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airport appears to have proven a drag on the stock of Turkish Airlines, but its launch three months ago at the same time seems to have boosted the shares of its budget rival Pegasus, Bloomberg wrote on June 18.
The stock of Pegasus Hava Tasimaciligi has outperformed that of Turk Hava Yollari AO, or Turkish Airlines as the company is known. As of August 19, Pegasus shares were up 173% y/y while Turkish Airlines shares were down 26% y/y. The divergence has been amplified by bets that Pegasus stands to gain amid setbacks that have plagued its rival — Turkish Airlines is now flying primarily from the new mega airport opened 20 miles outside Istanbul city centre. The $12bn Istanbul Airport is located on the foggy Black Sea coast and local reports show it struggling against far too many diverted flights, delays and long runway taxi times, all of which threaten to erode Turkish Airlines’ earnings. Meanwhile, Pegasus is the choice for many passengers determined to steer clear of any inconvenience. By choosing Sabiha Gokcen International Airport — Istanbul’s second airport on the Asian side of the city following the closure of Ataturk Airport to commercial flights to facilitate the opening of Istanbul Airport — they can easily opt for Pegasus as that is where the bulk of its flights operate from. “Sabiha Gokcen’s strategic importance has increased,” Behlul Katas, an analyst at Yatirim Finansman, an Istanbul-based broker, reportedly told Bloomberg, citing the distance that passengers have to travel to reach Istanbul Airport and concerns over the costs the flag carrier needs to assume at its new hub.
In January-July, passenger traffic at Sabiha Gokcen rose 3% y/y to 20mn while international passengers surged 21% y/y to 7.7mn, according to the latest data from the Turkish airport authority DHMI. Traffic at Istanbul Airport and the retired Ataturk Airport combined fell 3% y/y to 38mn over the period, with international passengers rising a mere 1% y/y to 28mn.
In January-July, Turkish Airlines served a total of 42.3mn passengers, marking a 2.2% y/y decline. International passengers increased only 1.4% y/y to 24.3mn but domestic passengers plunged 6.6% y/y to 18mn. Turkish Airlines’ net income declined by 70% y/y to TRY133mn in Q2 despite a tax revenue of TRY342mn, while revenues grew 35% y/y to TRY18.7bn, the company said on August 8 in a stock exchange filing.
However, it is not possible to explain the magnitude of the latest jump in Pegasus shares with fundamentals given the economic collapse in Turkey and it seems likely to be fuelled by speculative trading following the release of surprisingly strong financials for Q2. Circuit breaker was activated on August 9 in Pegasus shares following the sharp price rise, Borsa Istanbul said in a public disclosure platform (KAP) filing.
Pegasus’ net profit jumped to TRY324mn (€52mn) in Q2 from TRY16mn a year ago while the company posted a net profit of TRY109mn in H1 versus a net loss of TRY100mn a year ago, according to the financial statements released on August 8. The market had expected a net profit of TRY79mn in the second quarter. Significantly better-than-expected Q2 profit was thanks to strong operating performance and relatively lower effective tax rate, Fulin Onder of Seker Invest said in a research note.
In Q1 2019, Pegasus’ net loss jumped TRY214mn from TRY113mn a year ago due to rising financing costs. The company’s financing costs jumped to
81 TURKEY Country Report September 2019 www.intellinews.com