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ne of the more fascinating business models in the commercial aviation sector belongs to Turkish-based Corendon airlines. Originally launched under The Corendon Tourism Group to provide charter flight services, the airline is evolving its business model and processes, securing strategic expansion and investing in digital innovation, while keeping an optimistic outlook for 2021 air travel demand.
We caught up with Corendon Airlines CFO Olcay Türker to discuss the airline’s growth initiatives, including the partnership with Kambr Inc. to support the implementation of revenue management practices.
Kambr Media: Corendon has advanced in the Turkey 500 list, you’ve stated before this is a result of the increase in unit revenues compared to the previous year and the increase in exchange rates. What key strategies or passenger offerings do you attribute to the increase in unit revenues?
Olcay Türker: Corendon Airlines took 158th place by ranking up 40 places in the “Fortune 500 Turkey’s Greatest Companies” list announced in July 2020 based on the 2019 financial statements.
"One hundred percent, demand will be higher than what it is today, and flight fares will be higher. So whatever airlines survive through the pandemic, I am sure will have a major market share in the future."
According to 2019’s expansion plan, Corendon Airlines has offered many new flights from Germany to several touristic destinations in the Mediterranean area. Some of the destinations were longer routes and 12-month destinations which we’ve never flown before, such as Egypt and the Canary Islands.
These are nearly perfect routes for the sole aircraft type in our fleet, the Boeing 737-800. Accordingly, we’ve achieved better yield together with high load factors. Additionally, we leveraged the EUR-TRY exchange to move up the list since the list is based on the local currency.
Corendon has an interesting structure being part of a Tour Operator with the airline business offering both charters and scheduled flights. Where do you see the most growth for the airline in the next 5 years? Will there be more scheduled operations than charter?
Definitely. Corendon Airlines was established in 2004 to serve only charter flights. After 16 years, the Airline now offers seat-only services and short term wet-lease out operations in addition to our full charter flights.
Our aim is to increase the seat-only revenue portion up to 75% by the end of 2025. However, COVID-19 is presenting a big question mark.
As it relates to growth, can you speak a bit about Corendon’s expansion with bases in Basel and Düsseldorf opening?
Düsseldorf (DUS) is one of the best airports in Germany for leisure carriers. It has the highest number of departure flights to resort destinations from Germany. However, it has always been hard to get slot assignments and to achieve efficient aircraft utilization due to night curfew at DUS.
Undoubtedly, 2020 has been the hardest year for the aviation industry. There have been so many changes recently; the most significant being the liquidation of SunExpress Deutschland. They were serving DUS with four aircraft.
In addition, Lufthansa Group announced that they would reduce their fleet by more than 100 aircraft which would ultimately affect its biggest subsidiary Eurowings — the biggest player at DUS. Furthermore, Ryanair will close its DUS base in October 2020 after the German airport's operator and ground handling provider refused to lower their fees.
Speaking on the Basel (BSL) base, there’s several reasons why we find it enticing. BSL is geographically located in an important area since the airport is used by three different countries’ passengers. It gives us flexibility to benefit from three countries’ school holidays which enables long holiday dates. Additionally, per capita income in the area is higher than other regions so flight fares are relatively high.
The airport is dominated by easyJet which has limited access to tour operators. In addition, Tuifly has recently announced that they will reduce their fleet from 39 to 17 aircraft and therefore decided to shut down their BSL base.
One of the new innovations Corendon has rolled out is the “Double Seat” service which allows for travels to book the seat next to them. What has been the customer response to this product?
We are an airline of firsts! Corendon Airlines provides an opportunity to its passengers to book the open seat next to them with an affordable price, again leading the way and being the first in the Turkish aviation sector to offer the service. “Double Seat” service targets the passengers who desire a comfortable and safe travel experience especially during the pandemic.
"Kambr's team and system are much more flexible. Therefore, it was easy to make a decision because Kambr is willing to apply their expertise to fit our specific needs. We would've had more trouble with the other solutions."
Double Seat has been on sale since July 2020, and we’ve been receiving positive feedback from our customers. In three months, almost 200 seats were sold with the top three destinations being Heraklion, Izmir and Antalya. We expect to see higher double-seat sales figures in the future when the Seat Load Factors are relatively high.
What other innovations is Corendon cooking up? There has been a massive shift to digital in the past few years, is Corendon investing in this space?
I can speak on three core areas we’re focusing on:
- Revenue Management (RM): As we shift our attention from charter flights to scheduled flights, we are implementing and building out revenue management practices with the help of Kambr Advisory and Kambr Solutions.
- Customer-Relationship Management (CRM): We’ve tapped into Oracle to establish our CRM practices and system.
- Robotic Process Automation (RPA): The main idea is to analyze your daily tasks and perform these duties by RPA which is a robot that has a username and password like your employees. RPA performs tasks on behalf of your employee, which reduces your employment costs and saves time and increases efficiency.
Why did you decide to work with Kambr?
On Corendon's side, there are several options in the market. We were in long talks with some of them, but at the end of the day, Kambr was the best solution for us to solve Corendon's needs. We are using a classic tour operator system called Genius to manage our inventory, which is complicated to build a revenue management system on top of.
"Kambr Advisory provided us with fantastic preparation for the evolution of our business model. They studied our operations in detail and have provided value behind many of our commercial decisions on many fronts."
Kambr's team and system are much more flexible. Therefore, it was easy to make a decision because Kambr is willing to apply their expertise to fit our specific needs. We would've had more trouble with the other solutions.
As you’ve started to put new processes and systems in place you’ve started working with the Kambr Advisory team. What has that experience been like?
Kambr Advisory provided us with fantastic preparation for the evolution of our business model. They studied our operations in detail and have provided value behind many of our commercial decisions on many fronts.
And finally, their training program was practical, extremely useful and proved to be a memorably appreciated occasion for the team. It was more impactful than we ever imagined.
It sounds like Corendon is taking steps to increase market share and play the long game with growth initiatives. This must be a delicate balancing act for a CFO. What is your attitude towards managing costs while looking for opportunities to invest in business improvements to gain ground on competition?
What we are doing right now is trying to reduce almost every single cost including leasing costs, fix costs and employment costs, in order to get through the upcoming winter season.
People will be happier to travel because there were a lot of travel restrictions during 2020. But starting from 2021, countries will probably not bring the same level of restrictions to travel because it is against basic rights and freedom.
Most probably, testing facilities will be almost everywhere, maybe even next to your local grocery store. Therefore, you will have a lot of possibilities to get your PCR test together with a rapid result. Then you will be able to travel by presenting your negative results. The winter will be difficult for airlines, but our outlook is quite positive for the next summer season.
One hundred percent, demand will be higher than what it is today, and flight fares will be higher. So whatever airlines survive through the pandemic, I am sure will have a major market share in the future.
