2. TroyAvi
Global cross roads: to the West mature
economies, to the East, North and South
emerging markets with fast growth rates
Turkish Airlines demonstrated significant growth
leveraging both economic growth in turkey and
also leveraging 6th freedom potential of Istanbul
There is significant opportunities for air freight
growth in Turkey in the coming years both
destination and 6th freedom
Air freight growth is driven by economic activity,
world trade, industrial production and
consumption
Worldwide trade is expected to grow 3.8 % over
the next 20 years
Emerging markets are expected grow 6% which
is well above of mature markets
Growth in the air freight industry is primarily
driven by emerging markets
Opportunities for Air Cargo Growth , through Turkey’s
strategic location
Source: Airbus
3. TroyAvi
World air cargo growth has been relatively flat since 2011,
with some improvement in 2013
World air cargo traffic growth has been
relatively flats since 2011, following
strong recovery in 2010
- 2009 -9.6%
- 2010 +18.5%
- 2011 -0.9%
- 2012 -1.1
There has been an improvement in
2013 with +3.5% increase first two
quarters of 2013
IATA cargo confidence survey indicate
some improvement through 2013
4. TroyAvi
Turkey’s strategic location with access to emerging markets
and recent focus on air cargo enabled start of rapid growth of
air cargo activity
In recent years Air transport
growth in Turkey has been
faster than global averages
RTK growth tracks closely GDP
growth
In recent years gap is developing
between GDP and RTK correlation
Increasing fuel prices, mode shift to
maritime and other transport may be
contributing to this gap
Seasonally adjusted FTK’s have been
flat since recovery in 2010
This has not impacted growth of Air
cargo in Turkey – with significant
growth with new freighters, belly and
greater share of 6th freedom air cargo
market
Source: IATA, CAPA
5. TroyAvi
Opportunities for growth for air cargo in Turkey is greater
than global averages
World air cargo traffic has grown 5.4 % since
1982 from 50 to 200 billion RTK
Next 30 years world economy is expected to
grow by 3.2%, cargo traffic is expected to grow
to 600 billion RTK, 5%
2023 goal for Turkey is $500 M, this could
represent growth of air cargo from 2.5
million to 6 Million Tonnes
Industry is poised for change to replicate
the success we have seen in passenger air
transport in both destination and
transhipment market
Source: Boeing, Airbus
6. TroyAvi
6
0
50
100
150
200
250
Europe (ex
TK, RU)
Turkey Africa +
Middle East
CIS Rest of Asia
(ex CIS)
North America Central &
South
America +
Carib
Oceania (OZ
+ NZ)
Departures
Average Daily Departing Flights
July 2010
July 2013
Istanbul is now positioned as an aviation hub, primarily
through the growth of the passenger business
Source: Innovata Schedules (accessed through Diio).
Turkey has largest trucking fleet in Europe, from Istanbul it can effectively
serve most Europe. An Advantage over Gulf Carriers . Opportunities for
further growth, Asia
7. TroyAviTurkey’s GDP Growth is above global averages
Forecasted GDP growth in Asia Pacific, Middle East and Africa are
also above global averages.
Source: Thomson Reuters estimates
GDP Growth Forecast (2013-2023)
8. TroyAvi
8
Continuing growth of connecting traffic leveraging Turkey’s
strategic global location
Istanbul is poised to continue its growth as a global hub and
presents opportunity for cargo growth
EUROPE
- MIDDLE
EAST
EUROPE
- ASIA-
PACIFIC
N.A. -
ASIA
PACIFIC
EUROPE
- AFRICA
EUROPE
- CIS
IST
10. TroyAvi
Turkey Turkey experienced
above average cargo
growth of its European
peers in 2010 (average
15.4%)#1
Istanbul SAW
#4
Ankara ESB
World Ranking – Highest
Growth Airports by Passengers (
#6
Turkey
(In Europe)
#19
Turkey
(Worldwide)
World Ranking – Busiest Cargo
Country by Tonnage
26.4%
2010 YoY Growth
by Total Cargo
Carried
Istanbul IST
22.4%
2010 YoY Growth
by Total Cargo
Carried
In 2010, the amount of
cargo carried through
Istanbul IST airport grew
faster than similarly
cargo-sized airports in
the Middle East; Doha
grew at 10.7% and Abu
Dhabi grew at 15.6%
Turkey experienced above average cargo
growth in the recent years
11. TroyAvi
Further to belly Freighter Fleet now contributing to air
cargo growth
Turkey ranks 19th among largest air cargo
markets globally
Rapid growth of traffic circa 500K tonnes
imports and 350K tonnes exports
Turkish Cargo achieved + 20% growth in
freight tons-kilometre (FTK) in 2013. 35
Freighter Destinations
Focus on emerging trade lanes are under
served as they do not yet demand or
support dedicated freighter services in their
own right
Construction of new 50,000 square meter
cargo centre will begin at Istanbul Atatürk
Airport.
1 United States 14 Malaysia
2 Hong Kong (SAR) China 15 Luxembourg
3 United Arab Emirates 16 Singapore
4 Japan 17 Australia
5 China 18 Brazil
6 Germany 19 Turkey
7 Korea, Republic of 20 Italy
8 United Kingdom 21 Spain
9 Chinese Taipei 22 Switzerland
10 Thailand 23 South Africa
11 France 24 Indonesia
12 Netherlands 25 Chile
13 India
3 A310-300F, 6 A330-200F
6 A300 -600, 1 330 200F 1 737 F
12. TroyAvi
Istanbul is yet to achieve similar growth levels among
European Airports, Paris and Frankfurt remain leading air
cargo airports in Europe
Source: ACI 2010 Annual Report
This excludes grey cargo/passenger belongings with
significant volume to Russia/CIS
Boeing world cargo forecast 2023
13. TroyAvi
US West Coast
Mexico
Ohio valley
US East Coast
US South East
Mid-south
South America West
South America South
Europe North West
Europe South
Africa East
Africa South
Europe East
Israël
Middle East
Delhi
Bangkok
Singapore/Kuala Lumpur/Jakarta
Australia East Coast
Pearl river delta
Taiwan
South-Korea
Shanghai region Japan
Source: OAG
Almaty region
Astana region
Beijing region
Bangalore/
Mumbai
Kuwait
Calcutta
At cross roads of world economic regions
Africa West
Opportunity to replicate the success of passenger business
14. TroyAvi
World Map, distorted by Freight Volume
Source: Airbus, IATA Cargo Symposium 2011
Opportunity for further growth: Regional Cargo Hub
15. TroyAvi
Total trade import and export 000
Istanbul is an already retail hub for the region, and on its way to
becoming a regional distribution centre
Russia, China, and Germany are among leading partners. Turkey is
poised for further growth.
Istanbul become retail hub for countries in the region
Source : TroyAvi Analysis
17. TroyAvi
This is emphasised by growth unaffected by
relative slowdown of Asian routes last year
In 2013 Asia pacific
routes were most
adversely affected
Middle east carriers
added significant
capacity to capture
emerging opportunities
Overall world air cargo
grow was 0.4 in 2013
Turkish air cargo
carriers led by TK
continued their
growth in 2013
18. TroyAvi
World air cargo traffic is forecasted to grow 5% yoy over
the next two decades with opportunity to capitalise on
growth markets
Turkey, -- Europe To/From Asia/Middle East,/Africa/CIS
19. TroyAvi
Europe’s largest trading partner is China with 1.8+ MT Air
Trade, followed by India and Japan
1,241,410 1,152,168
1,658,021
1,808,950
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
2008 2009 2010 2011
Tonnes
Tonnes
EuropeanCountry-level Air Trade
(Exports& Imports)
India Japan South Korea Singapore Australia Malaysia Indonesia New Zealand China
* Estimated Q4-2011 based on proportion Q4 in
2010
Source: Districon
20. TroyAvi
Europe to Asia air trade is expected to grow 5.6%
through 2031
Air cargo companies in Turkey have services to
China, there are opportunities for growth.
Chinese carrier’s acquisition of Turkish Air cargo
companies – opportunities for regional
distribution, trucking to Europe
Air Cargo Mkt Share
By Freight Tonnes Loaded &
Unloaded
Asia-Pacific
Hong Kong HKG, 4.2M
Shanghai PVG, 3.2M
Seoul ICN, 2.7M
Tokyo NRT, 2.2M
Singapore SIN, 1.9M
Top Cargo Airports
Tonnage
35.1%
Source: ACI 2010 Annual Report, Highest Passenger Growth Airports with more than 5 million pax, Boeing world cargo forecast 2023
21. TroyAvi
21
Growth opportunities in China and Asia
Note: Excludes, China, India and CIS countries. Source: Innovata
Schedules (accessed through Diio). Week of July 20th, 2013
IST has only four cities and 27
weekly flights to China.
Western European hubs FRA and
CDG has nearly three times as
much flights each to Chinese
destinations
IST offers services to 15 Rest of
Asia countries, it lags behind most
other major hubs in flight
frequencies, compared with its
peer hubs.
TK MNG provides direct
freighter services to China
Intervistas
22. TroyAvi
6.5%
Air Cargo Mkt Share
By Freight Tonnes Loaded &
Unloaded
Middle East
Dubai DUB, 2.3M
Doha DOH, 0.5M
Abu Dhabi AUH, 0.4M
Top Cargo Airports
Tonnage
In the Middle East, liberalized bilateral agreements and
increases in fleet drove growth, i.e. UAE and Qatar.
23. TroyAvi
Air freight in Turkey doubled between 2004
and 2013
TR:Turkey, KR: Korea CNN: China North IN: Indonesia USNC:US North Central
CNS: China South, IL: Israel TW: Taiwan ONRE: Near East USSW: US south West
HKUS NE : US North East CNE: China East JP: Japan USSE: US South East CA: Canada
ONAF: North Africa SG: Singapore AU: Australia AE: UAE OME: Middle East
Non Directional
Source: LogCapStrat database
24. TroyAvi
Commodity breakdown of Turkey – Hong Kong Route
shows high yield cargo
OD originating china north OND originating Turkey
C390C: Manufactured Goods C381: Metals Products
C2A: Minerals C3853: Watches
C321: Textiles C390A: Toys/Sports
C3832B: Semi Conductors C3832C: Communications
C3825: Computers C371: Iron and Steel
Source: LogCapStrat database
Opportunities to distribute to
ME, Africa, Balkans/Europe
25. TroyAvi
Non directional OD totals include Textiles,
Cloths, Manufactured goods
C390C: Manufactured Goods C381: Metals Products
C2A: Minerals C3825 Computers
C321: Textiles 322:: Toys/Sports
C3843B: Auto Spare Parts C3832C: Communications
C3825: Computers C371: Iron and Steel
Source: LogCapStrat database
26. TroyAvi
US. Korea, Japan, Hong Kong, are leading routes by
commodity value
TR:Turkey, KR: Korea CNN: China North IN: Indonesia USNC:US North Central
CNS: China South, IL: Israel TW: Taiwan ONRE: Near East USSW: US south West
HKUS NE : US North East CNE: China East JP: Japan USSE: US South Est CA: Canada
ONAF: North Africa SG: Singapore AU: Australia AE: UAE OME: Middle East
Source: LogCapStrat database
27. TroyAvi
In US NE route Jewellery, Clothing, Aircraft Parts,
Medical and Computers lead the mix
C390B: Jewellery C851: Professional/Office
C322: Wearing/Clothes C825: Computers
C3845: Aircraft/parts C3821 Electrical/Machinery
C3832B: Semi Conductors C321: Textiles
C3522: Drugs/Medical C832C Iron Communications
C3829: Machinery
Source: LogCapStrat database
Opportunities to
distribute to ME, Africa,
Balkans/Europe
28. TroyAvi
In Europe Weekly frequency of truck flights grew five
fold over the past decade
Long haul truck flights in Europe increased 5 times
compared with airport flights which increased 3
times
Istanbul offer opportunity to provide truck flights
Distributing traffic to Balkans and Europe providing
door-to-door services
Given the changes in customer behaviour. With
speed and consistency of delivery there could be
opportunities for further growth
Third Istanbul airport including with multi-modal
connections will provide basis for further growth.
This could be a competitive advantage compared
with other hubs in the region
Turkey has the largest trucking fleet
in Europe with 55 K units and it can
significantly capitalise on Truck
Flight opportunity
Source:
29. TroyAvi
With largest fleet in Europe truck flight growth provides
significant opportunity for Turkey
Air transport agreements with new countries
opened new routes for air freight – 143 new
agreements over the past decade
During financial crisis in Europe focus has
shifted to African and Middle
In world bank ratings in 2012 Turkey went
up to 27th from previous 30th in 2009, The
goal is to reach among top ten by 2023
Domestic air cargo also grew from 181 KT
to 555KT
Growth of roads and airports in Turkey also
offer opportunities for growth of the air truck
flights for Domestic distribution, Iraq, in
future Syria
Regional Distribution of Air Cargo from
Asia with Trucks and Freighters
Source THY Cargo 2012
30. TroyAvi
Turkey is not immune to global challenges of air cargo
industry
Air cargo lagged passenger growth in previous years. With
recent focus air cargo experienced growth. For example
stated target is to grow revenues to 15% range
Source: IATA
31. TroyAvi
Some of the challenges we see globally are also
experienced in Turkey
Freighter load factor and utilisation averages are in line with
global averages. TK reports higher LF of their freighters
32. TroyAvi
Growth of WB fleet also present challenges for other
Turkish Air Cargo companies
Source: IATA Ascend
33. TroyAviIncluding pressures on cargo yields
Global Air freight rates have remained weak in 2013
Source : CAPA, IATA
This overcapacity in the air freight business has also contributed to weak cargo yield
trends. World cargo yield collapsed in 2009, falling 15%, then rebounding strongly in
2010, since when it has underperformed passenger yield growth (it fell by 6% in 2012
according to IATA).
34. TroyAvi
Air cargo industry in Turkey is poised for
transformation, to capitalise on the opportunities
Weakness
Infrastructure
High Total Transport Costs
Red tape and legislation
Unfair competitive practise
Customs
Lack of scale
Avoid apron congestion
Adopt Best practices
Opportunities
Cargo terminal at the 3rd Airport
Increase WB Services to Asia
Regional use of NB freighters
Integrated use of ISG and Ataturk
with common Customs
Road Truck flights
35. TroyAvi
Revenue Growth and Performance Improvement
Through Transformation of Processes better leverage of
technology
Commercial activities to improve cargo
revenues, yield and load factor for belly and
freighter operations.
35
Capacity management is focused to improve
cargo leverage and communications between
passenger and cargo
Pricing and revenue management evaluates
Pricing and Revenue Management activities
for belly and freighter operations..
Revenue planning and revenue delivery
activities including pricing, revenue
management and sales are assessed, and
improved.
With sales focus on key account
management, development of long term
revenues per key account and develop best
practice key account management practices.
Example Cargo Capacity Management
Example Cargo Revenue Management
37. TroyAvi
Our delivery team and associates include experts with
experience of working with leading airlines and aviation
consultancies worldwide
Dr. Emre
Serpen
President, Head of
Airline Practice
• 20+ years, 70+
airlines in 50+
countries
20+ Airline professionals with deep industry knowledge,
and optimisation expertise.
38. TroyAvi
Proven tools, methods and data to deliver strategy
and performance improvement engagements
2006 2007 2008 2009 2010 2011 2012 2013
SAR (Millions) Baseline Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Total Operating Revenues (Net)
Total Cargo Scheduled Revenue 488 569 622 749 799 844 880 918
Cargo Charter Revenue 8 15 15 15 15 15 15 15
Other Revenue 49 49 49 49 49 49 49 49
Total Revenue 544 633 685 813 863 907 944 981
Aircraft & Other Lease Costs (Incl. Ownership)
Flight Crew Employment Cost 30 38 47 57 59 60 61 62
Fuel 51 142 181 220 227 233 237 240
Direct Maintenance 47 100 124 147 153 157 160 162
Landing Fees 7 4 6 7 7 7 7 7
Overflight 12 13 16 19 19 20 20 21
Aircraft, Engines & Components Depreciation 56 55 65 75 79 81 82 84
Insurance 2 2 3 3 3 3 3 3
Passenger Operating Costs 7 5 5 6 6 6 6 7
Charter Operating Costs 6 11 11 11 11 11 11 11
Total Aircraft & Other Lease Costs 218 370 458 544 564 580 589 598
Total Indirect Operating Costs 307 269 282 306 306 312 313 312
Total Operating Costs 525 639 740 850 870 892 901 910
Profit (Loss) 19 -6 -55 -37 -8 15 42 71
Profit Margin 4% -1% -8% -5% -1% 2% 4% 7%
Operating Metrics
Freighter Fleet at Year-End 12/31 -- -- -- -- -- -- -- --
Total Weekly Departures (both directions) 26 26 34 38 40 42 42 42
Total Block Hours 8,173 9,623 11,859 13,757 14,073 14,454 14,454 14,454
Total Available Ton Kilometers (Millions) 517 596 734 884 905 919 922 926
Total Cargo Carried (000s) 63,649 70,161 77,818 92,531 98,483 105,357 109,794 114,426
Average Rate per Kilogram 8.6 9.0 8.8 8.8 8.8 8.6 8.6 8.6
Comparative Metrics
Average Daily Utilization (Block Hours) -- -- -- -- -- -- -- --
Average Block Hours per Flight 6.0 7.1 6.7 7.0 6.8 6.6 6.6 6.6
System Load Factor (Belly/Freighter Combi) 76.9% 64.5% 55.4% 58.5% 59.4% 62.0% 64.6% 67.3%
Total Operating Revenues per ATK 1.05 1.06 0.93 0.92 0.95 0.99 1.02 1.06
Total Direct Operating Costs per ATK 0.42 0.62 0.62 0.62 0.62 0.63 0.64 0.65
Total Operating Costs per ATK 1.02 1.07 1.01 0.96 0.96 0.97 0.98 0.98
Total Operating Revenues per Block Hour 66,613 65,776 57,786 59,065 61,304 62,771 65,279 67,896
Total Direct Operating Costs per Block Hour 26,705 38,497 38,640 39,566 40,075 40,133 40,736 41,349
Total Operating Costs per Block Hour 64,272 66,431 62,444 61,786 61,854 61,699 62,370 62,969
Example for illustration
Example: Project Approach
Example: Diagnostic Analysis
Example: Freighter and Belly Business Plan
Example: Route
Analysis
39. TroyAvi
Thank you for your Attention
Please contact Dr Emre Serpen for further information
eserpen@troyavi.com
+447944163891
