FLUG REVUE January 2003: Turkish Airlines advances

TURKISH AIRLINES IMPROVES QUALITY

By Andreas Spaeth

Istanbul is a hub between continents: this metropolis of 8 million people on the Bosporus even spans two continents, stretching from Europe on its north-western side to Asia in the south-east. This bridge function is also conspicuous at Atatürk Airport: at peak times planes stream in at one-minute intervals, a mix of modern Boeing 757's flying in from Azerbaijan and Turkmenistan, elderly Boeing 707 military tankers from Iran and Ilyushin 76 transporters and Antonov An-24 turboprops from the Ukraine. The latter set off home again soon afterwards, packed full of goods from the Istanbul bazaar.

Turkish A340

Many of these somewhat exotic countries are only a short flight away from Istanbul on the other side of the Black Sea. Then we should not forget the turbulent Turkish charter scene, vestiges of which also adorn Atatürk Airport in the form of grounded fleets belonging to expired carriers, as well as planes still active in the service of Alfa Air, Onur Air und Bosporus European Airways, all based at this airport. But all that pales in comparison to the mighty Turkish Airlines which, with a fleet of 66 jets, very much dominates the home airport.

On domestic routes, Türk Hava Yollari (THY), as it is known in Turkish, has a monopoly even though the routes are theoretically open to competition. Turkey is an enormous country of 63 million inhabitants whose size is the equivalent of Germany, Switzerland, Austria and Italy put together. The furthest distance between two cities within the country is almost 2,000km by road, so that in many cases flying is the only practical form of transport.

The proportion of Turkish passengers on THY reflects this, and in fact is often higher than the proportion of international passengers transported. Out of a total of 12 million passengers carried in the year 2000, 6.5 million were on domestic flights, and in 2001 the equivalent figure was 5.2 million out of a total of 10.2 million passengers.

Turkish charter airlines such as Istanbul Airlines, Sultan Air (both bankrupt) and Onur Air have periodically tried to get established on domestic scheduled flights, but were soon forced to give up. For until recently, the government, which still owns 98.2% of THY, set the air fares on domestic flights at an artificially low level.

According to Gürol Yüksel, Executive Vice President Commercial, speaking in an interview with FLUG REVUE, "This meant that no one could make any money on domestic routes, but now we are setting our own fares.” The star performer, with twelve flights daily using the Boeing 737-800, is the route between Istanbul and the capital city Ankara, on which a Business Class was recently introduced (a round trip on the 419km route costs just under Euro 200 in Business Class). A total of 26 airports between Istanbul in the West and Van in the east on the Iranian border are served by Turkish domestic flights. "Only 1.5% of the Turkish population travels by air at all today, so the potential is enormous,” says Gürol Yüksel.

Yet it could be some time before the population of the Anatolian countryside starts taking to the air in a Boeing or an Airbus in significant numbers. THY, which ranks 43rd in the world in terms of passenger revenue, therefore needs to create a distinctive image for itself on its international routes. Here it serves the function of being the biggest foreign currency earner of the Turkish economy.

"Today we earn about $1.1 billion of hard currency a year for Turkey, which puts us way ahead of the hotel and mining industries,” says Yüksel. In a country plagued by inflation such as Turkey, whose Lira currency was depreciating at one point at the rate of 50% p.a. and is still declining at an annual rate of 32%, this is particularly important.

For some time the most important international market for THY has been Germany. On 10 May 1960, a Vickers Viscount belonging to the airline founded in 1933 and re-named Türk Hava Yollari in 1956 landed in Frankfurt airport, its first scheduled destination in central Europe.

"Today we operate over 100 flights a week to nine German airports. Of course that is only natural, since two-and-a-half million Turks live in Germany,” says Nasuh Çetin, responsible for network management at THY.

"We have undergone an important transformation and our business is no longer based as it once was primarily on ethnic traffic and tourism. Since 1998 we have transformed ourselves into a hub carrier.” Today Atatürk Airport serves as a hub between East and West, with four daily waves of traffic.

"We would like to make even better use of our geographical position as a bridge between the Middle and Far East, Europe and the CIS states,” so Yüksel describes the objective. "Already today we are the biggest airline as far as the Gulf region and the strongest carrier in the Balkans and the CIS states.”

Before this transformation could get under way, it was necessary to expand the airport located in the Istanbul suburb of Yesilköy, and this was done in partnership with Vienna airport. Today Atatürk Airport comes over as a lavish, efficient hub where check-in and transfers are easy. By 2004 the modern terminal is to be expanded again by another six gates and an 84-room hotel within the security area. Its capacity will then rise to 20 million passengers a year. Already today some two million out of the 14.5 million passengers (2001) passing through Atatürk Airport are simply transferring to another flight. This corresponds to a transit proportion of around 30 per cent.

Even if there have frequently been reservations in the industry that THY's long haul route network was oversize, it is precisely on those routes that the airline makes a profit. Since the destinations of Miami and Kuala Lumpur were dropped, the airline, with its fleet of seven A340-300 planes, still flies from Istanbul to New York, Chicago, Johannesburg, Cape Town, Peking, Shanghai, Seoul, Tokyo, Osaka, Bangkok and Singapore, and now Hong Kong as well.

"The long haul routes have helped us break with the pattern of being a seasonal airline,” says Gürol Yüksel. The main focus of present network planning is the Far East. "Bangkok is our strongest route, and Singapore and the Chinese routes are also heavily utilised,” says Nasuh Çetin. The next priority is to increase the frequency of services to Peking, Shanghai and Seoul, even if, as Çetin admits, "on the Far Eastern routes we are heavily dependent on tourists, who make up 90% of passengers from Japan.” However, recently THY's Business Class has also been enjoying higher utilisation. First Class has been completely scrapped.

It is here that one of Turkish Airlines' biggest problems lies: among business travellers and full fare paying passengers in Germany its image is only weak. "We represent Turkey, and the image of Turkey is not good in Germany because our guest workers come from very rural regions and don't reflect the real Turkey,” says Gürol Yüksel, attempting an explanation.

But the fact is that THY maintains a defensive posture in Germany and, for example, hardly advertises its services. Moreover, the airline's relatively high accident rate has firmly anchored itself in people's heads. "Since the DC-10 catastrophe in Paris in 1974, we haven't had any further accidents on international flights,” says Yüksel. "All the other accidents occurred in difficult airports in Turkey, and we've implemented major improvements in our pilot training.” Again, the Kurdish Workers Party (PKK) terrorist attacks and the earthquakes in Turkey did not help advertise the country's national carrier. "Yes, we are a country in crisis,” Yüksel concedes quite openly, "In particular, the earthquake in Istanbul did us a lot of harm.”

Precisely on long haul routes, the Turkish airline offers a premium product which comfortably outshines Lufthansa's offering: its A340-300's have a Business Class cabin with 34 comfortable seats at a seat pitch of 1.37m, 15cm more leg room than on Lufthansa. "In two years' time we shall also be installing flat beds in Business Class,” the THY team announce. Anyone wishing to fly from Hamburg or Stuttgart to Cape Town can already buy a fully flexible Business ticket from THY for about Euro 1,900, and the flight time is hardly any longer than via Frankfurt, from where Lufthansa demands nothing short of Euro 5,020 for a Business Class ticket. The only problem is that the THY service is only offered twice a week.

"We offer a First Class service at Business Class prices,” is the catchphrase of the Turkish carrier. The Business Class in the Boeing 737-800 cabins specially configured to THY's requirements likewise boasts comfortable seats and a choice of three hot main dishes.

Yet despite all this progress on the product side, the Turks do not have an efficient feeder system to transport passengers to their hub, as they are used to being self-reliant and have not entered into any domestic alliances up to now. "The Qualiflyer alliance with Swissair and Sabena was a very good experience for us,” says Gürol Yüksel before then going on to describe the many shortcomings of the collapsed alliance.

"Swissair was much too dominant, so we only had a very low involvement. We were unable to derive very many benefits from the alliance nor, especially, to feed our hub with passengers.” Codesharing with American Airlines, especially on connecting flights from New York and Chicago, is working well. Is this a sign of a possible rapprochement with oneworld? "No, oneworld is not a particular priority, we also have bilateral agreements with many other airlines,” says Yüksel. "In the early summer of 2002 we stepped up discussions about our alliance future, but there is nothing concrete yet and we aren't in a hurry to act.” But then he does concede that "staying on our own would not be easy”.

Just as the possibility of entering into an alliance is hanging in the clouds, so is the privatisation of Turkish Airlines, which has been under discussion for decades. The last serious attempt dates back to before the Gulf War in 1991, but this fell by the wayside when the war broke out. At the beginning of 2001 it looked as if it might finally come off, but then in February the Turkish economy slumped into an acute crisis, only to be followed by 11 September. The government was forced once again to put its plans to sell up to 24% of THY to a foreign partner airline on ice.

"It will happen, but not in the immediate future,” Gürol Yüksel believes. For his colleague Nasuh Çetin, the need to contain the influence of the government is the top priority. "Having to go through all those bureaucratic channels to get anything done is very cumbersome and time-consuming, whereas if we were privatised we would be able to make better use of our time.” The most recent example of bureaucratic hurdles is a new procurement law which forces THY to put out to tender the purchase of relatively trivial items like a particular brand of drinks for the on-board service and also aircraft fuel. "This could force us to buy cheaper, but poorer quality kerosene and thus to compromise air safety,” complains Yusuf Bolayirli, CEO of Turkish Airlines. He demands above all else to be on an equal footing in the competition with the big European competitors. "But that will only be possible if the company is floated on the stock exchange and the government becomes a minority shareholder for the first time.”

Turkish Airlines has made significant strides ahead as regards fleet renewal. "We are now flying with only three types instead of up to seven before. The average age of our fleet is only 5.3 years,” Gürol Yüksel is proud to report. Its former fleet of seven A310-300's, purchased in 1984 with material assistance from Franz-Josef Strauss, has largely been taken out of service and sold to Iran Air and Mahan Air from Iran, which are unable to purchase any new aircraft due to the trade embargo. "Our last A310 will be sold at the end of 2003. In 2004 we shall be buying seven more Boeing 737's, either-700's or -800's, plus two Airbus A330's,” says Yüksel. The long haul routes will then be covered by A330's and A340's and the medium-range routes by Boeing 737-700's and -800's, with Avro RJ-100's and RJ-70's operating the short domestic routes. By 2005 at the latest, the British four-engined aircraft will also have disappeared from the fleet, to be replaced by additional Boeing 737-700's

Although Turkish Airlines relies especially on the 737-800, it is not planning to have them fitted with winglets. "We hardly use them on any flights longer than four hours, so it wouldn't pay,” explains Erhan Özcan, head of maintenance at THY. With regard to the technical overhaul of its own fleet, THY relies entirely on its own capacity and does not subcontract any work. All maintenance work is carried out in the airline's two hangers (51,000m2 and 80,000m2) at Atatürk Airport.

"We've changed our philosophy in recent years,” says Özcan, "and now we want to be a technical centre for the entire region.” Turkish Airlines is not only taking over line maintenance for 30 airlines in Istanbul and other Turkish airports, but, with a workforce of around 2,500, it also looks after some 100 aircraft belonging to regional airlines such as Iran Air, Mahan Air and Azerbaijan Airlines in Istanbul. It is licensed by both FAA and JAA.

When it comes to pilot and cabin crew training, once again THY is looking beyond the end of its own nose. A 15,600m2 facility at the age of the airport accommodates not only simulators for the 737-400, 737-800 and RJ-100, but also an unusual, fully mobile cabin evacuation trainer for simulating emergencies, along with several mock-ups for service training. It is not only THY crew who train here, but British Airways pilots also practise flying in the RJ-100, while Swiss, Braathens and Aegean Airlines send cabin and cockpit crew to Istanbul to train in the airline's modern facilities as well.

Things are looking good at THY at present: in the first half of 2002 the airline made a profit after tax of $55.7 million, up from a mere $3 million in the equivalent period in the previous year. According to Gürol Yüksel, the company will emerge from 2002 with a substantial profit, compared with the modest $7 million it achieved in 2001. "We did our homework even before 11 September, in that when the economic crisis hit Turkey in February 2001 we cut out some routes, introduced cost-saving measures and stepped up the sale of technical services and simulator training to external customers.” Now everything depends on political developments in the region. As Yüksel puts it, "If we have another bloody war in Iraq, then THY is the airline that will suffer the most after the airlines in Iraq and Iran.”

From page 20 of FLUG REVUE 1/2003

Last updated 5 December 2002

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