Pegasus aims to break into restricted markets for growth

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Turkish low-cost carrier Pegasus Airlines is working to unlock markets currently restricted by bilaterals to fuel its network growth, but has no intentions to develop a long-haul operation.

This year Pegasus is adding four new European destinations: Hamburg, Frankfurt, Geneva and Madrid. However it aims to enter other markets if it can negotiate a way through bilaterals which currently restrict access, the airline’s senior vice-president commercial, Guliz Ozturk, tells Flightglobal.

“The bilaterals [between Turkey and some countries] are restricted to one designated local carrier: Turkish Airlines. They’ve been enjoying those since 1992,” she says.

Serhan Ulga, the airline’s chief financial officer, adds: “They have these monopolistic markets and that’s why we are working to open up markets to Pegasus.”

These markets are mostly to CIS and Middle East destinations, says the airline.

“The agreement with Russia, for example, was a single designated carrier on a route-by-route basis. So, for many years on Moscow-Istanbul, one carrier from each country could fly – Turkish Airlines and Aeroflot,” Ozturk says.

“Now that has been liberalised and the second airlines from each country can fly – Pegasus and Transaero. The situation is improving, but one by one. For example, St Petersburg is still restricted to a single designated carrier.”

Ulga adds: “But if [the market is] bilateral protected, then it means there’s a lot of opportunities for us.”

Pegasus operates a fleet of 47 aircraft, the majority of which are Boeing 737-800s. However, it has four Airbus A320-family aircraft in service and will begin transitioning to an Airbus fleet in 2016 with the introduction the first of 75 firmly ordered A320neos.

“If we could get more traffic rights [to destinations] within the range of our 737-800s – which is 6h maximum flying time – and commercially the route is feasible, then we will fly there. For example Almaty, which is 5.5h [from Turkey], or African destinations,” says Ozturk.

For the Middle East, African and Russian markets, Pegasus has “some requests in front of the Turkish civil aviation authority and these are being discussed regarding the bilaterals”, says Ozturk.

Potential Middle East and African destinations include Algiers, Jeddah and Libya, but these are subject to discussions and bilateral negotiations, she says.

“There are some [routes to] Russian destinations that we want to fly to, which are commercially feasible and no one else serves.”

But Pegasus is tempering its ambitions by focusing on single-aisle operations for the time being, and has no near-term plans to extend its network globally like Norwegian or AirAsia X.

“We would not consider doing long-haul, because it is not low-cost conducive,” says Ulga. “We have 7.4 flights per aircraft per day whereas AirAsia X has two [flights]. So the averaging of the revenue stream and averaging of the capacity doesn’t work.”