Turkish Benefits From Middle East Crisis

Turkish Airlines has greatly benefited from the Middle East war and the massive capacity reductions of the Gulf carriers. Transit traffic via the Istanbul hub was up by 10 percent in the first quarter, passenger traffic to Asia by even 19 percent, Turkish said on Thursday in its Q1 earnings call. It was the first call of Murat Seker as Chairman of the Board since taking over from Ahmet Bolat, who left the airline earlier in April. Seker has been Chief Financial Officer, but this role is now held by Metin Gülsen. Both explained how the Middle East crisis has affected Turkish Airlines since February 28. The carrier grew capacity by 9 percent and carried 21 million passengers, up 13 percent year-over-year. When hostilities commenced, Turkish reduced capacity and redeployed some to markets with higher demand. But with the Gulf carriers knocked out for most of March and operating at low capacity, Turkish Airlines and Istanbul Airport found themselves in the sweet spot. “Our March performance was notably strong, marking our highest March results to date. The load factor improved by more than 6 percentage points year-on-year, driven by robust demand across our network. Most notably, load factor in Asia increased by 11 percentage points, reaching 94 percent, highlighting the market appetite in the region. As a result, first-quarter passenger revenue increased by 20 percent year-over-year”, Seker said. Passenger revenues were almost $200 million higher. Seker added: “There were around ten countries where we stopped operations, and they amounted to around 6 percent of our overall passenger capacity. Due to the decrease in demand on the Middle East-to-America corridor, flights to and from the Americas, North and South, were reduced. We put this capacity in the Far East, South and Central Asia, and certain countries in Africa, where the demand continued to be strong.” Asia Gülsen remarked: “In the first quarter, transfer traffic expanded by 10 percent, growing meaningfully faster than direct traffic and further reinforcing our competitive position as one of the most effective connectors between Asia and Europe.” “Asia stood out as the leading contributor during the first quarter, despite an increasingly complex operating backdrop. Demand trends in the region were robust, backed by capacity constraints among certain competitors and resulting shifts in traffic flows toward our network. Over the quarter, we expanded capacity across key markets, including China, Hong Kong, Thailand, Japan, Singapore, and Malaysia. This growth was effectively absorbed by demand, with passenger traffic increasing by 19 percent, resulting in a 5-percentage point improvement in load factor to 90.2 percent. Performance accelerated further in March, when the peak impact of the war drove load factors as high as 94 percent. Australia also contributed positively to regional results, particularly in Sydney, where a 41 percent increase in capacity translated into almost an 80 percent rise in revenues.” [caption id="attachment_191633" align="aligncenter" width="728"] Turkish Airlines Q1 2026 capacity[/caption] The strong demand in Asia offset headwinds and lower demand in Europe, notably the UK, Germany, the Netherlands, and Belgium. Turkish blames this on the aggressive capacity increases from rival airlines. North America was also weaker, with “capacity selectively reallocated from certain North American markets toward higher-yielding regions, particularly Asia.” Net profit Turkish reported a net profit of $226 million compared to a $44 million loss in Q1 2025. Revenues grew by 21.1 percent to $5.9 billion. EBITDAR was up by 15.8 percent to $769 million, but the operating margin dropped 0.6 percentage points to 13 percent. Capacity grew by 9.4 percent, and passengers carried by 12.7 percent to 21.3 million. Turkish Cargo carried 14.8 percent more cargo at 552 million tonnes and grew revenues by 29.5 percent to $987 million. Turkish didn’t feel the effects of the higher fuel prices in March, but this will come in Q2. It is only 40 percent hedged for fuel at a break-even price of $68, relying on a fuel surcharge to partly recover the extra costs. It has implemented a surcharge twice since March, recovering around 50 percent of the cost increases. Yet, the effects on demand have been limited. Seker said he has no intention of entering into new hedge contracts, but will closely monitor the market to see if an opportunity arises. He expects the overall impact of the war to be around $200 million. But this depends on which way fuel prices are going. In the darkest scenario Turkish has run, the fuel bill could be up by $3.5 billion. The airline will allocate 3% of its capacity from America to the Far East. Middle East capacity will be reduced by about 30 percent, while Central and South Asia capacity will be increased by 9 percent. “This reallocation is going to optimise our network mix and improve the alignment with the evolving traffic flows and revenue opportunities. Overall, we will probably have a net 1 percent increase, or flattish ASK growth, in 2026, whereas our budget was at 8 to 9 percent. So eventually we will have some reductions, but we will try to allocate the capacity to the routes where we can have the highest return.” Despite the Gulf carriers building back their capacity, Seker is positive that Turkish will be able to maintain some of the customers and market share won since March: “We have retained some new market share and both in the premium segment as well as in the economy segment. When we put the additional capacity to the Far East, we realise that there is a higher connectivity between Africa and Far East region. So, this is a new segment that we due to lack of capacity we have not seen before. For those potential customers seeing our product, we feel we will be able to retain some of this market, some of this customer base going forward. But how much of it is, of course, yet to be seen.” Fleet growth The crisis will not affect the long-term strategy that includes growing the fleet to 800 aircraft by 2033. “Definitely not. We have really a very strong growth plan ahead of us, and 2026 could be a little hiccup on that long route, but in 2027, for example, we are expecting about 30 aircraft deliveries. Then, if we did not have this period, we were planning to put an additional 7 to 8 percent ASK growth. We think this is a transitory problem; it will pass. We don't know how long it's going to last, but it's not going to be an uncertain future. At the moment, we have around 530 aircraft; by the end of this year, together with Turkish and AJet, we are aiming to reach a fleet size of almost 570. And next year, 2027, we were expecting to reach a fleet size of 610-ish. So, there are still a lot of aircraft to purchase for Turkish Airlines.” By the end of Q1, Turkish and AJet had parked around 40 out of 120 Airbus A320neo family aircraft with Pratt & Whitney Geared Turbofan engines for repairs and maintenance.

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