Turkish Airlines vs. Pegasus: different models and aviation market segments, but same profit cycle

Both Turkish Airlines and Pegasus Airlines enjoyed a strong return to profit in 2017 after rare losses in 2016. A series of geopolitical and terrorist events in Turkey had weighed on demand in 2016, and both airlines suffered plummeting unit revenue.

Turkey enjoyed a healthy recovery in air traffic in 2017; the country's two leading airlines benefited from higher passenger volumes and from keeping their capacity growth rate below the rate of demand growth. Pegasus grew passenger numbers faster than Turkish and achieved a new load factor high.

Both airlines achieved healthy profit margins but below previous highs, and it seems that they are both locked into a similar cycle. Both Turkish & Pegasus have low unit costs when compared with other European airlines in their respective segments. Ultra-LCC Pegasus has a significant unit cost advantage over Turkish Airlines, but macro factors appear to be the main driver of their shared profit cycle.