Turkish Airlines is facing challenges at its new hub in Istanbul New Airport, as Simple Flying reported last month. As a result, its competitor Pegasus Airlines, which uses Istanbul’s other airport, Sabiha Gökçen, saw over 200% share price growth. Now, in a sudden twist of events, Turkey’s Civil Aviation Directorate has decided not to approve any new flights or frequency increases from Sabiha. This will be a serious boost for Turkish Airlines, and bad news for Pegasus.
Turkish Airlines is facing problems
Net income at Turkish Airlines fell 37% in the first nine months of 2019. And this is not only because of the grounding of the 737 MAX.
Operating costs for Turkish Airlines have risen significantly since the relocation to Istanbul’s new airport, a move that happened in only 45 hours. Operating costs for Turkish Airlines now total almost $10 billion, which is almost 10% higher than in the same period last year.
Because Istanbul New Airport is far larger in surface area than Ataturk used to be, the increase in taxi times has contributed to a 20% increase in fuel consumption for Turkish Airlines. This is another factor that drives operational costs higher.
Turkey decides to limit growth at Pegasus’ Sabiha
In response to these developments, Bloomberg reports that Turkey’s Civil Aviation Directorate will not approve any new requests from any airline wanting to increase flight frequencies or launch new routes from Sabiha Gökçen International Airport.
The reasons given for this decision are cited to be capacity insufficiency, continuing maintenance work and heavy traffic.
This is a curious reason since Istanbul Sabiha Gokcen runs at 80% capacity at the moment. Its maximum allowance of daily flights is 798, but it currently serves just 627 flights per day. Even on its busiest days, the total number of flights does not exceed 720.
Its passenger number data tells a similar story: Istanbul Sabiha Gokcen served 35.5 million passengers in 2019, but it has the capacity to serve 41 million.
Impact of the decision on Pegasus and Turkish Airlines
Shares of Pegasus Airlines fell 7.3% in response to the news. Meanwhile, shares of Turkish Airlines were 3% higher. The news is very positive for Istanbul New Airport, which will see higher growth in the long-term as a result of the limit on growth at Sabiha Gökçen.
Consequently, this is also very positive news for Turkish Airlines which will itself see higher growth through Istanbul New Airport than Pegasus will see at Sabiha Gökçen.
Turkish Airlines recently announced it will be expanding out of Sabiha Gokcen Airport through its low-cost subsidiary Anadolujet. The new flights are due to take off in March.
Interestingly, they will not be impacted by Turkey’s Civil Aviation Directorate’s decision to curb growth at Sabiha. This means that Turkish Airlines will benefit in two ways: by expanding from this airport where it will face lower operating costs, and by seeing any future growth of its main competitor Pegasus halted.
Do you think Pegasus will be able to grow just through increases in its load factor? Let us know in the comments below.