The chairperson of Pegasus Airlines has warned the Turkish low-cost carrier’s financial performance is “not sustainable” because soaring costs are outstripping rising revenues.
However, Mehmet Nane says Pegasus will continue to expand its fleet to reflect Turkey’s growing travel and tourism market and will invite Airbus and Boeing to compete for its next order for deliveries beyond 2029.
Speaking at an Aviation Club UK luncheon in London on 13 June, Nane, the airline’s former chief executive and a recent IATA chair, said the problem of tight margins, a result of aircraft delivery delays and inflation-driven wage and other cost hikes, was one facing the entire sector.
“We are losing money,” he says. “We have seen a 5% erosion in gross margin in three years. This is not sustainable.”
Pegasus posted a full-year operating profit of €489 million ($530 million) for 2023, down around €100 million on the previous year, despite revenues climbing 9% to €2.67 billion.
The airline, which has its main base at Istanbul’s Sabiha Gokcen airport, has Airbus single-aisle deliveries scheduled until 2029. Those aircraft will take its total fleet to around 130, from 105 today, taking into account retirements.
Beyond that, Nane says the airline will need to place a further order for expansion and to replace older types. Despite a fleet increasingly weighted to the European airframer – it flies just 10 Boeing 737-800s – Nane insists there will be a contest. “We must go as a decent businessperson to both Airbus and Boeing,” he says, noting that Pegasus is one of the “few low-cost carriers to operate a dual fleet”.
As of the end of March, the airline’s fleet comprised 46 Airbus A320neos, 42 A321neos, and seven legacy A320 family aircraft, alongside the older Boeing narrowbodies, according to Airline Business data.
In July last year, Pegasus disclosed an agreement to firm up orders for another 36 A321neo jets, a variant it has described as a “game-changer” in terms of fuel efficiency, capacity, and range.
At the London event, Nane said supply chain problems were still causing problems across the industry. Although as an all-CFM operator, Pegasus is not affected by maintenance issues with the Pratt & Whitney PW1000G engine, Nane hit out at Airbus for being late with two aircraft which Pegasus had been counting on for its summer schedule. “We sold tickets for these flights last September for this summer. We will lose face when we have to cancel [those bookings],” he says.
He says Pegasus will keep adding to its 138 destinations – 103 of them international – “as long as Turkish tourism continues to grow”. The airline is shortly to add Edinburgh to its UK destinations of Birmingham, East Midlands, London Stansted, and Manchester.
Nane dismisses suggestions that the low-cost sector faces consolidation, predicting that budget airlines will continue to launch and thrive over the next decade as part of a wider consumer trend to seek value, “as long as we can control costs”.
