Turkey aviation: #2 in Europe. Turkish, Pegasus focus on low costs
Turkey is now second only to Spain among the nations of Europe ranked by airline seats in the week of 16-Aug-2021 - Europe's #2 aviation market by seats.
Turkey's domestic-led recovery has taken it to 84% of 2019 seat capacity, much higher than the average of 66% for all of Europe.
Both of Turkey's leading airlines are at even higher percentages of 2019 seat numbers. The ultra-LCC Pegasus Airlines is back to 100%, and the national flag carrier Turkish Airlines is at 91%. In both cases, the passenger traffic recovery is behind capacity, but still ahead of Europe overall.
Pegasus' advantage stems from a greater exposure to the domestic market (although both benefit from Turkey's large domestic market), while Turkish Airlines has a greater exposure to the still depressed market for long haul connecting traffic.
Nevertheless, Turkish Airlines is also now making greater use of its low cost brand AnadoluJet. In a recovery led by short/medium haul, point-to-point routes, and with a strong cost-focused competitor in Pegasus, this looks like a sensible move.
Summary
- Turkey is now Europe's #2 aviation market by seats. Its recovery to 84% of 2019 seat capacity, vs 66% for all of Europe, has been domestic-led.
- Ultra LCC Pegasus is back to 100% of 2019 capacity, vs 91% for Turkish Airlines (THY). Passenger recovery is behind capacity for both, but ahead of Europe overall.
- Pegasus' recovery has been helped by a greater domestic focus.
- Turkish Airlines' international transfer passenger numbers have fallen.
- Turkish Airlines is expanding its low cost brand, AnadoluJet, particularly on international routes.
Turkey is now at 84% of 2019 seat capacity, versus 66% for all of Europe…
According to data from OAG and CAPA, Turkey ranked second (behind Spain) among European countries by seat capacity in the week of 16-Aug-2021. This compares with Turkey's sixth place in the equivalent week of 2019, before the coronavirus pandemic.
Europe was at 66% of its 2019 seat numbers, which is similar to the average of 67% for the top 10 European countries.
See related report: European aviation: pax recovery closing in on capacity, but UK lags
Turkey is comfortably above both of these levels, at 84% of 2019 capacity.
Only two other top 10 countries have reached a greater percentage of 2019 seat numbers: Russia, at 89%, and Greece, at 102%. Russia is the third European country ranking by total seats, compared with seventh in the equivalent week of 2019, while Greece is unchanged in eighth place.
Europe: top 10 countries ranked by seats in week of 16-Aug-2021
|
Rank Aug-19* |
Rank Aug-21** |
Countries/Territory |
Total |
Percentage of Aug-2019* seats |
|---|---|---|---|---|
|
3 |
1 |
4,299,189 |
70% |
|
|
6 |
2 |
3,425,729 |
84% |
|
|
7 |
3 |
3,412,791 |
89% |
|
|
2 |
4 |
3,265,679 |
53% |
|
|
1 |
5 |
3,148,271 |
44% |
|
|
4 |
6 |
3,035,322 |
68% |
|
|
5 |
7 |
2,908,804 |
66% |
|
|
8 |
8 |
2,046,045 |
102% |
|
|
9 |
9 |
1,359,257 |
70% |
|
|
10 |
10 |
1,033,704 |
71% |
|
|
|
|
Top 10 |
27,934,791 |
67% |
|
|
|
All Europe |
66% |
|
…led by the domestic market (now Europe's second biggest)
Russia's relatively strong recovery owes much to its domestic market, which is the largest in Europe and almost twice the size of Turkey's in the week of 16-Aug-2021.
Nevertheless, Turkey has the second largest domestic market in Europe - up from number three in the equivalent week of 2019 (pushing Spain down to third).
Turkey has been at a higher percentage of 2019 seat numbers than Europe as a whole for the past year. Its domestic capacity has also recovered further, reaching 108% of 2019 levels versus 93% for European domestic markets overall.
The Turkish domestic market accounted for 32% of the country's annual seats in 2019, compared with 24% across Europe. This has helped Turkey to recover at a faster pace.
Percentage of 2019 weekly seats for Turkey and Europe, Jan-2020 to Aug-2021
Ultra-LCC Pegasus has reached 100% of 2019 capacity, versus 91% for Turkish (THY)
Both THY and Pegasus shut down their entire network in the early phase of the pandemic, in much of Apr-2020 and May-2020.
Both have recovered more rapidly than Europe as a whole since summer 2020, led by Pegasus, which was at 100% of 2019 capacity in the week of 16-Aug-2021, while THY was at 91%.
Percentage of 2019 weekly seats for Turkish Airlines, Pegasus Airlines and all Europe, weeks of Jan-2020 to Aug-2021
Passenger recovery has lagged capacity for both airlines
As with elsewhere in Europe, the return of capacity has not been matched by the return of passenger numbers, even in the domestic market.
Nevertheless, domestic traffic has outperformed international traffic, according to data reported by Turkey's two leading airlines for Jul-2021.
Moreover, both achieved a higher percentage of Jul-2019 passenger numbers than the 51% reported by ACI Europe in preliminary data for Europe overall in Jul-2021.
THY reported that total passenger numbers were at 77% of their Jul-2019 level, compared with seat capacity (from OAG/CAPA) at 86%. Its domestic passenger numbers had reached 93%, with international at 66%.
Pegasus' Jul-2021 passenger numbers were 84% of Jul-2019 levels, while seats operated were at 96%.
Pegasus' domestic passenger numbers were 3% above Jul-2019, with domestic capacity 13% higher than Jul-2019. The airline's international passenger numbers were at 67% of Jul-2019, but international seat capacity was at 82%.
Pegasus' recovery has been helped by a greater domestic focus
Pegasus has historically derived a higher share of its passengers from the Turkish domestic market compared with THY. In 2019, 52% of Pegasus' passengers were domestic, versus 41% for THY.
The more rapid recovery of domestic markets in Turkey meant that in the month of Jul-2021 58% of Pegasus' passengers were domestic, versus 48% for THY.
This is likely to continue to be an advantage for the ULCC for as long as the post-crisis recovery is led by domestic markets.
Turkish Airlines' international transfer passenger numbers have fallen
Moreover, although Pegasus carries transfer passengers in normal times, its business model is more focused on point-to-point markets.
THY's strong growth over many years has been significantly driven by targeting global connecting traffic over its Istanbul hub. In Jul-2019, 33% of THY's passenger numbers were making international to international connections.
In Jul-2021, this share dropped to 22%. This share was an improvement on the 5% recorded in Jul-2020, but is likely to remain depressed for as long as international markets - particularly long haul - remain weak.
Turkish Airlines is expanding its low cost brand, AnadoluJet…
LCCs are leading the recovery across Europe and Turkey is no exception, with Pegasus ahead of THY's percentage of 2019 capacity. The Turkish Airlines group also includes a low cost brand, AnadoluJet, and this is now helping the group to grow back.
AnadoluJet operates Boeing 737-800 aircraft under its own brand but with THY's TK code.
According to the CAPA Fleet Database, the majority of Turkish Airlines' mainline 737-800s have between 151 and 165 seats, compared with 189 seats for its low cost brand. AnadoluJet's greater seat density gives a unit cost advantage.
Based at Ankara Esenboğa Airport, AnadoluJet focuses mainly on leisure routes and was mainly a domestic operator before the crisis.
…particularly on international routes
However, it is expanding significantly in international markets, operating to destinations outside Turkey from Istanbul Sabiha Gökçen, Ankara, Antalya, Dalaman, Bodrum, Izmir, Konya, Adana, Trabzon and Kayseri this summer.
AnadoluJet is operating 97 international routes in 2021, compared with only 30 in 2020. Its Sabiha Gökçen base has 30 international routes, while Ankara Esenboğa has 24, Ankara has 20 and its other bases have 23.
AnadoluJet has added a number of new destinations in 2021: Amman, Baghdad, Baku, Beirut, Bremen, Dubai, Erbil, Kiev, Lyon, Milan, Moscow, Pristina, Sarajevo, Skopje, Sofia, Tabriz, Tbilisi, Tehran, Urumiyeh, Zurich.
THY does not report separate traffic, fleet or financial data for AnadoluJet. Nevertheless, some recent snippets of information give an indication of its progress and growing importance to the group.
According to Routes Online (16-Aug-2021), AnadoluJet CEO Said Samil Karakas has reported "very strong demand" from Sabiha Gökçen, including a "strong increase in transfer passengers from European destinations to Tel Aviv, Dubai, Erbil, Baku or Tehran".
Mr Karakas said the airline's main goals are to increase its 35% market share at Sabiha Gökçen and expand international operations from Ankara. He said its fleet of 54 aircraft "will most likely not be enough for our future growth".
According to THY's 2Q2021 results presentation, AnadoluJet increased its 1H2021 ASKs by 203% year-on-year at Sabiha Gökçen and by 39% year-on-year at Ankara.
Passenger traffic did not match these rates, however, growing by 112% at Sabiha Gökçen and almost flat (down by 1%) at Ankara. These results compare with Turkish Airlines group's overall ASK increase of 14% and flat passenger numbers year-on-year for 1H2021.
They seem to suggest that the low cost brand has potential to stimulate growth in the market, but this might not be immediately profitable.
The crisis is increasing the focus on low cost
Turkey's large domestic market is likely to continue to be an advantage as long as international travel restrictions continue to exist.
Where international travel is opening up, short/medium haul is returning more rapidly than long haul, and cost efficiency is becoming an even greater source of competitive advantage than before the crisis.
Pegasus is already an ultra-low cost operator. THY has historically been a cost efficient operator by comparison with many global long haul network competitors. However, with the focus of the recovery revolving more around short/medium haul, point-to-point operations, it makes sense to develop its low cost brand.