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in Air Transport / Features

Atlas' global map missing a few pages

Posted 29 November 2018 · Add Comment

AtlasGlobal is living up to its name by establishing a group of subsidiary airlines spanning the world. But, as Martin Rivers discovers, management already have their hands full dealing with the volatile Turkish market.

AtlasGlobal’s chairman, Murat Ersoy, turned heads last year when he pledged to create an alliance of nine different airlines spread across the world.
The Turkish carrier’s appetite for overseas subsidiaries was not by itself surprising. The company rebranded from AtlasJet in 2015 to underline its global aspirations, and it already holds shares in three such ventures – AtlasGlobal Ukraine, Iraq’s ZagrosJet, and Kazakhstan’s Jet One.
But the scale of the plan – and its focus on protected markets like Saudi Arabia and Russia – shocked many, particularly given the difficulties encountered with existing subsidiaries.
In Iraq, ZagrosJet has been grounded for the past year and is now embroiled in a legal battle with AtlasGlobal following a total breakdown of cooperation.
In Kazakhstan, political interference has all but ruined efforts to turn Jet One into a scheduled airline.
And in Ukraine, pressure from flag-carrier Ukraine International Airlines has so far blocked plans for European route launches.
Despite these difficulties, Nevzat Arşan, AtlasGlobal’s chief commercial officer, said the company remains enthusiastic about joint ventures.
“We had in our plan China, Saudi [Arabia] and Romania or Albania,” Arşan said, raising the prospect of an east Asian subsidiary for the first time. “We are working now with legal [advisors] and some partners over there to see if it’s possible. But it’s going to be tough.”
The Saudi project has gained the most traction to date, he confirmed, with plans to base narrow-bodies in the kingdom for flights to Turkey and the Commonwealth of Independent States (CIS).
That would inject yet more competition into a market that has already ballooned from two local airlines in 2015 to five this year – all part of King Salman bin Abdulaziz Al Saud’s privatisation programme.
“We want to be part of that,” Arşan affirmed. “We see that there is a huge opportunity over there.”
However, even as AtlasGlobal broadens its gaze to overseas investments, he admitted that none of the ventures will launch before the turn of the decade. “It takes too much time,” he shrugged. “And because of the last two years’ crisis in Turkey, we are really focused on our current operation.”
That was a reference to the wave of unrest – comprising terror attacks, a failed military coup and a bilateral fall-out with Russia – that destabilised Turkey in 2016, weakening demand for travel.
Following a respite in 2017, Turkey’s difficulties took on a new dimension this year when a war of words with the US administration deepened a currency crisis that – according to western economists – has been caused by President Recep Tayyip Erdogan’s ultra-loose monetary policy. The Turkish lira fell 44% against the dollar in the first eight months of 2018.
Frustratingly for AtlasGlobal and others, the financial headwinds emerged before the tourism sector had fully rebounded from its earlier troubles.
“In the second half of 2017 we started to see a strong recovery,” Arşan recalled. “But if you ask the question, ‘Has the recovery been completed, or reached the same level as 2015?’ – [the answer is] no. In some countries we have seen more than a 55% drop [in demand]. Especially the Nordic countries.”
AtlasGlobal has responded by reinventing itself: first, introducing sixth-freedom traffic to reduce its dependence on holidaymakers; and second, boosting charter flights at the expense of some scheduled European routes.
“Until 2015, AtlasGlobal was carrying 98% point-to-point and only 2% transit,” Arşan noted. “But if you take our 2017 results, we carried 27% transit. There were lots of slots available [at Istanbul Atatürk Airport], so we got them and we created two banks in our strategy: a morning bank for Europe and an afternoon bank for Turkey domestic and Middle East and CIS, to give perfect connectivity from east to west.
“Thank god we switched strategy. We would not have survived 2016 with just point-to-point traffic.”
Management want to continue growing sixth-freedom flows until they account for about one-third of the business.
The picture on the network front is more complex, however, with scheduled operations rising by 21% over the 12 months to July 2017, before crashing to half their original size in the same month this year.
The temporary growth reflected a push by AtlasGlobal into Russia, which had restored ties with Turkey in late 2016 following a bilateral dispute over the shooting down of one of its warplanes. AtlasGlobal operated scheduled flights to about a dozen Russian cities last year – up from two the previous summer – but, according to Arşan, visa problems made the routes untenable.
Management thus changed tack again, dropping all scheduled Russian routes except for Moscow and shifting capacity to charter flights from the resort city of Antalya.
This evolution means that 12 of AtlasGlobal’s 19 aircraft are currently based in Antalya.
Relocating aircraft from the Istanbul hub has had wider ramifications for the network – particularly in western Europe. Flights from Atatürk to Copenhagen, Hamburg, Milan, Stockholm and Zurich were all dropped this year, leaving AtlasGlobal with just four points in the region: Amsterdam, Düsseldorf, London Stansted and Paris Charles de Gaulle.
Arşan said delayed aircraft deliveries forced the airline to pull back from Europe more than originally intended – he wanted, for example, to continue serving Stockholm – but restoring routes now will be tricky.
“When you drop a route in Europe and you want to reinstate it again after six months, the market doesn’t trust you and they will not book on you,” he admitted.
As of September, AtlasGlobal’s scheduled network comprises seven points in Europe (also including Belgrade, Moscow and Mykonos); seven in Turkey and northern Cyprus (Adana, Antalya, Bodrum, Dalaman, Ercan, Istanbul and Izmir); nine in the Middle East and the Caucasus (Baghdad, Beirut, Erbil, Jeddah, Kuwait, Medina, Tehran, Tel Aviv and Yerevan); and three in central Asia (Almaty, Astana and Karaganda).
Dalaman and Mykonos are operated in the summer only.
The combined scheduled and charter network is served with a fleet of 12 Airbus A321s, two A320s, one A319, three A330s (wet-leased from Air Leisure) and one Boeing 737-800 (wet-leased from Somon Air).
Turkey’s recent troubles have made management “a bit nervous” about expansion, so the scheduled network will remain relatively stable this winter.
Odessa will be the only new destination, while previously suspended routes to Gaziantep, Aktau and Shymkent will be restored (with the latter two replacing AtlasGlobal’s existing Kazakh services). Longer-term, talks are under way about adding two new points in the Middle East and north Africa.
No aircraft orders are planned, in keeping with the airline’s general aversion to direct purchases. But the fleet will evolve, nonetheless, with the arrival of two dry-leased A330s in November and March. Management tested the wide-bodies this summer on a wet-lease basis and quickly concluded they are viable year-round.
Baghdad and Tehran will become the first scheduled A330 routes this winter, benefiting from strong demand among freight shippers as well as passengers. The planes will also be deployed on high-density charter services – especially during the Hajj and Umrah – as well as stepping in for other scheduled routes during peak periods.
“We swap the aircraft a lot depending on the demand,” Arşan noted. “If there is special event in, let’s say, London, we put [the wide-body] in London, and then after two days you see that it’s flying to Moscow.”
He added that one of the A330s will be registered under the air operator’s certificate of AtlasGlobal Ukraine, before being wet-leased back to the Turkish division. That should keep the subsidiary busy while it awaits approval for its European routes, as well as opening the door to charter flights from Ukraine.
By taking the aircraft on long-term leases, AtlasGlobal can also configure them with flatbed Business seats – something lacking on Air Leisure’s aircraft.
As for the narrow-body fleet, management are negotiating dry leases for another “two to three” A321s for next summer as well as considering more A320s. But they have ruled out the A220 – formerly known as the Bombardier CSeries – despite signing a letter of intent for the type in 2011. And they have no interest in courting US manufacturer Boeing for a future fleet renewal.
“We don’t want to shift from Airbus to Boeing,” Arşan said, emphasising again the need for stability. “We are really happy with [the] Airbuses performance, and our whole future plan is with Airbus.”

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