The terrorism and political chaos that has rocked Turkey
this year looms large over the aggressive expansion plans of Turkish Airlines.
The world’s 13th largest carrier in terms of capacity,
according to IATA, Turkish grew in size by an additional 19% in the first
quarter. In contrast, IATA forecasts just 7.4% growth industrywide this year.
Turkish said that by the end of 2016, it will be the world’s
10th largest airline, with a global market share of 2.1%.
But while analysts don’t dismiss Turkish’s chances for
success, they said that the carrier will have to overcome July’s failed
political coup, the terrorist attack on Istanbul’s Ataturk Airport in June and
a string of other terrorist attacks that are scaring tourists off in droves.
“Obviously the political situation in Turkey will affect
them greatly, but it’s anyone’s guess how that will pan out,” said U.K.-based
aviation analyst Barry Humphreys.
With tourism in Turkey already reeling, Turkish recorded
a loss of $421 million during the first three months of 2016, compared with a
$153 million profit a year earlier.
That figure could get worse if its revenue tracks the plunge
in tourism to Turkey. The number of foreigners who arrived in the country was
off 28% in April and almost 35% in May, after smaller drops during the first
three months of 2016.
Meanwhile, June was the worst month of the year for Istanbul
hotels, with occupancy falling 26 points from the previous June, to 40%. Revenue
per available room plunged 59%, to $39.
And those dismal numbers don’t reflect the fallout from the
June 28 attack on Ataturk, which left more than 40 people dead. Nor do they
reflect the new declines that will almost surely result from the failed
military coup attempt against Turkey president Recep Tayyip Erdogan on July 15.
In the aftermath of that coup attempt, the FAA shut down all
flights between the U.S. and Turkey for three days.
As Turkey’s tourism industry faces cataclysm, the business
model of Turkish Airlines could prove to be a saving grace. While the carrier
serves direct tourism to Turkey, it focuses more heavily on connecting
international travelers through centrally located Istanbul.
During the first quarter, 59% of international passengers
who flew Turkish were stopping in Istanbul only to catch a flight to another
destination, company figures showed. The airline services 290 airports around
the world, including 241 outside of Turkey. Its robust network of 128 countries
includes significant presences on every continent except South America,
Australia and Antarctica.
Turkish serves nine markets in the U.S., offering daily
flights to Istanbul from San Francisco, Los Angeles, Houston Bush, Chicago
O’Hare, Washington Dulles, Boston, Atlanta and Miami as well as three daily
flights from New York.
In fact, Turkish serves more countries than any of the
much-discussed Gulf carriers Emirates, Qatar and Etihad.
But even Turkish’s connecting business could take a hit for
now, said Mike Boyd, president of aviation consultancy group Boyd Group
“They are going to have to sit back and try to get through
it,” he said.
Turkish Airlines declined requests for comment for this
story. But Boyd said that the airline should push forward with its expansion
plans despite the difficult circumstances.
“They have built a hugely positive reputation for
reliability, for service, for quality. So the airline itself is a leader in
that,” he said. “It’s just where they are located. They had a terrorist attack
and a coup, and that cuts down on the number of people from Omaha who want to
connect through there. My gut is that they are doing the right thing. They
can’t just climb under a rock and hope that everything will get better.”
If the carrier can ride out the storm, its persistence could
bring a pot of gold.
Last year, Ataturk serviced 61.3 million passengers, making
it the third largest gateway in Europe, behind only London Heathrow and Paris
de Gaulle, according to the publication Airport World. But with Ataturk nearly
at full capacity, Turkey is currently building an $11.2 billion airport outside
Istanbul that will ultimately handle an annual capacity of 150 million
However, Brett Snyder, who runs the aviation blog Cranky
Flier, questioned whether the airline will be able to sustain its growth
without major boosts from the government, which owns just under 50% of the
“As long as Erdogan sees fit to continue to push Turkish as
a fast-growing airline, he can do it. And he can fund it,” Snyder wrote in a
post this week. “If Turkish needs to be a profitable business, however, that’s
going to be a real challenge.”