THY's expansion route

THY Turkish Airlines is embarking on a massive network and fleet expansion over the coming years, boosted by a fast-growing economy, an expanding tourism industry – and Turkey’s possible entry to the European Union

The carrier will expand its fleet by 25% to more than 100 aircraft over the next three years, and 23 new routes will be added in 2006. This will take the total number of destinations served by THY from 79 to 102. The figures are hardly surprisingly considering the carrier’s speed of growth – in the first nine months of the year, THY carried 11 million passengers, a 20% increase on the same period for 2004.

The carrier’s president, Dr Temel Kotil, says the rapid expansion is, in large part, a response to the fast-growing Turkish economy, following a financial crisis in 2001. The economy grew by 7.8% in 2002, 5.9% in 2003 and 9.9% in 2004. Dr Kotil says this has resulted in a significant increase in business travel – figures from the World Tourism and Travel Council (WTTC) indicate that business travel in Turkey grew by 10.4% last year. Tourism has also been growing strongly for several years.

New destinations in the former Soviet Union feature prominently in the 2006 timetable. Additional Russian routes include Ekaterinburg, Kazan, Rostov and St Petersburg. “There are business links to Turkey in these destinations,” says Dr Kotil, adding that flights to Astana International Airport in Kazakhstan achieved 80% load factors from their launch earlier this year.

In terms of future long-haul development, Dr Kotil says the Far East is looking more attractive than North America. He points to Istanbul’s location on the crossroads of some of the key east–west routes as a strategic advantage, and says that although the carrier is not relying on future membership of the European Union, this could provide a further boost to activity.

The airline has seen its domestic market recover after the blow of a government decision in 2001 to open up the internal market to private operators. This was undoubtedly a challenge for THY, which was forced to lower its prices to compete. However, lower prices have stimulated demand, and THY has seen the domestic market pick up strongly. “We reduced our prices by half,” says Dr Kotil. “Volumes increased, load factors increased, and profits increased.” The carrier is looking to set up a low-cost unit to operate on domestic and some European routes.

Dr Kotil says that, to some extent, THY is playing catch-up with the market, and benefiting from a period of prolonged economic stability. “Since 2002, we have had three excellent years,” he says. “We have faced problems keeping capacity up with demand.”

An economic downturn in Turkey in the early part of this decade hit the carrier badly. “There was a lack of investment at that time,” says Dr Kotil. “It was difficult for management to make decisions.” There has been no significant renewal of the fleet since the late 1990s, with the average aircraft age currently 9.3 years. By 2008, this will be down to about six years.

The airline now has 82 aircraft in its fleet, compared with 66 in 2002. Kotil says this “has satisfied demand to some extent”. The move up beyond the 100-aircraft mark is a step-change in size for the carrier, which has seen its fleet size range from 64 to 77 aircraft over the past 10 years.

Dr Kotil will not be drawn on THY’s choice of alliance, but makes it clear it is a question of sooner rather than later. “There are very few airlines of the sort of size of THY that are not in an alliance,” he says, noting that although the airline is “fully efficient” on short-haul routes, it will only be able to achieve global coverage for its widebody fleet through an alliance.

Source: Airline Business