Traumatic 2016 takes its toll on Turkey's ambitious airline

2016-10-03 11:30
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Istanbul - Even by the fraught standards of global aviation, 2016 has been tough for Turkish Airlines.

In June, its main hub Ataturk International Airport in Istanbul was hit by suicide bomb attacks blamed on jihadists, and then on July 15 putschists seeking to oust President Recep Tayyip Erdogan tried to take control of Ataturk.

Both incidents caused the temporary closure of Turkey's biggest airport, but the airline managed to resume flights the subsequent day, in a crucial message of business as usual and a symbol of Turkish Airlines' importance for the country's image and economy.

Traumatic 2016 has taken its toll

Yet while Turkish Airlines proudly boasts of its resilience in the face of the repeated attacks and the coup bid, Turkey's traumatic 2016 has taken its toll on the group and its ambitions.

After years where it was one of the few global airlines to reliably make profits, it recorded a $647 million loss in the first half to June, even before the effects of the coup are taken into account.

Meanwhile, brakes have been slammed on its exponential growth, which has seen the ambitious carrier move from being a low-scale outfit taking just 10.3 million passengers in 2002 to 61.2 million in 2015.

Growth this year has been far slower and the company expects to take a total of 63.4 million passengers in 2016, with most of that increase coming in domestic flights.

"In the last decade Turkish Airlines was one of the most profitable airlines in the world," company chairperson Ilker Ayci told journalists including AFP in Istanbul on Thursday.

"Turkish Airlines will continue to be an engine of growth," he vowed. "But this year is a hiccup, a very challenging year."

"We are very determined to continue our double digit growth but unfortunately not this year," he said, adding that the company is "financially very solid".

Turkish Airlines stock has lost over 30 percent of its value on the Istanbul exchange so far this year, even though it has traded relatively flat over the last month. On Friday its shares closed at 5.15 lira compared with 7.39 lira at the start of the year.

'Behind Erdogan' 

Ayci revealed that the company was suspending some routes in southern Europe for the winter to better use capacity -including Bordeaux, Pisa and Genoa - but insisted the routes were not being closed and the airline would return.

"2017 will be like 2015 - not 2016," said Ayci.

Turkish Airlines was transformed into a major international player after privatisation from 2004-2006 that left the government with a minority stake of just over 49 percent.

But it remains a national champion and, as Turkey's biggest exporter, its expansion is a cornerstone of the drive by Erdogan to make the country one of the world's top 10 economies by 2023.

The airline strongly backed Erdogan in the wake of the failed coup, putting messages on its websites and in-flight screens thanking the "commander-in-chief" for defeating the putsch.

Travellers even found colour brochures celebrating the defeat of the coup, along with the usual in-flight magazine, in their back seat pockets.

"If they (the plotters) had succeeded we would have lost tens of thousands of people... we would have lost the legally-elected government," said Ayci.

'Excited for new airport' 

Tourism however has plunged in Turkey due to this year's crises, with foreigner arrivals down almost 38 percent in August, and a dispute with Russia, a key market, not resolved in time to save the season.

Also the failed putsch has led to a government crackdown on suspected sympathisers of the coup-plotters which "has added significantly to concerns about personal security for foreigners as well as Turks, especially those living abroad," Alexander Kazbegi, an analyst at Renaissance Capital, said in a note in August, Bloomberg News reported.

"Unless these conditions change, we don't see travel picking up in months to come."

Ozgur Altug, economist at BGC partners, said in a note Friday that "the recent normalisation with Russia might alleviate the pain in the sector to some extent, but hopes are saved for next year."

While the airline remains hugely dependent on the security situation, it is still ploughing on with its growth plans, opening new routes to Havana, the Seychelles and even Zanzibar in the next months, with Ayci revealing a plan for Mexico City.

A cornerstone of its long-term growth is the new Istanbul airport by the Black Sea, a key infrastructure project championed by Erdogan which is set to open in the second quarter of 2018.

Ayci said the new airport will have a capacity for 90 million passengers annually in first phase after opening -- well over the current 70 million at Ataturk -- and then up to 150 million, meaning it could overtake Paris Charles de Gaulle and London Heathrow as Europe's largest airport.

"The airport will be very important for our growth. We are so excited," he said.

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