Turkish Airlines Plans Revival by 2018 After Terror Prompts Loss

  • State-controlled carrier has first annual deficit since 2000
  • Fourth-quarter cost measures prevent deeper reversal

A passenger aircraft, operated by Turkish Airlines, stands at the gate at Vienna International Airport.

Photographer: Lisi Niesner/Bloomberg

Turkish Airlines is targeting a return to its earlier pace of gains in passenger numbers by next year as the effects of terrorism and political turmoil wane after causing a loss in 2016.

Turkish Airlines will post a “moderate” increase in passenger numbers this year and “from 2018 onwards, we will be seeing our historical growth rates,” Chairman Ilker Ayci told analysts on a conference call Monday.

Once the rising star of the aviation industry, the Istanbul-based carrier, formally known as Turk Hava Yollari AOposted a 47 million-lira ($13 million) net loss last year compared with profit of 3 billion liras in 2015, its first annual deficit since 2000. Passenger numbers rose 2.5 percent in 2016, slowing from an average yearly gain of about 16 percent from 2011 through 2015, according to an investor presentation.

Tourist and business sites in Turkey have been terrorist targets in the past year and a half, including an assault by suicide bombers in late June at Istanbul’s Ataturk Airport that killed 41 people. Economic sanctions by Russia after Turkish forces shot down one of its fighter jets reduced traffic from that market in the first half of 2016. The airline’s efforts to recover from those incidents were hampered by an unsuccessful insurgency in the military to overthrow President Recep Tayyip Erdogan on July 15 that killed about 250 people.

Fleet Plans

The carrier grounded 30 aircraft, about 9 percent of its fleet, and scrapped 22 destinations in November. Tourist arrivals in Turkey plunged more than 30 percent to the lowest in a decade. The airline’s full-year loss was held back as the company reduced costs per available seat kilometer in the fourth quarter and scaled back flight offerings, according to the presentation. Ayci said Turkish Airlines will start bringing the grounded planes back into service in April after bookings for that month and May jumped 4.2 percent from a year earlier.

Turkish Airlines shares rose 0.7 percent to 5.65 liras at the close in Istanbul. The stock has gained 13 percent this year.

“We see this as the first sign of normalization in the Turkish market, although we believe it is still too early to become positive on the sector,” Maciej Wardejn, an analyst at Wood & Co. in Prague, said Monday in an emailed report.

The company’s SunExpress joint venture with Deutsche Lufthansa AG reported a $26 million loss for 2016. Lufthansa is buying the venture’s German assets. Turkish Airlines will continue “tight controls” over costs and focus on expanding cargo operations this year by 7 percent after a reorganization was completed at the unit last year, Ayci said. The carrier is looking at China, India and some American markets for any “inorganic growth possibilities,” he said, without giving specifics.

Turkish Airlines will invest $1.2 billion to $1.5 billion in its planned move to Istanbul’s new airport, scheduled to open in phases starting in 2018, from its hub at Ataturk, Ayci said. The spending includes building a campus for the carrier at the new site, he said.

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