Turkish Airlines improves 2015 margins thanks to lower fuel; growth to accelerate in 2016

Turkish Airlines reported its highest absolute profits for at least a decade in 2015. Both unit revenue and unit cost were lowered by the weakness of TRY versus USD (the airline reports its financial results in USD). With the benefit of lower fuel prices, Turkish managed to reduce CASK somewhat faster than RASK.

However, its 2015 operating margin (operating profit as a percentage of its revenue), while slightly better than in 2014, was still little more than half its 2008 peak level. Moreover, its profit improvement was not evenly spread through the year, instead relying mainly on a strong 3Q result.

Rapid expansion sustained over many years, and exposure to markets with geopolitical and macroeconomic uncertainties, make Turkish Airlines vulnerable to volatility in unit revenue. Capacity growth will accelerate in 2016, when the airline should again benefit from lower fuel prices. However, it will need to continue to focus on further labour productivity improvements and other non-fuel cost efficiencies in order to maintain or improve its margins, without help from low fuel prices.