NAME: AHMET CAN

SURNAME: ZKAN

TASK PLAN

PEGASUS AIRLINES
Brief Overview
Pegasus is a leading low cost airline in Turkey,which provides reasonably-priced tickets on
point-to-point basis in short and medium range flights. The company is set up a wide range
flight network with high flight frequency.
With its fleet composed of 45 aircraft, as 44 of them are new generation 737-800 NG and the
general age average is 4.1. In 2013, Pegasus delivered its guests with an average punctual
departure rate of %90 for the first time nine months of the year.
Pegasus extended its flights network, which was initially composed of 6 domestic locations at
the beginning of scheduled flights, up to 76 locations and currently has 45 abroad and 31
domestic flight destinations in 30 countries.
According to the final structure of partnership after the initial public offering, 34,5% of shares
are floating in Borsa stanbul and 65.6% belongs to Esas Holding A.,whereas the rest is
owned by Sevket Sabanci.
Mission
From our point of view, everybody has the right to fly comfortably, with reasonable prices and
on time. We achieve our goals in cooperation with our partners and suppliers.
Vision
To be the most important low-cost airlines in our region. Thanks to our succesfull
collaborations, we aim to become one of the most known airways in the world.

Commentary of Vision and Mission Statements

The vision statement of Pegasus Airlines is clear and powerfully expresses its competitive
strategy to become known and preferred by people. Also, its main goal is clearly explained at
the end of sentence, which means this goal may seem a little bit assertive.

The most outstanding subject of mission statement is to emphasize its services and target
groups in the first sentence. Additionally, it states quality standartds of flight process which is
one of the most important factors in the perceived quality of aviation industry.

PESTLE ANALYSIS
Economic Factors
-GDP
Higher GDP: Opportunity
Real GDP Growth Rates of Turkey are as follows (Distribution by Years)
2003 5.3%

2004 9.4%

2005 8.4%

2006 6.9%

2009 -4,8%

2010 9,0%

2011 8.5%

2012 2.3%

2007 4.7%

2008 0.7%

(http://www.gfmag.com/gdp-data-country-reports/157-turkey-gdp-countryreport.html#axzz2ll5HcM7V)
The average growth rate of civil aviation industry in the past ten years
2003-2013

10,5%

http://www.dunya.com/turk-havaciligi-buyumede-avrupanin-onune-gecti-189789h.htm
As we figure out with respect the above growth numbers, apart from exceptional years, higher
GDP rates make a major contribution on the growth rates of civil aviation industry in Turkey.
Of course,this opportunity will directly contribute to increase of turnover of Pegasus Airlines
Fall in GDP:
Turkeys GDP is not expected to fall by economists in the next five years. Therefore, we can
leave out this option.
-Higher Interest Rates: Threat
Turkey Central Bank has been pegging the interest rates in a particular range. According to
Turkey Central Bank, the interest rates will not be increased for a long time. However, If we
consider the rising probability of interest rates because of rise in rate of exchange, raising
funds and accessibility of credit to purchase new airplanes would be more difficult and raise
the costs for Pegasus Airlines .
-Exchange Rates: Threat
As some foreign investors pulled out of the Turkish market about 5 months ago, the Turkish
Lira has gone down in value against Euro and Dollar for 5 months. This situation will

definitely increase the total income which is derived from foreign operations, especially in the
short run. However, the Turkish Lira had been rising against the dollar and the euro until some
foreign investors pulled out of the Turkey market. Since the central bank has been auctioning
off its foreign currency reserves every week for last 3-4 months, which means that local
currency will rise in value

-Price Inflation: Threat

Price Inflation is one the most important points to take into consideration in domestic market
as it has been getting higher and higher for a few years. Thus, it cause a decrease in the
purchasing power of customers, especially for domestic market.
On the other hand, this uncertain situation will decrease the future yields of Pegasus Airlines,
which means that the company should place importance to financial management as well as
investment planning.
Inflation rates of Turkey are as follows
2007 8.4%

2008 10.1%

2009 6.5%

2010 6.4%

2011 10.5%

2012 6.2%

http://www.hazine.org.tr/tr/index.php/ekonomi/enflasyon
-Increase in Currency Supply
Turkey Central Bank has been keeping the inflation at a certain level for about 10 years.
Based upon declarations of central bank, we are pretty sure about that there is no possibility of
increasing in currency supply in the next years.

-Level of Unemployment: Neutral

Turkey, which has a 10% unemployment rate, has been one of the most steady countries on
this point among European and Middle-East countries since 2008. The announced
unemployment rates are pretty much the same figures for 5 years. So, we can use this average
figure as a base to make a prediction for next years.
The second important point on this matter is minimum wage rate, which is determined by the
government considering the inflation rates. Thus, it is not difficult for us to take a guess for
minimum wage for near future. In conclusion, we could say that there is no threat or
opportunity for his criteria.
-Reservoirs of Crude Oil: Opportunity
There is no high-quality oil reservoir within the boundaries of the Turkish Republic. Yet,
strike researches have been done by big companies for a long time within the borders of the
Turkey. It is more than likely, oil will be struck in a few years in Turkey. Therefore, we are
able to predict that oil prices could go down in domestic market in the long run.

-Lower Disposable Income: Threat

Owing to high income taxes and high indirect taxes in Turkey, the burden of tax on people is
continuously increasing, and whats more, this situation is directly affecting the purchasing
power of the people. As a matter of course, the growth rate of Pegasus Airlines will be directly
influenced by this critical point.
-More People on Retirement: Opportunity
Turkey is mentioned by young bulge and working population, which are getting higher and
higher every year. Furthermore, the Turkish Grand national assembly amended the laws and
acts regarding pension a few years ago, which means the people have to work until 65 years
old. So, we could take advantage of this competition that is between economically active
population.
-Distribution of Wealth: Threat
We should take a look at the gini coefficient to have knowledge about distribution of wealth.
Gini coefficient measures the income distribution of any countrys residents
Gini Coefficient of Turkey
2002 0.44% 2003 0.42%
2008 0.41% 2009 0.41%

2004 0.40%
2010 0.40%

2005 0.35%
2011 0.40%

2006 0.43%
2012 0.40%

2007 0.41%

While gini coefficient converging to the zero, it expresses the perfect distribution of income.
As we see figure out from upper numbers, income inequality is really high in Turkey, which
means that the significant amount of the income is earned by few people. Considering our
vision and mision, this situation may have a huge impact on our business strategy and we may
be obliged to cut the costs as low income people are not able to travel by airplane.

The graph shows that the Gini coefficient is equal to the area marked A divided by the sum of
the areas marked A and B. that is, Gini = A / (A + B). It is also equal to 2*A due to the fact
thatA + B = 0.5 (since the axes scale from 0 to 1).
http://en.wikipedia.org/wiki/Gini_coefficient
Technologic Factors
-Strong Involvement of Universities in R&D: Opportunity
Research and development activities and the aviation industry always need to cooperate in
order to make progress in aviation sector. Progresses in civil aviation industry provides
facilition of flying more distant destinations, new developments for security systems.
Particularly, developed automation systems make a major contribution to cut the labor costs
which are one of the most important expenses in aviation operations.
Flying directly to further destinations would expand the revenue of Pegasus Airlines.
Moreover, it is possible that strategic alliances, whic are One World,Sky Team and Star
Alliance, may cause breaking these agreements
-Increasing Involvement of Universities in R&D:Threat
There are few universities in Turkey which have researches regarding civil aviation industry
and engineering. In this regard, our company could lead to found some institutions in order to
make researches for the development of aviation sector as well as to improve the service
quality of airplanes.
Another big problem in aviation sector is finding qualified workforce to raise productivity in
workflow processes. For this reason, we had better cooperate with a university to train new
employees for increasing productivity.
Environmental Factors
-New or Improved Sources of Energy: Opportunity
As profit margins in transportation industry is directly linked to fuel consumptions and fuel
prices, new and cheap energy sources ,which could be used instead of oil, absolutely
contribute to rise of profit margins.
-Pollution: Threat
Air and noise pollutions are important points for aviation industry which are subject to
particular laws and act in every country. Therefore, airline companies and airports are
expected to protect the environment and go green by other shareholders, such as society.
-Weather/Climate Changes and Natural Disasters: Threat-Opportunity
Global warming and climate change would indirectly influence the aviation industry in a such
way that global warming causes climate changes in particular regions, which means less

people would be willing to take a holiday in these regions. On the contrary side, we should
also consider that summer months would last longer in particular regions, under these
circumstances, Pegasus Airlines should definitely increase flight frequencies for seaside
places.

Moreover, some natural disasters cause to bring to a halt flight operations, such as volcanic
eruptions in Mexico in 2013, in Iceland in 2013. In those days, many airway companies
suffered financially because of volcanic eruptions, even a few days of discontinuation of
operations cost tens of million dollars.
Political Factors
-Type of Government:
Republic of Turkey, which was founded in 1923, is a parlimentary representative democracy.
Constitutional law rules the legal of the country. Republic of Turkey is a unitary state and
Ankara is the capital city of regime.
The current prime minister is the former mayor of stanbul, Recep Tayyip Erdoan, whose
conservative Justice and Development Party was elected for a third consecutive time in 2011
general elections. Although the ministers do not have to be members of the parliament,
ministers with parliament membership are common in Turkish politics.
http://en.wikipedia.org/wiki/Turkey
-Freedom of Speech and Press: Threat
The issues of press freedom and freedom of expression in Turkey have for several years
attracted a great deal of attention and provoked extensive debate both in Turkey and in other
Western countries. Dozens of journalists critical of the government have been jailed, and hefty
fines have been levied against media outlets seen as opposing the ruling Justice and
Development Party, or AKP. The perceived deterioration of the situation has raised concerns
about the course and character of Turkish democratic development.
http://www.americanprogress.org/issues/security/report/2013/05/14/63159/freedom-of-thepress-and-expression-in-turkey/
-The Degree of Enforceability of Law: Threat
There are some problems in the degree of enforceability of law in Turkey, especially because
of way of legal regulations. However, there is no problem in legal infrastructure in Turkey.
Pegasus airlines may encounter some problems with Turkish government thanks to this
situation, as we witnessed before many times. Since Pegasus Airlines is not the flag-carrier
airline of Turkey, it suffered from many problems like slot permission. As Turkish Airlines is

the flagship of Turkish aviation concerns, it has been bestowed a privilege on slot
permissions.
-Taxation Policies: Threat
Undoubtedly, taxation policy in Turkey is very complex. Also, the corporate income taxes and
goods and services taxes are so high in comparison with other European Union companies.
Of course, these high tax rates are obliged to be reflected in prices, so this situation directly
influences the competitive power of Pegasus Airlines, especially in international market.
-Unemployment Policies: Threat
Turkey, in addition to imbalances in its social and economic structures, is facing worsening
employment and unemployment problems due to macro-economic policies that are being
implemented.
http://journals.manas.edu.kg/mjsr/oldarchives/Vol10_Issue20_2008/595-1630-1-PB.pdf
In particularly, we encounter this potential problem in aviation industry which have problems
to hire qualified and well-educated employees to increase the productivity.This problem also
reveals that Pegasus Airlines spends a long time for orientation training of new employees
even so they might not be able to cover all expectations,though.
-Trade Agreements: Opportunity
As Turkey has not been a member of European Union, Turkish citizens are not allowed to
move freely within the borders of europe coutries. The lack of free movement right in Europe
sometimes limits freedom of Turkish people to travel to Europe. At the same time, this
situation is an opportunity for Pegasus Airlines if Turkey would be a member of European
Union.
Additionally, Turkeys membership in the customs union has brought advantage to incerease
flow of goods between Turkey and other member countries, especially with European
Countries. So, Pegasus Airlines could benefit from flow of air cargos between Turkey and
European countries
-Legislation: Threat
There are many available and pending laws which could directly affect air aviation industry.
Governing laws for civil aviation were amended at the beginning of 2004 by national
assembly, hereby this situation enabled big investors to make an invesment in this sector.
According to me, the second important act is concerning labor unions which was changed a
few months ago and that aims weakening the dominance of labour unions in this sector.
The third important law is regarding price ceiling which is going to be enacted in a few
months. After legislating of this law, Pegasus Airlines will not be able to sell tickets above a
certain price in domestic flights.

Legal Factors
-Health and Safety: Threat
The European Aviation Safety Agency proposes to establish a uniformly high level of civil
aviation safety in Europe as part of creating the single European sky. It has set out the
responsibilities of the European Aviation Safety Agency in this respect, underlining the need
to achieve harmony between air safety standards.
http://europa.eu/legislation_summaries/other/l24249_en.htm
To alleviate incresing anxiety of people, all acts have to be followed by Pegasus Airlines,
which will probably increase the costs, especially labor costs.
-Tort: Threat
Due to the rapid growth of Pegasus Airlines, some companies are troubled by this situation,
such as Turkish Airlines, which is the flag-carrier airline of Turkey. As we mentioned above,
Pegasus Airlines is still suffering from obtaining permission for new destinations abroad.
-Deregulation of Utility and Other Industries
Turkish government has been giving particular importance to regulate utilies, especially in
civil aviation industry. According to ministry of transportation, marketization and creating
competitive landscape are the most important principles in transportation industry. So, Turkish
government intend to hand over Turkish Airlines, which means the government will pull out
of the market and civil aviation industry will be literally marketized.
Socio-Cultural Factors
-Demographics
Average life expectency and birth rates are consistenly increasing in Turkey, therefore
potential customer numbers will rapidly go up continuously. Contrary to this, birth rates are
falling in many European countries, and this situation directly decreases the number of
potential customers.
Other important point, which is subject to discussions in domestic politics and international
politics, is rising of conservatism in Turkey. The part of the subject regarding aviation
industry is that rising of GDP per capita and rising of conservatism lead to increase in the
number of people going on pilgrimage through the whole year. So, increasing the flight
frequencies from Turkey to Saudi Arabia should be definitely considered by administrative
body.
As Islam is the dominant religion of Turkey, most people do not prefer to go on holiday
during the Ramadan period. Despite low ticket prices during this period, many of muslims do
not opt for going holiday, and that causes revenue loss for airway companies in domestic
flights.
-Postponement of Family Formation: Threat

As number of women employees are so high at airline companies, especially for hostes staff,
this subject is always a bone to pick for airway companies. All airway companies suffer from
this problem from time to time.

-Health and Safety Consciousness: Threat

Many of Turkish people have a high sensivity of hygiene thanks to cultural habits and
religious reasons. Also, some employees would claim to have special bathrooms to perform an
ablution, which means we should make an invesment to found them in the building.
Because of increasing number of people in upper-middle and upper income groups, many
people tend to fly in first or business class. Although Pegasus Airlines is a low-cost airway
company, this great opportunity should be considered in long run policies of Pegasus.
-Customer Behavior: Threat
Because of low saving rates in Turkey, many people could not be able pay their debts on time,
so some of them get into trouble like sequestration and prison sentence. This problem makes
people less willing to use credit cards and this could bring up to sell tickets through agents.
Consequently, our profit margin may decrease.
-Attitued: Opportuity
Because of cosmopolitan population structure of Turkey, there is no prejudice and
discrimination between personnels and upper management in corporate culture of many
companies in Turkey. In case of potential buy-out of our company by a company from a
different country and a different culture, our staff members would easily get used to new
upper management and corporate culture.
-Temporary Workers
Owing to the structure of airline industry, there are many critical business processes with
regard to security and safety. Furthermore, there are a lot of people who are disposed to be
hired in aviation industry as a temporary employee. However, we are not legally allowed to
hire these people.
PORTERS 5 FORCE ANALYSIS
New Entrants
-Too expensive to enter the industry, one of the most expensive industries, unaffordable fixed
assets
-There is no space for newcomer companies, saturated market
-Obligated to take strict safety measures

-Necessity of high skilled workforce

-High brand loyalty. Reputed companies are preferred
-New companies may only enter the market with new concepts
-Airplanes could easily sell off
-Easiness of sublease of flight and landing permits.
Substitutes
-Threat of other transportation modes, especially over short distances
-Proliferation of high speed trains
-Development of new technologies (such as video-conference..)
Buyers
-Low barganing power of buyers
-Be less able to compete on services
Suppliers
-High switching costs of airline companies(it would increase repair and maintenance costs.
There is no possibility of buying few planes from other company)
-Oil prices determined by market forces
-Because of high unionisation rate, personnels of have barganing power
Rivalry Among Existing firms
-Intense rivalry among competitors
-Intensive price competition
-Excess seat capacity
-Threat of low cost companies
-Increasing rivalry in air cargo transportation