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Turkish Airlines Doubling Fleet Pushes Out Order of Largest Jets

May 09, 2013

Turkish Airlines CEO Temel Kotil

Temel Kotil, chief executive officer of Turkish Airlines, pauses during an interview in London on May 9, 2013. Photographer: Simon Dawson/Bloomberg

Turkish Airlines (THYAO), which will more than double its fleet by the start of next decade, said it’s delaying a possible order for jumbo jets for at least two years as it focuses on expanding its network with smaller airliners.

“We aren’t planning any this year, not next year or in the years to come,” Chief Executive Temel Kotil said in an interview in London yesterday about a possible order of Airbus A380s or Boeing Co. (BA:US) 747-8 jumbos. “We have built our fleet.”

Kotil is overseeing an expansion that includes the purchase of 117 single-aisle planes from Airbus and 95 from Boeing, as he bolsters the current fleet of 218 airliners to support a network serving 225 airports around the globe. Turkish Air had said previously that it was considering as many as six A380s to help build Istanbul into a global hub, in what would have been a boost to a model that’s struggled to pick up orders.

The company is preparing to sell bonds to help finance its narrow-body orders, and is discussing the plan with rating companies, while the timing and size of the issue has not been determined, Kotil said. Turkish Airlines, 49 percent owned by the government, hasn’t sold bonds in international markets and doesn’t have a credit rating.

Kotil’s purchase plans for the largest commercial airliners in the market contrast with comments by Turkish Air Chairman Hamdi Topcu, who said in an interview on April 17 that the company will decide on buying Boeing 747-8 or A380s by the end of this year. The carrier will also consider the purchase of smaller A350 and Boeing 787 Dreamliners, Topcu said.

Struggling Jumbos

Boeing and Airbus have both struggled to bring home new customers for their largest planes, with the U.S. company announcing plans to clip the output of its latest 747 variant because of slack demand. Airbus’s double-decker airliner missed a company target of 30 new orders last year, and the European manufacturer has said it wants to sell about 25 units in 2013.

The biggest plane in the Turkish Air fleet is the Boeing 777-300ER, which has about 330 seats, with deliveries stretching to 2017. The wide-body line-up also includes Airbus A330s and A340s, according to the carrier’s website.

Kotil said acquisitions are not part of his growth strategy, as he focuses on internal expansion, hiring about 1,000 flight attendants every year. The company has about 2,500 pilots and 6,000 cabin crew at the moment, he said.

More Destinations

Turkish Airlines, which aims to fly to 205 international and 38 domestic destinations by the end of this year, will increase transit traffic to 70 percent of the international total by 2020 from about 40 percent, Kotil said. By then, the carrier wants to more than double the number of passengers it carries to 100 million, he said.

The carrier will get a likely boost from a new airport in Istanbul, as the main Ataturk airfield approaches its capacity limit. A group of Turkish builders led by Limak Holding AS won the bid last week to operate the site for 25 years, beating three other parties with a 22.13 billion-euro ($29 billion) offer.

Contrary to the carriers in the Middle East, Turkish Airlines has a domestic market to count on for a sizable portion of its passengers. At the same time, Kotil said he doesn’t want to rely too heavily on Turkish demand, and he’s added more destinations in Africa and European cities including Marseille and Nantes in France to draw in transfer passengers.

Kotil said he aims to keep the earnings margin at about 16 percent in coming years, based on earnings before interest, tax, depreciation and amortization. Revenue this year will advance to $9.7 billion from $8.3 billion in 2012, the company has said.

To contact the reporters on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net; Robert Wall in London at rwall6@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net


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