Turkish Airlines & Pegasus: 2Q losses, but positioned for survival

As with other European airline groups, Turkey's two leading operators suffered a massive drop in capacity in 2Q2020. Turkish Airlines' (THY) ASKs plummeted by 95.6%, and Pegasus' by 95.3% (both slightly deeper than the 94.5% collective fall of the first eight European airline groups to report 2Q2020 results).

Pegasus' revenue fell by 94.6% - almost in line with the ASK cut. By contrast, THY's revenue fell by 'only' 71.7%, mainly due to a 90% increase in cargo revenue (on a 7% decline in cargo/mail tonnes carried).

Neither airline was able to cut operating costs at the same rate as revenue fell. Pegasus' costs were down by 70.3%, and THY's fell by 63.6%. This meant a collapse in operating result: Pegasus from an operating profit of EUR72 million in 2Q2019 to an operating loss of EUR78 million in 2Q2020; THY from a profit of USD10 million to a loss of USD232 million.

Nevertheless, liquidity increased for Pegasus and remained flat for Turkish across 2Q2020. Moreover, Turkey's relatively large domestic market has helped the airline's recovery versus the rest of Europe. The outlook remains uncertain, but both airlines are positioned for survival.