SunExpress’ introduction of larger Boeing 737-10s as part of its new long-term follow-on order for Max jets underlines chief executive Max Kownatzki’s confidence the leisure carrier can continue to ride the Turkish boom which has seen it perform so strongly since the Covid pandemic.
The Lufthansa-Turkish Airlines joint venture carrier is still in the process of adding 42 Max 8s from an earlier order but secured its long-term fleet requirements by signing a firm deal during the Dubai air show for 45 more Max aircraft for delivery from 2029 through to 2035. It has also secured five options and purchase rights on 40 more Max narrowbodies over the same period.
Amid the glut of huge deals that airlines have struck over the past 18 months, the significance of the order to SunExpess should not be lost.
”It is the largest order in the history of SunExpress,” Kownatzki said during a Dubai air show press conference to announce the deal. “It means we are more than doubling our fleet in the next 10 years.
“We have 66 aircraft now. We are growing to about 100 in 2028, 150 in 2032-33, and actually 166 aircraft by 2035.”
SunExpress took delivery of its first Max in December 2021, around two years later than planned after the type’s lengthy grounding, and now has nine in service.
Last November was the most profitable November we have ever had, so we are pushing the summer season into the fall and the spring
“Our share of new technology [Max aircraft] is roughly 15-20%,” he tells FlightGlobal, during an interview in Dubai. ”We want to get to 85% roughly.”
Notably, 17 of the 45 new firm Max orders are for the larger -10s, the first time SunExpress will have narrowbodies with a more-than-200-seat capacity.
“One thing that is counter-intuitive is we will have the first Max 10 in 2027,” Kownatzki says, explaining that both the existing and new order contain substitution rights from -8s to -10s. ”The older 33 we can still swap into -10s, so we are starting early on that.”
He says the carrier also considered Boeing’s Max 8-200 – the higher-density version of the -8 which can seat up to 200 – as well as the Airbus A321neo.
“The A321neo was interesting because the payload goes up to 244 seats, while the Max 10 only goes up to 230,” he says. But noting the high seasonality of the leisure carrier’s business, Kownatzki says that while it is a case of “the bigger, the better in the summer”, that also means taking a bigger hit in the winter.
“We looked at four things: Cost, obviously. Capacity/payload played a role. Capability – in terms of complexity of multi-fleet flying, type ratings, maintenance programmes – so complexity and keeping that low. Then, when do they [manufacturers] have it available?
“We are very happy with it,” he says. ”We are going to get the first -10 in 2027 and, for our seasonality profile, we are fine with 230 seats as opposed to 244.”
SUNEXPRESS ON A GROWTH RUN
Taking to the stage to place the biggest order in the carrier’s history would have seemed a world away to Kownatzki after his early days at the helm of the airline. Having moved from his network and partnership role at Lufthansa Group to head up the airline almost four years ago, the Covid pandemic then immediately hit. It meant his first months in the job were spent restructuring the carrier.
Despite that challenging start, which included the shutting down of its SunExpress Germany unit, the airline’s fortunes have rapidly improved. Fuelled by strong travel demand to Turkey, it had already reached parity with pre-pandemic capacity by 2021. And while challenges keep coming, be it the outbreak of the Russia-Ukraine war last year or the devastating earthquake that hit southern Turkey and Syria earlier this year, the carrier continues to thrive.
“In this industry you really have to earn the right to grow, the right to buy aircraft,” Kownatzki says. ”Our ASKs were already at 101% [of 2019 levels] in 2021. They were at 122% in 2022 and this year we are operating at nearly 150% of ASKs compared to pre-pandemic levels. That really shows the growth trajectory we are on.”
The airline was back in profit in 2021 and increased EBIT to €85 million ($93 million) last year, on revenues up 63% to €1.5 billion. Revenue and profit are up again after the first nine months of this year.
”From a market point of view we have seen growth of 10% to 12% in the market we are operating, hence, we can’t get enough capacity at the moment. That’s where we are pushing [Boeing] for timely deliveries,” he says, noting that pre-summer deliveries are preferred.
TURKISH AVIATION BOOM
Few aviation markets have rebounded from the pandemic as strongly as Turkey’s. Indeed, the country’s biggest carrier Turkish Airlines – co-owner of SunExpress – and Pegasus Airlines have posted record profits and growth of their own. Both too have been looking to secure their own fleet growth: Pegasus in July ordered a further 36 A321neos while Turkish Airlines remains in talks with Airbus and Boeing over a massive order to double its fleet over the next decade.
That rebound has been driven by the country’s strong tourism market, helped in part by increased affordability due to a weak local currency.
Kownatzki is confident that continued growth is sustainable, but this is not based on blind faith. “I challenge everything,” he says, citing the potential for the country to lose its competitive advantage as inflation and prices rise.
He though points to the track record of Turkish market performance. “Historically, and not just for SunExpress, they [Turkey] have rebounded from crises a lot faster than other markets. So the country rebounds very fast.”
Similarly, while he sees things like hotel and car rental prices increasing in the country, Kownatzki says package travel pricing remains low compared with rival European hotspots like Greece, Italy and Spain. ”So on that front I am not worried.”
It means Kownatzki describes his answer to whether growth is sustainable as ”not a naive yes, but a well-tested yes”.
DIVERSIFYING THE NETWORK
The airline’s outlook is also helped by its diversified customer base. While tourism is key a component – representing about a 45% share of its business – a similar portion comes from visiting friends and relatives (VFR) traffic. “Just in Germany there are 3.6 million Turks, so we had that as a very stable source of income during the pandemic. When tourism went down, VFR traffic went up significantly,” he says.
Notably, the carrier, which has strongholds in Anatolia and the Turkish Riviera, is particularly strong in connecting the markets of its two shareholders. Cirium schedules data for October, for example, shows SunExpress held a 60% share of ASK capacity on routes connecting Turkey, excluding Istanbul, with Lufthansa Group home markets Germany, Austria and Switzerland.
The carrier is also continuing to extend its footprint from Turkey to other markets. “We have extended to the UK,” he says. ”Summer ’22 we rolled it out. Summer ’23 was 82% higher, and we are adding another 74% in summer ’24. Besides that we have the Middle East, we have Dubai, Abu Dhabi, Sharm el-Sheikh [among others].”
It has also moved to fill some of the void left from the axing of SunExpress Germany through a partnership with Air Cairo.
“We didn’t have the traffic rights between Egypt and Germany [any more]. So we partnered with Air Cairo,” he says. SunExpress handles the sales, distribution and commercial steering for Air Cairo in Europe. “We have more than 80 weekly frequencies with them, one million passengers a year,” he says.
Kownaztki is also working to mitigate the big impact of seasonality on the business. ”We have a big drop between the summer and winter,” he says, noting it is looking to tackle this in several ways.
One facet is to extend the summer into the season’s shoulder months. ”Last November was the most profitable November we have ever had, so we are pushing the summer season into the fall and the spring. And this also means a diversification of the [travel] use case,” he says, pointing to drivers like golf, soccer and tennis training camps and historical travel.
The carrier also struck a deal to deploy two Boeing 737-800s with South African Airways over the winter. ”We are basically flying Johannesburg to Cape Town and Durban for South African,” he says. SAA, which is taking the aircraft on damp-lease, already has one in service and the second enters service this month.
”We are planning on building it out as much as possible,” says Kownatzki. “The counter-cyclicality between their summer and our winter is fantastic.”
Another move to mitigate seasonality impact is on the labour side, where there is a link-up with Swiss shipping firm MSC to provide out-of-season crew work opportunities. There have been over 75 applications over the winter for crew working in guest relations and services on cruise ships, which he notes is an example of how SunExpress is thinking differently to offset seasonality.
“Obviously the larger we get, the more we are going to have to do that,” he says
