Turkey’s Pegasus Culls Boeings for Leaner Neo as Demand Ebbs

  • Carrier to offload older 737s, hasten Airbus A320 buildup
  • Last year was worst for tourism in a decade, CEO says

Turkey’s Pegasus Airlines is accelerating a shift to more fuel-efficient A320neo planes ordered from Airbus Group SE as a spate of terrorist attacks in the country hurts demand and curbs revenue.

The low-cost carrier, owned by Istanbul-based private equity firm Esas Holding AS, will start selling older Boeing Co. 737 jets following Turkey’s worst year for tourism in a decade, Chief Executive Officer Mehmet Nane said in an interview.

Mehmet Nane

Photographer: Chris Ratcliffe/Bloomberg

Pegasus, which currently operates 62 737-800s and a mix of 20 original-generation A320s and re-engined Neos, plans to add at least 18 aircraft over the next three years while eliminating the Boeing planes and reducing the average age of its fleet to 5.2 years from 5.6.

“Our plan to roll out our fleet to Airbus from Boeing by 2020 still holds,” Nane said. “We are aiming to have 100-plus aircraft, the final number depending on the pace of the fleet phase-out.”

Pegasus now aims to take five A320neos this year, two more than originally planned, Chief Financial Officer Serhan Ulga said separately at the 2017 Global Airfinance conference in Dublin. That will lift the number of Neos in operation to nine following a 2012 order order for 75 plus 25 options. The planes consume 15 percent less fuel than the A320 “classic,” according to Airbus.

Shares of Pegasus rose as much as 3.8 percent to 15.23 liras before closing 2.7 percent higher at 15.07 liras in Istanbul.

The carrier will also this year get two 737-800s as part of an agreement reached in 2015, while leasing out six Boeings with crews, four to Pakistan International Airlines Corp. Ltd and two to Saudi Arabia’s Flynas LCC, in order to rein in capacity. Nane said that more such deals may follow.

“I am optimistic that 2017 will be a better year in terms of traveler numbers than 2016,” the CEO said, adding that passenger traffic could show a double-digit increase, versus an 8.1 percent gain a year earlier.

Last year “saw the worst of all scenarios,” Nane said, referring to the terror attacks and a botched coup attempt in July that prompted a purge of more than 150,000 people and 800 companies, acting as a further brake on travel.

Esas Holding has no plans at either board or shareholder level to dispose of Pegasus, the CEO said, responding to speculation about the carrier’s ownership.

Istanbul’s Sabiha Gokcen airport, the Pegasus base, will get a second runway next year, though the existing landing strip will then undergo maintenance before both are in operation from 2019. The hub is operated by Malaysia Airports Holdings Bhd.

— With assistance by Benjamin D Katz

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