Turkish Air Has Worst Loss Since 1999 as Terror Hits Tourism

  • Revenue down and planes flying more than a quarter empty
  • Reversal follows record profit at fast-growing carrier in 2015

Turkish Airlines posted a net loss of 1.24 billion liras ($421 million) in the first three months of 2016, its worst quarterly result since at least 1999, as revenue fell and planes operated below three-quarters full after months of terrorist attacks that have hit cities including Istanbul and Ankara.

The loss, which followed a year-earlier profit of 373 million liras, was wider than the 1.04 billion-lira shortfall predicted by analysts, according to the average of 10 estimates compiled by Bloomberg. Earnings were also hurt by a $306 million write-down of foreign currency debt.

Bombings by Islamic State and Kurdish militants, as well as tensions with Russia, have undermined Turkey’s $32 billion tourism industry, with foreign arrivals dropping for eight straight months through March, the longest declining streak since at least 2006, according to government data.

State-owned Turkish Air is lifting capacity 14 percent this summer as foreign airlines pull out, according to scheduling database provider OAG, with much of that increase likely to be unprofitable.

Occupancy Falls

The carrier’s load factor, a measure of seat occupancy, shrank to 74 percent from 76.9 percent in the quarter, while revenue slipped 1.4 percent amid a decline in fares even as the number of travelers rose 10 percent.

Shares of Turkish Airlines, as Turk Hava Yollari AO is known, fell as much 2.8 percent and closed 1 percent lower at 6.65 liras In Istanbul. The stock has declined 10 percent this year, compared with a 9.9 percent gain in the Borsa Istanbul 100 Index.

The decline in direct traffic to Turkey was led by group cancellations from Japan and China, the company said, while the number of Russian visits has slumped since the imposition of sanctions by Moscow following the shooting down of a Sukhoi warplane.

Transfer traffic through Turkish Air’s Istanbul hub provided some compensation, with the number of passengers changing planes there -- but not leaving the airport -- up 22 percent.

The loss comes as a blow after Turkish Air posted a record profit in 2015 amid a slump in oil prices that helped slash operating costs. Expenses including fuel rebounded 9.5 percent in the first quarter in dollar terms, spurred mainly by maintenance outlay and personnel costs including new union agreements.

The foreign-currency hit involved mainly yen-denominated bank loans.

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