Turkish Airlines pulls out of nosedive but challenges remain
LOW-COST CARRIERS AND A NEW ISLAMIC SPIRIT ARE PERVASIVE
KEMAL ATATURK, Turkey's revered founder, once observed that he had managed to teach his people most things, but not how to serve others. He made this remark after a waiter accidentally spilled a drink over a foreign ambassador at the presidential palace in Ankara. For decades passengers on Turkey's national carrier, Turkish Airlines, suffered similarly poor service. Baggage frequently went missing; flights rarely took off on time; and once they did, ferocious stewardesses charged up and down the aisles barking orders at their customers. With nine fatal plane crashes between 1974 and 2003, the airline had a poor safety record. Its acronym THY (Turk Hava Yollari) came to stand for “They Hate You”. Not surprisingly, THY's finances were disastrous too.
But in recent years the airline has pulled out of its nosedive. Sales jumped by 22% in 2006 and net profit by 28%; the firm's latest results, announced on June 4th, suggest that the growth will continue, says Bahar Deniz Egemen, an analyst at Garanti Securities in Istanbul. Last year the Association of European Airlines named THY Europe's fastest-growing airline, its most punctual, and the least likely to lose luggage. “Our goal is to grow by 20% every year, to become the world's best airline,” says Temel Kotil, THY's boss, who was appointed in 2005 by Recep Tayyip Erdogan, Turkey's mildly Islamist prime minister.
Mr Kotil, an American-trained mechanical engineer, says the turnaround began in the early 1990s under Turgut Ozal, the president at the time. An ardent free-market advocate, Mr Ozal replaced the succession of retired generals who used to run THY with experienced, Western-trained managers and began privatising the company. (The government's holding has since been reduced to 49%.) As well as better managers, THY also has better aircraft, having spent $3 billion expanding and modernising its fleet since 2003. With new long-haul aircraft, THY has doubled its capacity to 17m passengers per year and has added 24 new destinations to its network.
Further gains came with the boom in Turkish tourism and an influx of business travellers as Istanbul became the main hub for those flying to the newly independent oil-rich states in Central Asia and the Caucasus, routes which THY dominates. Mr Kotil hopes to exploit Istanbul's position straddling Europe, the Middle East and Asia, and expand THY's market share in the Far East. And he is finalising arrangements to join Star Alliance, an airline grouping led by Germany's Lufthansa.
But the skies are hardly clear. Turkey's threats to invade Kurdish-controlled northern Iraq and escalating Kurdish rebel attacks inside the country might burst the bubble, analysts warn. Smaller low-cost operators have already forced THY to adopt a more flexible pricing scheme. And THY's growing standing abroad is not always reflected at home. The secular media has accused Mr Kotil of filling senior posts with cronies whose religious zeal is unmatched by their managerial skills. Mr Kotil denies this and maintains that only six of the company's entire staff are graduates of the Islamic clerical training schools known as imam hatips.
Yet a newly Islamist spirit was undeniably on display when a group of employees sacrificed a camel near a runway at Istanbul airport last December and then distributed its meat to co-workers to celebrate the modernisation of the THY fleet. The manager in charge was moved to a different department and an investigation was launched. But “in any other Western airline, he would have been sacked instantly,” observes a former THY official.
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