Turkish Airlines Company Analysis

Introduction

Turkish Airlines is constantly achieving double digit growth in traffic and revenue due to its enormous and rising home market and strategically enlarged transfer traffic. The Company initially started as “State Airlines Administration” under the Ministry of Defence in Ankara in the year 1933with one King Bird, one ATH-9 and two Junkers.

Later in 1935, it came under the Ministry of Public Works with a different name, “General Directorate of State Airlines”. In 1938 it was turned over to the Ministry of Transportation. It took off its first international flight on the Ankara-Istanbul-Athensroute in 1947.The airline reorganized in 1956 renaming itself as Turk HavaYollari (THY) (“History of Turkish Airlines”, par. 4).

Mission

The mission of Turkish Airlines is to become the leading air carrier of Europe. It looks forward to increase its global coverage while retaining its identity as the flag carrier in the civil air transportation industry in Turkey. The airline maintains reliability and service quality while being in strict compliance with flight safety. It offers excellent service quality and product line to remain among the top airlines in the world.

Vision

Turkish Airlines looks forward to have a constant growth trend with minimum crashes and accidents. It aims at keeping its sales and distribution costs below than the normally prevalent costs in the industry. Moreover, the company is focused upon developing the awareness and knowledge of its officials so that it may attain full benefits with their contribution.

Turkish Airlines aims to become an air carrier with “an entrepreneurship that creates business opportunities for fellow members in the Star Alliance and takes advantage of the business potential provided by them” (“Vision and Values”, par. 2).

It also cherishes the vision to look for the interests of the shareholders and stakeholders both with the help of staff that is well familiarized with the modern governance values.

Values

The core values of the company are based on honesty and sensible dealing. Turkish Airlines cherishes the values of productivity and confidentiality. Customer satisfaction and respect for individuals is the prime concern of the company. It aims to find innovative ways to attain productivity and customer satisfaction.

The Company promotes leadership opportunities and effective team work at every level. The “Open Door” policy of the company makes it convenient for the employees to express and share their views concerning the work quality and legal or ethical matters within the Company (“Vision and Values”, par. 1).

It has received the awards for the Southern Europe’s Best Airline, Skytraxawards for Europe’s Best Airline for four consecutive years from 2011 to 2014. It has also received the award for the World’s Best Premium Economy Class Airline Seat repeatedly for three years from 2011 to 2013 (“Best in Europe for the last four years”, par. 3).

Target Market

“A market is a group of individuals and/or organizations that have needs for products in a product class and have the ability, willingness, and authority to purchase those products” (Pride & Ferrell, 8) A definite group of customers on which the organizations focus their marketing efforts are called the ‘target market’. It can be a large group or a small one depending upon the requirement and marketing strategy of the company.

Selection of the target market also depends on their buying capacity. For example the increasing interest of marketers in Hispanic consumers is based on the rapid growth of Hispanics in the United States and their massive buying capacity. An effective marketing strategy keeps in view the requirements of such target market and modifies their products accordingly. For example, Procter &Gamble customizes their products according to Hispanic taste and requirement to satisfy Hispanic consumers (Pride & Ferrell, 5).

THY also has a target market that needs to be focused while planning marketing strategies. The Airlines has a huge number of destinations. It chiefly covers the European and North American market. Besides these, it has a strong hold on the emerging markets of many more countries like Brazil, India and China. These emerging markets prove to be of great benefit for the Company due to their economic growth and subsequent air traffic increase.

Turkish Airlines is also planning to get advantage of the rapidly growing aviation in the African region. It plans to become the main carrier linking Africa with the world in near future. However, this strategy depends chiefly upon the availability of aircrafts and flight authorization. The focus of the Company is on the international market as the profit contribution from the international market is much bigger when compared to the domestic market (Arcuri, 17).

Marketing Strategy and BCG matrix Analysis of Turkish Airlines

Turkish Airlines is progressing assertively to retain its position among the top airlines at international level. Using its strong commercial features, it makes the maximum use of the opportunities that are available in the industry. The effective marketing strategy of the company has made it increasingly popular with time (“Strategy”, par. 3).

Turkish Airlines is dedicated to provide high quality service to the customers for reduced prices. The Company is committed to achieve this goal through various measures including good meals and entertainment equipment in the flight. With these strategies THY has been successful in promoting its brand and attracting customers at global level.

It adopts various other promotional strategies such as advertising campaigns and sponsorships including celebrities and sportspersons. The Company also emphasizes on the proper utilization of the social media to communicate consistently with the customers to help them with their queries. This marketing strategy may prove helpful for THY to compete and excel at global level in future, however, it requires huge investments to carry on.

Skilled and well-organized management of the subsidiaries is another feature that contributes to the brilliant performance and success of THY. These firms perform various activities such as catering services for the flight, technical maintenance of the carriers and ground management.

They benefit THY by assisting it with complementary services and also making profit by supplying products and services to other customers. For instance, a subsidiary providing technical assistance including maintenance, repair and overhaul (MRO) services to the THY aircrafts also offers its services to the other foreign carriers (Arcuri, 18).

Market Growth/Market Share Matrix is important for the organizations to analyse the market growth rate and market share of a product before formulating its marketing strategy. Market Growth/Market Share Matrix, developed by the Boston Consulting Group, works as a significant tool in determining marketing strategy for the

products. It generates a portfolio of all products, companies, and SBUs of an organization and helps in prioritizing and preparing adequate marketing strategies for specific products and the company as a whole (Pride & Ferrell, 6).

Growth Share Matrix is based on the idea of strategic thinking about investments and cash flows. In this matrix, the organization classifies its Strategic Business Units (SBU’s) depending on their relative market share and the industry growth rate.

In BCG matrix, the relative market share is positioned at the x-axis and the mid-point that relates to a unit having half the market share of the foremost company in the industry, is normally fixed at 0.50. Y-axis signifies the industry growth rate relative to sales. This rate is measured in percentage that could range from -20 to +20 percent having 0.0 at the midpoint (Torlak & Sanal, 84).

The BCG matrix is conducive to the appropriate allocation of resources for the products depending on their priority. With increasing competition, improving technology and changing consumer preferences, products may also change their positions in the BCG matrix. Hence, it is important for the marketers to keep evaluating the situation and prioritize the products in the BCG matrix accordingly (Tanner & Raymond, 3).

The persistent wellbeing of an organization depends on the fact that it has some profitable products that generate cash on regular basis and others utilize that cash to upkeep growth. In this manner, an organization can have a healthy and robust manifestation (Pride & Ferrell, 5). We can classify products into four categories depending on their share in the market and the growth rate in the industry. These are:

Stars: These products have a large share of the market and are considered to be more profitable with better prospects in future.

Cash Cows: Cash cows are products that have dominant share of a market but do not show any prospective for growth in future. These cash cows are necessary as they allow continuous cash inflow to support the other significant products that have better prospects in future (Pride & Ferrell, 5).

Dogs: There are certain products that have little share in the market and also do not show any hope for growth in future. These are called dogs and the organization does not want to invest in such products.

Question Marks: These products have a trivial share in a developing market and need monetary support for building market share.

Turkish Airlines has a strong hold on the international market with relation to its cargo and passenger planes. It has almost tripled its profit in 2012. The passenger and cargo carriers have shown a rapid market growth and market share. Awarded with various awards in this field, the company is blooming with 16.7% increase in the passenger numbers every year. Hence it holds a position in the star category in the BCG matrix.

Based on its success in the industry, the company has planned to invest in the expansion of its market and add more destinations in the near future. According to the CEO, Turkish Airlines, the carrier is planning to increase the number of aircrafts from 228 to 415 by 2020 (Davies, 6).

Turkish Airlines has benefitted the most from its cargo transport that has led to the expansion of the Company. “The posted cargo revenue reached 491 million US dollars in the first nine months of 2012 with a 12% increase compared to the same period of the previous year” (Arcuri, p.17).

THY has many profitable subsidiaries that generate cash flow for further investments. THY Technic, specifically, offers a significant revenue flow owing to its planned profitable expansion (“Turkish Airlines Swot Analysis: Can the dream continue”, par. 4).

SWOT Analysis of Turkish Airlines

An organization requires incorporating different tools to assess its potency, flaws, prospects and pressures. Swot analysis is one such strategic planning tool that is used by different organizations for examining their internal forces such as strengths, weaknesses and external forces like further opportunities and threats it faces in the outside environment.

Despite its criticism for being subjective and of partial worth, it can guide the human resource departments in relation with the performance assessment of the organization and can help in setting future goals. Swot analysis, along with other strategic planning tools, can prove beneficial in developing action plans for the growth of the organization (Nestor-Harper, 3).

Internal Forces

The internal forces of an organization that are believed to be constructive and encouraging for its progress are called its strengths.

Strengths

Turkish Airline has many internal characteristics that make it one of the best European airlines and has won it so much acclaim. These are:

Strategic geographical position: Turkey has an excellent geographical position in the world map with respect to air transportation. Istanbul works as a link connecting East with West. “It has become a major international passenger transfer point on Europe-Middle East, Europe- Far East and Asia, Europe-Africa, and America- Middle East lines, reduces the flight time and introduces the use a variety of fleets of diverse capacity” (Strategy”, par. 2). Istanbul, being located at the centre of East and West, makes it possible for the air carriers to reach 55 countries in a time less than four hours, hence signifying a global hub (Arcuri, 18).

Flight Network: With the efficient utilization of its expansion strategy, Turkish Airlines is progressively expanding its network by increasing the number of new destinations. This Airline is the largest carrier globally and the second largest when ranked among the airlines with the maximum destination number (“Strategy”, 6).

Low Costs: Turkish Airlines has been able to keep its operating costs low by adhering to its strategic decisions and cost- cutting procedures. The air carriers selected for operation are not very large and demand low purchasing and operating costs. It also focuses on finding ways to consume less fuel to make the flights profitable for the Company. Besides this, it takes measures to increase direct sales networks to make more profit (Arcuri, 19). THY’s unit costs are the lowest when compared to the other European network carriers. Its virtuous labour productivity has led to its cost efficiency and competitiveness (“Turkish Airlines 2012 operating profit almost triples; 2013 more doubtful, with 20% seat growth”, par. 4).

Customer Loyalty: Turkish Airlines enjoys customer’s loyalty since it has been successful in fulfilling their expectations in the manner they wanted. The Company is the most preferred airline due to its inventive outlook and customer gratification.

Supply Chain: Turkish Airlines has a robust supply chain helping it with appropriate resources and subsequently providing the right product to the customers.

Brand Name: Turkish Airlines is an influential brand name that has the power to attract new consumers and hold the old ones. With its progressive and successful social media campaigns and strategic sponsorship and advertising efforts, it has broadened the horizons for its brand. Turkish Airlines has endorsed hospitality worldwide with the message “Globally Yours”.

Unique Products: Turkish Airlines has been ranked at the top positions for its unique products and services including good meals and entertainment equipment in the flight. It has received the 2014 “Best Airline in Europe” award from the most renowned international passenger survey company, Skytrax. Due to its unique services in catering it has acquired a good reputation. Besides this, it is also acknowledged for providing best airline seats in its Comfort Class (“Best in Europe for the last four years”, par. 3).

Strong Management: Turkish Airlines is dedicated to improve its products and services in order to provide a convenient and hassle-free experience to the travellers. The airline makes efforts to manage the commercial and operational processes in an incorporated manner so as to provide an enduring satisfaction to the customers. Skilled and well-organized management of the subsidiaries contributes to the admirable presentation and success of THY (“Strong wings, big goals”, p. 10).

Weaknesses

The internal forces that may be considered unfavourable for the Turkish Airline are:

Penetration in Asia Pacific is Weak: The Company has a relatively weak acquisition of traffic as compared to that in Europe. It occupies less routes in the region and “it accounted for only around 13% of Turkish passenger numbers in 1H2014.” (“Turkish Airlines SWOT: A recent pattern of falling quarterly profits”, par. 2).

Capacity limitation at Istanbul Ataturk: Istanbul Ataturk Airport is the main hub of Turkish Airways that has a declared capacity of fifty eight movements per hour, however, the rapid growth of THY has made it necessary to handle sixty seven travels per hour. It is assumed that activation of the proposed new Istanbul Airport in 2019 would ease out this situation.

External Forces

An organization always has an external environment too that affects its growth. These forces may have positive (Opportunities) or negative (Threats) impact on the growth of the organization.

Opportunities

There are certain external forces that can benefit an organization with its growth. These external forces are called opportunities. Turkish Airlines can make use of various opportunities such as:

International Expansion: Turkish Airlines can expand its routes between Europe and Africa. Even though it occupies the major market share in the North Africa as compared to the other Gulf airlines, it needs to focus on expanding its coverage in other parts of the region, chiefly South Africa.

Improvement in load factors: In spite of gaining creditable load factors in the recent years, the overall load factor was 79.0% in 2013. It can improve more to reach the average AEA of 80.1% with improvement in its marketing strategy.

Improvement in daily utilization: Though, THY has attained considerable escalation in the daily aircraft operation in recent years, “it’s 2013 level of more than 12 hours compares favourably with global and European averages in the range of eight to nine hours, but is a little lower than the levels achieved by the Gulf Three “ (“Turkish Airlines Swot: A recent pattern of falling quarterly profits, but much strategic strength”, par. 11). The constraint lies in its relatively high proportion of short and medium- haul routes that can be managed for further improvements.

Expansion with New Istanbul Airport: The activation of the new Istanbul Airport in 2019 will create new opportunities for the Company by increasing the passenger capacity three times more than Ataturk airport. THY can benefit from it in future.

Benefit of wide-body aircrafts: Turkish Airlines is planning to increase the number of its wide body aircrafts in the near future. “According toTHY’s1H2014 result presentation, its fleet at in 30-Jun-2016 comprised 50 wide body aircraft and 198 narrow bodies” (Turkish Airlines Swot: A recent pattern of falling quarterly profits, but much strategic strength”, par. 13).

Sun Express can be a good support in the low cost competition: THY can benefit from its stake in LCC Sun Express to combat the competition with LCCs on the European route.

Threats

Every organization has certain potential external characteristics that may pose threat to its growth. Turkish Airlines may have to deal with the following threats:

LCC competition: The competition between THY and Pegasus may pose a threat to its position in the aviation industry. THY deals more with the transfer traffic and Pegasus concentrate more on carrying passengers from one point to another; however, the Company faces a major competition from Pegasus and certain other LCCs such as Atlasjet and Transavia etc. while operating at SabihaGokcen.

Exposure to geopolitical risks: Turkey is vulnerable to the geopolitical risks due to its vicinity to some problematic spots in the Middle East. Moreover, the instability of the political situations within the country may also pose trouble to its wellbeing.

Confrontation from the gulf airline: THY is constantly witnessing a confronting competition from the other airlines that are progressing speedily in the Gulf region. The Gulf Three have been able to invite connecting passengers in the route of Southern Asia and Australia with their efficient service and robust products. In spite of having an extraordinary network, THY may be affected by Etihad’s marketing strategy in growing its presence in Europe.

Transfer traffic may cause cost challenge: It is clear that linking flights between two points would not be very profitable if there is a straight link available on that route. THY needs to keep the costs low to balance the plunging pressure on unit revenues. The Company should also be cautious while expanding swiftly in order to avoid depression of unit revenues (“Turkish Airlines Swot: A recent pattern of falling quarterly profits, but much strategic strength”, par.7).

Global Marketing Mix

Efficient marketers realize that it is important to keep in mind the similarities and variances existing across countries while developing the marketing strategy for some particular target markets (Pride & Ferrell, 5).

Marketing mix is a blend of four elements that are essential for company’s marketing strategy. These four elements are:

• Product: The quality and appearance of goods and services.
• Price: The amount fixed for selling a product.
• Promotion: The procedures involved in spreading information about the product.
• Place: The point from where the consumers can buy the products.

“Firms modify each element in the marketing mix to establish an overall brand image and unique selling point that makes their product stand out in the competition” (“The Marketing Mix”, p.1).

The success of a marketing mix plan depends on the company’s awareness about its target market. These decisions should be stable with the business- unitand corporate policies. Companies may stick to their standard marketing mix or make alterations in it to make them suitable for the target market country (“The International Marketing Mix”, par.3).

The international growth plan of the Company includes cooperation with the other airline companies in certain target markets. It seeks cooperation of the local airlines to avail vital competitive advantage from their support. Turkish Airlines has strategically associated with the Star Alliance, which is a top international airline network including membership of a large number of global airline companies (Arcuri, 18).

With a strong air transportation system, the Turkish enterprises can expand their business in the international market. Hence, the efficiency of the national transport is conducive to the economic growth of the country and vice versa. Further, THY’s massive international destination coverage has also benefitted the country with increased number of tourists, subsequently, creating opportunities for various business sectors of the country.

Turkish Airlines’ success sets an example for other airlines and even businesses outside air transport sector. The influential factors relating to its success is its well-organized business strategy.

Besides a congenial geographical position, efficient and involving staff, subsidiary assistance and customer satisfaction has also been conducive to Company’s growth at international level. The investment plans and strategies of Turkish Airlines may prove to be advantageous for it irrespective of the economic depression in Europe and instable economy of the Middle East (Arcuri, 19).

Impact of the external environment on the company

Competitive forces: Since the airline sector is being globalized, the competitive forces are affecting the industry tremendously. According to Porter (1980; 1985), to present the standard product to the customers, to present a product which is unique in nature and to have a cost advantage by concentrating on geographic regions is the focus of this industry.

Being one of the superior airline companies, Turkish airline is trying to beat these competitive forces (Kilinc et al., 326). The effective cost control system of the Turkish airline is improving its products and services. Its operating cost is very much lower than its competitors. Having operational flexibility, it successfully achieves profit margin.

1. Environmental forces: Increase in fuel cost has been affecting the ticket prices of the airline. The company is making efforts to make the most efficient use of fuels and reducing greenhouse gas emissions.
2. Economic forces: Since economic uncertainties are happening globally, it is required that the airline industry should change its strategies to be practicable.
3. Political: There have been political changes in the Middle East and Africa that has affected the Turkish airline’s cargo business. Turkish airline has expanded its cargo network by increasing scheduled flights to the countries like Nigeria, Ethiopia and Saudi Arabia. By increasing air cargo traffic between Europe and Asia, Turkish airlines have made Istanbul a regional cargo transport hub.
4. Technology: Changes in the technology is also working as a force for this sector and it is expected if the organisations will not follow the technological changes it is difficult for them to compete others. So Turkish airlines is working with up-to-date technology. It is taking the services of Turkish Technic. It is providing the company- industrial gas turbines, engine propulsion systems and engine housing systems and cabin interior equipments (“Keep discovering with Turkish airline”, p. 5).
5. Socio-cultural: Turkish airline is trying to understand its social responsibility so it is making efforts to create a cleaner environment for future generations and also it is focusing on flight safety.
6. Legal and regulatory forces: The airline industry is deeply affected by regulations and restrictions in connection to tax policy, international trade and competitions. The aviation law of Turkey regulates the following:
   • Aircraft accidents.
   • Airports.
   • Flight rules.
   • Conditions regarding liability and punishment.
   • Aviation enterprises.
   • Rules concerning the civil aviation personnel.

After the civil aviation law opened the door for liberalization, Turkish airline (THY) has been modernised and it has captured the international market.

Conclusion

Having an excellent geographical position in the world map with respect to air transportation, Turkey offers a great advantage to its aviation industry. THYhas made an efficient use of this feature and skilled marketing strategy to flourish its business. THY has many profitable subsidiaries that generate cash flow for further investments.

With the skilled and well-organized management of their subsidiaries it has been able to perform brilliantly and successfully constantly for many years. THY realizes the importance of considering the similarities and variances existing across countries and it has worked on this direction. The promotional tags like “Globally Yours” shows its efforts for attracting air travellers from all around the world.

Recommendations

• Turkish Airlines highly needs a new airport to deal with the mounting movements of aircrafts.
• The Company requires taking extra care while planning expansion to balance the plunging pressure on unit revenues.
• THY can improve its daily aircraft operation further to reach the levels achieved by the Gulf Three by managing its short and medium- haul routes.
• THY needs to focus on the other parts of Africa, chiefly South Africa to increase its prominence in the region.
• THY needs to take extra care with the LCC’s in the region.

Works Cited

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