Turkish Airlines and Thai Airways, both members of the Star Alliance, signed a preliminary agreement to “move towards” a network joint venture covering flights between Europe and the Asia-Pacific region. The two airlines said the partnership, if finalized, would “enhance the cooperation between the flag carriers of Thailand and Türkiye.”
Turkish and Thai already have a codeshare arrangement, enabling them to market each other’s flights. But joint ventures go deeper, often involving revenue sharing, collaborative pricing, joint capacity planning, loyalty plan reciprocity, and/or cargo cooperation. The two carriers haven’t yet detailed their precise plans, other than to announce that Thai will begin flying to Istanbul in December. It will join Turkish, which is already on the route.
The two partners are on starkly different trajectories in terms of capacity deployment. Turkish is one of the world’s fastest growing airlines, with ASK capacity up 30% this quarter, versus the same quarter of 2019, according to Cirium Diio. Thai, by contrast, is working its way through a bankruptcy restructuring, having slashed capacity by nearly 40% since the start of the Covid pandemic.
Turkish has steadily produced strong profitability both before the pandemic and during the post-pandemic recovery. Thai, for its part, struggled with heavy losses during the 2010s but has more recently posted some of the best profit margins of any airline worldwide.
During the first quarter, the peak period for Thailand’s tourist sector, Thai generated an extraordinarily high 31% operating margin. For all of 2022, its operating margin was 7%. Turkish, meanwhile, managed a 3% operating margin in the first quarter, which is offpeak in Türkiye. Its full-year figure for 2022 was 15%.
The chief motivation for airline joint ventures is network expansion. With their new arrangement, assuming it’s enacted, Turkish will be able to market and sell tickets — with influence on pricing and scheduling — to places Thai serves throughout East Asia and Australia.
Thai will in turn have the same opportunities on flights Turkish operates beyond Istanbul to Europe and even Africa. Joint ventures, however, are typically reviewed by competition regulators, weighing their impact on the traveling public.
In one respect, such close collaboration can reduce competitive vigor and elevate fares. On the other hand, consumers can benefit from the convenience of expanded flight options, pooled loyalty benefits, and so on. The airlines said in a statement, “This collaboration will enhance connectivity between the two regions, provide seamless travel experiences, and offer passengers a wider range of destinations and services through both airlines’ networks.”
For Turkish, Australia is a missing piece of its increasingly expansive global network. And while it plans to start its own flights to Australia via Singapore sometime soon, Thai offers immediate nonstop flights from Bangkok to Sydney and Melbourne. Thai at one time served Brisbane and Perth as well, not to mention Auckland in New Zealand.
Conversely, Thai counts Europe as a critical market, targeting European tourists headed for Thailand itself, as well as European travelers connecting onward to Australia and elsewhere in the Asia-Pacific region. But its own European network is currently limited to just London, Paris, Frankfurt, Zurich, Copenhagen, Stockholm, and Munich, having exited markets like Rome, Milan, Oslo, Vienna, and Brussels.
Turkish can fill Thai’s gaps with its extensive European offerings. Moscow, incidentally, is another important Turkish Airlines market that Thai no longer serves. Russian tourists, locked out of European markets, have increased their trips to Türkiye and Thailand instead. Both countries are among the world leaders in international tourism, with Türkiye receiving roughly 50 million inbound visitors in 2019, and Thailand about 40 million.
Thai Airways hopes to exit bankruptcy protection sometime in 2024. Most of its markets are performing well now, with the exception of China, the largest source of tourists to Thailand before Covid. The Chinese market has yet to normalize, in part because of visa issues.
