Turkish Airlines: the taxman cometh, but cost control drives 2Q operating profit growth

Turkish Airlines once again grew its operating profit in 1H2013 and 2Q2013 and continued its double digit growth in traffic and revenues. However, its net result fell as a result of foreign currency movements and a higher tax bill. Foreign exchange markets and the taxman are non-operating items and should even out over time, but the improved underlying profits demonstrate the success of its transfer traffic-driven growth strategy.

One cause for concern in the operating result is that the first quarter's growth in revenue per available seat kilometre turned into a decline in the second quarter. Only good cost control, which saw 2Q unit costs fall more than unit revenues, enabled the continued growth in operating profit. Unit revenues can fluctuate with market conditions, but the ability to keep CASK growth below RASK growth is one of the key skills for any airline management.