Turkish Airlines & Pegasus Airlines: lower costs key post-COVID-19

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The previous link between the profit cycles of Turkey's two biggest airlines broke in 2019. Turkish Airlines' operating margin halved, but Pegasus Airlines' operating margin almost doubled in 2019. For most of the past decade, in spite of their different business models and market segments, the two had followed a very similar margin cycle.

Total passenger numbers in Turkey grew by 3.4% in 2019, which was the slowest rate since traffic fell in 2016, and only the third time in 10 years when growth was not in double digit territory. International passenger numbers grew by 11.8%, but domestic passengers fell by 11.2%. Neither Turkish Airlines nor Pegasus achieved an increase in passenger numbers for the year.

The ultra-LCC Pegasus has a much lower unit cost than Turkish Airlines, but Turkish Airlines has a lower unit cost than many of the global full service airlines with which it competes.

Pegasus' much stronger margin in 2019 suggests that its low costs may give it more robustness when market conditions are more challenging. That theory may be tested once more in 2020 against the backdrop of COVID-19.

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