Turkish Airlines SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

1. Political tensions in the region: Backed by the government, Turkish Airlines often becomes a political sword of sorts, often causing trouble to the airlines. The recent conflict between Trump’s USA and Turkey over the detention of an American Pastor led Trump to declare new sanctions. The exchange rate of the Lira to the dollar also saw a drastic change with the Lira trading at 6.4 to a dollar- the weakest it has ever been. This is likely to effect the number of customers who will be willing to fly out of Turkey to the USA, especially as relations between the two countries continue to remain anything but friendly.
Also following the 2016 coup, Mr Erdogan was re-elected with almost authoritarian powers, causing the airline to have to work completely in line with government dictates. It is now banned from serving alcohol on its flights as well as newspapers with critical content. This affects the global brand image of the airlines, rebranding it as a conservative airline, with possible effect upon the number of clientele who choose to fly with it.

2. Violence within Turkey: A spate of bombings and bloodshed scattered across the country and around Istanbul has raised speculations about safety and security measures within the country. France has issued a warning to its citizens to “exercise great vigilance while travelling and in tourist areas”, the USA has forewarned of "increased threats from terrorist groups throughout Turkey" and while the UK has deemed Turkey as being generally safe, it has nevertheless advised its citizens to exercise added precautions when visiting the country. While Kurdish militants avoid attacking tourists, the same discrimination is not exercised by the IS who attacked the Istanbul airport in 2016, in spite of it being the country’s greatest transport hub. In fact, 2016 saw as many as 269 attacks. These events are likely to have a strong negative influence upon the number of tourists who fly to Turkey, eroding its tourist friendly image and consequently significantly reducing the profit margins of Turkish Airlines.

3. Increasing competition from developing local airlines, as well as global giants: While Turkish Airlines holds the majority share of the local market; upcoming airlines pose a potential threat. Local airlines like Pegasus, Atlasjet, and Onur airlines are slowly growing and as Turkish airlines went from a 2% share to its current 71.1% with a strong growth strategy, the possible growth of these local competitors will always remain a threat. On the global platform, Turkish Airlines has to contend with competition from long term contenders like Lufthansa, Ryanair, American Airlines, Singapore Airlines and Emirates who have high goodwill in the industry as well as strong financials.

Political

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Economic

1. Revival expected in Turkey’s economy: The period following the 2016 coup saw a decline in the growth rate of Turkey’s economy with a rise of only 3.3% being realized. However, this soon stabilized to show faster growth rates by 2017. The first quarter saw a rapid rise of 5.4% and the thirs quarter recorded a rate of 11.3%. These readings are the highest recorded growth rates amongst G-20 countries globally. The average growth rate for the year was 7.4% with an increase by around 5.5% in 2018. A key factor behind this growth is the tourism industry which has prospered in recent times. The numbers of tourists visiting the country were 28% higher at 32.4 million in 2017 as compared to 2016. Revenue generated was around USD 26 billion.

2. Sharp depreciation in Turkish Lira: Turkey is facing a severe currency crisis with the Lira steeply depreciating. This crisis made worse by strained relations with the United States caused the already weakened currency to drop at faster rates as many foreign investors began pulling out from investing in Turkey. The crisis was so bad that at one point it had plummeted by as much as 40 percent to the dollar. In early Oct-2018 there was a slight recovery with the lira being down by 38% year-on-year against the US dollar. This is partially because its banks have been heavily borrowing way too many dollars. If this depreciation does not go down, then Turkey will be close to facing a financial disaster. This highlights uncertainties about the macroeconomic and geopolitical backdrop for airlines operating in Turkey. Moreover, a deputy for the Turkey’s leading opposition Republican People’s Party (CHP) has revealed that the country is considering selling Turkish Airlines to Qatar to make up for the losses.

Social

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Technological

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Legal

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Environmental

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