THY reputation ’scratched’ by the crash in Amsterdam

Hurriyet Daily News with wires

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Increasing its passenger numbers by 15.6 percent in 2008, THY ranks among the top three fastest growing European carriers according to figures from the Association of European Airlines, all while its rivals suffer significant drops in profit due to waning demand. 

In 2008, THY surpassed Italy’s Alitalia airline to become the seventh biggest airline in Europe in terms of passenger numbers, after Lufthansa, Air France, British Airways, SAS Scandinavian, KLM and Iberia. After Wednesday’s crash, THY shares trading on the Istanbul Stock Exchange suffered a 5 percent drop but analysts said such accidents rarely affected a company’s performance.

"Crashes rarely affect airline shares or the financial performance of airlines, as they are very rare," Michael Derchin, an analyst at FTN Equity Capital Markets, told Hürriyet Daily News & Economic Review. "Airline shares are usually relatively unaffected by aircraft incidents, unless there is a major event such as the Sept. 11, 2001 terrorist attacks," Gert Zonneveld, an analyst at Panmure Gordon & Co., told the Daily News. "Virtually all European airline share prices are up today, reflecting rising stock markets. Investors recognize, despite the fact that safety is a top priority, that accidents happen from time to time."

THY may suffer a "dip in bookings" in the early weeks or months following the airline crash but the situation normally recovers fairly quickly, Zonneveld said.

"We do not expect a substantial deterioration in stock price because of the accident. Even though there may be a slight weakness in the ensuing weeks, we don’t see a major reason to change our fundamental view," Bloomberg quoted a report by Eczacıbaşı Securities.

Eczacıbaşı Securities has an "outperform" rating on the stock, meaning THY shares will exceed the overall performance of the benchmark IMKB-100 index. The index declined 10.7 percent since the start of the year, while THY shares fell less than 1 percent in the same period. In the aftermath of the accident, THY dropped a television advertisement featuring Hollywood star Kevin Costner. The ad, which began broadcasting in 70 countries this month with the slogan "Feel like a star," was withdrawn until further notice.

THY has nearly 13,000 employees and 24.83 percent of its shares are publicly traded. The company’s shares fell 25 percent year-on-year, and it had a market capitalization of just above 1 billion Turkish Liras. The firm announced the Boeing 737-800 that crashed in Schiphol was insured for $41.77 million. Ray Sigorta, the insurer, said in an IMKB filing that 100 percent of all the risk the firm has is reinsured globally and Ray will have a net negative effect of $50,000 due to the accident.