THY Turkish Airlines is awaiting the country's national elections on 18 April with bated breath, as its future privatisation and relationship with Qualiflyer partner Swissair hang in the balance.
The hope is that a strong coalition government will emerge with the political backing to implement a package of economic reforms and a privatisation programme headed by Turkish Airlines. Until now the country's privatisation efforts have been weak to say the least, with a number of key privatisations being abolished by the courts due to alleged procedural anomalies.
In the meantime the airline is pressing ahead with its restructuring against a backdrop of contracting national economic growth and slowing tourism.
Its membership of Qualiflyer is an essential part of THY's aim to improve its yields and poor service image. The carrier is heavily reliant on tourist traffic and its yields average just ó9.7, compared to ó14 for a carrier like Lufthansa. The airline plans to launch a marketing drive shortly and hopes to reap substantial benefits from Qualiflyer by offering premium passengers an extended network and frequent flier benefit, as well as improved sales and marketing.
However its participation in Qualiflyer's joint marketing company has been put on hold, following a refusal by the Turkish privatisation administration to approval THY's application to become a co-founder. Swissair has indicated its interest in purchasing a stake in THY when its privatisation goes ahead. However, the administration was concerned that such a close link to Swissair might hinder the privatisation process by deterring other prospective bidders, says analyst Emre Tezmen, with Bayindir Securities.
Just 1.8% of THY's stock is listed, giving the airline a market capitalisation of $1.8 billion, says Tezmen.
Meanwhile, the airline is pushing ahead with its co-operation with Qualiflyer in areas which do not require approval and looking at ways to boost its profitability. Tezmen expects the carrier to report a net result of $11.5 million, down from $18.8 million in 1997, on revenue of around $1.2 billion for 1998.
Plans to spin off its unprofitable domestic and regional operations into a separate subsidiary would save the airline an estimated $358-$793 million, says Tezmen, through increased efficiencies. The new airline will have Ankara as its hub and will operate an efficient hub and spoke system using 10 British Aerospace regional jets. The intention is to privatise the carrier although THY will remain majority shareholder.
The expansion of Istanbul's Ataturk Airport, with a new international terminal due for completion in mid-2000, will boost capacity from 11 million to 21 million passengers and help THY to reach its full growth potential.
Turkish Airlines is also implementing an ambitious $2.5 billion fleet renewal programme which will nearly treble its capacity by 2003. THY has 26 new Boeing 737-800s and two Airbus A340-300s on firm order plus options on another 23 737-800s.
Source: Airline Business
