On Tuesday, I posted part 1 of my conversation with Temel Kotil, CEO of Turkish Airlines. Today we finish that discussion.
Cranky: You’re not in the Gulf region, but you’re often compared to the Gulf carriers. Very high growth but very different home markets. From the perspective of people in Africa, North America, and Asia, there are similar options for connection purposes. What do you view as the most important differentiators between you and the Gulf carriers?
Turkish CEO Temel Kotil: We know by nature that when the new airport opens, there will be more demand for the airlines to fly to Istanbul. We know the current airport is really hurting everybody. If you have the slots [available] at the proper times… there will be big numbers of Asian carriers, the Chinese. And they are welcome. In order to attract them, what we are doing the last 10 years is serve every single city in Europe. We are about 110 cities in Europe and more coming. Anybody who comes on the other airlines to Istanbul and we can connect them very efficiently because of so many cities plus at a high frequency…. 6, 7 flights in Frankfurt and Paris and Dusseldorf and Berlin and so on. This means we became a natural hub to fit Europe.
Talking about the Gulf region, Gulf carriers aren’t as strong in the European market because we are a European airline. They aren’t European airlines. We are closer, we use smaller machines. This means we can have higher frequencies. The flights are shorter to get there and back so we can do it more efficiently. So when the Chinese come out with big numbers from Asia/Pacific to Europe, I believe they will hurt the Gulf carriers, so we are totally different compared to them. Why we are different actually is we welcome all the airlines to come to Istanbul. We support many competitors no problem. Year to year, we are building a strong network with 38 cities we serve in Africa with purpose. We will rely in the next 5, 10 years on our network. Whatever happens with fighting, competing, I don’t know the future of course, but I know that I’ll have strong network.
Cranky: It’s interesting. You mention the proximity to the rest of Europe. Even coming from the US you have the option of connecting through Istanbul to get to other parts of Europe and you can’t do that through the Gulf. It’s not as much of an issue to places like Africa or from Europe to Asia, but you’re saying it’s efficiency? You can be more efficient and have more frequency?
Temel: Yes. From Istanbul to Kinshasa we’re using 737-900s, we call it the Queen of Africa, it’s a Boeing machine. It’s very comfortable and it’s narrowbody. So I can have twice maybe three times more frequency than other airlines serving Kinshasa with big machines. We are down to earth, you know? Our service is the best airline in Europe, but really we’re counting the pennies.
Cranky: What is the percent of traffic that’s local vs connecting?
Temel: Forty percent of the passengers from 72 million this year are domestic passengers. The domestic passengers produce a small share of the profit. Of the 60 percent left, 55 percent is transfer.
Cranky: Which is a big difference compared to the Gulf carriers as well. Istanbul is such a large market.
Temel: Right, but income-wise, half of the income is from transit passengers. So domestic is small, local to Turkey is also small, and our growth has been 18 to 20 percent but in transit our growth in 10 years is about 34 percent. Transfer is still very solid. You know why it’s solid? Because of so many destinations. With purpose the last 10 years, we’re keeping the airline under capacity. We’re opening tiny small routes that trigger transfers. In Africa, 80+ percent, some destinations 90 percent is transfer. So Africa is going to the bottom line immediately. So you’ll see transfers grow because of the size of the network.
Cranky: How do you think about your onboard product? At times in the past, you’ve had Premium Economy. You don’t have an international First Class. How do you view the product and what’s important to your passengers?
Temel: We don’t have First Class at all. Our Business Class if you know it, is very high end, full flat, full meal and so on, all those good things. And also we removed the Premium [Economy] class as you know. So you’ll see Turkish serving very high-end business class, best in the world, and and also serving the best economy class in the world. That’s it. Because we’re a fast growing airline and my load factor in business class is about 50 percent. And average load factor is about 80 percent. So when I’m struggling with this growth, there’s no logic to putting everything in. No First Class, no Premium [Economy], you know? We are not a luxury airline, but we are certainly better than other airlines. We want everybody in the world to see us surprise them with the product we promise.
Cranky: For your Business Class, are you happy with the seats you have? Are you looking at different seats in the future or do you think you have the right product?
Temel: Actually, most of the machines are full flat, nice seats. Of course, if there is a better one, we can go. But the rule for long haul business class is we should have the full bed, we have special covers, you need to feel like you’re home. A full closed cabin, we don’t want that one. We want everyone to have a decent sleep in a comfortable and welcoming environment.
Cranky: Could you talk about partnering with other airlines? You’re obviously a member of an alliance. You have a large and growing partnership with Lufthansa with Sun Express. How do you view the importance of partnering? In particular if you could talk about in the US.
Temel: In the US market, unfortunately our Star member United is very busy. And we’re not able to codeshare and work very efficiently, you know? In the US market we are working with JetBlue very efficiently. But this is why a few years back we decided to go to as many US cities as possible. We are in 8 cities and a 9th one, Atlanta, coming. We’re working on other cities. Most likely there will be 5+ additional. And if the Canadians authorized us, we’d be willing to do the same thing there. So it looks like our cooperation in the US will not be great and that’s why we go to so many cities. And we have high frequency. If you know, in New York we have 3 flights per day, we want to bring in 4, and also try to increase our other destinations to at least twice daily. And in Star, we have codesharing with other Star members, but once you get this size you start doing everything yourself, you know?
So the network is very large already, and more destinations are coming. We are starting Bogota. We are starting Panama very soon. And other African cities, European cities coming. But you will see that we increase the frequency so that the frequency depth will happen to us. Naturally that gives us the connectivity.
Cranky: So as you get larger, do you think Star Alliance becomes less important?
Temel: We are pretty big in Star. The alliance is perfect. We are happy, we get all the benefits and we will stay there forever. But you’re supposed to do your homework yourself, and that’s what we are doing. It’s not something magic being a Star member or an alliance member. But working hard to really make magic is what we’ve done.
Cranky: Just one more question, is there an aircraft that you’re most excited about in the future that’s going to be really good for Turkish?
Temel: Yeah, the 380 is not new but it’s out there and we don’t have it. The 350 is a pretty good design. The 787 is a nice-designed machine. The 777X coming is a pretty nice machine. But right now we have 212 aircraft on order and 300 in operation, you know? So we’re going to order aircraft not very soon. This year we’ve financed more than $2 billion in aircraft. But the aircraft is a machine for us, if I’m speaking from my 11 years as CEO. What we’ve learned actually is good machine, bad machine, there is no difference. Only thing is if you use them on the right routes, we have a lot of destinations, so we can increase the efficiency, [keep] costs down, and [improve] productivity.
Cranky: Thank you for your time.
Temel: You’re welcome.
If you missed the first part of our conversation, you can find it here.