WOOD Flash – Turkish Airlines: 3Q22 – can it get any better?

Turkish Airlines (THYAO) has generated another stellar set of results, with the revenues some 2%, and the EBIT and EBITDA some 3-4% above our and the consensus elevated expectations. Demand remains strong, driving unit revenues higher, despite the rapid recovery in traffic. The RPK exceeded the pre-pandemic level by nearly 20% in 3Q22, as Turkish Airlines ramped up its capacity and allocated more seats to the international segment, pushing up both the unit revenues and the stage length. In particular, the higher capacity allocated on the profitable routes to the Americas (ASK up 80% vs. 3Q19) and Europe (ASK up 28% vs. summer 2019) contributed to the strong result. Cargo remains an important contributor, as pricing – although gradually coming off now – was still well above pre COVID-19 levels in 3Q22. Having maintained its workforce throughout the pandemic and operating from the brand new airport, THYAO's network was resilient throughout the summer. The operational disruption affecting its European peers may have enabled a faster capacity recovery. THYAO’s cancellation rate (0.3%) was around 5x lower than the European average (1.7%) during the summer quarter. THYAO also continues to benefit from the closure of Russian air space, which has made it more expensive for the European majors to fly some of the Asian routes due to the detours this entails. Management sees encouraging booking evidence for 4Q22E.