Turkish Airlines expects to make fleet decision ‘soon’ |

Turkish Airlines expects to be ready to announce a decision on its large fleet order “soon.” The carrier is still in the decision process for the aircraft and engines, which is more complicated due to delivery delays and technical issues. For that reason, Turkish will likely source aircraft through operating leases to cover capacity demands through 2028, Chief Financial Officer Murat Seker said during the Q2/HY1 earnings call on Thursday. The airline said in April that it would place an order for 600 aircraft as part of its growth strategy to double the airline in size and grow the fleet to 818 aircraft. On the sidelines of the IATA AGM in Istanbul in June, CEO Ahmet Bolat said that more time was needed to finalize the order. He attributed this in part to the presidential elections in Turkey and to the preference to secure agreements will all airframers and engine makers at the same time. Bolat said that requests for proposals have been issued for 400 narrowbody aircraft (Boeing MAX, Airbus A320neo family), 170-175 widebodies (A350-900 and 787), and 20-25 large widebodies (A350-1000 and 777X). Seker was asked during the earnings call about the status of the order, given the full order books and scarcity of delivery slots with the OEMs. “Exactly this is the reason why we have not made a public announcement regarding our RFP. This is a very large order. Given the close relations, Turkish Airlines has with both OEMs, we are working closely and have received various proposals. But of course, the engines are playing a key role here. So as we are trying to decide which aircraft type to order, we are also closely investigating which engine types to get and which kind of maintenance contract we can get. That’s why we haven’t made a decision yet, but it won’t take much time. It will be soon, let me put it that way, we will be able to announce the result of this tender.” Turkish Airlines ended June with 419 aircraft. The current order backlog with Boeing and Airbus includes 78 aircraft like the 787, A320neo family, and A350. This will satisfy growth plans for the upcoming years, but they will not be enough for further growth toward 600 aircraft in 2028. “As there are difficulties to get the new orders, we are trying to fill this gap with operating leases and even some wet-leases. This year, we have some 35 aircraft on operating lease to fulfill our needs. Going forward, our intention is to grow the capacity in terms of available seats per kilometer (ASK) by seven to ten percent year on year over the next five years. So we will try to accommodate the necessary aircraft through operating leases if we would not be able to get a new contract with the OEMs.” “As we finish this year with about 435 aircraft, next year we expect to reach 460-470, in 2025 roughly 500 aircraft, and reach a fleet size of 600 by 2028. We believe that number will give us seven to ten percent ASK growth in the coming five years. We will be more clear with this fleet growth as soon as we finalize the tender with the OEMs,” said Murat Seker. GTF issues affect some eleven aircraft Turkish Airlines operates forty Airbus A321neo’s and subsidiary Anadolujet twelve A321neo’s and four A320neo’s that are powered by Pratt & Whitney Geared Turbofans. Seker confirmed that the airline group is affected by the latest powder metal contamination issue, which requires engines built before Q3 2021 to be inspected and repaired before the end of September. “We have 56 neo’s in the fleet with GTFs and we have about ten percent spare engines. Of the 56, we have grounded nine aircraft. In the coming month, our technical team will look into the situation closely. We might be adding two or three more aircraft to the list, so overall, we might finish the year with about eleven or twelve aircraft grounded due to the GTF problem.” Strong competition Turkish Airlines reported a strong Q2-result on Wednesday with an operating profit of $794 million. This has been the eighth consecutive quarter with a profit. The carrier has seen strong results on its international network, while domestic revenues per passenger were lower due to the high inflation in the country. Turkish will launch new routes to the Americas, Asia, and Australia in the coming period, which should strengthen its competitive position. Seker noted that there has been strong competition in all regions, “but we are observing more competition coming from Europe and the Middle East regions. In Europe, added competition from our peer airlines and aggressive pricing of the low-costs have been putting some pressure. Yet, our consistency and increasing transit traffic from our Far East routes allow us to withstand this competitive pressure. The diversity of the network and our connective power through our Istanbul hub provided more alternatives, which helps us to face competition.” “In the Middle East region, we observe the addition of new capacity, in particular in the Gulf region. Competition has intensified. Demand is somewhat weaker, but there are other opportunities. On a global basis, our connective power and fleet composition between narrowbodies and widebodies offer us an efficient allocation of the fleet and allow us to serve routes more profitably. Constraints from engine issues and airspace congestions are putting all airlines at the same level of pressure, so we aren’t more disadvantaged than others. Until the end of the year, our strong position is going to continue.” This year, Turkish Airlines expects to grow ASKs by fifteen percent year on year, mainly driven by growth in the Far East and the Middle East, ahead of domestic, the Americas, and Europe. China is doing very well and Turkish has returned to three destinations in the country and producing revenues 75 percent higher than projected conservatively early this year. In Q3, ASKs will grow by six to nine percent. Yields should be one to two percent higher year on year, but there will be some normalization after very strong yield growth in Q2 and Q3 last year. Turkish has revised its EBITDAR margin to 25-27 percent from 23-25 percent, given the strong profit environment in HY1 and the positive outlook for HY2. Demand for tourism to Turkey is strong and should be up by seventeen percent year on year to sixty million tourists.

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