- Passenger numbers: 12,717,246, +19%;
- Domestic: 8,442,955, + 20%;
- International: 4,274,291, + 18%.
Sabiha Gokcen Airport reports 19% increase in YTD passenger numbers
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Turkish Airlines: unprecedented loss provokes slowdown in expansion and int'l transfer strategy
Since adopting its strategy of rapid growth, driven by capturing global connecting traffic flows via its Istanbul Ataturk hub, Turkish Airlines (THY) has expanded its capacity in ASKs at double digit rates for 13 consecutive years. However, in 2016 it plans ASK growth of only approximately 3%, with cuts in the winter 2016/2017 season. Moreover, its long haul capacity will be almost flat in 2017, and it seems probable that it will not repeat its habitual increase in the number of passengers transferring between international flights this year.
The prompt for this unprecedented change in THY's growth path was a slump into loss in 2016, also unprecedented – at least, since the airline adopted its connecting strategy in 2004. This loss was itself the result of a slump in demand for air travel to/from Turkey, coupled with overexpansion. The consequent slide in unit revenue could not be mitigated by a matching cut in unit cost, in spite of lower fuel prices.
Recent management changes at THY raise the possibility of a new approach, but the airline cannot hide its pride over its history of growth and market share gains. It will need to balance this against the imperative to restore profitability.
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.