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AIRLINES Pegasus Airlines

BRIDGING Pegasus Airlines is


bouncing back and
looking to new markets

CONTINENTS
WORDS: MARTIN RIVERS

y the time the Turkish


B government had suppressed the
military coup of July 2016, it
was clear that tough times lay ahead for
the country’s aviation sector.
A series of high-profile terror attacks –
including one devastating assault
on Istanbul’s Atatürk International
Airport – had already shattered Turkey’s
appeal as a tourism hotspot and
intercontinental aviation hub. Political
unrest only looked set to damage its
reputation further.
With flag-carrier Turkish Airlines and
low-cost rival Pegasus Airlines both
posting operating losses for the year –
their first in recent memory – concerns
grew that Turkey’s era of double-digit
passenger growth was grinding to a
halt. The subsequent election of US
president Donald Trump and the
imposition of his laptop ban on Turkish
and Middle Eastern carriers made 2017
appear no less ominous.
Yet, despite battling headwinds on
multiple fronts, the two network carriers
rebooted their growth plans last year after
bouncing back into profit. Amid a vastly
improved security climate and a better-
than-expected recovery in outbound
demand, Turkey’s aviation sector now looks
stronger than ever.
“It’s true 2016 was a very catastrophic
year for every airline in Turkey,” admits
Emre Pekesen, sales and network planning
director at Pegasus.
“The coup attempt and the other
security issues affected inbound traffic a
lot. But all those issues seem to be solved
right now, and for 2017, I can say, it has
definitely recovered.”
The worst of the downturn hit Pegasus
between September 2016 and February
2017, when passenger numbers fell for
six consecutive months as Europeans
steered clear of Turkey.
Wet-leasing six Boeing 737s to foreign
carriers allowed the company to scale
back operations without grounding its
planes and crew. Another seven Boeings
were then sold for $179 million, enabling
management to speed up the transition to
fuel-efficient Airbus A320neos.
Other measures such as introducing
electronic flight bags and acquiring
Salesforce, a digital customer-service
platform, also played a part in boosting
efficiency. Combined with a healthy w
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AIRLINES Pegasus Airlines

pick-up in demand, the result was a net


profit of 492 million Turkish lira ($125
million) for the first nine months of 2017.

International focus
Pekesen notes that the airline added six
new destinations last year: Grozny, Nizhny
Novgorod, Samara and Volgograd in
Pegasus’s Russia; Odessa in Ukraine; and Abu Dhabi
in the UAE.
joint venture This reflected a conscious shift away
strategy from domestic traffic and towards
non-Western overseas markets, he says,
though the reason had less to do with civil
With ambitions to become a Pegasus is recovering
from a tough 2016 unrest than with capacity restrictions at
truly global operator, it should
Sabiha Gökçen International Airport, the
come as no surprise that Pegasus has
airline’s main hub, which is located on the
an active strategy of developing foreign
Anatolian side of Istanbul.
joint ventures.
“Slots are precious in Sabiha Gökçen
In 2012, it acquired 49% of Air Manas, a small
so we cut some of our domestic network
airline based in Bishkek, Kyrgyzstan. The subsidiary
and put [the growth] in the international
was initially rebranded Pegasus Asia, but has since
sectors,” Pekesen recalls, emphasising
reverted back to its original name. It deploys three
that the gateway operates well above its
Boeing 737s on flights to Osh in the south of the
intended capacity of 25 million passengers
country, Moscow in Russia, Urumqi in China and
per year. “Inbound traffic was affected
Delhi in India.
by the coup attempt, but outbound from
Another subsidiary, IZair, based in the western
Turkey to international [destinations]
Turkish city of Izmir, has a more complex history.
was not... The Turkish people travelled
Having started life as an independent airline, it was
more than ever in 2017. That was a good
rebranded Air Berlin Turkey after both Pegasus and
sign for us.”
Air Berlin became shareholders. However, its leisure-
Having rebalanced the network, Pegasus
focused charter model quickly unravelled and last
is due to receive seven A320neos this
year’s failure of Air Berlin left Pegasus with 99% of
year for what CEO Mehmet Nane says
the joint venture’s shares. All seven of its 737s are
will be “the real growth”. His predecessor,
now wet-leased to its parent.
Sertaç Haybat, placed a landmark order
Emre Pekesen (pictured below), sales and network
for 75 A320-family neos plus 25 options
planning director at Pegasus, admits that the
in 2012, moving Pegasus away from its
subsidiary strategy has not always gone smoothly.
longstanding aircraft supplier Boeing.
Maintaining IZair as a separate entity with no strategic
purpose carries a “cost”, he concedes, while slow
Fleet renewal
growth at Air Manas demonstrates how “it’s really very
The fleet transition still has a long
difficult to run a [foreign] company from Turkey”.
way to go, with 40 Boeings currently
Nonetheless, such problems have not deterred
in service versus 24 Airbuses. But
the company from pursuing additional joint
Pekesen says management have already
ventures, particularly north of the Black Sea.
decided to exercise all 25 options,
“Pegasus always is looking around nearby
given their confidence in the market’s
countries and just waiting for the opportunities,”
potential. Moreover, he reveals that the
Pekesen says, when asked about a recent meeting
stretched high-density A321neo – due
with Ukraine’s government. “Ukraine is really an
to begin arriving in 2019 – will play a
under-served market… it’s a huge
bigger role than previously planned,
country, the population is
potentially accounting for “45 to 48”
huge, and it’s in the middle
units in the fleet.
of [a region with]
“The slot issues will continue, the
expanding GDPs. So
bilateral [traffic-rights] issues will continue
it’s an interesting
in the short and the near-term,” Pekesen
country. We are just
insists. “So A321s with 239 seats will be
monitoring
an advantage for us.”
right now.”
Pegasus’s existing network comprises
72 international destinations plus 36
in Turkey. Western and central Europe
account for the largest share of its
overseas operations, while 15 points are
also served in the Middle East and the
Caucasus, seven in south-eastern Europe,
seven in Russia, five in Ukraine, and two
in central Asia.
About 30% of the airline’s passengers
use Sabiha Gökçen as a transit hub, w
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Pegasus Airlines AIRLINES

Pegasus is introducing more


Iran is also underserved, with Pegasus
Airbus A320s to its fleet only operating one daily flight to Tehran
under the current bilateral agreement.
Tabriz, Mashhad, Shiraz and Isfahan would
all be considered if access were offered.
In North Africa, Morocco is the only
country not being targeted due to Turkish
regulations mandating crew layovers for
lengthy sectors. Algeria, Tunisia, Egypt
and even war-torn Libya are all candidates
for growth. “Right now I can say [security
in Libya] is not at the appropriate level,”
Pekesen admits. “But for 2018 it might be
an opportunity for us.”
In the CIS region, Russia, Ukraine,
Uzbekistan, Turkmenistan and Tajikistan
also offer potential.
The upcoming A321neos could even
see Mumbai and Delhi join the network,
though Pekesen stresses that India “is,
again, bilaterally a very strict country”.
“Inbound traffic to Turkey was affected by the coup Asked how Pegasus can overcome
traffic-rights issues in its target markets,
attempt [in 2016], but outbound to international he says the opening of Istanbul New
destinations was not... The Turkish people travelled Airport in October 2018 should be a
catalyst for liberalisation. The new gateway
more than ever in 2017. That was a good sign for us.” will replace slot-constrained Atatürk as
the city’s dominant hub, paving the way
exploiting the same geographical for greater access by foreign carriers.
advantage that has fuelled breakneck Once they have secured landing slots in
growth for Turkish Airlines at Atatürk. Istanbul, Turkey’s government should find
Outside of Istanbul, Pegasus also now it easier to negotiate reciprocal access for
stations five aircraft in Ankara, Turkey’s its own airlines.
capital. About 85% of flights from this The new airport could also become
secondary base are bound for mainland a secondary base for Pegasus given its
domestic markets, owing to Ankara’s distinct catchment area on the European
geographical location in the centre of side of Istanbul, but not until its third
Anatolia. However, flights to Germany, runway is operational in about 2020.
Austria, Ukraine and Jordan are also Incumbents at Atatürk will be first in line
served, and Pekesen sees more overseas for slots before then, and Sabiha Gökçen
routes joining the network as Pegasus is anyhow due to gain its own new runway
targets alternative access to markets for this year.
which it lacks traffic rights from Istanbul. “Definitely we will not move our base
Asked about route development at from Sabiha Gökçen Airport,” Pekesen
the primary hub, he says management says, emphasising the low-cost carrier’s
has a “shortlist” of candidates in the commitment to its home base.
Commonwealth of Independent States “Of course we would like to fly from
(CIS), the Middle East and North Africa. Istanbul’s third airport, but there are no
“All those three regions are bilaterally given decisions on how many aircraft
not open skies, so it’s really very difficult it will be and where [we will fly
to obtain traffic rights,” he admits. to]. Domestic, international, one
“But it’s worth doing this... because they aircraft, five aircraft – there are
are mostly underserved markets and the Facts & no concrete decisions.” £
competition is less than [in] Europe.
Yield-wise, those markets will contribute
stats
to our profitability.”
Countries: 41
Saudi Arabian ambitions
Destinations: 111
Saudi Arabia stands out as the obvious
(38 domestic, 73 international)
white spot in the Middle East. “I’ve been
Fleet: 76 (12 A320neos, 12 A320-
working for Pegasus Airlines since 2010
200ceos, 1 737-400, 51 737-800s)
and during these seven years maybe
Passengers (January to
we wrote 17 letters to our Civil Aviation
November 2017): 25.54m
[Authority about Saudi Arabian routes],”
Weekly flight operations:
Pekesen complains. “If we can obtain
3,000+
the permissions we can start flying
immediately... Jeddah, Riyadh, Madinah,
Dammam are all on our shortlist.”
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