M. İlker Aycı, Turkish Airlines’ Chairman of the Board and the Executive Committee says the airline’s balanced growth trend will further continue
Turkish Airlines continues to grow. A new hub airport in Istanbul, new aircraft, and a booming cargo business all point to a bright future for the expanding company.
Are you happy with the performance of the airline so far in 2018 and do you expect to meet your targets?
In 2018, we are breaking the records we broke in 2017. We are continuing to benefit from the steps we took in 2017 and the strict fiscal discipline that we have been pursuing.
We are targeting to reach 74 million passengers this year, increase our capacity 5%-6% to reach 183 billion Available Seat Kilometers (ASKs) and load factor is expected to be close to 80%. Our cargo target is 1.3 million tonnes. So, we are already experiencing the excitement of taking a major step forward in 2018, to further our success in 2017.
Our transition to the new Istanbul Airport in 2018 (due to open in October) will be another important milestone for both Turkey and Turkish Airlines. I am pleased with our performance so far and I believe we can achieve a performance above our 2018 targets in the light of these indicators.
What is the strategy for the next couple of years?
The upcoming period can be considered a period of renewal. We would like to be the best by further enhancing our efficiency, performance and productivity in all areas that we are able to touch.
One of the key elements in our short-term goals is moving to our new hub at Istanbul’s new airport. Istanbul New Airport will become a touchstone for increasing our service quality and growth to achieve our long-term strategic goals.
When the third runway goes into service, our growth will increase, and our costs will be minimized by improving the parameters derived from capacity limitation.
And with the recent orders for new generation aircraft, that we announced last March— a total of 30 B787-9 aircraft, of which 25 firm and 5 optional, will be purchased from Boeing, and a total of 30 A350-900 aircraft, of which 25 firm and 5 optional will be purchased from Airbus—we will focus on the markets we have not been able to enter before.
We will continue to grow not only the number of destinations, but also the frequencies and connection quality. We will have reached 120 million passengers and 500-plus aircraft in our fleet by 2023. Reaching the top 10 in terms of ASKs by 2023 is another target.
Of course, we will continue to grow in cargo. The new airport will allow us to move 2 million tonnes by 2023 and it is one of our strategic goals to be one of top five air cargo companies in the years ahead.
How important is the new Istanbul Airport to your overall strategy?
An airline needs infrastructure that supports its fleet size and service quality. For that reason, Istanbul New Airport will be one of the most important factors in Turkish Airlines reaching its targets.
The existing airport has been a bottleneck in runway and slot availability for us. The new airport will be able to provide, in the first phase, capacity for 90 million passengers and 10% more slots per hour compared with the existing facility. When the third runway is put into service, we can increase market share in markets where that has not been possible before.
The Istanbul New Airport also aims to improve cargo. In the first phase, cargo capacity will be 2.5 million tonnes. On full completion, Istanbul will have 1.4 million m2 of cargo space handling 5.5 million tonnes of cargo capacity.
Additionally, Istanbul New Airport will be the largest maintenance and repair center in the world with a 700,000 m2 maintenance and repair space. Turkish Technic, a prominent subsidiary of Turkish Airlines, is one of the best maintenance and repair centers in the world at present. However, it will have the ability to increase the capacity and improve the quality with the Istanbul New Airport project.
In short, the airport will add an utterly different dimension to Turkish Airlines.
Will you alter your marketing or partnerships?
We will further our brand positioning through innovation of our marketing mix. To bring our customer satisfaction and product quality to a higher level, we plan to increase and standardize the quality of products/services offered. To this end, we are prioritizing cabin quality and airport operations.
Business partnerships and joint ventures agreements will continue at full speed, as we will partner with companies in North America, Central, and South America, and especially in the Far East. Our new hub will provide an effective competitive advantage in establishing new agreements.
Also, in an era where low-cost carriers have been increasing market share every year, we will develop our AnadoluJet strategy. We plan to rebrand our subsidiary in every aspect, including its destinations.
How important is cargo to your financial performance?
In the last 10 years, we have increased cargo carried more than fivefold whereas passenger numbers tripled. In 2017, cargo revenue grew 32.2% to $1.3 billion. Thus, the share of cargo revenue to total revenue—which was 6% in 2008—increased to 12% in 2017.
Cargo’s importance will grow in 2018. We are increasing our investment in new cargo aircraft. Our first B777F freighter aircraft joined the fleet in 2017. There will be five B777Fs in our fleet at the end of 2018. The long range and high tonnage capacity of the aircraft has increased our operational capability. We will strengthen our cargo network and we will be stronger in transit cargo.
Additionally, we are going to improve belly cargo capacity with the recently-ordered widebody passenger aircraft that will start to join our fleet in 2019.
Is aviation still an attractive career and can you recruit enough staff to sustain your growth plans?
We plan to employ a sufficient number of pilots, cabin crew, technicians and other staff in line with our 2023 strategic goals. For pilots, we meet half of our annual need with Turkish Airlines Flight Training and Airport Operations Co., which was established two years ago and has become a fully-owned subsidiary of Turkish Airlines.
This year, we will increase pilot training capacity by 30%. Additionally, we are further increasing our capacity through agreements with various flight schools in Turkey.
We work with several universities on projects that will provide prospective employment for technicians. Both universities and students are increasingly interested in the aviation sector.
How do you plan, given geopolitical uncertainty in some key markets?
Turkish Airlines has the fourth largest destination network in the world. It is first in many regions when the number of origin and destination pairs is taken into account. In 2017, the ratio of transit passengers to total international passengers carried was about 60%.
In addition, 40% of world international traffic and more than 60 capitals are located in our narrowbody aircrafts' range. We are currently serving more than 165 international destinations with narrowbodies from Istanbul.
Our crisis management experience allows us to produce agile solutions in such situations. We work on various capacity analyses and different strategies to set and direct our plans in the markets that face geopolitical uncertainty.
This extensive flight network, coupled with geographical location advantages provide us with dynamic capacity management strategies to optimize the network in every possible case.
What does it mean for Turkey to have a strong national airline that is now a global brand?
The power of countries comes from the power of their companies. Turkish Airlines offers unique value to Turkey as the power of the airline strengthens the power of our country day by day. Moreover, Turkish Airlines directly serves Turkey’s open door policies.
About 70% of inbound tourists travel by air and a large part of that is carried out by Turkish Airlines. We make a huge contribution to Turkey’s tourism potential and continue to promote the country through high-end commercial films. And we also perform successfully in the business market, too. So, we are essential to Turkey’s global representation and promotion.
In terms of contribution to Turkey's economy, we are a unique service exporter for our country. That is, we provide a significant currency input to our country.
Increasing the number of destinations and frequencies also brings about the development of commercial relations between our country and other countries. Mutual import and export increases are observed at the destinations in Turkish Airlines’ network.
Together with our affiliates, we employ more than 50,000 people. We also guide our national technology.
For example, seat manufacturing and galley manufacturing is done by our local manufacturing and exporting companies, TSI (Turkish Seat Industries), and TCI (Turkish Cabin Interiors). And as the largest buyer of products, we consistently support other business fields in Turkey.
Do you think ICAO’s Carbon Offset Reduction Scheme for International Aviation (CORSIA) will play an important role in managing aviation’s climate change impact?
As the aviation sector grows, its environmental impact is increasing accordingly. Besides significant technological advances, infrastructure and operational improvements, alternative fuel developments are having an impact. Even though today's aircraft consume about 80% less fuel per passenger kilometer compared with the 1960s, we absolutely need a large-scale solution for aviation today and in the future.
CORSIA will encourage airline operators to reduce their emissions by purchasing environmentally-friendly aircraft, seeking sustainable alternative fuels, and using fuel-saving applications.
What is the best way to improve security?
Research indicates that passengers require simple, fast and less intrusive security screening.
I believe the way to enhance the security level and improve the customer experience is to improve the use of technology.
Security must be seen as a whole. There should be improvements from the entrance of the airport to the end of the journey. For security reasons, we should focus on well-supported, reliable and reasonable solutions rather than restrictions and prohibitions.
Promoting the use of automated systems, effective use of big data, biometric passports, new generation x-ray machines, and new generation security checkpoints will all be useful.
Airlines and other shareholders in the airline industry, through their customer-focused point of view, can lead the technology companies and the authorities in developing more efficient and customer-focused security systems.
What other challenges do you see ahead for the industry?
The world is constantly changing and as time progresses, the speed of change increases. That being the case, effective management of customer expectations and technological developments are becoming even more important.
The spread of new business and new transportation models are issues to be considered in the aviation sector. I also want to mention information security. Personal data and its protection, which remain high on the agenda, will become even more crucial in the future.
Energy policies and progress in politics and geopolitics will be other issues that directly affect the aviation industry.
Fuel, for example, will be one of the major costs of airlines in the future as it was in the past. Fuel prices and fuel economy will maintain their current significance from the airlines’ perspective.