Published in June 2015 issue
With one wing in Europe and the other in Asia, Turkish Airlines continues on a flight plan destined to prove Napoleon Bonaparte correct for saying, some 300 years ago: “If the earth were a single state, Istanbul would be its capital.”
By Jeff Kriendler
Similar to the extraordinary growth of the big three Gulf carriers—Emirates (EK), Qatar Airways (QR) and Etihad (EY)—with which Turkish Airlines (TK) is often compared, TK uses its Geo-strategic location to connect continents, but is further advantaged by having a large and mobile home market of over 77 million potential travelers with access to 52 Turkish airports. In addition, its Istanbul-Ataturk Airport (IST) (Airways, May 2015) is within narrow body reach of 55 countries, including over 100 European cities served non-stop. The airline’s President and CEO, Dr. Temel Kotil, says that the carrier’s strong growth will continue as it pursues a strategy of building international-tointernational passenger transfers to create one of the airline industry’s largest global networks, currently ranked fourth.
Dr. Kotil says that the Turkish carrier serves more countries (108) than any other airline, and also leads in terms of the number of international destinations served (220). It offers the largest number of origin and destination city pairs to and from Africa and the Middle East, and the second largest to and from Asia and the Pacific. Besides its main market within Europe—in which it has come into prominence as a key player over the past decade—Turkish has also penetrated thinner European markets, and will continue to expand to many of the continent’s second and thirdtier markets that are not economically served by larger aircraft, such as Edinburgh (EDI) in Scotland, Liverpool (LPL) in England, Billund (BLL) in Denmark, and Genoa (GOA) in Italy. Building critical mass is the foundation of the airline’s strategy, he notes, with further market route development planned this year, especially to Asia, Africa and the Americas.
THE PASSENGER IS NOW THE ‘BOSS’
This Aeronautical Engineer from Istanbul’s Technical University joined the technical section of the carrier in 2003 and became CEO in 2005, a year prior to the airline’s partial privatization. The Turkish government holds a 49.12% stake, while a 50.88% one is held by the public; its shares are traded on the Istanbul Stock Exchange. Dr. Kotil believes that the airline’s dramatic growth and sustained profitability after the partial privatization are no coincidence. “Government-owned airlines are as if poisoned in some way,” he states. “At Turkish, the passenger is now the ‘boss’, as it should be. The focus of our attention must be the customer. The successful airlines are those that love their passengers—and we do love ours,” he says with a smile.
With his technical education—he received his Ph.D from the University of Michigan and has also served as a guest professor at the University of Illinois—Dr. Kotil surprises observers with his interest and commitment to invest in the service product. This customer-centric priority is paying dividends. In 2014, Turkish Airlines was chosen by Skytrax as the best airline in Europe for the fourth consecutive year. It was also recognized as having the “Best business class catering in the world; Best business class lounge dining, Best European cargo airline”, and for being “Overall Carrier of the Year,” among other industry recognitions and awards. At the end of 2014, it provided 1,200 daily flights, and Dr. Kotil assures that, by 2020, this volume will swell to over 2,000 per day.
Battling the competition in various parts of the globe, the airline’s CEO points out that the marketplace no longer buys tickets blindly. “Passengers can select any carrier they wish— there is no captive market. If you don’t have the product, forget about it. At Turkish, the management wants to support our staff by investing funds in the product, as if we were inviting passengers into our own homes in the true Eastern tradition.” For example, he says that the airline does not consider catering just a ‘food service’, but a true example of Turkish hospitality. “We want to satisfy our guests at the utmost level and are upgrading our already excellent offerings. In essence, we are competing with ourselves and are totally concentrated on how we can do things better.”
TWENTY-FOUR ROUTES ADDED IN 2014
Last year, Turkish added 24 new routes from its IST hub. The company flies to 101 airports in Europe; 42 in Africa; 33 in the Middle East; 31 in the Far East; and 10 in the Americas, with seven gateways in the United States [New York (JFK), Boston (BOS), Chicago O’Hare (ORD), Washington-Dulles (IAD), Los Angeles (LAX), and Houston(IAH)] and two in Canada [Toronto (YYZ) and Montreal (YUL)], while San Francisco (SFO) will join the prolific network later this year.
Already the largest non-African carrier to serve the African continent, Turkish will bolster its presence by launching three new points in 2015.
“I believe that Africa will grow to be one of the most important continents in the world,” says Dr. Kotil. “The region has an enormous potential, so we are planting a seed which may take some time to be fully nurtured.” He notes that Turkey is the third biggest investor in Africa after China and Saudi Arabia and that, by expanding its network, Turkish will make the region more accessible than ever before. The strategy is to add international- to- international traffic, which reached 14 million passengers last year, more than the total number of passengers flown by many airlines over their entire networks.
He jokingly refers to the airline’s fleet of Boeing 737-900s as the ‘African Queens’, plying long, thin sectors in a C10 / Y141 configuration. As routes mature, the carrier will upgrade to Airbus A330s to meet increased demand, he notes. TK’s expansion in Southern Africa will increase as the airline gets more wide-bodies capable of flying the route segments non-stop, as they are beyond the range of fully-loaded and fueled narrow-bodies.
The Turkish mega-carrier not only has a global route network, it also has multi-daily frequencies in key markets to build mass and reduce operating costs by maximizing aircraft and crew utilization. For example, the carrier has eight daily round trips to London from Istanbul (five to Heathrow and three to Gatwick); six daily trips to Moscow and Tel Aviv; and five or more daily rotations to Frankfurt, Berlin, Düsseldorf, Amsterdam, Vienna, Paris and Brussels. Its network in Germany numbers 13 cities, serving German business travelers and tourists as well as the large Turkish diaspora, which numbers over four million in Germany alone.
The strong market to Germany enticed Lufthansa (LH) to join with TK in 1989 to create a 50-50% joint venture—SunExpress (XQ)—a low cost carrier which connects cities in Anatolia (the Asian part of Turkey) with popular European destinations using a fleet of Boeing 737 aircraft. SunExpress does serve Istanbul as well, but from Istanbul’s secondary Sabiha Gökçen (SAW) airport, which is located about 18 miles (30 kilometers) away on the Asian side of the city. In 2014, SunExpress carried over seven million passengers.
In 2008, Turkish also established a domestic LCC, branded Anadolujet, which uses Boeing 737-800s and -900s, Embraer 190s, as well as Airbus A340s for long-haul missions.
Dr. Kotil points out that his carrier has its sights set on further expansion in the Indian sub-continent and China as well as Australia; however, for now, the priority will be the Americas and Africa. Currently, Turkish utilizes all the traffic rights granted by its Chinese and Indian bilateral treaties, but wants to increase the number of frequencies and destinations it serves. He notes, “India is a large and important air market (the 5th largest domestic one), and is expanding its economic global power. Air India (AI) joining Star Alliance will assist our goal of spreading our reach within India.”
NEW MEGA HUB IN THE WORKS
Turkish Airlines has reaped the benefits of a booming demand for commercial air service in Turkey, which has experienced high rates of growth in the last decade. Although its market has tripled over a period of 10 years, Turkey remains under penetrated compared to more mature markets, indicating its growth potential. In 2014, the Turkish market grew by 13.5%, more than double the global industry growth rate of 5.1%. As a consequence of this rapid growth, Turkish has been constrained by capacity limitations at its IST hub.
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In anticipation of the continued demand for traffic to Istanbul and for international connecting passengers, the government of Turkey has begun work on an ambitious project to build the world’s biggest airport based on a passenger handling capacity that is estimated to reach the 150 million mark by 2021.
While Istanbul is a natural hub to connect continents, it is surrounded by politically unstable countries, which have impeded traffic flows. The airline boss calls the region ‘complicated’. Turkish has been forced to reduce or suspend services to Libya, Iraq and Ukraine, and also borders Syria and Iran. The airline is adept at modifying flight schedules and can move aircraft around with ease as warranted by the prevailing political conditions.
GETTING THE JOB DONE
When it comes to fleet plans, the airline’s CEO is not sentimental. “To us, they are tools, machines to get the job done,” he states. At the end of 2014, Turkish Airlines had a strong fleet of 236 aircraft, including 197 narrow bodies (divided between 91 Airbus A320 family aircraft and 83 Boeing 737 series), and 55 wide bodies (comprised by 34 Airbus A330s, 5 Airbus A340s and 16 Boeing 777-300ERs). The carrier also operates seven cargo aircraft (two aging Airbus A310F and five Airbus A330-200F). In March 2014, it was announced the purchase of four additional Airbus A330F, and launched $328 million in secured enhanced equipment trust certificate notes (EETC), for the purchase of three additional Boeing 777-300ERs, adding up to a robust fleet of young medium-and long-haul airliners.
On order are 117 Airbus A320 Family aircraft and 95 Boeing 737s, the vast majority of which are from the Neo and Max generation. Sun Express, the LH/TK joint venture, has placed an order for 50 additional 737-800s and 737-8 Max. The Board of Management of TK is constantly evaluating further aircraft options. The airline currently offers a premium economy on its fleet of Boeing 777-300ERs, but there are plans to remove those sections this year and expand their business class product to meet increasing demand.
With nine dedicated freighters, Turkish also has a growing presence in the carriage of international cargo. Currently the sixth largest airline in Europe in terms of freight tonnage, the carrier transported only 1.0% of the global freight market share in 2009, which rose to 2.0% by year-end 2013. It has set itself the goal of achieving $1.7 billion in cargo revenues by 2018, representing 3.4% of the global carriage. This would represent about 11% of the airline’s total projected revenues of $18 billion.
MASSIVE LOUNGE AT ATATURK
In addition to an already abundant portfolio, Turkish operates one of the world’s largest airport lounges at Istanbul’s Ataturk Airport. Sprawling over two levels, the lounge is almost 65,000 square feet (6,000 square meters) and should not be missed by anyone passing through the airport while traveling either in business class or as an elite member of Star Alliance. First conceived as Lounge Istanbul in 2011, two major extension projects have doubled the space, achieving a capacity of 1,100 seated guests, many of whom arrive early to enjoy the sumptuous fare and soothing design.
Within the lounge are a fully stocked library, a children’s playground, pool tables, showers, private rooms for napping and the Golf simulator (Turkish Airlines sponsors the Turkish Golf Open). Catered for by Turkish Do & Co, the food options are varied and of gourmet quality. Fresh omelet stations are available throughout the lounge for morning flights and there are plenty of healthy food and drink options, including many Turkish specialties. There is a tempting selection of Turkish Meze (bite-size appetizers featuring vegetables) and desserts are spread out throughout the lounge, with numerous tea and coffee stations.
The impeccable in-flight service, gourmet food and amenities, with small touches like dinner by faux (LED) candlelight, all combine to make the long-haul Business Class experience memorable. The course-by- course cart presentations, including tea and coffee, are the crowning touches. Turkish Airlines uses famous athletes, such as football greats Lionel Messi and Didier Drogba, to get its message across, and, in earlier campaigns, had contracted US basketball legend Kobe Bryant to underscore its theme of being home to the stars.
To get another competitive lift, all passengers transferring in Istanbul between international Turkish Airlines flights are offered a free hotel stay in Istanbul and a complimentary city tour with all transportation, meals and museum fees included. Visitors are almost unanimous in praising the tours of magnificent Istanbul—and many choose to return.
FLIGHT TRAINING ACADEMY
Last but not least, Turkish has established its own in-house flight academy, which is providing a means to mitigate the global shortage of skilled pilots. Currently, the airline recruits some pilots from abroad, especially qualified captains. About 15% of its 4,000 airmen are foreigners who seem to enjoy working and living in Istanbul. The local sourcing of flight attendants is not a problem in Turkey as there are many qualified men and women who have a good command of the English language and are well trained in the art of service. The carrier also employs 284 flying chefs on its transoceanic routes and 500 more on its various flights of under eight hours duration (all supplied by Do & Co) to personally handle the food and spirits presentations.
“If you do the calculations, we are fueling our own growth,” Dr. Kotil notes. Our hub is in the ideal location, we are expanding our network, our fares are competitively priced and we strive for customer excellence.” The calculations are indeed most impressive: over the period 2006-2013, Turkish reported an average profit margin of 18%; its utilization rose from 10:31 daily hours per aircraft to 12:40. They are trying to lift curfews at European airports to further increase their productivity, which rose dramatically from 1,323 passengers per employee in 2006 to 2,084 in 2013.
As Dr. Kotil ponders his airline’s future, he can take inspiration from the words of Mustafa Kemal Ataturk, the Father of modern Turkey, who said, “On the meeting point of two worlds, the ornament of Turkish homeland, the treasure of Turkish history, the city cherished by the Turkish nation, Istanbul has its place in the hearts of all citizens.” The Turkish CEO would also agree with Ataturk’s prediction “The future is in the skies;” for Turkish Airlines, that brilliant future has arrived. Merhaba, Turkish!