Turkish Airlines chief bets on lower fuel prices throughout 2007

ISTANBUL -The head of Turkish Airlines, Europe’s eighth largest carrier, is betting the price of jet fuel will stabilize or fall this year. «We don’t have a policy of starting to hedge in 2007. We expect oil prices to stabilise or fall,» CEO Temel Kotil told Reuters in an interview yesterday. His view is contrary to the market’s, which saw oil top $64 a barrel yesterday. Goldman Sachs raised its three-month target for Brent crude by $1 to $70 a barrel after noting that crude prices are up about 29 percent from January’s low of $49.90. But despite those price increases, Kotil said he expected fuel to account for 28 percent of total costs in 2007, the same as last year. Turkish Airlines, which is 49 percent state owned, is expected to become a full member of the Star Alliance airlines group in December. That will allow the carrier to code share with other members such as Lufthansa. Kotil said he expects the linkup to boost demand for international flights by about 10 percent. He is aiming to have sales of $3.2 billion in 2007, up 14 percent from 2006 for the carrier which is 49 percent state-owned. He is also aiming to see Turkish Airlines’s passenger load factor, a measure of efficiency, increase to about 74 percent, up from 68.7 percent in 2006. In the first quarter, which is in low season and traditionally a weaker period, the passenger load figure came in at 70 percent, he said. «It’s a very good figure for THY. In the first quarter there was a 4.6 point increase compared to the first quarter of last year,» he told Reuters. «It looks like we’ll finish the year at around 74 percent,» the same ratio for similarly sized Austrian Airlines. Kotil has set up a cost-cutting team aimed at shedding direct costs by 5 percent a year. THY closed last year with a market share of 4.8 percent among European airlines, which it increased to 5.2 percent in the first quarter.

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