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26 February 2011
Turkish Airlines - Connecting Continents
Standing on the European side of the Bosporus Bridge in Istanbul and looking over to the Asian part of the city, the two continents suddenly are very close. And it is particularly this unique geographic situation that made Istanbul a city of choice for many travellers over the past centuries. As the final station of the famous Orient Express, Istanbul has a long heritage as a transportation hub. Travellers from all over Europe went through Istanbul on their way to exotic destinations in the east. While planes have replaced trains and ships as the predominant means of travel, the city's unique position at the far end of Europe still remains an asset. And with Turkish Airlines' massive growth ambitions, the best seems yet ahead.
In previous centuries, Turkish Airlines was mostly recognised as an ethnic carrier, connecting many Turkish people all over the world with their families and homeland. However, during the last years, the airline has definitely outgrown this cliché as it repositioned itself as a leading network carrier, destined to connect continents. One boost in profile and network came when the airline joined the Star Alliance in 2008 and started partnering with existing members. At the same time, Turkish Airlines also wanted to grow by itself, building on its strategic location on the edge of Europe. So far, a dense network to 171 destinations has been developed. The airline is particularly strong in Western Europe, from where it now offers a wide range of connections through Istanbul to an ever growing number of places in Africa and Asia. And new destinations are opened at an aggressive pace. This year alone, the airline plans to add 14 new international destinations including Los Angeles, Shiraz, Valencia, Malaga, Toulouse, Manila as well as three cities in Iraq. Shifting its focus to international markets is also a reaction to new arrivals in its home market. Pegasus Airlines, a successful low cost carrier based in Istanbul, is competing on national as well as regional routes in Europe. Backed by the country's recent economic growth, flying became immensely popular and accessible. But while passenger numbers soared, yields went down and Turkish had its challenges in fighting the new low-cost competition. In reaction to the new arrival, Turkish Airlines even established its own low-cost carrier AnadoluJet but it also shifted its focus on longer hauls and connecting passengers.
And as network expansion is a high priority, the list of international destinations is set to keep growing. On average, the airline plans to add 10 new airports to its portfolio every year, consistent with the past few years. On the wish list are places such as Calcutta, Kuala Lumpur but also more distant cities such as Sydney and Auckland. On the European side, the network is already quite dense, with direct flights to 64 destinations. Historically grown, the airline has a strong position in many European markets and it is now building on these established links. Turkish Airline's ambition is to develop Istanbul into a leading connection point between Europe and Asia as well as Africa. Therefore, the airline is building on its geographical position which allows it to reach all of Europe on narrowbody aircraft such as the Boeing 737-800, one of the company's workhorses.
As Mr. Akif Konar, Senior Vice President Marketing & Sales points it out, being able to fly smaller planes to Europe is seen as a significant cost advantage against competing airlines with hubs in places like Dubai or Abu Dhabi. This requires them to use widebodies to collect European transfer passengers. And while they're able to offer larger cabin with more amenities, they're also requiring a much higher catchment areas to fill their planes. Turkish Airlines, on the other hand, can connect smaller places to its Istanbul hub with less risk as these places can be reached by aircraft in the area of 150 seats. In this light, it does not come as a surprise that single-aisle aircraft make for the biggest part in Turkish's fleet. Out of the total fleet of 155 planes, the airline operates more than 60 Boeing 737s as well as more than 50 Airbus A320-familiy aircraft. The fleet is quite diverse anyway, also on the long-haul side, where Airbus A330s and A340s operate alongside Boeing 777s. While it would certainly be more economical to operate a single type per category, there are no plans to harmonize the fleets right now. On the opposite, the airline has planes on order with both manufacturers. The reason for this mix is a political one. While Turkey historically has strong ties to the USA, it also has the ambition to join the European Union. The fleet reflects the fact that the carrier, originally founded as part of the Turkish Air Force, is still partly owned by the government and can be used as a political instrument. Currently, the state still holds 49.12% but has recently shown interest in offloading its stake. But despite that, Turkish Airlines seems quite free in its business decisions. And this has worked well, as numbers suggest. The airline has consistently been profitable since 2002 and shown particularly strong results in 2008 and 2009, with operating profits well above 500 million USD. Passenger numbers are increasing sharply too, they have almost tripled to 29 million since 2003, reflecting the airline's massive expansion over these few years. However, to stay in profit with all the upcoming new destinations, Turkish Airlines will be forced to find many more passengers to fill its planes.
To find these customers, Turkish Airlines is investing heavily into marketing and product enhancements. On the marketing side, sponsorship agreements with leading sports clubs such as Manchester United or FC Barcelona are certainly the most visible initiatives in Europe, while international television and print campaigns such as a TV commercial featuring Kevin Costner accompany these efforts. On the product side, catering is one area where the company saw opportunity. In 2007, Turkish Airlines entered a joint-venture with Austrian premium caterer DO&CO to establish Turkish DO&CO. Turkish's existing catering subsidiaries were brought into the new partnership to build a new market leader in airline catering. It must have been a high-risk project for DO&CO, the previous Turkish catering offering wasn't exactly known for being premium. So, drastic changes had to be applied to turn the business over. Today, the food served on Turkish Airlines' planes cannot be compared with its previous offering anymore; it is on a way different level. And the efforts do get recognized. The airline won the Skytraxx 2010 World Airline Award for best economy class catering. This first place highlights efforts taken over the past years to get the on board food offering onto a new level. Economy's done now, respective awards for its premium class food offers should be a next goal now.
But it's not only the passenger's meal that has been redeveloped. The whole flight experience has seen upgrades. As an example, the airline offers a Business class that's comparable to its network competitors in Europe and Asia.
As a first class cabin was available, Turkish Airlines rolled out a full product, including limousine service, personal assistance, lounges, designated check-in and passport control as well as a corresponding in-flight catering and service concept. But despite these efforts, offering a first-class does not seem to be a long-term strategy for Turkish Airlines. As the airline started to take delivery of factory-new Boeing 777-300ERs in late 2010, it did not fit them with first class cabins anymore. And as the aircraft leased from Jet Airways are supposed to be returned and replaced by new 777s through 2011, there is an expiry date on Turkish's first class offer. The importance of first class is diminishing anyway, as higher-quality business class products tend to replace the front end cabins and it seems that Turkish Airlines has chosen that way after its short excursion into the traditional first class world. While first class will be gone, the airline introduces another new cabin, premium economy. Located between traditional economy and business class, this new product is aimed at savvy business travellers as well as leisure travellers. Upgraded economy class cabins have shown quite some success in recent years and have helped airlines to generate good yields on the lower end of the fare table. Turkish Airlines differentiates its "comfort class", as the premium economy product is marketed, with more space (seat pitch 46" instead of 32"), more onboard catering and better in-flight entertainment options. Currently, comfort class is offered on two new Boeing 777s on routes from Istanbul to destinations including Beijing, Sao Paulo and Toronto. The new product will continually be rolled out to more markets as the airline takes delivery of fresh 777s straight from Seattle.
The airline certainly has a strong foundation to achieve its goal, but there's also a lot of work ahead. Its fleet and cabin products need further standardization and the accomplished growth needs to be absorbed by all the different parts of the company. But the airline is very well positioned to master this task. So far, Turkish Airlines seems on a very good track. A lot has been achieved over the past years as the airline emerged from a local player to a network airline that claims to be "globally yours". And the message spreads. Just recently, the airline's success has also been acknowledged by ATW, a leading air transport magazine, when it awarded the Turkish carrier with its "Market Leadership Award 2011", honouring Turkish's rapid sustainable growth and strong profitability in 2010.
Michael Meier travelled to Istanbul as a guest
of Turkish Airlines.
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