Turkish Airlines & Pegasus: the slumping lira isn't all bad news

The value of the Turkish lira (TRY) lost a quarter of its value against USD between 8-Aug-2018 and 13-Aug-2018, before starting to rally.

For both Turkish Airlines (THY) and its low cost rival Pegasus Airlines, it's not all bad news. Their currency exposure is complex; both have significant costs and revenues in USD and EUR in addition to those in the local currency, TRY. The different mix of revenues and costs in these currencies for each airline is such that a weaker TRY may be better for Turkish Airlines than for Pegasus.

Both airlines reported 1H2018 financial results as the currency crisis was unfolding, but Pegasus maintained its EBITDAR margin guidance for the year and THY actually increased its guidance. For both, this may have been too soon for any impact on underlying demand to be visible.

Traffic figures for Aug-2018 may be the first indicator, but ticket pricing (and aircraft financing) in hard currencies by both airlines should help to mitigate the impact.