Turkish Airlines 1Q revenues grow 28% as losses narrow, but unit costs will be key to FY result

Turkish Airlines cut its 1Q2013 operating loss from TRY173 million to TRY23 million (EUR9.7 million), almost breakeven in the traditionally weakest quarter. Revenues grew 28% on capacity up 21%, with particularly strong growth to Africa, Middle East and Europe. The improved result was driven by unit revenue growth (RASK) as unit costs (CASK) were held flat in spite of higher fuel prices. Earlier this year, the carrier said it did not expect a unit revenue increase for FY2013, so this represents a good start to the year, and ex fuel unit costs will need to remain under control over the rest of the year.

Much of Turkish Airlines' success has been built on an efficient workforce and the geographic location of the Istanbul hub, which facilitates a global connecting strategy. Both of these elements were visible in 1Q2013, with labour cost growth slower than capacity and transfer passenger growth outpacing the total. Nevertheless, a strike called on 15-May-2013 (albeit with limited impact) and the relentless competitive presence of the Gulf carriers are reminders that this success cannot be taken for granted.