17.01.

2011

Academy of Economic Studies

Strategic Marketing Management of Turkish Airlines

Strategic Management

Table of contents
1. Introduction 2. General description of the company 3. Vision, mission and corporate alues !. Strate"ic o#$ecti es %. Analysis of e&ternal competiti e #usiness en ironment '(orter)s model* +. S,-. Analysis, (ES. Analysis
7. Strate"y description / implementation

0. (ossi#le resistances analysis and methods of o er passin" resistances 1. 2onclusions 10.3eferences

1. Introduction
A comprehensive marketing plan for Turkish Airlines, particularly focusing on its services, product differentiation, target markets and customer segments is vital to ensure its survival against the existing services provided by its competitors - British Airways, Pegasus Airlines and Easy et! The ob ective of this strategic marketing management plan is to further develop Turkish Airlines market share in summer "#$# and winter "#$#%$$ period through marketing programs and initiatives! The task undertaken begins with overview of the company, its products for the worldwide market and competitive advantage! &n order to better understand where Turkish Airlines should focus its strategic marketing management campaign and how it should differentiate its product several analyses are made! The report also looks at the airline internal strengths and weaknesses through '()T analysis and identifies the airline external operating environment through PE'T analysis! *arketing promotions highlighted in this strategic marketing management plan serve to increase market share in the short term while the advertisements seek to increase product and brand awareness in the long term! +inally, the report will be concluded with an overall summary of the company situation, market share and evaluation of its future marketing activities!

2. General Description of Turkish Airlines

T,- . Turkish Airlines, &nc! is the national flag carrier airline of Turkey, head/uartered in the Turkish Airlines 0eneral *anagement Building on the grounds of Atat1rk Airport in -e2ilk3y, &stanbul! &t operates scheduled services to $"4 international and 56 domestic cities 754 domestic airports8, serving a total of $9: airports, in Europe, Asia, Africa, and the Americas! The airline;s main base is at Atat1rk &nternational Airport, with secondary hubs at Esenbo<a &nternational Airport, 'abiha 03k=en &nternational Airport, and Adnan *enderes Airport! &n "##9, "##:, "##4 and "##6, T,- carried $: million, $6!: million, ""!> million, and ">!$ million passengers with total revenues of ?' @"!"5, ?' @5!#, ?' @A!>, and ?' @A billion, respectively! T,- has been selected by 'kytrax as providing the best economy class food services in the world and as Europe;s +astest 0rowing Airline! According to "#$# data, Turkish Airlines is Europe;s 5rd best and 'outhern Europe;s best airline! The airline has more than $>,### employees! T,- has been a member of the 'tar Alliance network since $ April "##4! Turkish Airlines is in talks with BAT of 'erbia to establish a new company instead of BAT Airways that is in debt! Turkish Airlines is currently an official sponsor of +C Barcelona, *anchester ?nited +!C!, *aroussi Basketball Club and the Turkish Airlines Euroleague Basketball! The airline also has an endorsement deal with Dobe Bryant and "#$# tennis season Eo!$ Caroline (oFniacki has become the new face of Turkish Airlines Business Class and Comfort Class until "#$A and in the PTT Thailand )pen! History of THY 1930s 1940s: Early years Turkish Airlines was founded under law no! "$49 in AEDAGA under the name H'TATE A&GI&EE' AJ*&E&'TGAT&)EK as a department of the *inistry of Jefence! 'tate Airlines Administration, now Turkish Airlines, started operation with five aircraft and "5 seating capacity on August $655!

The +leet in $655 " Ding Bird 7> seats8 " Bunkers +-$5 7A seats8 $ Tupolev AET-6 7$# seats8 &n $654, the name was changed to K0eneral Jirectorate of 'tate AirlinesK and was operated under the *inistry of Transportation &n $6A>, JC-5 aircraft oined the fleet &n $6A:, the first international flight was held between Ankara and Athens via &stanbul!?nder the control of Adil 0oFender and )rhan Ayata,The JC-5 aircraft registered as TC-ABA took off from Ankara in the morning at $#!## to Athens after making transfer in &stanbul!The ourney last " hours and A# minutes totally! Postwar Period The airline benefited from the postwar ?!'! assistance program to Turkey! (ith the help of Pan American, the fleet was upgraded with Jouglas JC-5s!T,- soon added to the route network were Eicosia, CyprusL Beirut, IebanonL and Cairo, Egypt! Jomestic service remained the airline;s focus until the $69#s, however! The Turkish government reorganiFed the airline in $6>9 under the name T1rk ,ava -ollari A!)! 7T,-8! &t was capitaliFed at TGI 9# million! British )verseas Airways Corporation 7B)AC8 began supplying technical support after ac/uiring a 9 percent shareholding,which it held for about "# years! The fleet was upgraded with Miscounts and +okker +":s in the late $6>#s! The company began operating its first et, a JC-6, in $69:! This was followed by the addition of a leased Boeing :#: in $6:$! )ther ets operated in the early $6:#s included the JC-$# and Boeing :":! 1980s and 1990s ?nfortunately, the airline was plagued by a several difficult issues! &t developed a reputation for poor customer service and delays! &t also endured hi ackings and suffered seven accidents between $6:A and $645, noted Air Transport (orld! ,owever, a new government came to power in $645 which recogniFed T,-;s importance as Turkey;s ambassador to the world, beginning the airline;s make-over into a modern operation! &t would maintain one of the youngest fleets in the world! 'ecurity was intensified, causing one shipper to compare it to &srael;s El Al, at least in terms of delays! T,- built a new, state-of-the-art technical center at -esilkoy Airport in $64A! &t was capable of both light and heavy maintenance on a number of different aircraft type! Technical staff then made up one/uarter of the airline;s 9,### employees, according to Air Transport (orld! n $64A, the company;s capital was raised to TGI 9# billion as it was classified as a state economic enterprise! Three years later, the capital was raised again, to TI$># billion! By the mid-$64#s, T,- had a fleet of 5# aircraft! &t was flying about three million passengers a year to $9 domestic destinations and three doFen international ones! The airline was Turkey;s largest source of foreign currency, according to Air Transport (orld! Turkish Airlines operating Airbus 5$#s in $64>, allowing the addition of flights to 'ingapore in $649! A route to Brussels and Eew -ork was added in $644! The company posted losses in $64: and $644, largely due to high payments on its doFen new Airbus A5$#s, according to Air Transport (orld! The fleet also included $$ Boeing :":s and nine JC-6s! T,- ended the decade with 4,>## employees! The company suffered in the global aviation crisis following the Persian 0ulf (ar and would not break even again until $66A! ,owever, business was again booming in the mid-$66#s, with the greatest growth coming from Eorth American destinations! T,- launched a nonstop to Eew -ork in

Buly $66A! The company;s capital continued to be raised, reaching TGI $# trillion in $66>! Juring that year, the airline also converted three of its Boeing :":s to dedicated freighters! 7The old JC-6s had been sold off!8 The company posted a @9 million profit on revenues of @$ billion for the year! (hile profitable, T,- had to contend with Turkey;s exorbitant inflation, making capital improvements difficult! The domestic market was deregulated in $669, allowing new scheduled competition from charter airlines! At the same time, larger international carriers were providing stiff competition on routes to (estern Europe! T,- entered into marketing agreements with other international airlines to enhance its competitiveness! The company teamed with Bapan Airlines to offer service to )saka and Tokyo in $66: and $664! )ther ointly operated flights soon followed with Austrian Airlines, 'wissair, and Croatian Airlines! 2000s A new terminal opened for the airline in Banuary "### at &stanbul;s Atat1rk &nternational Airport! Turkish Airlines continued to extend its international reach, forging marketing agreements with Asiana Airlines 7'eoul, Dorea8, American Airlines, *alaysian Airlines, I)T Polish Airlines, CFech Airlines, and Cathay Pacific Airlines 7,ong Dong8 in "###! An Antalya-+rankfurt route was added in "##$ through a code sharing agreement with 'un Express! ,owever, T,- withdrew from the 'wissair-led Nualiflyer Alliance in order to help attract a strategic investor in its privatiFation! Turkey underwent an economic crisis throughout most of "##$, cutting traffic on domestic routes in particular! T,- managed to survive after the 'eptember $$, "##$ terrorist attacks on the ?nited 'tates without a government bailout or mass layoffs, although 5## middle management positions were eliminated, A## part-timers were laid off, and wages were cut $# percent! Turkish Jaily Eews credited the airline;s survival to entrepreneurial management, which was /uick to cancel loss-making routes at home and abroad! &n "##5, the war in &ra/ prompted Turkish Airlines to close some routes in the Persian 0ulf, while flights to Asia were suspended during the 'AG' epidemic! ,owever, the airline soon recovered, increasing fre/uencies on existing routes and adding service to &ndia 7Eew Jelhi8 after an $$-year lapse! Another fleet expansion program kicked off in "##A, helping T,maintain one of the youngest fleets in Europe! &n Buly, the airline announced the massive order of 59 ets from Airbus, worth @"!4 billion, plus another $> Boeing :5:s! T,- was not ust ordering new planes! &t was planning to spend @5># million on a new technical and training facility at &stanbul;s underutiliFed 'abiha 0okcen &nternational Airport, reported Air Transport (orld! The airline had built up a significant technical services operation, maintaining not ust its own aircraft but those of third parties! Turkish Technic employed ",:## and was planning to hire another ",### by "#$#! T,- also had three flight simulators and offered flight training services! Although the company was publicly traded, the government owned 64 percent of shares! The privatiFation program was revived in "##A with a public offering of "# percent of shares on the &stanbul 'tock Exchange! The Turkish government owned :> percent of shares after the offering, which raised @$:# million! T,- was divesting its ># percent holding in Cyprus Turkish Airlines 7Dibris Turk ,ava -ollari8 in "##>! T,- faced the entry of new competitors into the liberaliFing Turkish aviation market! ,owever, tourism was booming, with "# million people expected to visit the country in "##> versus $" million in "##5! T,-;s financial statements should be read in light of a new currency created in Banuary "##>! )ne Eew Turkish Iira 7-TI8 is e/uivalent to one million of the former Turkish Iira 7TGI8!

3. Mission, Vision, & Corporate Values

Mission To become the preferred leading European air carrier with a global network of coverage thanks to its strict compliance with flight safety, reliability, product line, service /uality and competitiveness, whilst maintaining its identity as the flag carrier of the Gepublic of Turkey in the civil air transportation industry! Vision To become an air carrier withL a continued growth trend over industry average Fero ma or accidents%crashes most envied service levels worldwide unit costs e/uating with low cost carriers sales and distribution costs below industry averages a personnel constantly developing their /ualifications with the awareness of the close relationship between the benefits for the company and the added value that they contribute an entrepreneurship that creates business opportunities for fellow members in the 'tar Alliance and takes advantage of the business potential provided by them a staff well adapted to modern governance principles by observing the best interests of not only shareholders but also stakeholders Corporate Values (ith flight safety and customer service /uality as its two indispensable values, Turkish Airlines acts with the awareness of being the flag carrier of Turkey! Another important value that the airline tries to maintain on a regular basis is value for money . cheap tickets with no compromises on services provided! As the "#th 'tar Alliance member, Turkish Airlines took its place among the giants of the worldOs aviation sector, having completed an array of membership steps in areas ranging from information technology infrastructure, marketing, sales, customer service and ground operations! Turkish Airlines /uality and safety have received global exposure through the 'tar Alliance broad network, leading to sharp increases in passenger numbers!

. !trate"ic #$%ecti&es
Turkish Airlines main goal is to become the most preferred operator on flights to Turkey 7and beyond8 for both leisure and business travelers! Another ma or goal for the company is to be the bridge between the Asia and European markets through their &stanbul hub! This goal will be achieved by strong focus on transit passengers! The main ob ective of the strategic marketing management plan for Turkish Airlines is to increase the generated revenue in the business segment in order to secure the financial sustainability and future growth of the company and its premium product in the global market! This will primarily be achieved in three stagesL firstly by defining the market to narrow the market focus to consumers and businesses that are /ualified to or are already users of business class air travel, secondly by further identifying the available market from rest of the countries not emerged yet and finally targeting the potential market for additional leisure and business travel on the route! Each

segment of the market will be targeted to increase Turkish Airlines sales and improve the airlines load factors!

'. Anal(sis of e)ternal co*petiti&e $usiness en&iron*ent +,orter-s *odel.

$! Threat of New Entrants. At first glance, you might think that the airline industry is pretty tough to break into, but don;t be fooled! -ou;ll need to look at whether there are substantial costs to access bank loans and credit! &f borrowing is cheap, then the likelihood of more airliners entering the industry is higher! The more new airlines that enter the market, the more saturated it becomes for everyone! Brand name recognition and fre/uent fliers point also play a role in the airline industry! An airline with a strong brand name and incentives can often lure a customer even if its prices are higher! "! Power of Suppliers. The airline supply business is mainly dominated by Boeing and Airbus! +or this reason, there isn;t a lot of cutthroat competition among suppliers! Also, the likelihood of a supplier integrating vertically isn;t very likely! &n other words, you probably won;t see suppliers starting to offer flight service on top of building airlines! 5! Power of Buyers. The bargaining power of buyers in the airline industry is /uite low! )bviously, there are high costs involved with switching airplanes, but also take a look at the ability to compete on service! &s the seat in one airline more comfortable than anotherP Probably not unless you are analyFing a luxury liner like the Concord Bet! A! !aila"ility of Su"stitutes. (hat is the likelihood that someone will drive or take a train to his or her destinationP +or regional airlines, the threat might be a little higher than international carriers! (hen determining this you should consider time, money, personal preference and convenience in the air travel industry! >! Competiti!e #i!alry. ,ighly competitive industries generally earn low returns because the cost of competition is high! This can spell disaster when times get tough in the economy!

/. !0#T Anal(sis
Strengths Expanding home market economy and favorable demographicL 'trategic geographic positionL 'ubstantial cost advantage over rivalsL Gising market shareL 'tar Alliance membership and close relationship with IufthansaL %ea&ness ,igher risk organic growth strategyL *assive fleet growth to fundL ?nder-utiliFing the potential of a strong allianceL $pportunities A growing market, despite the economic crisisL A popular tourism destinationL Benefiting from liberaliFation policiesL

Threats ICCs increasing their presence L Currency shifts may inhibit profitabilityL

,1!T Anal(sis
Political >#!6Q of the company shares - public, the rest remain state-owned L strong political%governmental backupL Sociological uni/ue growth opportunityL population of :> millionL Economical dynamic economyL relatively large geographical area 7:4#,### s/ km8L increasing disposable income among its populationL Technological Eew fleet L e-ticketing L e-services L e-customer careL

2. !trate"( Description & I*ple*entation

Intended Strategies The marketing strategy serves as a foundation for the marketing plan and sets out the strategic approach that the plan will apply in reaching the marketing ob ectives set! Promotions like companion free offers, advanced in-flight technology and world class cuisine are all marketing strategies that Turkish Airlines competitors embrace to capture premium travelers! The airline marketing strategy therefore has to be designed to promote the airlines superior service and product at a price lower than the competitors 4 inferior product to attract consumers! )nce the airline, via its uni/ue product, has established a relationship with the consumer its goal is to retain those customers by enhancing their experience through increased customer service and higher level of /uality offered, as a single bad experience on Turkish Airlines will drive customers back to British Airways 7and other airlines8! Market Penetration (Impro ing In!"lig#t ser i$es% &mproving in-flight services is a ma or move that could separate Turkish Airlines from its competitors! Providing a different in-flight product, such as catering that influence the Turkish tradition 7cuisine8 and hospitality, and specific product tailored for the business travelers focusing on their needs and wants, would attract more passengers looking for en oyable and influential travel experience! Entertainment and communication in-flight systems are ma or advantage of Turkish Airlines! Market &e elopment (E'tending new ro(tes% A great opportunity for Turkish Airlines, as the largest carrier for Turkey in the global market is to expand its presence and extend the market share by penetrating into countries with less competition! This will enable the company to draw huge amounts of traffic!

Prod($t &e elopment ()irst $lass pri ate s(ite%

Turkish Airlines is one of the very few airlines in the world that implemented private suite on its long haul fleet! This is a uni/ue product focused towards the needs of superior customers and awareness of this product in the global market will increase the passenger demand for the onward flights of Turkish Airlines from &stanbul! *ost red($tions Cost reductions can be achieved by reducing the office premises and ground staff the airline use! +ocusing on online bookings, e-customer services and e-technology will be a ma or ob ective in achieving cost cuts! Thus, the benefit would be given to consumers in the way of cheaper tickets or special discounts!

3. Cultural 4esistance to Chan"e

All large R complex businesses like T,- have to address the need to change in the face of a rapidly changing and often hostile external environment! &t is inevitable that a CE) will face some internal resistance to whatever change is proposed, regardless of the prevailing culture! The issue is the relatively importance of culture as compared with other causes of resistance! )rganiFation culture does play a key role in whether change can be implemented and managed successfully! A business where employees are used to ongoing change and where internal communication is effective can handle significant change well, even in a hostile market environment! 'imilarly, employees in a business with a prevailing culture of resistance and confrontation to change will typically respond predictably during a period of ma or upheaval! The way in which the employer%employee relationship is managed is a key determinant of whether culture influences the degree of resistance! Gole of trade unionsS in general, industrial relations in Turkey are much less confrontational than in previous decades, with substantially less time lost to industrial action! But not every industry is the same! 'ome remain heavily unioniFed - like the airline industry - which increases the risk of stakeholder resistance to change!

5. Conclusion
Turkish Airlines market presence will be achieved by relying on the strategy of identifying and serving well both leisure and business market! Geservations will be centraliFed and cost effective, by populariFing the official website of the airline! 'trategic marketing will be media generated to the business and corporate accounts with combined media and direct sales focused to the leisure market! The marketing programs section of this report highlights the set of co-ordinated actions that will be implemented to meet the airlines marketing ob ectives and to attract existing business class travelers from competitors! The advantage of a local and highly identifiable market is that media selections can be limited in scope! The most effective media is expected to be outdoor billboards and posters on buses and underground, as they have acted as a key generator of sales for other airlines! Presence in the popular social websites would be beneficial in order to increase brand awareness and can be used as powerful marketing tool for advertising promotions, etc! Based on all these actions, Turkish Airlines can meet its challenges and act in order to achieve its set goals and ob ectives, as well as to maintain its leadership position in the global market!

16. 4eferences
Joganis G! 7"##98, HThe Airline BusinessT, "nd edition, Goutledge Publishing, ?'A Joganis G! 7"##68, H+lying off course . Airline economics and marketingT, Ath edition, ,arperCollins Academic, ?'A
Tony Proctor . "###, H'trategic marketingS an introductionT, ?'A

+e, sites: Turkish AirlinesS www!turkishairlines!com Pegasus AirlinesS www!flypegasus!com EasyBetS www!easy et!com Emirates Airline 'trategiesS www!emirates!com 7$8 www!skytrax!com 7"8 www!skyscanner!net 758 www!ba!com &stanbul . Ataturk AirportS www!ataturkairport!com Centre for AviationS httpS%%www!centreforaviation!com% Turkey Tourism AuthorityS www!tourismturkey!org Turkey Misitors siteS www!goturkey!com European Culture CapitalS www!en!istanbul"#$#!org Turk 'tatistic &nstituteS www!turkstat!gov!tr