WTM2010: Pegasus celebrates continued and diversified growth

“We’re growing so fast internationally that we have outdoor adverts that are changed by hand” – so declared Pegasus Airlines executive chairman Ali Sabanci at the 2010 World Travel Market.

“We now have 25 international destinations,” he noted, “and we want to grow more, particularly in the CIS/former Soviet Union. But these are ruled by bilaterals and they restrict us. And this is the same when we try to fly to most of our neighbouring countries. In fact, some of them we cannot even ask for [traffic rights]!”

The airline’s CEO, Sertac Haybat, expanded on his chairman’s comments. “Never mind a level playground, it is not an even playground in Turkey. For example, last year we applied for rights to fly to Damascus. THY Turkish Airlines was running two a day and we asked to operate the third. It came up and was given to THY,” he recalled. “Basically we have no choice in the destinations for which bilaterals are offered. The authorities just offer them and even if they look poor we are going to try to make the best of them.”

The reason for the situation, according to Sabanci, is the regulation process in Turkey which he described as being 20 years behind western Europe. “But every day it gets better,” he confirmed.

With Turkey looking to join European Union, the potential for even greater is there too, but Sabanci has reservations. “I think Turkey will have a tough time joining the EU. But we will progress as though we are going to join, because that will develop the air traffic regulations,” he predicted.

Not that Pegasus is short of opportunities. “The economy in Turkey is growing so fast. With the opportunities there are, it’s like being a child in Hamleys [famous London toy store] for the first time,” Sabanci quipped.

Whilst undergoing this growth, the carrier is standardising its fleet on the Boeing 737-800. “We have five Classics, which will go back as will the five A320s with our subsidiary IzAir,” Sabanci remarked before looking further down the line. “Among the manufacturers, the new narrowbody or perhaps re-engining will be open for choice – when one of them chooses to move and the other follows.”

In 2011, the airline will take delivery of 12 more 737-800s. The full order of 40 aircraft will be completed in 2015.

Sabanci described the Pegasus model as a mix of Ryanair and easyJet. “We differ from Ryanair in that we are not very abrasive. And we only fly to secondary airports a bit, but much of the time to primary airports,” he noted.

Where the airline has some frustration is with competition, or the lack of, between airports in Turkey where more than 40 airports are under the control of the national airport owner. “It’s one of the bottlenecks which is throttling the growth of tourism in the country,” claimed Sabanci. “For example, in Antalya there are more than 400 five-star hotels, which do almost doing nothing for five months a year. But the airport rates don’t get reduced to encourage traffic.”

CEO Haybat, added, “The beautiful thing about EU airports is that generally they are transparent [in their dealings].” While that is helpful, taxes by EU governments only hinder progress. And here is where Haybat believes the European governments could learn a lesson from Turkey. “In 2003, the government took tax off air travel. After that, they saw that the revenue in domestic air travel increased by double-digit growth. Then there were about 10 million passengers a year, now we have doubled that,” he explained.

Fortunately in the domestic market there is still an untapped market waiting, as Sabanci explained. “We have 20 million journeys a year within Turkey using aircraft, which probably involve around 3.5-4.5m individuals. But there are 160 million journeys still being done using the bus. Yet this is a country of 72 million people, and it’s a youthful population with an average age of 29. The geography of Turkey means that 2h20 is longest domestic sector. By coach this would be up to 30 hr and it’s not the safest journey,” Sabanci commented.

The position of Pegasus within the industry has been enhanced by the increased presence and visibility of parent ESAS Holding. The company has already a share just over 16% in airberlin (making it the largest single shareholder) with Sabanci holding a place on the German carrier’s board.

“When we first invested in airberlin, we did not particularly have in our mind what synergies it had with Pegasus. They were an attractive investment,” Sabanci admitted. “And now that the two are collaborating – Pegasus is to codeshare with airberlin from 2011 – it is not because of the two shareholdings, but because of what can be achieved.”

Although Pegasus and airberlin will be codesharing, Sabanci does not foresee the former following the latter into the oneworld alliance, or any other alliance for that matter. “I do not personally believe it will happen. I think it would add a lot of costs,” he contended.

Another ESAS investment in aviation came with the company’s purchase of shares in Air Lease Corporation (ALC), the latest leasing company set up by the doyen of the leasing business, Steven Udvar-Hazy. ALC was launched just before the Farnborough Air Show in July and spent much of the show ordering aircraft from a string of manufacturers.

Photo shows Pegasus Airlines executive chairman Ali Sabanci (right) being interviewed at World Travel Market 2010 by John Strickland, head of JLS Consulting.

Bernie Baldwin, editor, Low-Fare & Regional Airlines/LARAnews.net
London ExCel

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