Pegasus Airlines SWOT: Turkey's ultra-LCC is set for further growth

In 1H2018 the ultra-LCC Pegasus Airlines achieved passenger growth of 13.9%, a slightly faster pace than its FY2018 target of 11%-13%. It also narrowed its losses in the seasonally loss-making first half, recording an operating profit margin of -2.7% versus -8.6% a year earlier.

Both Pegasus and its leading local rival, Turkish Airlines, enjoyed a strong return to profit in 2017 after rare losses in 2016, when a series of geopolitical and terrorist events in Turkey had weighed on demand. Turkey enjoyed a healthy recovery in air traffic in 2017 and Pegasus' traffic growth outpaced that of Turkish. This recovery continued into 2018, but the recent slump in the Turkish lira is a reminder of the macro risks faced by Pegasus.

Nevertheless, in spite of the unfolding currency crisis at the time of its 1H2018 results (on 13-Aug-2018), Pegasus has maintained its FY2018 guidance. Its position as Turkey's leading low cost airline has led to consistent strong growth over many years - the kind of track record that breeds confidence.

In this context, this report considers Pegasus' strengths, weaknesses, opportunities and threats.