terminal came into service, expanding its annual capacity to 41 million. A further new 80,000sqm terminal by 2020 will increase total capacity to 63 million passengers. A second runway is expected to be completed by the end of 2018.
Turkey has shown itself to be a strong aviation growth market over many years; Sabiha Gökçen, as the country's second biggest airport and its largest LCC base, looks well placed in this market.