A Study of the Strategic Responses of Turkish Airline Companies to the Deregulation in Turkey: Onur Air

A Study of the Strategic Responses of Turkish Airline Companies to the Deregulation in Turkey: Onur AirOnur Air was a charter airline before 2003 when it became one of the first carriers to introduce domestic scheduled airline transportation as deregulation gave the right to enter this market. Until 2003, there was only one airline company operating in the domestic market and, as the prices were most of the time high, it was only high income level customers that were targeted; however Onur Air, with its entry the market, targeted middle income level customers. In order to fulfill this strategic objective, Onur developed a strategy of offering low fares with low cost and a low profit margin and addressing the needs of an extended group of customers in the domestic market with low fares. This strategy became feasible as domestic market was deregulated and restrictions on market entry and prices were abolished. When compared with Turkish Airlines, Onur Air has a more advantageous cost basis and with Turkey having a wide geographical structure, these factors are regarded as important aspects that form the basis for the execution of this strategy. Onur Air uses this cost advantage that forms the essence of its strategy in order to offer lower prices by reflecting them onto fares and thereby attracting more passengers, instead of gaining higher yield. Service design process

The most effective factor that reduces cost is the annulment of extra services offered by traditional airlines and focusing only on the safe transportation of passengers from one point to another; thus the Onur Air customer profile has passengers that are willing to reach their destination at affordable prices rather than insisting on comforts. After having realized that though offering lower prices works, offering a single fare is insufficient in competition, Onur Air started implementing yield management and transited to a dynamic pricing system. Yield management is not necessarily based on software programs that require high levels of investment cost, but is rather executed by manually tracking competing airlines’ prices. Within this context, most of the time Turkish Airlines fares are tracked as the company is seen as the price-maker in the market and Onur tries to compete with prices that are lower than those of Turkish Airlines.
Onur Air’s network strategy aims to reach high load factor by having an extensive network structure. Within this context, Onur, with its line network structure model centered at Ataturk Airport, operates direct flights to Turkish cities popular with passengers. Onur Air started increasing the number of city pairs at first and then headed towards increasing flight frequency in these markets. It mostly targets passengers that prefer land transportation, so as much as possible, it operates in such city pair markets where travelling by bus takes longer than eight hours; because otherwise, intercity bus transportation will be a significant threat from a competitive perspective.
When the strategy of Onur Air is analyzed, it can be said that it aims to implement cost leadership strategy from Porter’s competitive strategies. Low prices that are offered by basically an extensive network structure, and a reduction in cost with operational processes as much as possible are regarded as the most remarkable strategic tools the operator uses against competitors in order to gain a competitive advantage. It aims to reduce unit cost by operating flights with larger aircraft that have greater seating capacity and on routes that have higher passenger potential as well as by discontinuing extra services that may be regarded as luxurious. Though Onur Air exhibits signs of a low cost airline by keeping seat pitch to a minimum, selling food and beverages onboard and executing yield management, it also has some attributes that would contradict this strategy. The most important one is that it operates from Ataturk Airport where air traffic is the busiest rather than a secondary airport. The second attribute is that its fleet does not have a standardized structure, but rather it has various types of aircraft in its fleet; however, it plans to form a single type fleet structure in the future. Its third attribute is that most tickets are sold through travel agencies. All these attributes would cause an increase in the cost of Onur Air and would contradict the general practices within a cost leadership strategy in airline transportation.