Bloomberg News

Turkish Air Gains Most in 3 Years on Earnings, Lufthansa Talks

November 19, 2012

Turkish Airlines surged the most in three years in Istanbul after Europe’s fifth-largest carrier posted quarterly earnings that beat analyst estimates and cooperation talks with Deutsche Lufthansa AG (LHA) progressed.

The stock surged as much as 10 percent, the biggest jump since Oct. 20, 2009, after the company said third-quarter net income rose 39 percent to 704.6 million liras ($391 million). Analysts had expected a 452 million-lira profit.

Turkish Airlines plans to expand its fleet to 350 planes by 2020 from 200 now as it builds Istanbul into a transfer hub for flights from Europe and North America to Asia. While the talks with Cologne, Germany-based Star Alliance partner Lufthansa remain at an early stage, the companies are examining potential focuses for deeper ties short of equity investments, Turkish Finance Minister Mehmet Simsek said today in Ankara.

“Cooperation may be developed in certain areas such as catering or maintenance,” Simsek said at a press conference, citing as an example the pair’s existing 50:50 charter venture SunExpress, which transports 7 million people a year between Germany and Turkey with a fleet of 28 Boeing Co. 737-800 planes.

Lufthansa, Europe’s second-largest airline, is pushing ahead with the sale of a stake in LSG Sky Chefs, the No. 1 inflight caterer, and has mandated JPMorgan Chase & Co. to help seek a buyer, people familiar with the matter said last week.

Share Surge

Claudia Lange, a spokeswoman for the airline in Frankfurt, declined to comment today beyond reiterating that the allies are constantly working together to improve their customer offerings.

Turkish Airlines, (THYAO) as Turk Hava Yollari AS is known, traded 6.4 percent higher at 4.69 liras as of 12:29 p.m. local time during the first trading session since the Istanbul-based company reported financial results on Nov. 17.

The stock has more than doubled in price this year, valuing the business at 5.63 billion liras. That’s equivalent to $3.12 billion, compared with a $2.54 billion valuation for Air France- KLM Group (AF), Europe’s biggest airline by passenger traffic, the measure most commonly used to rank carriers.

“Margin improvement was impressive and much better than expected,” EFG Istanbul Research said in an investor note, citing lower-than-forecast fuel expenses.

Sales that increased 21 percent to 4.48 billion liras also beat estimates, as did passenger yields, a measure of average fares, according to EFG, which upgraded its rating to “outperform” from “market perform” and set a 12-month price target of 5 liras, up from 4 liras. Yapi Kredi Yatirim also upgraded the stock to buy from hold, it said in a note.

Shares of Lufthansa advanced as much as 3.3 percent and later traded 2 percent higher at 11.92 euros.

To contact the reporter on this story: Aydan Eksin in Istanbul at aeksin@bloomberg.net

To contact the editors responsible for this story: Chad Thomas at cthomas16@bloomberg.net; Shaji Mathew at shajimathew@bloomberg.net


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