Aviation Turkey: How do you evaluate the year 2021 in terms of aviation after two challenging years? Pegasus Airlines announced the 2021 Q3 profitability as €56 million. What can you say about the current situation?
Mehmet Nane: Like 2020, 2021 also passed under the shadow of the COVID-19 pandemic, nevertheless there was a significant recovery process. The most important reason for this recovery was the increase in consumer confidence thanks to the rapid progress of vaccination program and the ease of international travel bans implemented by the authorities for precautionary purposes. With the increase in demand, the airline industry brought the seat capacities it offered to the market, especially in the summer, to pre-pandemic levels. From a global perspective, according to the International Civil Aviation Organization ICAO data, it is estimated that the total seat capacity has increased to 60% and the number of passengers to 50%, when compared year 2021 with 2019. However, it is forecasted that there will still be a loss of around $320 billion in total turnover compared to 2019.
In Turkey, on the other hand, the industry saw a more rapid recovery and remained slightly above the world averages. Number of total passengers rose back to 60% of 2019 in 2021. In addition, we witnessed that the number of passengers reached 75% in the second half of the year compared to 2019. We can say that this was due to the surge in passenger demand following the ease of travel restrictions by authorities. We have already expressed our expectation in this direction; there is an intense demand potential in the market and when travel restrictions are eased or lifted, the demand increases immediately.
As Pegasus Airlines, we have outperformed in the recovery of seat capacity since the beginning of the pandemic. In 2021, our seat capacity reached 75% of 2019, and the number of passengers reached 66%. With the recovery in demand, it was pleasing for us that our seat capacity reached 93%, almost the pre-pandemic level, in the third quarter of the year, our high season, compared to the same period of 2019. In terms of financial results, our sales and operating revenues are still below 2019 levels, but we see a rapid recovery trend here as well. For example, in 2021 Q3 we achieved to increase our sales revenues back to 70% of the level recorded at the same period of 2019. Since the beginning of the COVID-19 pandemic, the global airline industry has suffered huge losses each quarter. Under these circumstances, Pegasus Airlines distinguished itself from the sector, posting a net profit for the third quarter of 2020. We also achieved a net profit of €56 million in 2021 Q3, which we consider as one of the developments that encourages us on the way to “return to normal”.
Aviation Turkey: Eurocontrol announced the figures for 2021 and Pegasus Airlines ranked 8th across Europe. How do you evaluate your company’s position in Europe in terms of passenger growth and number of flights? What is your projection regarding the return to 2019 figures?
Mehmet Nane: The pandemic hit the aviation industry hard, and airlines suffered dramatically. Travel restrictions, especially for international travels, led to an unprecedented suppression of passenger demand. As Pegasus Airlines, in the first and most challenging period of the pandemic, we were able to perform highly effective capacity management thanks to our lean operational structure and agile decision-making processes and achieved one of the greatest performances in our industry in capacity recovery., The ease or lift of travel restrictions in the second half of 2021, especially in parallel with the rapid progress in vaccination program, led to an increase in demand again. We also managed to increase our capacity to almost 2019 levels. We are proud to be able to rank high in Europe amid unprecedented challenges.
Of course, we could not manage to go back to 2019 in all our performance criteria yet, we still need time. Under current conditions, we anticipate that we will regain our pre-pandemic capacity in 2022, and we will make considerable progress in other criteria such as occupancy level, sales revenues and profitability, with an eye on the course of the pandemic and travel restrictions, as well as the impacts of the global inflationary environment on our costs.
Aviation Turkey: Following the diplomatic relations regarding the reopening of the Armenia-Turkey border, Pegasus Airlines has announced to conduct three flights a week between Istanbul and Armenia. Can you inform us about the new routes that have been launched and to be launched?
Mehmet Nane: Our main source of growth is the new markets we have entered in Russia, the Middle East, Asia, Africa, the Caucasus and Eastern Europe. These markets offer significant opportunities for particular reasons. Such reasons can be listed as the growth potential of aviation in these markets, where low-cost airline penetration remains low, flexibility in visa regulations, and the increasing foreign trade between Turkey and these countries. We continued to expand our flight network in these regions throughout the pandemic and added Karachi, Chisinau, Odessa, Batumi, Shymkent, Kherson, St. Petersburg, Makhachkala, Osh and Tabriz to our flight network. During the pandemic period, we launched 4 new domestic routes and 33 new international routes.
Aviation Turkey: In 2012, the company placed an order of 100 Airbus aircraft, the largest order placed at that time. What is the current state of the deliveries?
Mehmet Nane: While observing the course of the COVID-19 pandemic, travel restrictions and demand on one hand, we continued, on the other hand, to make investments and received the delivery of a total of 14 A320neo and 6 A321neo during this period. As per our fleet transformation strategy, we continue to expand our fleet and make it younger with new generation green aircraft. As per our order and according to the current delivery schedule, we plan to add 20 new generation A321neo aircraft to our fleet in 2022. With the exit of our old generation aircraft from the fleet, 3/4 of our total seat capacity will be covered by our new generation NEO model aircraft by the end of this year.
Aviation Turkey: During the pandemic period, the first delivery was made to Pegasus Airlines within the framework of Airbus' "e-delivery" concept. How do you evaluate this concept and process?
Mehmet Nane: Under normal circumstances, our authorized personnel and consultants from our relevant technical units are assigned for Airbus new A320neo and A321neo aircraft deliveries. Accordingly, the appointed personnel can directly and in detail examine the technical documents and aircraft by being present at the Airbus delivery center during the delivery process of the aircraft. At the beginning of the pandemic period, when travel restrictions and health measures were adopted, it was impossible for us to be physically involved in the aircraft delivery process at the Airbus delivery center. By creating an innovative solution in line with our cooperation with Airbus, we were able to perform the delivery process under difficult conditions. While Airbus authorized representatives carried out the inspections of technical documents and aircraft in an electronic environment, our authorized personnel from our technical units took part in the delivery processes of the aircraft remotely. Thus, we remained committed to our growth and young fleet goals, at the start of the pandemic even with greater uncertainty than today. We have proven that we are an airline with the agility to respond and adapt to sudden changes affecting the world and our industry in the fastest way possible.
Aviation Turkey: Pegasus Airlines has selected CFM International's advanced LEAP-1A engine to power its new fleet of 100 new A320neo/A321neo aircraft. What can you say about the contribution of engine selection to your company in terms of fuel efficiency and environmental responsibility?
Mehmet Nane: We broke new ground in the world with the CFM Leap series engines used in our A320neo aircraft. We were the first airline in the world to use CFM's environmentally friendly new generation engines. In other words, as Pegasus Airlines, we used the world's most efficient engine in one of the world's most advanced aircraft and became a launch customer. Other airlines across the world have learnt about the performance of this model and engine combination from us. As the engines of our new aircraft consume 15% less fuel than other equivalent models, it indirectly contributes to reducing emissions by 15%. In addition, thanks to its passenger capacity, the A321neos also reduce the carbon emissions per passenger. Thus, fleet transformation becomes a critical step for decarbonization.
Aviation Turkey: Turkish aviation industry has made a significant progress, reaching a competitive position in international markets. Havelsan with its Training Platform Simulators and STM with its Electronic Flight Bag Capabilities, Cockpit and Cabin Information Management Applications have transferred their knowledge and experience from the defense and aviation industry, where certification processes are of great importance, to the civil aviation industry. How do you evaluate the development of the Turkish aviation industry? As Pegasus Airlines, what is your approach to the domestic ecosystem and cooperation with the domestic industry?
Mehmet Nane: With our digital transformation journey that we started in 2018, we have implemented and continue to implement significant projects. Our PLATO (Planning & Training Optimizer) project, in which we developed the Flight Academy Training Planning System from scratch, is one of such key projects. Thanks to PLATO, we can make highly efficient training plans for our 1,200 pilots, 89 flight instructors and 3 flight simulators, making use of artificial intelligence.
With our Smart Cabin tablet application, which we developed for use in the cabin, we enable our cabin crew to instantly access information about the flight and our guests. For example, the seat numbers of our guests with disabilities, babies and wheelchairs who need special services can be easily tracked through the system and the services they need can be provided accordingly. With Smart Ops, our other application, we have made it possible for all our flight crew to access information about their duties from anywhere in the world via their own mobile devices.
In order to make aircraft maintenance activities easy and efficient, we have implemented our Smart Technic application for our aircraft technicians. Thanks to this tablet application, our technicians can access the necessary information and make the required entries to the system while they are working in the field and performing their maintenance tasks. Thus, we have enabled paperless, efficient and flawless task management through the application. We continue our efforts to prevent loss of flight time by using augmented reality with wearable equipment and providing remote technician support.
Additionally, we have put into use our SENKRON system, which enables us to manage all our ground operations effectively, efficiently and in real time with the support of IoT and artificial intelligence. We continue to work on our projects aiming to make use of the power of artificial intelligence and big data on flight safety issues. Thus, we will ensure that the risks are predictable arising from conditions such as the runway and weather conditions at the airport where the flight to be conducted.
We have implemented all such systems and applications together with our domestic aviation companies and technology suppliers in our ecosystem, with the support of our universities and with the cooperation of domestic and foreign authorities such as DGCA, IATA and EASA. Thanks to these efforts, we have not only invested in the areas we deem necessary, but also made substantial contributions to the development of aviation technology in our country. We will see the Turkish origin technology products in the field of aviation to become more available in the market soon.
Aviation Turkey: Operating with the motto "Turkey's Digital Airline" as of 2018, Pegasus Airlines is known to be a pioneer in this field and attaches great importance to the subject. What are your activities within the scope of digital transformation?
Mehmet Nane: We, as Pegasus Airlines, have already started our digital transformation in 2018. We not only renewed our website and mobile channels, but also started to implement several innovations in the airport and in-flight travel experience. Travel Assistant Program, Express Baggage service, New Chip ID and Travel Technology are just a few of them… Today, as “Turkey's digital airline”, we offer our guests exceptional novelties that will facilitate their travel experience by using digital technologies in all our processes from A to Z. Digital transformation will also be one of our top priorities in 2022.
If we look at the passenger side, we will add new features to our Travel Assistant application in 2022 and work to make sure that our guests have a more comfortable travel experience. We plan to include additional self-check-in services in our Express Baggage kiosks, such as seat selection, and expand the locations we serve. We will continue our developments as part of our 360 Flight Search project, in which we started to offer the cheapest flight tickets monthly and annually. Moreover, we will work with the ambition to support all our operational systems with digital transformation and continuous improvement, and to be one of the airlines that uses technology best. Our digitalization journey will continue at full steam in order to both facilitate the lives of our guests and increase the performance of our employees and processes.
Aviation Turkey: Recently, Boeing has announced that it will build aircraft in the metaverse. We observe that airlines are starting to position themselves in the metaverse in terms of passenger demands and needs, marketing, entertainment and even personnel training. As Pegasus Airlines, what are your plans regarding metaverse and XR/VR technologies?
Mehmet Nane: We have been thinking about and following very closely the metaverse. We keep a close eye on the developments in order to both adapt to new technologies and take the right steps to align with our own strategies. With the evolution of the internet, we, as "Turkey's digital airline", keep up with these developments, which we think are important for new generations today and will increase in importance in the future. While doing this, one of the most important aspects we focus on is to develop projects that are useful and compatible with the use and philosophy of platforms.
Aviation Turkey: Pegasus Airlines, one of the leading airline companies committing IATA’s "Net Zero Emissions by 2050", aims to reduce its emissions by 20% by 2030. Can you inform us about your efforts to this end?
Mehmet Nane: As Pegasus Airlines, we conduct all our operations with the understanding of "sustainable environment". We perform studies as part of the efforts fighting against climate change. Within the framework of reducing greenhouse gas emissions, which is quite critical for the aviation industry, we fully comply with the regulations introduced by the national and international authorities for the industry, and we fulfill the monitoring, verifying and reporting the total carbon emissions during the year in accordance with the international regulations. We also make efforts to reduce emissions at the source of the process, with operational measures such as rejuvenating the fleet, acquisition of low-emission aircraft models, reducing weight in aircraft, and optimizing routes. We plan all such efforts in line with our company’s governance strategy in the field of sustainability and to support its outputs.
In line with IATA's "Net Zero Emissions by 2050" resolution approved in 2021, we became one of the leading airline companies in the world that made this commitment, and we also set our interim target for 2030 in order to reinforce this commitment. We aim to reduce our flight-related carbon emissions per RPK by 20% compared to 2019, by 2030. In addition to our commitment to "Net Zero Emissions by 2050", we have started to share the flight emissions on a monthly basis, with the October 2021 report, on our investor relations website, in line with the principle of transparency. We will continue to manage all our operations and activities with a “sustainable environment” perspective.
Aviation Turkey: You have been elected as the Chair of the IATA Board of Directors to take office as of June 2022. You will be the first Turkish Board Chair of IATA. You previously served as the board member. What is your vision for this role in terms of its contributions to both the Turkish and European aviation industry?
Mehmet Nane: The Turkish civil aviation industry has made a significant progress since 2003 with the foresight and strong support of our government. Turkey is a shining star in the world with its civil aviation industry that continues to develop and grow increasingly. The COVID-19 pandemic has certainly had a negative impact on our industry and our country as well as all other sectors and countries. As all stakeholders of Turkish civil aviation, we continue to work with all our capacity to return our industry to the pre-pandemic days, to develop it further and to strengthen its rising position in the world.
As for the IATA Board Chair, I am very proud to have been deemed worthy of such an important task. This is also an important indicator of the point that Turkish aviation has reached. The aviation industry, which is a supporter of numerous sectors in addition to its own critical role, is going through one of the most challenging periods in its history. As IATA, our greatest task is to exert efforts so that our industry, a driving force for global economies, can return to the pre-pandemic level as quickly as possible and to continue its sustainable development. I will do my best for this. We will overcome these tough times striving together.
Aviation Turkey: Pegasus Airlines is one of the first airlines in the world that signed IATA’s “25by2025” gender balance pledge, an initiative for IATA member airlines to improve female representation in the industry by 25%, or up to a minimum of 25% by 2025. In the following period, the aviation industry has faced the pandemic reality and it seems that there will possibly be a deviation in this target. Can you tell us the progress Pegasus Airlines has made in this regard?
Mehmet Nane: Gender equality is a very important issue for us at Pegasus Airlines and we have ongoing activities. As Pegasus Airlines, we are the first airline in the world to join the UN Women's Empowerment Principles platform. We are performing activities as a member of the DGCA Gender Balance Development Commission. We support organizations such as YANINDAYIZ Association, wtech Women in Technology Association, Women in Sales (WiS) platform. By signing IATA's "25by2025" initiative in 2019, we pledged to ensure gender balance within our company. In this context, we continue to review our target on a quarterly basis. In addition, by taking part in the Target Gender Equality program, one of the programs developed by the United Nations Global Compact for member companies, we set our goals to increase the representation and leadership of women in senior management, and we are taking firm steps towards achieving our goals through performance analysis, workshops and learning opportunities between member companies.
We are happy and proud to have women excelling in their fields at every level in Pegasus Airlines, from pilots to senior management. Regarding our company's dedication to gender balance, we name our new aircraft after the girls of our employees. We will continue to advocate the gender balance and exert efforts for a gender equal world.
Aviation Turkey: As the first implementer of IATA Travel Pass in Turkey, Pegasus Airlines has fulfilled this integration. Can you inform us about this application?
Mehmet Nane: By signing an agreement with the International Air Transport Association (IATA), we became the first airline to launch the IATA Travel Pass application as a pilot in Turkey, and after successfully completing our pilot studies, we were among the first airlines in the world to offer this application to their guests on international flights. The IATA Travel Pass application, which allows our guests to digitally store and manage the necessary health-related certifications such as COVID-19 test results and vaccination certificates, and to receive approval for flights by declaring them when necessary, can be used on many of our international flights. With this application that combines the verification of health information in a single digital app, our guests can have a faster and smoother travel experience in terms of the country entry requirements for international travel that vary during the pandemic period.
Aviation Turkey: Pegasus Airlines attaches great importance to social responsibility projects. “Flying into the Future”, the social responsibility project launched by Pegasus Airlines in 2018 to support ideas around youth empowerment has entered a new term. What can you tell us about this project?
Mehmet Nane: We care about youngsters and believe wholeheartedly in the importance of supporting them so that they can make a valuable contribution to society. We are also aware that support is essential for putting valuable ideas about their empowerment into action. Now, the 3rd term begins in our “Flying into the Future” project. In this new term, we aim to provide more comprehensive support to the projects of NGOs focusing on youth. Our primary goal is to contribute to the empowerment of our youngsters who are depressed and discouraged especially due to the pandemic.
Within the scope of the project to be co-organized by the Support Foundation for Civil Society (STDV) between February 2022 and March 2023, we will provide support to three non-governmental organizations for their online or in-person projects focusing on young people between the ages of 18 and 29. Projects that are related with youngsters and contribute to gender equality and the environment, which are also adopted as key principles in our company, will be prioritized during the selection process. Projects aiming to empower young people in three different themes will be supported: "protecting the environment and fighting against climate change", "well-being of young people", "digital literacy and digital security" will be supported.
Aviation Turkey: Is there any message you would like to add for our readers?
Mehmet Nane: We are a company that addresses its passengers as “guests” and our core value is to always treasure people. With our guest-oriented service approach, we are working hard to improve and facilitate the travel experience of our guests as "Turkey's Digital Airline". While working for our guests, we will make every effort for a more equal and sustainable world