Pegasus Airlines and Kyrgyzstan Airlines established a new JV, Kyrgyz Pegasus Airlines (KRA) (AA, 13-Oct-2009). The carrier will be used for international and domestic low fare operations. Pegasus will hold a 49% stake in the carrier and will wet lease two B737NGs to the new carrier. KRA plans to launch services from Bishkek in Nov-2009 with five aircraft, operating domestic services and routes to Istanbul, Dubai, Incheon, Astana and Moscow. The carrier also plans to operate services to China.
Pegasus Airlines and Kyrgyzstan Airlines form Kyrgyz Pegasus Airlines
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Georgia aviation market Part 2: a case study on liberal policies driving rapid airport growth
Georgia’s three international airports have benefitted from a liberal aviation policy, which has led to a period of rapid traffic growth. As highlighted in the first half of this report, total passenger traffic in Georgia increased by 26% in 2016 and is projected to grow by another 40% in 2017.
Passenger traffic at Georgia’s main gateway, Tbilisi International Airport, increased by 22% in 2016. Tbilisi traffic has grown from only 700,000 in 2009 to 2.3 million in 2016. The airport has been operated by Turkey’s TAV since 2007.
Georgia’s other two international airports, at Batumi and Kutaisi, grew even faster in 2016. Batumi also has been operated by TAV since 2007, while Kutaisi has been government owned since it opened in 2012.
Kutaisi is marketed as a low cost airport – the first of its kind in former Soviet republics – and has experienced an accelerated rate of growth since the opening of a base by Wizz Air in Sep-2016. Georgia’s investment in Kutaisi, and decision to pursue an LCC model for the new airport, represent another example of a liberal and innovative approach in a region dominated by legacy thinking.
Pegasus Airlines: still galloping (just), but no longer flying high, as Turkey events slow demand
Pegasus fell into loss in 2016, extending an unbroken trend of falling operating margins from the peak in the year of its stock market flotation in 2013. A series of geopolitical and terrorist events in Turkey weighed on market demand, leading to a drop in traffic in 2016.
Against this difficult backdrop, Pegasus slowed its expansion to single digits after years of double digit growth, but this remained ambitious in a falling market. In addition, its fleet grew faster than its traffic, piling on cost that did not generate sufficient revenue. It is now wet leasing aircraft to other airlines and deferring some new deliveries.
Pegasus' capacity growth is set to slow further in 2017, but it still looks fairly aggressive in a market that is again falling (according to OAG data). An increased focus on cost management may bring down ex fuel unit cost, but against this are rising fuel prices. Pegasus is likely to find a return to break even in 2017 to be a real challenge. In 2013 its margin was similar to those of its fellow ultra LCCs Ryanair and Wizz Air, but it has followed a worryingly divergent path since then.