Category: Business

by Delphine Strauss

The turreted roof of Haydarpasha station, the starting point of the Istanbul-Baghdad railroad, long featured in Turkish films as the first landmark rural migrants saw when they arrived to make a new life in the city.

After a fire destroyed the roof on November 28, the charred silhouette might instead stand as a symbol of changing habits that have emptied Turkey’s railway stations – as a plethora of budget carriers brings air travel within reach of all but the poorest.

The latest figures from the State Airport Authority, for the year to October, show year-on-year growth in passenger numbers of 21.5 per cent. Growth in domestic traffic of 25.4 per cent outstripped an 18.1 per cent rise in international passenger numbers.

This boom in internal flights is being serviced by a new breed of homegrown budget airlines. Turkish Airlines, the national carrier, has the broadest coverage and has expanded rapidly by using Ankara’s airport as a hub for Anadolujet, its budget arm.

But rivals such as Pegasus, a well-established budget carrier, are fast rolling out new routes to both domestic and international destinations. There are also newcomers such as Turkuaz Airlines, a charter specialist that has begun using its fleet for domestic flights over the winter, and Borajet, which is trying to fill a gap in the market by flying between provincial cities, rather than only through the main hubs.

Selim Kunter, an analyst at the brokerage ExpresInvest, said the growth of budget airlines had not harmed Turkish Airlines (THY), which dominates the market and is focused on more lucrative international routes. The flag carrier has won rapid growth in passengers by using its base, Istanbul’s main Ataturk airport, as a hub for transit between Europe and the Middle East; it is now opening new long-distance routes.

The government, which still owns 49.1 per cent of THY, is preparing to cash in on the flag carrier’s success, announcing last week that it would appoint advisors to assess the options for its ongoing privatisation.

Analysts say a secondary public offering could be difficult because of restrictions on foreign ownership of airlines. Although Turkey’s customs union with the European Union includes open skies arrangements, any airline operating domestic scheduled flights within Turkey must be majority Turkish-owned, as must a designated flag carrier. At present, foreign investors own most of THY’s 51 per cent free float.

This explosion in domestic air travel is in sharp contrast with the trend in western European countries, such as France and Spain, where high speed rail links have made many internal flights redundant. In Turkey, with vast distances and mountainous terrain between cities, it is bus and rail travel that is suffering.

Very few Turks now make inter-city journeys by train: the old-fashioned sleeper wagons that crawl overnight between Ankara and Istanbul are used largely by tourists. Government plans to expand a fast rail network – confined at present to a short stretch between Ankara and the provincial city of Eskisehir – may restore the appeal of rail. But the bus companies running long distance routes over Turkey’s mountainous terrain face an even bigger challenge.

Many are now trying to tempt passengers with the kind of gadgets more usually found on long-distance flights – offering wireless internet access and individual TV screens on each seat, as well as a regular supply of hot drinks and cakes.

But a Pegasus campaign this month offered domestic flights from TL25.99 – cheaper than the fare for a bus journey that takes 6 hours simply to link Istanbul with Ankara. As for the trains, it takes a traveller with a keen sense of nostalgia to brave the 36 hour trundle from Haydarpasha to Kars, on Turkey’s eastern border with Armenia.

via Turkey: planes, not cars or trains | beyondbrics: News and views on emerging markets | FT.com.