Turkish Airlines Slumps as Laptop Ban Risks Dreams of Global Hub

(Bloomberg) -- Investors were just starting to warm to Turkish Airlines and its goal to be at the heart of an Istanbul airline hub after a turbulent year for the carrier’s stock. Then came Tuesday’s in-cabin electronics security restrictions, announced by the U.S. and the U.K.

Istanbul is among locations covered by the new travel curbs barring laptops and other devices from carry-on luggage. Turkish Airlines has tumbled 7.1 percent since news of the measures, the biggest two-day decline since Dec. 1.

The turbulence is eroding a recovery from the steep declines set off by Turkey’s downing of a Russian jet in November 2015, losses that were aggravated by terror attacks -- including one on Istanbul airport -- and an attempted coup last July. Turk Hava Yollari Anonim Ortakligi, the company’s official name, is among airlines with the most to lose from the restrictions, as it relies heavily on passengers using its flights through Istanbul to reach destinations in the U.S. and the U.K.

Here are some analyst views on the potential effects of the new security measures:

  • Selim Kunter, analyst at Istanbul-based Deniz Invest:

“Turkish Airlines’ hopes to become a global hub carrier will depend on whether this ban will be a permanent one and whether other countries will follow course. However, looking at the stock move, it seems like it led investors to take a more cautious stance.”
The U.S. accounted for 5 percent of the airline’s passenger revenue in 2016 and the U.K. 1.2 percent, Kunter said.

  • Ali Cinar, Chairman of Turkish Heritage Organization:

“Given Istanbul’s status as a global hub, these kind of restrictions are likely to lead to declines in passenger numbers and give advantage to competitors. One should also not ignore the possibility that Istanbul being listed among locations that the ban will be imposed could negatively impact tourism.”

Turkish Airlines Slumps as Laptop Ban Risks Dreams of Global Hub
  • Is Investment in Istanbul:  

“The share of North America in Turkish Airlines revenue was around 14 percent in 2016. These or similar security measures may reduce the attractiveness of Istanbul as a transit hub, if they become permanent.”

  • Melis Pocar, analyst at Oyak Securities in Istanbul:

“The news is likely to act as a short-term negative catalyst for aviation stocks, taking into account Istanbul Ataturk Airport’s status as Turkish Airlines’ leading hub and business class passengers’ importance to the carrier, as well as its wider route network.”

The airline may face higher costs as it seeks in-cabin responses to the security bans so that it can meet the needs of its passengers, particularly its lucrative business-class travelers, Pocar said.

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