ECONOMY

Newcomers set to challenge Turkish Airlines’ domination

ANKARA – Three private airline companies are preparing to launch domestic flights in Turkey in a move analysts say could eventually break the stranglehold on the market exercised by the largely state-owned flag carrier, Turkish Airlines (THY). All three companies – Fly Air, MNG Air and Onur Air – currently operate international cargo and passenger flights. They will be offering cheaper fares than THY to attract passengers to their domestic routes. Fly Air, which is planning to begin flights from Istanbul to the Black Sea city of Trabzon in late September, will sell tickets at 69 million liras (about $50), the company’s director general, Ahmet Karaman, told AFP. THY currently charges 149 million liras (about $108) for such flights. MNG Air and Onur Air, which are set to launch flights in October and November respectively, will also offer cheap tickets, but have yet to set prices. The newcomers will inevitably force THY to pull down its prices, but snatching a share of the market from the state giant will depend on performance, one analyst said. «The private carriers cannot break THY’s monopoly in the short run because their fleets and seat capacities are not big enough,» Bora Tezguler, an aviation industry analyst at Koc Investment, told AFP. «They could become serious competitors if they build up their fleets,» he said. In the face of impending competition, THY, which is slated for large-scale privatization, announced that it was looking for ways to cut expenses and reduce ticket prices on domestic flights. «Our new pricing strategy for domestic flights can be summarized as increasing the load factor and revenues, and at the same time enabling more people to fly,» THY General Manager Abdurrahman Gundogdu told a press conference on Tuesday. «We are expanding efforts to reduce our costs by 30 percent,» he added. Analysts suggested, however, the newcomers would find it hard to keep their prices low. Low-price initial offers are probably meant «to enable them to break into the market… These low prices will not be sustainable,» Tezguler said. Alper Paksoy, a transport industry analyst at Global Securities, said any real discount in domestic flight fares depended on the government reducing taxes. But such a cut would have to be agreed upon with the International Monetary Fund (IMF) whose standby deal with Ankara foresees increased tax revenues, he said. None of the three carriers see themselves as a threat to THY which currently operates 66 aircraft and flew some 5 million people on domestic routes last year. The company, which also flies international routes, posted a profit of 64 million dollars in 2002. «I do not think THY will be greatly affected by private companies launching domestic flights. There might be a 1 or 2 percent decrease in the number of passengers preferring THY, but there will not be a huge change,» Karaman said. The director general of MNG Air, Yavuz Cizmeci, said their operations will attract new passengers – people who would like to fly but who cannot afford tickets at THY prices. «Overall passenger capacity, which currently stands at 5 million, could rise to 10 million in three to five years,» he said. Tezguler said such a prospect was likely only if the carriers provided good service.