AIRLINE TRANSPORTATION

Prepared byFunda KAYMAKSeçkin YENİELYiğit KOCAGÖZOĞLU

INTRODUCTION

newly developing sector in Turkey has important role in economies has many advantages such as security and

transportation of inputs and outputs efficienly and rapidly

has a positive effect on development of many important sectors such as tourism

Number & Size Distribution of Firms and Barriers to Entry

regulations prohibite private sector to fly in the same line with THY. The schedules which the firm can fly was decided by government

Today, in the market, there are 16 firms, 5 of them are Turkish associated and 11 of them are charters.

Name of The FirmTotal Plane

NumberCapacity of

SeatsCargo Capacity

(tone)Number of Passenger

Planes Number of Cargo

Planes

THY A.O. 84 13807 38000 83 1

Onur Hava Taş.A.Ş. 26 6227 - 26 -

Atlasjet Uluslararası Havacılık 17 3000 - 17 -

Pegasus Hava Taş.A.Ş. 14 2608 - 14 -

MNG Havayolları Taş. A.Ş. 27 2447 354341 13 14

Fly Havayolları A.Ş. 10 2338 - 10 -

Sunexpress Havayolları A.Ş. 10 1917 - 10 -

Kıbrıs Türk Havayolları Ltd.Şti. 7 1414 - 7 -

Sky Hava Taş. A.Ş. 5 863 - 5 -

Saga Hava Taş.A.Ş. 3 703 - 3 -

Inter Express Hava Taş. A.Ş. 5 702 - 5 -

Freebird Havayolları Taş. Tic A.Ş. 3 534 - 3 -

Dünyaya Bakış Hava Taş. 3 495 - 3 -

Turistik Hava Taş. A.Ş. 2 296 - 2 -

Kuzu Havayolları Taş. A.Ş. 3 - 131500 - 3

ACT Havayolları A.Ş. 1 - 42000 - 1

Total 220 37351 565841 201 19

the distribution of firms as number of seats and capacity of passenger

PRODUCT DIFFERANTION

the distance between seats. young planes different timetabling no price-cutting for cancelling or

changing the flight date

Diversification giving technical licence education to other

firms staff widen their service to other areas

Vertical Integration some firms are educating people and employ them in their firm. so they can be more effective in their operations. decrease their transaction costs.

Vertical Integration

some firms are educating people and employ them in their firm.

so they can be more effective in their operations.

decrease their transaction costs.

Business objectives &

pricing policies This is a newly developing industry So firms’ main aim is growth instead of

making profit. By growth they can increase their market

share In order to growth, their aim is to maximize

sales revenue.

Business objectives&

pricing policies changing market structure monopoly to oligopoly a price fighting has began prices fall down and the consumer’s interest increases

in airline transportation as the number of firm has increased, the number of

buyer has also increased. firms determine their pricing policy according to this

growth policy they are applying some promotions they are decreasing prices as possible as they do

Changing in Total Pasenger Number

0

10.000.000

20.000.000

30.000.000

40.000.000

50.000.000

60.000.000

1994 1996 1998 2000 2002 2004 2006

Domestic Routes

International Routes

Total

Product design and branding firms’ most important aim is to be first in their sector,

so they differantiate their products, apply some promotions and try to increase their growth

In airline transportation sector, branding is a bit difficult in respect to other sectors

airline transportation is a luxurious service as average individual income level is not very high

firms decrease prices and targeting middle class customers.

Most of this target customer has not fly before firms’ purpose is creating new brand loyalty over them

Advertising and marketing

Advertising is one of the main weapons of competition between firms

In order to branding and increasing market demand firms have to advertise their product

But in oligopolistic market, instead of non-price competition such as advertising and marketing, firms choose price competition

So they reflect advertising expenditure to price discount

but this oligolistic market is so new as the firms, thus firms need to introduce company name and their

service

Research and development In airline transportation sector is based on service

quality of service technology of planes

research and development activities mainly consist training the staff. They give education to their staff about security and technical service. Thus, by this way they increase the service quality.

research and development activities mainly consist training the staff.

they give education to their staff about security and technical service.

thus, by this way they increase the service quality.

Collusion

This sector is a very new sector as an oligopolistic market .

So firms are not in a collusion about • prices,• output levels, • advertising, • research and development.

moreover there is no constitution or any cooperation to create collusion.

we certainly say that firms act individually.

Merger

conglomerate merger private firms merge with tourism sector firms also it decreases the cost of tourism services and

increase the number of passengers vertical merger firms server in different stages of process make

merger

• Havaş and Atlasjet

Profitability

Firms have to make a certain amount profit in order to provide growth of the firm

Otherwise they could not continue to their growth The one of most important factor that affects the profitability is

increasing in fuel prices. The other one is that raising the value of YTL Although these negative effects of economy, firms’ costomer-

oriented policy, competition and price policy have earned more profit to the company’s.

government have reduced taxes increasing in demand by developing Turkish economy supported firms’ growth policy this is reflected to the firms’ profits.

Growth

We examine firms’ growth by observing number of seats, planes and flight number.

Capacity of Seats

PEGASUS HAVA TAŞIMACILIK A.Ş.7%

MNG HAVAYOLLARI TAŞIMACILIK A.Ş.

7%

FLY HAVAYOLLARI A,Ş.6%

SUNEXPRESS HAVAYOLLARI A.Ş.5%

ATLASJET ULUSLARARASI HAVACILIK A.Ş.

8%

THY A.O.37%

ONUR HAVA TAŞIMACILIK A.Ş.17%

T HY A.O.

ONUR HAVA T AŞIMACILIK A.Ş.

AT LASJET ULUSLARARASI HAVACILIK A.Ş.

PEGASUS HAVA T AŞIMACILIK A.Ş.

MNG HAVAYOLLARI T AŞIMACILIK A.Ş.

FLY HAVAYOLLARI A,Ş.

SUNEXPRESS HAVAYOLLARI A.Ş.

KIBRIS T ÜRK HAVAYOLLARI LT D.ŞT İ

SKY HAVA T AŞIMACILIĞI A.Ş.

SAGA HAVA T AŞIMACILIĞI A.Ş.

INT ER EKSPRES HAVA T AŞ. A.Ş.

FREEBIRD HAVAYOLU T AŞ. ve T İC. A.Ş.

DÜNYAYA BAKIŞ HAVA T AŞIMACILIĞI A.Ş.

T URİST İK HAVA T AŞIMACILIK A.Ş.

Growth

Nowadays firms try to increase their transport capacity so they can reach more customers. For example, Atlasjet will buy 9 planes and THY bought 5 new planes and also they have an agreement to buy 59 planes in 2006.

NUMBER OF PASSENGER

0

5.000.000

10.000.000

15.000.000

20.000.000

25.000.000

30.000.000

35.000.000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005*

DOMESTIC

INTERNATIONAL

NUMBER OF FLIGHTS

0

50.000

100.000

150.000

200.000

250.000

300.000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005*

DOMESTIC

INTERNATIONAL

QUANTITY OF CARGO

0

100.000

200.000

300.000

400.000

500.000

600.000

700.000

800.000

900.000

1.000.000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

DOMESTIC

INTERNATIONAL

Quality of Service

the first quality measurement is consumer satisfaction

technology, service rendered while flying, security precautions and at the right time flights

•Genel Müdür•Accountable

Manager

•Uçuş İşletme Müdürü

•Yer İşletme Müdürü

•Teknik Müdür

•Kalite Müdürü

•Eğitim Müdürü •Ticaret Müdürü

•Finansman Müdürü

•This scheme is sample scheme for the firms that published by Ministary of Transportaion and every firm have to have this kind of organization scheme

Technical progress

Technical progress is one of the most important variable in order to protect and increase their market share and continuing their activities

For that reasons firms try to obey general standards and get some certificates that have international validity

firms have to renew themselves and their services continuously.

In airline transportation sector, firms make daily and weekly checks of their planes for security.

Besides, firms give some educations about any unfortunate incidents that arise from any technical problem for their staff.

Productive efficiency

When the market is monopoly there was no competition, so there was insufficient effort for cost minimizing.

After 2003 a price war has begun between firms and it made firms more competitor.

the most effective weapon in this war is cost minimizing.

moreover, there is no collusion between firms. It also make this war heavier than it used to be. this market is productive efficiency

Allocative Efficiency In recent years we observed that the customer

population of the firms has been changing. Today this population includes the middle class

consumers. The main reason of this change is the price wars and

government policy. Due to fall in prices its more attractive to use airline

than the other alternatives. The explanation of the Minister of Transportation can

summarize the story “we make real, the fantasy of traveling by planes” So this market has allocative efficiency.

GOVERNMENT POLICIES Government applies encouragement policy over

airline transportation. Up to 2003 government policies was a difficulty for

sector to develop After 2003 government’s view has changed

reversely and allow private sector to enter the market easily.

Approximately 5 months ago, government was taking nearly the half of ticket price under the name of lump-sum taxes, consumption tax and like this.

Ministary of Transportation have reduced private comsumption tax(ÖTV) and contrubution for education tax (EKP) that is taken by consumer

GOVERNMENT POLICIES In addition, government does not apply a price floor

policy for this sector in order to create better competition ambiance

Nowadays government is preparing to put a new obligation to firms about the age of planes.

Between six months and one year, every firm in this sector have to change their 12year-old planes.

In general, planes in Turkey are 25-30-year old and it is said that a bit difficult to apply for newly entered firms to this sector.

Also there are some regulations in European Union harmonization progress.

One of these are penalty for the firm’s delayed flights.

CONCLUSION In other countries airports are managed by private

firms the help of this application, air zones, airport capacity and runway can be used more efficiently and more productive.

This is called slot application and has just began to apply in Turkey.

92% of total passengers are intense in only 8 airports. By new investments this intensity must be broaden to other airports.

It must be evaluated this developing sector’s investment possibilities by direct or indirect investments.

New airports must be founded and with other airports, they must be specialized.

CONCLUSION

There must be international partnerships between tourism agentas and this can be a positive effect on both sectors.

there must be some airline service companies such as ticketing firms, catering firms and security firms

Government must have a seperate institution by specialized staff and they put in order arrangements. Besides, THY must make private by the way competition would be more equitable