A couple weeks ago, the CEO of Turkish Airlines, Temel Kotil, was in Boston to speak at Harvard Business School. No, I wasn’t there, but I guess he had some extra time on his hands while in town, because I was asked if I had any interest in talking to him on the phone. Of course, I did.
Today I’m posting the first part of our conversation, which I really enjoyed. The back half, where we address how Turkish is different from the Gulf carriers and the importance of efficient partnerships (or lack thereof, United), will go live on Thursday. Let’s get things rolling…
Cranky: I’d like to start by talking about Turkish Airlines today. Obviously the last couple of years you’ve had a strategy of fast global growth. Where are you today in that plan? Is there still much more or are you starting to see things moderate?
Turkish CEO Temel Kotil: Still we are a baby, you know? We are about 2.1 percent of the market share worldwide. Number of destinations we are going, internationally, to 236. And number of flights per day is about 1,200. With destinations, we can be double. We are halfway in our growth. You will see Turkish coming over the next ten years growing like before, at a similar rate. Our average is 17 percent in 10 years.
Cranky: That’s average per year?
Temel: Yes. This year we’re growing 21 percent in [available seat kilometers].
Cranky: Of course, that’s a lot of growth and the bigger you get, 20 percent growth means a lot more flights every year. How do you work with this considering some of the geopolitical concerns? You’re surrounded by countries with terrorism issues. You’re surrounded by other countries with economic issues thanks to oil prices going low. How has that changed your growth strategy or has it?
Temel: Actually, with the number of destinations, we are very well positioned geographically. We are not focused on Europe only as we had in years past. The Middle East is strong. Africa is growing fast. And also the African market is not hurting from anything. And on the Atlantic, we have 8 destinations in the US and 9th one coming.
As you said, the problem with Syria, if that hurts us, fine. Or not fine… but it’s not the largest market. In the Russian case, the ruble is going down very badly. We are in 10 cities in Russia. We had 6 flights per day in Moscow. We went 6 to 5 daily but we’re going back in the summer. We’re able to maneuver. We have just 1,200 flights a day. If there’s a problem in one location, I can move other places very easily.
Cranky: You can change where you put airplanes with the exception of Turkey itself. Are there any things in Turkey that concern you? There has been some instability with protests and issues with bordering countries. Is that a concern to you?
Temel: If you know the numbers with tourism, it’s still solid. Last year Istanbul increased 7 percent, worldwide average is about 4.7 percent. And Istanbul hosted about a million tourists. It’s damaged the numbers of course, but our transit ratio is already 55 percent internationally, almost half the income. We’ve surpassed Frankfurt and we’re supposed to pass Charles de Gaulle, Paris. I believe maybe tourism is not as perfect as it used to be. In the Russian case it’s because of some restrictions between Russia and Turkey. But we have Saudis that come in big numbers on the Black Sea as a tourist. Still, the Turkish economy I think is still functioning good. We grew 21 percent. That’s a big number.
Cranky: So maybe the bigger concern is the airport itself? I know you have a huge new airport in progress in Istanbul. What’s the state of the airports today? Do you have room or is it constrained?
Temel: Actually constrained. It’s been constrained the last 10 years, and it’s my 11th year as a CEO, you know? The international terminal is expanding by 30 percent in capacity. So we had terminal problems but the terminal problem was solved. On the runway, they’re still improving the escape routes and increasing the throughputs, and I believe we’ll see an additional 20 percent increase. But our 21 percent growth isn’t just at Ataturk [the primary Istanbul airport today].
At Ataturk we have about 10 percent. We’re growing very heavily at Sabiha Gökçen which is also crowded. But if you know, they’re building another runway at Sabiha Gökçen. And also we’re focusing on Ankara very heavily if you know. This means with all that growth until 2018, which is the scheduled opening date of the new airport, 26 of February 2018, I think we can cooperate.
Next year we grow only about 10 percent, not that much. And 2018 we shift to the new airport. Ataturk is not the finest airport in the world, but it’s working. And we subsdize its physical shortcomings with additional labor force with our joint venture ground services company…. When the new airport opens, it will be great.
Cranky: When the new airport opens, will both the other airports close?
Temel: Actually, Ataturk is supposed to be closed. When the new airport opens, Ataturk becomes non scheduled only…. Only charter, cargo, and business jets can come. But Sabiha they’ll continue even enlarging.
Cranky: You mentioned Ankara. Do you see Ankara as having an ability to become more of an international hub of sorts?
Temel: Our logic is we have a production machine. So we can scale up with any number we want because… we have the ecosystem in place already to grow. And we have a good amount of cash if you know it. We’ve raised close to $4 billion over ten-plus years. This means we want to keep the opportunity everywhere.
So Ankara, if it became a natural hub, it’s the capital. AnadalouJet is already a brand there. It has 30+ aircraft, not so small. They’re connecting to other cities in Turkey. By nature I can’t go international from there. Sabiha will be a big hub, we are happy there. Later on, Izmir, Antalya. So you see that Turkish Airlines is hungry for success. We’re never satisfied. Hopefully that’s a good thing.
But when we’re growing this much fast, there are problems, of course. But thanks to god we have enough cash we can run projects on safety, training, service quality. We can spend any amount to fix a problem from growing this much fast. Scale isn’t hurting us. As I said, we have the ecosystem. Just one single example. We have 10 simulators for pilot training, and we’re putting together an additional 48…. In order to support this growth, really we can do some crazy things.
Come back on Thursday to read part 2, where we talk about why Turkish is different from the Gulf carriers. We’ll also dive in to Turkish’s partnership strategy and more.