TBY talks to Hamdi Topçu, Chairman of Turkish Airlines (THY), on being named “Best Airline in Europe," the expansion of the company's routes, and its main targets for 2014.

Turkish Airlines (THY) was named “Best Airline in Europe" for the third consecutive year in 2013. What key factors have contributed toward this achievement?

Naturally, as a global carrier, we have adopted the “hub and spoke" strategy, which given our unique geographical position provides us with enormous reach. That is an exceptional opportunity that no other airline can boast. In fact, our excellent geographical position translates into a 30% cost reduction when compared to most European carriers. Waste is anathema to our corporate culture, and cost cutting is a way of life. Moreover, we enjoy greater economies of scale thanks to our fleet of new aircraft. Accordingly, our production costs decline by virtue of increased productivity. Our strategy, therefore, is based on cost cutting in pursuit of growth through productivity.

THY recently signed a $560 million deal with International Aero Engines (IAE) to power 25 new A321 aircraft with V2500 engines. Could you elaborate on consequences of this deal?

THY entered into an agreement under which IAE AG's V2500 engines will power 25 new A321 aircraft in our fleet. This brings the total number of V2500-powered A320 aircraft to 90. The deal is valued at $560 million and includes an option for a 12-year Fleet Hour Agreement. The aircraft will be delivered between 2015 and 2017. We appreciate our long-standing relationship with IAE, and are delighted with the reliability of our V2500 engines. The engine supports our mission to become the preferred European air carrier with a global network, since we are one of Europe's fastest growing airlines.

“We are of the belief that the center of gravity of the global aviation market is still shifting from West to East."

Which new routes or regions is Turkish Airlines prioritizing as part of its expansion strategy?

We are of the belief that the center of gravity of the global aviation market is still shifting from West to East, which should become ever more relevant for Istanbul over the next decade. Meanwhile, we value the African continent for being a relatively undiscovered aviation market. Ultimately, however, as a global network carrier flying to more countries than any other airline with the largest international network, one can say that the entire globe is our market. Via our hub in Istanbul, we fly to almost every point in Europe and crucial points in the Middle East, Africa, the Americas, and Asia. Over time, we will also enhance our service in the Americas and Asia, while commencing flights to Australia.

What are your main targets for 2014?

According to the non-consolidated 2014 budget approved by our Board of Directors, the guidance regarding Turkish Airlines' targets and expectations is as follows. By the end of 2014, our fleet number is set to reach 267, including 204 narrow-body, 54 wide-body, and nine cargo aircraft. With the inclusion of 16 new routes, the total number of destinations we serve will reach 259. Meanwhile, the total number of passengers carried is targeted to reach to 59.5 million including 26.2 million on scheduled domestic routes, 32.3 million on scheduled international routes, and the remainder on charter and Hajj flights. While the passenger load factor is expected to be 78.8%, total available seat kilometers (ASK) will reach 141 billion on an increase of 21% compared to 2013. Capacity ASK is expected to rise 33% in Turkey, 29% in South America, 25% in Africa, 22% in the Far East, 20% in North America, 16% in Europe, and 13% in the Middle East. In 2014, cargo/mail carried will increase by 23% to 653,000 tons. Compared to 2013, we expect a 2% decrease (in TL terms) in passenger yield on domestic routes, a 1% increase (in EUR terms) on international routes, and a 2% increase (in USD terms) in ex-fuel unit costs. In 2014, Turkish Airlines' total personnel count is expected to rise 18% along with a 23% increase in fuel consumption, and 2% increase in utilization levels compared to 2013. As a result of scheduled commercial activities, Turkish Airlines is targeting to increase its sales revenue by 17% to $11.4 billion.

© The Business Year - July 2014