Turkish Airlines Plans for Growth With Business Travel at Core

The last two years have been challenging for Turkish Airlines, as geopolitical issues and a nascent economic slowdown have posed challenges to its big aspirations in the global air travel market.

Although traffic declined this year, the airline is carrying on like these issues are just temporary. The company's stock has tripled since 2017, reflecting optimism that creating a hub sitting close to Western Europe and Asia can thrive.

At the Turkish Airlines Corporate Club conference in Istanbul this week, there was little talk of the rocky environment the airline has endured recently. Even Turkey's recent currency fluctuations were talked away as a non-issue.

"It's not only the problem of Turkish Airlines, it’s a sectoral problem," said Mehmet İlker Ayci, chairman of the board and executive committee of Turkish Airlines, onstage during the event. "We are preserving our cost structure and diversifying our risks."

Basically, said Ayci, since most of the currency the airline accepts is in U.S. dollars and euros, the disruption hasn't been felt as deeply in aviation as in other sectors of the Turkish economy. It also goes without saying that a weaker lira makes Turkish travel and products more affordable to foreigners. The company had more than $2 billion cash on hand through the first six months of 2018, according to its financial reports.

Turkey's economic issues seem to be improving as the airline enters a period of change. Next month, it will begin moving its operations to a new and enormous $11 billion airport (dubbed Istanbul New Airport) located around half an hour from Istanbul's city center. Sitting between China and Europe, it is in the right place to grow as global business travel continues its rise and the airport has an expansion planned for completion a decade from now.

Right now, the airline flies to 304 destinations in 119 countries, and 80 of those destinations are within a three-hour flight from its hub in Istanbul. Even more growth is in the offing as the airline begins operating from the new airport, the construction of which has generated a bit of controversy.

"The new airport will have the capacity to serve 347 narrow-body aircraft or 264 wide-body aircraft per day – including a super-jumbo category of planes like Airbus A380 and Boeing 747-8 – 2,000 aircraft will be landing at, and taking off from, the Istanbul New Airport," said Mert Dorman, senior vice president of Turkish Airlines' Corporate Club. "While Turkish Airlines confidently moves towards its 2023 goals—a 500-aircraft fleet and a 4 percent share in global aviation - the Istanbul New Airport will play a key role in realizing the potential of our country, our industry, and our brand. With our young and modern fleet, ever-expanding flight network and our commitment to customer satisfaction, we will continue to outpace our rivals."

From the business travel perspective, Ayci is right, Turkish Airlines has a few advantages. It flies to secondary cities across the work with Istanbul acting as a hub, allowing travelers to get around with one-stop. Its business class product is respectable, although in need of a refresh (which will likely come when its Dreamliners begin arriving from Boeing in 2023).

While its 2-3-2 configuration in business class is strange, especially considering the desire for privacy and personal space from business travelers, sources said the airline would move towards a staggered configuration in the future. The airline's business class meal service is excellent and traditionally Turkish, which is fun.

Turkey's fraught political relations with the U.S. and Russia, along with the lingering war at its south border, pose some risks. Now that Turkish Airlines flies routes to the most destinations of any airline, there is also the reality that a protracted downturn in leisure and corporate demand could hit it harder than rivals since its business model is based on scale.

Turkish Airlines has ramped up to compete against the Gulf carriers as they deal with their own issues. Although it is unlikely to provide a full-blown luxury experience like Emirates, lower prices will likely mean fuller planes.

"Turkish Airlines is a rising and growing airline today, now is the time for us," said Ayci. "In terms of the industry, if you want to be leader in the sector you have to always look at your future and your eyes shouldn’t be on who did what in the past. Give [customers] the best match in terms of expectations and don’t waste their time... the Gulf carriers did great in the past and they are still doing great, but Turkish Airlines today is different. Instead of talking about the others, we’re going to be talking about ourselves."

In other words, it's not a contest, but it is. With ambitious growth planned, Turkish Airlines will need to refine its business class product in order to remain relevant in a global aviation market marked by innovation with business travelers in mind.