There is perhaps no better example of the success of a country’s flag carrier being at odds with the economy of a country than that of Turkish Airlines. Inflation in Turkey continues to be sky-high, with World Data observing that items priced at TL100 ($5.07) in 1960 would now set a buyer back TL1.06 billion ($53,783) at the beginning of 2023. According to the Central Bank of the Republic of Turkey (TCMB), the Consumer Price Index (CPI) rose by 43.68% in April 2023 Year-on-Year (YoY) compared to the TCMB’s baseline of 2003. The rate peaked at 85.51% YoY in the past 12 months in October 2022. According to the Organisation for Economic Co-operation and Development (OECD), CPI is “defined as the change in the prices of a basket of goods and services that are typically purchased by specific groups of households”. In contrast, Turkish Airlines has experienced enormous growth over the course of several decades. Even in 2021, during the peak of the pandemic when air travel was still largely grounded, the carrier achieved a net profit of $959 million compared to a $836 million net loss in 2020. Profitability continued in 2022 ($2.7 billion) and Q1 2023 ($233 million), even though Turkey was facing unparalleled inflation. Globally, some of the biggest airlines in the world failed to post a profit in Q1 2023, with eight out of the 10 largest carriers in the United States suffering a loss during the first three months of 2023. As Turkish Airlines celebrates its 90th year in operation, having been established on May 20, 1933, it harbors many ambitions for the future. According to Turkish Airlines chairman Ahmet Bolat, the airline plans to order 600 aircraft in June 2023 to be delivered within 10 years. Split between 400 narrow-body and 200 wide-body aircraft, the order will overshadow Air India’s recent buying spree, which saw the recently privatized airline order a total of 470 aircraft, including options, from Airbus and Boeing in February 2023. If the 600-strong aircraft order does materialize, then Turkish Airlines could grow from 65 aircraft in 2003 to an airline with a fleet of more than 800 aircraft by 2033, a significant increase in just 30 years. In 2003 its Available Seat Kilometers (ASK), which indicates the total network capacity, was 24 billion, while demand, measured in Revenue Passenger Kilometers (RPK), was 16.1 billion. The carrier ended the year with a net profit of TL213.8 million ($10.8 million in today’s exchange rates (TL1 = $0.05)). Profitability continued throughout the next few decades, with the carrier only posting a loss in 2016 and 2020 during the period between 2003 and 2022. By 2019 ASK had reached 187.7 billion and RPK had climbed to 153.2 billion. By 2021 capacity and demand had dropped to 127.7 billion ASK and 86.7 billion RPK, respectively, because of the pandemic but increased to 201 billion ASK and 162 RPK by December 2022, meaning that both demand and capacity overshadowed 2019’s numbers. The company described its planned growth trajectory as “From Boutique to the Top” during an April 2023 presentation regarding its long-term future. Turkish Airlines plans to become the second-largest airline in terms of international capacity globally, carrying 171 million passengers in 2033 compared to 10 million passengers in 2003, also aiming to operate a fleet of 813 aircraft by the same year. This growth is expected to significantly contribute to Turkey’s economic growth, with the airline projecting that it will provide directly, via service exports, supply chains and induced effects, up to $55.6 billion in 2023 and $143.9 billion in 2033. At the end of 2022, the country’s General Domestic Product (GDP) was $905 billion with the International Monetary Fund (IMF) projecting Turkey’s GDP to grow to $1.03 trillion by the end of 2023, and $1.33 trillion by the end of 2028. Turkish Airlines selected 2033 as its growth benchmark date to coincide with the airline’s centenary year. But one question remains, how did Turkish Airlines manage to navigate an uneasy economic environment in its home country and competition within the Middle East to become a global powerhouse? After all, the region is home to some of the most recognizable names in the industry, including Emirates, Etihad Airways, Qatar Airways, SAUDIA, and the newly announced but yet-to-take-off Riyadh Air, as well as smaller carriers that are based in the region. Part of the answer lies in the fact that Turkey is the final destination for many passengers. For example, in 2022 Turkish airports handled a total of 182.3 million passengers of which 385,838 were transiting, per data from the General Directorate of State Airports Authority (DHMI) of Turkey. Meanwhile, Dubai International Airport (DXB), the main hub of Emirates, handled 66.1 million passengers, 42% of which were transit travelers, according to Dubai Airports, the managing company of DXB and Dubai World Central International Airport (DWC). Abu Dhabi Airports, which manages several airports in the Abu Dhabi Emirate, including Abu Dhabi International Airport (AUH) where Etihad Airways is based, finished the year with 15.9 million passengers. Doha Hamad International Airport (DOH), the hub of Qatar Airways, welcomed 35.7 million passengers. Neither Abu Dhabi Airports nor DOH clarified the number or percentage of transit travelers. Turkey welcomed a total of 51.3 million tourists in 2022, 44.5 million of which were of foreign origin, while the remaining 6.8 million were Turkish nationals living abroad, according to data published by the Ministry of Culture and Tourism of Turkey. Meanwhile, according to a report by the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf (GCC-Stat), tourism numbers in the United Arab Emirates (UAE), Bahrain, Saudi Arabia, Oman, Qatar, and Kuwait peaked at 47.7 million in 2019. The center has not published data for 2022, but 2021 statistics showed that a total of 13.9 million visitors were present in those countries during the year when the pandemic was still largely restricting international movement. Turkish Airlines has been developing the new Istanbul Airport (IST), as well as the now-defunct Istanbul Atatürk Airport (ISL) as a major hub in the region, akin to the strategy employed by the Gulf’s Big Three airlines, namely Emirates, Etihad Airways, and Qatar Airways. While many airlines in the Middle East have looked to develop their respective hubs as transit points between North America, Europe, Africa, Asia, and Oceania, Turkish Airlines has one advantage: IST’s proximity to Europe. “All of Europe, for example, is within reach of a narrowbody aircraft. Turkey also has a domestic market that is especially large during summer tourist season and helps Turkish and Pegasus [Airlines – ed. note] to produce some of the industry’s highest profit margins,” aviation analysis company Cirium noted in a analysis published in June 2022. Even if the newest narrow-body aircraft, such as the Airbus A321neo-based A321LR or A321XLR, or the Boeing 737 MAX-8 or MAX-7, have an unprecedented range for a single-aisle jet, the question is whether passengers would be willing to sit in a much smaller seat for several hours to travel from Western Europe to DXB or AUH. Cirium also highlighted that the location of IST is not ideal. For example, reaching Australia or New Zealand is problematic on a nonstop flight from the Turkish airport, which is a possibility from DXB, DOH, or AUH, as evidenced by routes offered by Emirates, Qatar Airways, and Etihad Airways to the largest cities in Australia and New Zealand. Looking at the scheduled one-way seat data for Turkish Airlines, Emirates, Etihad Airways, and Qatar Airways in 2023, the four airlines have placed emphasis on different markets. Turkish Airlines’ second-largest market is the Middle East, while Emirates, barring its home market, has the second-greatest number of seats scheduled to depart from Europe. Etihad Airways and Qatar Airways’ second-largest markets are Asian countries, with both airlines scheduling more than a million fewer seats on flights from Europe compared to Asia. Looking at data from OAG, a global travel data provider, confirms that Turkish Airlines has no seats scheduled from Oceania, with the airline scheduling 4.1 million and 3.3 million seats to depart from Asia and Africa, respectively. Meanwhile, Emirates has more than 1.8 million seats from Oceania as do Etihad Airways (0.2 million) and Qatar Airways (1.3 million). Barring Etihad Airways’ small market share on flights from North America (0.5 million seats), Turkish Airlines (2.2 million), Emirates (2.3 million), and Qatar Airways (1.9 million) have all scheduled a sizeable number of seats from the region. However, the Turkey-based airline has leveraged its geographical position, offering more flights to and from South America (1.1 million seats from South America) than Emirates (0.4 million) or Qatar Airways (0.2 million), while Etihad Airways has no direct connections to South America. Naturally, not every market is easily accessible due to several reasons, including gaining approval from mandatory regulators to fly to certain countries. However, all four airlines have utilized codeshare agreements to expand their networks beyond direct connections. Turkish Airlines is part of the Star Alliance and Qatar Airways a oneworld member, while others have partnered with individual airlines to offer a greater number of connections to and from their hubs. In addition to its strong network and large aircraft fleet, Turkish Airlines has also been able to weather the financial storm in Turkey relatively well. The carrier’s shares, 50.8% of which are publicly traded, are only down 6.3% Year-To-Date (YTD). But the BIST 100 index, which tracks the performance of companies, real-estate investment trusts, and venture capital trusts listed on the Istanbul Stock Exchange, is down more than 17.50% YTD. According to Fitch Ratings, which upgraded Turkish Airlines from a B to a B+ on its long-term foreign and local-currency Issuer Default Ratings (IDR) in February 2023, a “high share of revenue is generated in US dollars and euros”. Since the airline holds its cash in Turkey and most of its debts are in hard currency, this mitigates the company’s exposure to volatile foreign exchange rates. Describing the airline’s situation, Fitch Rating said that even with a well-managed foreign exchange risk “due to the geographically diversified revenue stream, the volatile lira adds to demand volatility. A depreciating lira has been a strong, but unsustainable, draw for foreign tourist demand, in our view.” Additionally, even though a 49.12% share in Turkish Airlines is held by the Turkish Wealth Fund (TWF), since the airline manages all its non-equity funding independently, its IDR is above that of Turkey. According to Fitch ratings, the fact that airlines were also exempt from “an obligation to convert a portion of exporters’ foreign-currency revenues into lira” has also helped Turkish Airlines because restrictions on lease payments, for example, are “unlikely”.