Airline Leader Interview Pegasus CEO Güliz Öztürk

Transcript

Nuala McGovern:It's really good to see all of you. I met some of you in Abu Dhabi last year. Great to see you in Belgrade in Serbia. I want to welcome my guest. I hope you'll give a warm welcome for Güliz Öztürk, who is the Pegasus Airlines CEO. Good morning. Oh, we know we're afternoon now, aren't we? Yes, you had an early start flying in from Turkey, but you're very welcome. Um, you know, I was watching this morning, we had the Serbian president here, President Vučić.

Güliz Öztürk:Yeah, I missed that opportunity.

Nuala McGovern:Well, he was quoting Amelia Earhart, the American aviation pioneer, and I was like, that sets me up nicely because I have a pioneer here beside me as well, because Güliz made history in May 2022 When she became the first woman Chief Executive Officer of a leading airline in Turkey. That's a great achievement.

Güliz Öztürk:Thank you.

Nuala McGovern:So you're flying the flag. And I did notice when you took the post, you said gender equality is a key priority for us at Pegasus and an integral part of our future vision. So you're in it now. How do you think it's going and what stands in the way?

Güliz Öztürk:I may say so far so good. I'm in the business since 1990, so it was like, of course, it's a great honor and I'm very proud of being the first female CEO. It's a long and long title for me, being the first female CEO in Turkish civil aviation, airline CEO. Having said this, this is also a big responsibility, of course, on my shoulders, because I have looked at the situation more from a gender-free perspective up until that time.

Nuala McGovern:Yes.

Güliz Öztürk:When I got the post, the striking part was not my experience, was not my investment into the sector, was not actually because I joined Pegasus in 2005 and we created a brand, an LCC model in Türkiye for the first time. We came from 10 aircraft to 112 now. These are big achievements. The first, let's say, striking part was being the first female CEO. I got a bit, sincerely speaking, I got a bit disappointed to be called as a female CEO because a male CEO is not called a male CEO.

Nuala McGovern:No.

Güliz Öztürk:They are CEOs and we are female CEOs. I hope that in the future we will not be called like this. From another perspective, and I changed my perspective, looking at this as being a role model, as being an example, not a role model, maybe it's a big word, but—

Nuala McGovern:I think it's a role model. I think when I was looking, there's only about 28 female airline CEOs in the world.

Güliz Öztürk:Exactly, in the world. When you look at the numbers, If you look at the numbers, the C-suite roles as females are like 15% in the airline sector. Globally, when you look at across the board for all sectors, it's about like 25%, 26%. We have still room to grow here. What we do, I mean, I was lucky because in my airline experience, I was always in a culture where we supported gender-free, I mean, the right person for the right job. I was of course into it from the first day. At Pegasus, our culture always supported males and females if they are doing what they have to do actually without looking at their gender or so. After taking over the post, we were a party to many international initiatives, but I wanted them to be taken under one umbrella. We started an initiative at the airline called Harmony. The Harmony initiative is more not like putting only the numbers, the targets, but it's like we have so many awareness programs we are running under it because Pegasus, Has now 8,600 employees. If we make a difference there on the mindset, that also socially affects. Of course, we have some targets that we move forward. For example, at the head office level, we have 49% female right now. We have pilots, 8% of our pilots is female pilots. It's Seems very small number, but it's coming from 2%.

Nuala McGovern:It has jumped so much. That is really something to understand. Actually, since the pandemic, there has been quite a bit of change in the sense of a leap with female leadership, be it in a role like yours or as a pilot.

Güliz Öztürk:Yeah, that's also true. That's true. But at the same time, because there is now this home office work, so it's more flexible working type, and we are working hybrid, for example, as Pegasus Airlines, like, uh, in 3— I mean, days in the office, 2 days home office. But at the same time, it made the, um, the mother's lives more difficult actually after COVID. So what we are trying to do at the airline is if— because the, the problem always starts for the— for my female colleagues when they get married and when they gave birth, when they have children. Then there is a gap can arise. Exactly. What we are trying to support their work life, like for our female pilots, for example, if they gave birth, we don't give them layovers for 3 years so that they come back to home every night to be with their children. We have such initiatives taken within the company so that we support It's really interesting.

Nuala McGovern:I saw a question when I was looking into gender and airlines that some of our colleagues that were here at Ruth's had done, which says, why don't women run airlines? What do you think about that question? Because I know you have a psychology degree, and I'm kind of bringing all this together. Exactly.

Güliz Öztürk:I mean, why? Because I think for until now, There are so many technical roles within the airlines since its start.

Nuala McGovern:Yes.

Güliz Öztürk:When you look at 50 years, 60 years, 70 years, the engineers, the pilots, so many technical roles, and those roles were from the previous times more male-dominated. Even if the pool, you got females, in the pool, started their career in the airlines. Then when you go up the steps for more managerial levels also, I think, I mean, that's what I think, that those managerial roles are filled by those technical expertise.

Nuala McGovern:It's from the grassroots. Yes.

Güliz Öztürk:Those were more— I mean, I don't want to be like so many positively discriminating the females over males. I believe the opportunities should be there. If we give the equal opportunities and have that selection criteria, and then if a man is chosen to the job or a female, that's not the case. The case is we shouldn't look at with prejudice like, Because she has children, she's a female, we have so many issues like this and that, so she cannot do it.

Nuala McGovern:To take away some of those barriers that could be seen as barriers instead of opportunities.

Güliz Öztürk:Otherwise, you can always choose a female or a male for the position itself.

Nuala McGovern:It's really interesting. You'll know if you're at some of the earlier sessions that you can put in your questions with Slido, which is the QR code. That will come up on the screen, and do feel free on any of the issues that we talk about here over the next 20 minutes with Güliz. I want to move on to— you have the job, the female CEO, you have the job. It's been so interesting to see the growth that Pegasus has had. It's been called from a small regional carrier into one of the most successful low-cost carriers globally. We also know that Turkey is one of the fastest-growing airline markets. How are you capitalizing on that growth?

Güliz Öztürk:You're right. I will start from the last word you have said. Turkey has done a very good job at the exit of COVID Not only us, but also other carriers from Turkey has done a great job to increase their— to bring back their capacity. Because the country itself has a great potential, not only in terms of sea and sand tourism, but also cultural tourism, educational tourism, health tourism right now. I think we were the first country to bring back the capacity on the domestics, for example, at the exit of COVID Now, as Pegasus numbers, for example, compared to the 2019 figures, which was the last normal year. On the international operations, we are way ahead of 70% more in terms of ASK, in terms of capacity, I mean. The load factors are also strong, so we were able to grab that demand to Turkey and out of Turkey. Because as Pegasus, we operate 112 aircraft right now.

Nuala McGovern:Mm-hmm.

Güliz Öztürk:We fly to 109 destinations internationally, so 53 countries abroad and also domestically. Most of the business we do is the international business and the sales are coming from into Türkiye.

Nuala McGovern:Mm-hmm.

Güliz Öztürk:Türkiye, Istanbul, Antalya has so advantageous positioning, especially Istanbul, that we also attract people to Türkiye. Plus we have transit traffic also as Pegasus, so that also brings incremental traffic on our flights in the international and domestic operations.

Nuala McGovern:You are working primarily out of Istanbul's secondary airport, Sabiha Gökçen. Yes.

Güliz Öztürk:The new airport is after Sabiha Gökçen, but still we call Sabiha Gökçen as the second airport.

Nuala McGovern:There, yes, maybe just with some of the traffic that's in and out. I'm wondering, because you've outlined some of what you have already and the point you've got to in that growth, but there is scheduled for delivery, if I have this right, 52 A321neos.

Güliz Öztürk:After this year.

Nuala McGovern:Yes, from 2025 and 2029. You've also— I've read that route expansion is really important to you. Where is it most successful at the moment? You talk about international, but where specifically? Where do you want to be that Pegasus is not there yet?

Güliz Öztürk:Now, you're right. We have still fleet growth ahead of us until the end of 2029. This year, we will receive another 6 aircraft, so we will end up by 118, and then we will receive another 52 aircraft until the end of 2029. Now, international operation-wise, around 50% of our business is To Europe, to and from Europe.

Nuala McGovern:Germany, I suppose, particularly?

Güliz Öztürk:Germany, exactly. Germany has the most, let's say, have the highest capacity offered. Then comes UK, France, Italy, Spain. What we want to do is we want to have, of course, we have Middle East flights, we fly to North Africa, we fly to CIS countries, The strategical areas we want to grow, putting aside the geopolitical tensions and the wars and everything, was like the CIS countries, North Africa, and Middle East, because there's a huge traffic to Türkiye. It's a high-yield traffic, and also there's a transit traffic to Europe and from Europe. Having said this, we also would like to grow to Europe because we have still countries that we don't fly. Either in terms of some frequency limitations or some air services agreements limitations, like some capitals we are not flying yet.

Nuala McGovern:Where do you see opportunity if you were able to be in one capital tomorrow?

Güliz Öztürk:We want to fly to Lisbon from Istanbul, for example, which is not possible right now in terms of air services agreements. We want to fly to Baltics, for example, which is like now is only single airline. designation. That's why we cannot fly. We have the growth appetite, we see the demand, we have the fleet orders ahead of us so that we can fly and we can grow internationally in the coming years. Of course, that needs an infrastructure at our hubs because we fly 75% of our business is out of Sabiha Gökçe, and we fly about 20 aircraft out of Antalya. These 2 airports are very critical for us, but also for Turkish tourism, and the infrastructure growth should come hand in hand.

Nuala McGovern:Who is the Pegasus customer?

Güliz Öztürk:The Pegasus customer is More, I have to say, the leisure and VFR most, but we also have business travel also. The ratios are small, of course. We get it from the researches we make because we don't see from the traveling data, ticket data, we cannot understand on which purpose our customers are flying, but we still have— As we grow our frequencies into Europe, for example, or in the domestics, we also have business travel, but mainly it's leisure and VFR, I may say.

Nuala McGovern:I was also reading with your growth, there was quite a bit to also give its due or give credit to ancillary sales within Pegasus. Do you want to talk a little bit about that, about how basically you make money from those and grow that airline?

Güliz Öztürk:Most of the profit is coming from there. If you don't want to run an airline, but we run an ancillary business, that would make more sense, by the way. But we should find the customers.

Nuala McGovern:Yes, this is true. You need the customers to sit on the seats that they're going to pay for. Exactly.

Güliz Öztürk:Last year, our ancillary revenue were over €800 million.

Nuala McGovern:That is seat selection, bags?

Güliz Öztürk:That's seat selection, baggage fees. Baggage is the first one. Baggage, seat selection, Pegasus Cafe, service, fee, check-in fee, cancellation fee, some fee packages, flex product where the reissues and reservation changes are free if you buy it. We have over 25 different products we sell as ancillary, and it's like about 30% of our revenue right now.

Nuala McGovern:Yes.

Güliz Öztürk:Perpax is also— over €40 right now in the 3rd quarter, we had an increase of 27% year on year. It's really, I mean, in this model, this business model, if you ask me what are the 2, or let's say the first magical points of reference to be successful is, of course, the load factor.

Nuala McGovern:Yes.

Güliz Öztürk:Because as you get the load factor, you get the market share, you expand the market, or you get it from your competitors. The second one is the ancillary. For us, for example, revenue generation or revenue growth, our strategy is to get more customers on board, increase our load factor, and sell more ancillary products. It's not the yield, for example, at the first step.

Nuala McGovern:But it must be a balance. Because for that passenger to not be turned off by too many ancillaries.

Güliz Öztürk:Of course, you have to have that balance. That balance is actually, we have an ancillary team working and they are like, I mean, some analytical tools are used, got the customer researches and all. There's also another customer experience team where they Just try to find a balance in between.

Nuala McGovern:Because it is a balance, right?

Güliz Öztürk:There's a balance, of course. The experience part, it's like we're paranoid. I mean, paranoically struggling doing the right thing for the customer in terms of experience, but also getting out of an ancillary from what we're offering. I think if you give the most affordable fare to the customer, On top of that, if you offer the ancillaries as they wish, then that has a balance in itself naturally.

Nuala McGovern:That they're not forced into that.

Güliz Öztürk:That should not be the case.

Nuala McGovern:Yes.

Güliz Öztürk:Because forcing the customer maybe works only once, not the second time.

Nuala McGovern:Yes, because it's, I suppose, a goodwill as well and trust with the particular brand. Something else with Pegasus, you also won a Global Environmental Sustainability Award for the airline, um, and it talked about when you received that award, uh, just how much making sustainability initiatives a part of corporate culture and a decision-making driver. Um, what is it that you're doing? I know you're working towards net zero 2050. Um, when it comes to fuel, you know, like, that's You're right. Sustainable aviation fuel. I mean, how much longer until there's the there there, so to speak?

Güliz Öztürk:That's the key. Sustainable aviation fuel is the key. For us, of course, I mean, sustainability is one of the key integral part of our business strategy. We prepared our climate transition roadmap at the beginning of this year. Governance side, I think Pegasus is doing the right thing because from the board level down to the, let's say, company level, we're all in it. Our board is also endorsing our roadmap.

Nuala McGovern:Do you feel that's been a culture change in the time you've been working in airlines, not specifically Pegasus, but do you feel people are on board? Excuse the pun.

Güliz Öztürk:I see it also in our company. When we started bringing sustainability into our integral part of business strategy, we said we want to develop a sustainability culture within the company. Right now we see it because we have also started a program where people, our colleagues, were in it willingly, and it's over 70 people are working within those working groups right now, from pilots to the marketing department, from finance to HR department. We managed within these 3 years, we managed to have a mindset of sustainability within the company. That's, I think, on the governance side, that's critical.

Nuala McGovern:Yes, it's more than these particular initiatives. It's changing the mindset or the culture.

Güliz Öztürk:More than having a target and only the board level talks about it, also the management level talks about it. What is advantages to us is, of course, new generation aircraft, that fleet investment is one critical part of it, but SAF production, and of course, economically, we should be economically buy SAF. We're using SAF right now on some of the flights, but it's like 3.5 times higher than—

Nuala McGovern:Yes, that's what I'm talking about, the there there, that it's not—

Güliz Öztürk:be there. We need a stakeholder management there. Governments should be in it. They should also incentivize the production. We should find a way. I know that target, net zero, is very challenging, very challenging. Sometimes they ask, do you think it's wise to keep it that way, like net zero? Yes, of course, because we have 25 years to go and technology is improving. Stuff It's a drop-in solution. You don't need to change anything on the aircraft, at the airports.

Nuala McGovern:But you need to change the fuel.

Güliz Öztürk:But you need to change, yes.

Nuala McGovern:We have a lot of questions coming in. Thank you so much to everybody who submitted them. Shall we run through a few of them quite quickly?

Güliz Öztürk:Okay.

Nuala McGovern:Because we've just got about 8 or 9 minutes left. Are there plans to grow your network from Ankara?

Güliz Öztürk:Yes. We have a base in Ankara running 3 aircraft right now, and I cannot say that we will Double it, triple it within the coming 2 or 3 years. Yes, we want to grow our hubs, İzmir, Ankara, and Antalya also.

Nuala McGovern:On to the next one. What is the magic to recruit or motivate young people, teenagers, to plan for a career in airlines or aviation?

Güliz Öztürk:Young people, what I see from our colleagues, because it's a young company, in the Turkish sector compared to the other Turkish companies. We are a young company. I think they are after open discussions, open doors, want to speak out their ideas. If you kill their ideas at the first glance saying that, I'm here for 30 years, come on, this doesn't happen. We tried it 4 times. Sorry for that. This is not an environment they want to work with. They want to be flexible. They want to speak out loudly, talk about their ideas. Either you do it or not, but they have to be there, a part of it.

Nuala McGovern:It's really interesting, I think, the generational divides in any industry, whether it's mine or yours, and that there are different ways of working and there needs to be some meeting of the minds to try and figure out If those people are to remain motivated. Exactly.

Güliz Öztürk:I have a daughter of 25 years old. She was working and she started after university. There was a rule in the company, so I asked, isn't there a rule like this? She said, yes. I said, okay, if there is a rule, you will be applying that rule. But then she asked, why?

Nuala McGovern:Why do we have to?

Güliz Öztürk:It's a rational one, so I'll go and speak why are they keeping this.

Nuala McGovern:Yes.

Güliz Öztürk:They are totally different.

Nuala McGovern:It's a different relationship to authority sometimes. Here's another one. How do you manage the seemingly David and Goliath balance between you and Turkish Airlines, who we also have in the room, when it comes to building brand awareness and government advocacy?

Güliz Öztürk:I have colleagues from Turkish Airlines. We are competing very fiercely within Türkiye and to— from Türkiye. At the same time, both of us trying to grow the aviation, Turkish aviation sectors, that's for sure. It's not easy, I have to say, because it's more like a government-owned company. I was there, I worked for Turkish Airlines for 30 years.

Nuala McGovern:Yes, you did 3 years.

Güliz Öztürk:I know Turkish Airlines also. They are doing a great job, a great brand, but business-wise, the models are totally different. What I say is they have aircraft, we have aircraft. That's it. Nothing is alike. The government being the second biggest airline in Türkiye, of course, the government looks at this as an aviation sector of Türkiye. As long as the competition is fair, we like to compete. We should keep that fairness.

Nuala McGovern:I should also say Türkiye, I know that is— Uh, well, and people with Turkey, I think it's kind of moved more away from Turkey to Türkiye.

Güliz Öztürk:Türkiye.

Nuala McGovern:Pronounced.

Güliz Öztürk:Yeah.

Nuala McGovern:Um, okay, a couple more. Um, as an ex-Pegasus employee, I want to congratulate Güliz Öztürk for her great leadership. How Pegasus manage, uh, off-grounded fleet due to engine problems? Now I'm not completely across that one, but you might be.

Güliz Öztürk:Up until now, we didn't have engine issues because we are using a CFM LEAP-1A engine, so we don't have Pratt Whitney engines. Until now, we didn't have such an issue, no grounded aircraft. Hope this will continue like that.

Nuala McGovern:I liked that one on the restrictive bilateral agreements. What's the best approach to open them up? You were just mentioning certain places that you can only go, for example.

Güliz Öztürk:What we're after, I mean, when I was working for Turkish Airlines, at the same mindset and approach. I think you should be— I mean, liberalism is important. I mean, as long as you're liberal, then you are open for competition and you're open for improvement and development. I'm more after more liberal, more flexible approaches actually in terms of air services agreements. It may not be an open skies, of course, but still, I mean, A restrictive approach does not make much positive influence on the national carriers, on the flag carriers, or on the other third-party carriers. That's my position and my idea on this.

Nuala McGovern:Let's pop to the answer. There's so many questions for you, Güliz.

Güliz Öztürk:We are independent from government influence.

Nuala McGovern:There's one question here because nobody else can see them.

Güliz Öztürk:This is how independent from government influence We are independently running the company, that's for sure, but we are not independent in terms of traffic rights are allocated by the Turkish Civil Aviation. What is traffic rights? Those frequencies, the destinations you would be flying. If you look at from that perspective, of course, we're depending on getting the traffic rights and up until now we didn't have issues so that we grow like this. The pilot certification, Communication also and everything. Other than that, business-wise, we are independently running the company and we are also publicly listed. The influence would not be there.

Nuala McGovern:Somebody else taking your ancillaries idea very seriously. Do you aim to grow that line to an even bigger percentage of your income? If so, what challenges might you face?

Güliz Öztürk:As long as the percentage is also something like you should be— we should be careful of because you may take down the yield and then the percentage may grow. What we want to do is while we're keeping our ticket revenue, of course, we want to grow the ancillary revenue. We're measuring it more on per pax and per penetration-wise. We have some new products, not much left, by the way. We have newly launched Baggage, cabin baggage this year. Not much left which would grow our ancillary. More, we're now working on having an AI integration for dynamically AI-based pricing for our ancillary products.

Nuala McGovern:Which I didn't actually get to ask you, but I meant to because I know digital transformation was also another plank in your platform as you came on. Is AI at the heart of that?

Güliz Öztürk:AI is at the heart of that. I think most of the industries, for more industry, lots of industries, it is so. We have in December last year, we have established an innovation lab in Silicon Valley in San Francisco as Pegasus. We want to have this technology scouting from there directly into our processes. For next year, for example, we have in the Roadmap, 30+ AI-based projects for the operational processes, for customer-facing products, services, pricing, personalized offerings or so. It's right at the heart, you're right.

Nuala McGovern:The future is here. Just in our last minute, I did see your Pegasus chairman warned of the difficulty when facing eroding margins, aircraft delivery delays, inflation-related costs. That can be sobering. Are you optimistic?

Güliz Öztürk:Let me say, I mean, I'm rationally optimistic. I'm not such an optimist type of person, but I'm not pessimist either. I mean—

Nuala McGovern:You're a realist.

Güliz Öztürk:Yeah, realistically optimist, let's say. I carry the hope because I have seen within the business, like 32 years, Seen so many challenges, so many crises in this sector. This sector is open to crisis. We should be very well aware of that.

Nuala McGovern:If it doesn't happen, you feel it.

Güliz Öztürk:Yes. Every 3, 4 years, we see something else happening in our sector. Yes, inflation is an issue, but what I say is aircraft deliveries also, but these all will be handled at the end. As long as we have the demand, as long as demand is there, I think we will find a way to manage it.

Nuala McGovern:Güliz Öztürk has been my guest, the Pegasus Airlines CEO.

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