Turkey's Pegasus may postpone Boeing deliveries as costs weigh, CEO says

November 25, 2016 7:15 AM EST

The Boeing Company logo is projected on a wall at the "What's Next?" conference in Chicago, Illinois, U.S., October 4, 2016. REUTERS/Jim Young


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By Ceyda Caglayan

ISTANBUL (Reuters) - Turkish budget carrier Pegasus Airlines may postpone delivery of three new Boeing aircraft next year, lease some of its current fleet and sell older planes to cut costs after a difficult year for tourism, its chief executive said.

Pegasus , which competes with national carrier Turkish Airlines , has increased passenger numbers more slowly than planned this year as series of bombings, a failed coup in July and tension with Russia deterred tourists. A weak lira currency has driven up fuel costs and other expenses.

"We were going to take delivery of five planes ordered from Boeing next year. Two of them will come but three of them we may take later," Mehmet Nane told Reuters in an interview late on Thursday.

Pegasus initially expected passenger growth of 13-15 percent this year, then cut that target in August to 5-7 percent. Now, Nane said: "Current developments show we will do better than our revisions." He did not elaborate.

The airline has been cutting costs by closing some less popular routes, he said. It is also leasing out two of its aircraft, complete with crew, maintenance and insurance - known in the airline industry as "wet lease".

"If our planes are empty, why not?" Nane said when asked if more lease deals were possible. Pegasus has a fleet of 77 aircraft, which is set to rise to 82 by year-end, not including next year's Boeing deliveries.

Pegasus plans to sell off older, less fuel-efficient planes as new ones arrive, Nane said. He does not expect the fleet to shrink overall.

TOURISM SLUMP

The number of tourists visiting Turkey slumped 32 percent to 20.3 million people in the first nine months of the year. Relations with Russia, traditionally a major source of tourism, soured after Turkey shot down a Russian warplane over Syria last year.

Rival Turkish Airlines has also been hurt, postponing delivery of a total 39 aircraft from Airbus and Boeing due to arrive between 2018 and 2022.

Ankara has worked to restore relations with Russia and Nane said he was optimistic that 2017 would be a better year. Pegasus was waiting for regulatory approval for 40 new routes and could open them as soon as it gets permission, he said.

"The majority of routes will be international. The new flights will be not just from Istanbul but Ankara, Izmir and Antalya too," he said.

(Reporting by Ceyda Caglayan; Writing by Daren Butler; Editing by David Dolan/Ruth Pitchford)



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