INTRODUCTION

This project is about an airline company in Turkey, which is named Pegasus Airlines.

The company was established in 1990 by Aer Lingus, which is a participation of partnership

between Silkar Investment and Net Holding. The origin of company was in Istanbul city. The

company was made first flight in May 1990.

In those times, company was working on flights that associated with travel agencies.

Between the years of 1990 and 2005, company did not have any kind of scheduled flights,

they were flying only with travel agencies on associated flights.

After 15 years, company has changed hands in 2005 and the owner of Pegasus was

ESAS Holding. Since 2005, ESAS Holding is the only owner of Pegasus. Ali Sabancı is the

chairman of the board and Sertac Haybat is the general manager.

In this project we are going to examine the time period between 2005 and 2011.

Because, Pegasus Airlines had different objectives and strategies before 2005.

1. Company Profile

In this part of our study, we are going to introduce history, organizational structure,

policies, and services of Pegasus Airlines.

Pegasus Airlines describes its mission as;

“We believe that everybody has the right to fly. The Pegasus Family, our suppliers and our partners work together in cooperation to achieve this goal.”

And they describe their vision as;

“To be the leading low-cost airline in our region with our innovative, rational, principled and responsible approach. Our leadership criteria: numbers of guests, our response to customer expectations, our pricing policy and the added value we provide to the Pegasus Family”

1.1 History of Pegasus Airlines

Pegasus Airlines was bought by ESAS Holding in 2005, just after the Turkish

Government declared a new legislation about airline business. That legislation gave the right

to companies to establish their own private airline companies in scheduled flights.

Pegasus Airlines was started to accomplished scheduled flights with several new

private airline companies which were competitors of Pegasus Airlines. But, Pegasus Airlines

made right choices to get more revenue, other are just get what they needed in that time.

At the beginning, they only have two airplanes. But, now they have thirty-two

airplanes and the fleet gets bigger and bigger every year. They also bought one of their

competitors, which was named IZair.

Here are some of milestones of Pegasus Airlines;

2005 - Introduced online seat selection

2005 - Introduced Ekopark services for our guests

2006 - Began the Pegasus cafe service

2007 - Started selling travel insurance online

2007 - Became sponsors of the PWA Windsurf World Cup

2007 - Took delivery of first aircraft named 'Hayirli', first of our planned fleet of 40

Boeing 737-800s. The biggest single investment ever made in the Turkish private

aviation sector, valued at USD 3.2 billion

2008 - Started a car hire service online.

2010 - Started a pre-ordered meal option before flights

2010 - Flew 8.6 millionth guest

2010 - For the first time in Turkey offered mobile phone check-in using a barcode.

Also offered an online facility to purchase extra weight allowances for luggage and

optional online seat selection

2011 - Built a flight training center with the latest flight simulation technology,

placing Pegasus in the top 10% of companies out of the world's 582 airlines with this

simulator.

2011 - Integrated Groundling End to End Network Solutions System into fleet,

becoming the first airline in the world to do so.

1.2 Organizational Structure of Pegasus Airlines

Pegasus Airlines has one chairman of the board of directors, and 6 members of the

board of directors which includes the vice chairman of the board of directors. Their main duty

is to decide companies new actions, when they also assessing the performance. They also

make the corrective actions of margin errors, like a natural disaster or economic crisis, as soon

as possible.

The board of directors also controls the work of departments. There is a hierarchical

chain for management, as it always exists in companies. But, in difference Pegasus Airlines’

board of directors have significant respect to their colleagues. Last year, they gave their new

airplanes their colleagues’ children’s names. Also, they are not using the company name, they

always say; “Pegasus Family”.

1.3 Policies of Pegasus Airlines

After the company changed hand, and make its first priority to achieve scheduled

flights. Pegasus Airlines make its main goal to give lower prices with a significant quality.

Pegasus Airlines is the first airline company in Turkey which makes couch surfing for

lowering the prices.

Quality, environment, work health and safety policies are also company’s important

goals. These policies are fully apply all mandatory aviation regulations and ISO 9001:2000

standard requirements, fake all necessary steps to ensure secure and safe flights, constantly

improve our operational efficiency in order to provide reasonable and on-time services to our

passengers, ensure the satisfaction of all our passengers, Reinforce teamwork, staff excellence

and unrivalled service to carry Pegasus Airlines far into the future.

Pegasus Airlines safety policies are as follows; to ensure that Pegasus Airlines applies

all national and international flight and ground safety regulations and standards. On-going

training of employees in flight and ground safety issues, to ensure that employees at every

level can report issues anytime and without notice. There are no restrictions to the reporting of

flight and ground safety issues. Employees at every level of seniority may report directly to

the highest level of seniority. To evaluate all employee reports in the strictest of confidence.

Pegasus Airlines believes that the interactive process of communication between employees

and feedback is part of our corporate culture, and aims to provide the necessary environment

for this to flourish. Pegasus Airlines encourages employees to share information regarding

flight and ground safety with the Quality Assurance Management Department, To use written

and verbal communication to increase employee awareness regarding flight and ground safety

procedures. To identify causes of human error and to take preventative measures. Pegasus

Airlines engages in notifying its employees if the activities of other establishments in the

sector threaten flight and ground safety.

1.4 Services offered by Pegasus Airlines

Pegasus Airlines has scheduled flight in domestic and international lines. Besides

these flights, Pegasus Cargo is also a foundation of Pegasus Airlines which is used for airline

cargo services.

Pegasus Airlines has twenty-flight destinations in domestic lines and sixty-flight

destinations in international lines to eighty-flight center. Some of these flights are achieved

several times in a day, especially the domestic ones.

In its flights, Pegasus Airlines offers limited luggage (in domestic flights 15 kg and in

international flights 20 kg), also hand-baggage of 9 kg is allowed both in domestic and

international flights.

Pegasus Flying Café is another service of Pegasus Airlines which offers drinks,

snacks, model toys, and meals with a price. They have a system, which is named pre-ordered

food delivery on flights, which gives you the privileges to order food before flight with a

lower price.

Pegasus Airlines also have an alliance with HSBC bank; they made an agreement on a

credit card, which is named Pegasus Card, to make the card owners collect flight credits from

their shopping.

Pegasus Airlines has a website which offers lower prices and the right to choose seats

and to make or not to make a flight insurance. Also, you can give pre-order for your meal in

flight.

2. External Analysis

In this part of my survey, I am going to analyze the external environment in three parts

1) the macroenvironment, 2) the task environment, and 3) the industry. In these three parts, I

am going to analyze the government, international, technology, economy, and demographics

environment in the first part; suppliers, regulators, labor unions, customers in the second part;

competitors, firm in third part.

2.1 The Macroenvironment

Government is the beginning factor of the private airline. Around 2005, Turkish

Government made a new regulation for airlines. In this regulation, government offers that

private companies can own airline firms in scheduled flights. Pegasus and its competitors in

low price private airline sector began scheduled flights after this regulation made.

Government regulates and controls taxes, fuel prices, environmental protection laws,

and other laws for airline passenger transportation. Beyond these direct effects, government

also has the control of airports. Every plane landing or taking off has to pay landing or taking

off fee.

Turkish Private Airline Law has some lines strictly concerns Pegasus Airlines and the

other airlines firms. These lines are;

Entry 31 – Inside The Turkish Republic air space, between two destination flights

must be done by only Turkish Aircrafts.

Entry 49 – A private aircraft is counted as Turkish Aircraft in situations which are

defined as;

a) The property of public institution like associations, organizations, political

parties, trade unions, foundations, and professional organizations, the

administrative part must has the majority of its members from Turkish

Nationality.

b) The property of companies, associations, foundations who has been

registered in Turkish Trade Registration, and the administration must have

Turkish Citizen(s) or at least one of the partners of institution must be

Turkish Citizen.

Entry 54 – Aircraft which is registered in Turkish Private Aircraft Registration, must

be dropped out of previous registration.

Entry 85 – Aircrafts must pass the examination and tests of flight suitability, to get the

chance of registration

Entry 89 – Every Aircraft which flies into Turkish Airspace, as the regulation of their

own countries;

a) A central register must be registered, and to carry the certificate

b) To carry nationality and register signs

c) To carry flight suitability documents

d) To own crew documents

e) To carry permit of installation of wireless

f) To carry insurance policy

g) To carry the documents which defines by laws and regulations

Entry 108 – The carrier must carry the passengers’ baggage and belongings, as in the

transportation contract offers.

Entry 122 – The carrier is responsible for the harm of late baggage arrivals.

As these entries explain briefly the airline firms have some restrictions on owning

aircrafts; they can not have foreign aircrafts in domestic scheduled flights. Companies have to

register their new aircrafts by some entries, and they must first pass examination and tests for

flight suitability of aircrafts. The government stipulates the baggage responsibility on

companies; they must give the right amount of baggage right to their customers and must

achieve the rapid baggage delivery.

International policies of Pegasus are shaped by landing fees, customers’ demand,

taxes, fuel prices, politic situation and trade volume between destination country and origin.

As a solution of these problems, Pegasus has been registered into The International Air

Transport Association (IATA).

The International Air Transport Association (IATA)’s mission is “Air transport is

one of the most dynamic industries in the world. The International Air Transport Association

(IATA) is its global trade organization”. For the benefit of all parties involved:

o For consumers, IATA simplifies the travel and shipping processes, while

keeping costs down. Passengers can make one telephone call to reserve a

ticket, pay in one currency and then use the ticket on several airlines in several

countries.

o IATA allows airlines to operate safely, securely, efficiently and economically

under clearly defined rules.

o IATA serves as an intermediary between airlines and passenger as well

as cargo agents via neutrally applied agency service standards and centralized

financial systems.

o A large network of industry suppliers and service providers gathered by

IATA provides solid expertise to airlines in a variety of industry solutions. 

o For governments, IATA seeks to ensure they are well informed about the

complexities of the aviation industry to ensure better, long-term decisions.

Pegasus is not member of Star Alliance Membership, which offers their customers lots

of opportunities around the world. For example, you have had a connected flight and your

flight has been delayed. If you would have the tickets from Star Alliance firms, you could

catch your connected flight.

Every airline company must be registered into the airports before they begin their

flights. This registration includes all the information like landing fee rates, check-in offices

etc., also company must agree with the government about taxes, fuel limitations etc.

Economy is affecting Pegasus both domestic and international areas. Main subjects are

economic growth, fuel prices, tourism, wealth situation of population, taxes, landing fees.

In domestic flights, when the gross national product level is low people are more and

more intended to take cheaper ways to travel, they do not care about the comfort or rapidness

of the travel type. Here are the gross national product levels of few years;

Results of GNP

GNP of Current Prices

Growth Rate

GNP of Current Prices

Growth Rate

GNP of fixed

pricesGrowth

Rate

Term(Million

TRY) % (Million $) %(Million

TRY) %

I 241 881 16,3 160 332 27,3 23 390 12,2

II 267 144 16,9 173 821 19,5 25 645 10,2

III 297 184 13,6 196 516 13,0 28 672 5,3

IV 297 541 17,0 204 260 19,2 28 033 9,2

2010 annual 1 103 750 15,9 734 929 19,2 105 739 9,0

I 290 178 20,0 183 975 14,7 26 205 12,0

II 318 345 19,2 203 586 17,1 27 905 8,8

III 348 802 17,4 201 512 2,5 31 029 8,2

2011 9 months 957 326 18,7 589 072 11,0 85 139 9,6

Here are the numbers of passengers who traveled 2010 and 2011 (first six months);

As you can see from the charts, first 6 months of 2011 domestic flights has around

3.000.000 more passenger than half of 2010. But, Abroad (International) passengers are more

intended to travel summer season for summer tourism.

Fuel prices are another important factor for creating lower price policy, some of the

graphics indicates the fuel prices and currency effect on them.

Taking a look at the price action over the past six months

Taking a longer term perspective of price movements

Impact of Euro/US$ exchange rate movement

In June 2008, there is a peak point for fuel prices around 125% increase has happened.

These type of events make the companies more cautious about their next move to survive.

Inflation is another factor that affects the companies with customers’ desires to take

the flight instead of other transportations. When the inflation is higher than previous years

customers are not very intended to take flight, they prefer railway, buses and other cheaper

methods to travel between the destinations. Inflation also affects the tourism and this is also

very bad for airline companies.Because, tourism has very big part of their market share.

Pegasus has been purchased a flight simulator for training their pilots. They have been

also using Wireless Groundlink End to End Network Solutions to accopmlish two point data

flow all the fleet are installed with this system. Pegasus give importance of technological

improvement, they have been raised to top 10% of the flight market.

Social and natural environment, in airline companies most of the crew are female and

must be trained for cabin work, that’s a problem. Because, in recent history of Turkey women

are not educated for these type of works, they have been active only in textile sector and

medical instuations. There were not enough labor force for airlines. But, nowadays new

schools and training center have been opened.

Airline industry has lots of obligations for their workers; languages, safety trainings,

customer relationships, etc. . This means, airline personnel must be well educated.

Demographics are measusres of various chacracteristics of the people composing

groups or other social units. Work groups, organizations, countries, markets, or societies can

be described statistically by referring to their members’ age, gender, family size, income,

education, occupation, and so forth.

Customers are from mid-wealth and high-wealth population, which are contains

around 80% of the whole turkish population. Most effective factor for this much customer

population is the low cost policy of Pegasus. But, besides low cost policy they scheduled their

flight for both business destinations and majority of the mid-wealth level population’s choice

of destination. Also they have the highest percentage of flight on time, 95,63% .

2.2 The Task Environment

The task environment is another part of external environment, which affects both the

competitors and the firm itself. The task envorinment comprises the specific organizations

with which the organization directly interacts. These organizations include regulators, labor

unions, suppliers, and customers.

Regulators, all the regular technical and logistic activities, that occur in Turkey, are

regulates and examine by a department which is named Private Airline General Management.

Private Airline General Management is a department of The Transportation Ministery. They

are responsible for examining things like; flight safety, gas emission, landing and take off

procedures, schedules, registration of both fleet and airline companies, etc. The Ministery of

Finance also have to examine companies for taxes, revenue reports. The Social Security

Instuation examines the workers’ safety and insurances.

Labor Unions, there is only one significant labor union named “HAVA-IS”. Hava-is

has 99 % of all labor, both flight and land crews, in its union. Their strategy and goals are

simple, to make their members not worried about lose their jobs and more wealty. They have

a lot of actions to create an environment which has better conditions for airline workers.

Suppliers. Tüpraş is the only jet fuel supplier in Turkey. The fuel market is in their

monopoly. Tüpraş was a government facility, in 2004 government sold Tüpraş to third person

company, which is operated and centered in Turkey. Tüpraş’s strategy is to keep up the world

development, quality, and price levels.

For the flight menu Pegasus mostly uses their group company’s products. Thus, they

can offer cheap and good quality foods and beverages to their customers.

Pegasus has an arrangement with Turkish Airlines to take care their fleet. THY is

responsible for maintanance and repair of Pegasus fleet. THY’s technical crew are the most

talented and the most realible crew in Turkey.

For airport ground team and check-in crew Peagasus has a contract with Çelebi GT.

They don’t have lots of choices for ground team, there are only two company exist, which are

Çelebi and Havaş. Both of them are experienced and well know, but çelebi is offered less

price and less obligations to airline firms.

Customers. Most of the turkish population use transportation either to do business or

to visit their relatives. Nowadays, a new customer type is growing very fast, customers who

just want to see new places and do touristic actions. Even in winter season, turkish tourist

want to go some places which are known for its winter climate. In domestic flights, customers

always put the prices in their highest priority. But, in international flights, customers change

their priority to punctuality. This does not mean they ignore the price, they also care about the

prices, but the first priority is not the price.

In summer season, Pegasus has lots of foreign customers for the Antalya, Izmir,

Bodrum, Istanbul, etc. But in winters, Pegasus has 10% of its summer foreign customers, even

they have the lowest prices.

2.3 The Indusrty

There several competitors in domestic and international flights. Simply, most of

pegasus competitors have little fleets with respect to Pegasus’s fleet. But, they are flying to

the destinations, which have more customers then other destinations of Pegasus. Pegasus’s

competitors list is like below with the priorties.

Name Center Destinations Fleet

Sunexpress İstanbul (Asia) 24 common destin. 28 airplanes

Easyjet Basel Mulhouse 4 common destin. 183 airplanes

Anadolu Jet İstanbul (EU.&Asia) 8 common destin. 20 airplanes

Onur Air İstanbul (EU) 12 common destin. 33 airplanes

THY İstanbul (EU) All destinations 28 airplanes

Besides these airline companies, which are very active in Turkey, there are several low

budget airline companies exist.

Pegasus has a fleet of 39 airplanes and destinations of 85 cities, which are counted

both in domestic and international points are together. Pegasus’s priority is to offer low cost

and avaiblablity for all destinations, that its competitors already have scheduled flights to

these destinations.

Sunexpress is Pegasus’s first competitor in the market. Because, they both have the

same goals and same infrasturcture for their domestic flights. As a result of Sunexpress’s

origin, which is indeed Germany, Sunexpress achieves most its international flights to

Germany. For that reason, Pegasus competites with Sunexpress only in domestic and

Germany ended flights.

Easyjet is not a domestic company, its origin is Basel – Mulhouse Airport. They have

only 4 common destinations exists with Pegasus flights, which are Basel-Muhouse and

Londra (2 airports), but these flights are the most valuable flights for turkish companies.

Because, these flights have more income then the other flights and there are plenty of

customers on these destinations.

Anadolu Jet is indeed a participation of THY (Turkish Airlines). They have a big fleet

but they do not have that much flight like their competitors. Because, they are using the

turkey’s capital city, Ankara, to achieve their flight in both domestic and international.

Onur Air is a private firm whose owners do not very intend to make it big. They have

scheduled flights and much more than these flights they are doing some subcontractor flights

for other tourism agengies. Even in their scheduled flights, they always prefer to fly some

toristic locations in Turkey, and from other countries to these touristic locations.

THY is the well-known and biggest turkish airline company around world. They

enourmous number of destionations and they have well-educated crew and technicians , also

they have their own technical department. But, they have the highest prices in Turkey.

3. Internal Analysis

Pegasus’s mission, financials, value chain, and competitive advantages are discussed

and illustrated.

3.1 Mission Statement

Pegasus’s mission is, “We believe that everybody has the right to fly. The Pegasus

Family, our suppliers and our partners work together in cooperation to achieve this goal.”

speaks to their goals, but does not reflect the way they earn a profit. The statement definitely

gives the company a future to strive towards, as it will be quite some time before not

everybody has the right to fly in a manner of money even though they have made great

strides. The mission statement sets the company up as a resource that would be used by

anyone who was doing research whether as part of a thesis or just a question out of curiosity.

The mission statement does not give a timeline; it only states the end result. The mission

statement is broad enough that it allows for Pegasus to use any means possible to organize

information.

Mission statement is graphic because it gives a sense of the scale of the endeavor in its

bold declaration “…everybody has the right to fly”. This definite goal is making the future

and past of the company. This goal is a very broad goal to make, because everybody wants

different things to choose a Pegasus flight. There three part of customers in a manner of

economics, which are wealthy, medium, poor levels. Wealthy customers prefer punctuality,

comfort, and service quality. Medium income level customers are more concerned about the

prices, but they also care about comfort, and service quality. Customers who can be counted

in poor income level are not so intended to use airlines to travel; only some of them are using

it in urgent situations, and they only care about the prices. This mission statement is not

completely true because there are always some people outside, who can not use the airlines

because of their income levels, or because of some criminal records, or just because of flight

phobia.

The statement is forthright in understanding to Pegasus growth and service widener

approach for airlines customers in suggestion that “Pegasus is continually developing to meet

passenger expectations and priorities…”. The map above this paragraph is showning the

2012 destinations of Pegasus Airlines. They have a significant number of destinations (85

destinations), even they started this journey at end of 2005. The statement is really in

understanding of “where is Pegasus Airlines company going?” is in suggestion that “Pegasus

leads the way in Turkey by applying its low cost model”. They are leading low cost market

and they have been doing something that others do not, they offers stable prices in long

periods not just a day or a week, they are offering stable prices just before a week from flight.

Low cost and finding the lowest prices in the market all the time is the priority for medium,

and low income level population. “Pegasus operates Turkey’s youngest fleet with the newest

aircraft” , this statement has a good part, their fleet new and there are not much aircrafts in it,

and a bad part, their fleet is not big like their bigger competitors, which might have much

more number of new aircrafts in their fleet with older ones. “Pegasus is Turkey's only private

airline whose wide network of domestic and international flights depart from Istanbul’s

Sabiha Gökçen Airport”, using an airport is far from turistic places and also far from city

centre is not good for the customers from abroad or customers whose intention is just for

turistic purposes. But, on the other hand majority of Pegasus’s customers are in medium or

low income level and these type of customers are stayying in asia part of Istanbul.

3.2 Financial Analysis

Pegasus is indeed a young company. Pegasus has been established in 2005 by ESAS

holding. They are planning to make the company public at end of 2012. They had assest of

223 million $ in 2008, 463 million $ in 2009, and 803 million $ in 2010. They had been

doubling their assets past years.

Pegasus derives almost all its revenue from tickets. But, there are other services with

income like, extra luggages, cargos, meals, delayed tickets, even from job applications. This

begs the questions of if customers find a better service from other airlines companies will

Pegasus Airlines survives.

Pegasus Airlines Turkish AirlinesRevenue (in $) 734996815 5613065757Raito AnalysisIncome from Continuing Operations 1,83% 3,40%Cost of Goods Sold 90,02% 78,47%Balance Sheet Common-Size DataLiabilities/Total Assets 51,18% 34,70%Profit RatiosReturn on Assets 1,68% 2,76%

Table 1 Primary Competitor Analysis (Turkish Airlines)

Pegasus has revenue of 734 million$ and Turkish Airlines has revenue of 5 billion $.

Turkish Airlines’ revenue is 763% of Pegasus Airlines revenue.

Pegasus Airlines has a fleet of 39 aircrafts and destinations of 85 cities, 1,83% of its

income from these operations. Turkish Airlines has 183 aircrafts and 190 destinations, 3,40%

of its income from these operations.

Pegasus Airlines is a young company, and Turkish Airlines is the oldest company in

turkish airline sector. For these reason Turkish airlines has a buget bigger than Pegasus

Airlines, they have more destinations and they have better service quality. These are criterias

which are very important for wealty customers.

All these informations indicates that Turkish Airlines has more income and efficiency from its

assests. But, as one can understand from the return on assets Pegasus Airlines has 1,68% , Turkish

Airlines has 2,76% return from their assets, these are two close numbers.

Pegasus Airlines 2010 2009Growth RatiosSales Growth 43,69% -3,47%Income Growth 72,38% 230,48%Asset Growth 73,42% 107,20%Activity RatiosFixed Asset Turnover 0,86 0,67Profit Ratios Profit Margin 1,83% 1,53%Return on Assets 1,68% 1,69%

Table 2 Ratio Analysis

Pegasus Arilines ended 2008 with a loss of 5 million $. But, At the end of 2009 they

managed to make over 7 million $ profit with their new strategy which was to make ticket

prices more stable. When they came to the end of 2010, they have achieved 17 million $ profit

and with nearly 4 million $ profit, which was shared to its stock holders.

Their assets grew with 73,42% efficiency and their sales grew 43,69% and most

importantly their income grew 72,38% just in 2010. They have made nearly same percentage

of investment with their income increase, which makes Pegasus Airlines more stable in

economic environment.

Turnover rate from assets have been increased from 0,67 to 0,86, which in 2009 every

0,67 $ investment’s return is 1$ turnover, and 2010 every 0,86 $ investment’s return is 1$

turnover. Because of investing assets is expensive in airlines business than other businesses,

turnover rate increased about 20% from 2009 to 2010, and this does not mean company

makes any loss from their actions.

Table 3 Revenue values of last years

Pegasus Airlines has achieved nearly 50% of growth in their revenue in 2010. But, in

2009 even they had bigger net income than 2008; they couldn’t make any improvement on

their revenue from their sales.

Graphic 1 Revenue changes from year-by-year

3.3 Value Chain Analysis

The value chain analysis describes the activities the organization performs and links

them to the organization’s competitive position. Value chain analysis describes the activities

within and around an organization, and relates them on analysis of the competitive strength of

the organization. Therefore, it evaluates which value each particular activity adds to the

organization’s products or services (Recklies 2001).

3.3.1 Primary Activities

Primary activities are primarily concerned with the creation or delivery of a product or

service. They can be grouped into five main areas:

o Inbound logistics (receiving, storing and distributing the inputs to an organization)

o Operations (transforming inputs into outputs)

Years 2010 2009 2008Revenues (x1000) 734.996 USD 511.521 USD 529.891 USDNet Income (x1000) 13.486 USD 7.823 USD -5.996 USD

o Outbound logistics (storing and distribution and delivery of product and service

combinations)

o Marketing and sales (means by which consumers are made aware of an can purchase

products and services)

o Service (activities that enhance the value of a product or service)

3.3.2 Support Activities

            Each primary activity is linked to support activities, which help to improve their

effectiveness or efficiency.

o Procurement (the process of acquiring the resource inputs to all the primary activities

across the whole organization)

o Technology development (all activities have a technology – including know-how and

knowledge, whether concerned directly with products and services or processes)

o Human resource management (those activities involved in recruitment, managing,

training, developing and rewarding people)

o Infrastructure (systems of planning, finance, quality control, information management

and others)

3.3.3 Pegasus Airlines’ Value Chain Analysis

Pegasus Airlines is a Istanbul (SAW) – Turkey based airline that have a

comprehensive network of flights to over 85 destinations around the globe. It is considered as

one of Turkey’s biggest airlines. The company was founded in 1990 in Istanbul. Between,

1990 and 2005 they conducted only private flights for tourism agencies. After, company

changed hands in 2005. They began to conduct scheduled flights.

Operations

Pegasus Airlines believes that everybody deserves to fly. The emotional bonding with

the passengers is the key to building loyalty and one of the major factors that encourage the

customers to repurchase the airline products. The biggest difference of Pegasus Airlines to its

competitors is its people. The passengers in Pegasus Airlines always feel welcomed,

appreciated and reassured. Passengers that travel with Pegasus Airlines know that they are in

good hands. Service Straight from the Heart is a programme that aims to develop cultural

change within the airline focused on improving customer service. Service is the principal

means of differentiating between airlines and is highly influential in customer choice. 

Pegasus Airlines has expressed within its programme its understanding of the importance of

the people within the organization and its recognition of the contribution of those people to its

success. Pegasus Airlines provides excellent customer service by:

1. Creating a climate for positive behaviour

           Pegasus Airlines’ corporate culture instills in the employees the understanding of the

company’s big picture. The corporate culture that the company has encourages innovation,

constant improvement and personal responsibility. The service philosophy of Pegasus Airlines

– Service Straight from the Heart, encourages the employees to render quality service with

human touch

2. Recruiting the right people and offering proper Training

           Pegasus Airlines uses a holistic approach for managing its people. Better understanding

and continuous learning are achieved by involving the staff in the job rotation scheme. Each

employee in Pegasus Airlines is a flag barer of the company. Every member of the Pegasus

Airlines family can represent the whole company

3. Continuous Improvement

           Pegasus Airlines always bears a sense of urgency and crises. Present successes are not

allowed to create complacency. Pegasus Airlines absorbs any good ideas from different

companies, governments or organizations.

Services

Everyday airline companies around the world offer their customers new and different

services. Every airline company has its own key values, some of them offer better services

and more comfort and the others make it cheaper and less comfortable. Pegasus Airlines

offers everything as choices of customers, who can order a meal or extra baggage or choose

their seat, etc. This way Pegasus Airlines can reduce the cost and thus the ticket prices

become cheaper.

Pegasus Airlines has no business class in its flights, only economy class. They are

giving only ticket with taxes and 20 kg check-in baggage with an 8 kg cabin baggage for free.

Anything else is charged with an amount of money. Some Pegasus Airlines services are:

1. Pegasus Flight Cafe

Where you can find meals, drinks, duty free items, and gifts with reasonable prices.

2. Rental Car, Parking Lot, and Hotel

Pegasus offers its customers rental car services with a discount of 25% from all

airports. Also, customers could make hotel reservation with using Pegasus website. Parking

Lot service is only for the Sabiha Gokcen Airport (SAW).

Technology Development

Pegasus Airlines is a young airline company. Pegasus has no reputation like Turkish

Airlines or any other global airline brand. Because of this, Management of Pegasus Airlines

gives importance to technological development than its competitors. Pegasus Airlines wants

to evolve and to give best service with punctuality to its customers.

Pegasus Airlines doubled its assets in every year. Last know assets value is around 800

million $. In 2011, Pegasus made an investment of 22 million $ on Flight Training Centre and

Wireless Groundlink end-to-end Solution. They are investing money on pilot training, crew

safety and service training, ground services, and mostly e-business.

1. Online Check-in

Pegasus Airlines offers its customers to make online check-in with only reservation

number, and their names. Customers can make online check-in not early than 72 hours, and

not later than 40 minutes to flight.

2. Mobile Check-in

Pegasus Airlines offers a new and useful process to its customers, to make check-in

from their mobile devices, cell phone, PDA, etc. Simply, customers go online and make

check-in with their e-mail and cell phone number, then an e-mail and an SMS are sent to them

with a boarding card and a barcode, this way passenger can board with only using barcode on

SMS.

3. NotiFly

Pegasus Airlines also offers flight reminder system with both e-mail (for free) and

SMS (for just € 0.40) this way passengers could be more aware about their flights.

4. Flight Training Centre

Pegasus Airlines has a simulator, which is just owned only 10 % of world’s airline

companies, on this facility. This simulator based on real Boeing 737-800 aircrafts.

5. Wireless Groundlink End-to-End Solution

Pegasus Airlines is the pioneer on using this system in both ways. They are simply

getting flight information content simultaneously to Groundlink, and analyze them in 15

minutes. This means every aircraft can be checked up in just 15 minutes and not in every

month in just before every flight.

Human Resource Management

Ensuring All Pegasus’s Family Members working in teamwork through unifying the

objectives of everybody in the team and increasing their motivations to the possible highest

level by providing a democratic environment, in which All Pegasus’s Family Members share

their ideas freely.

Pegasus select the best; while progressing in that direction, finalizing the recruitment

process together with the departments through managing the recruitment process in the most

effective way and directing the right person to the right department on the right time.

Ensuring All Pegasus’s Family Members executing their jobs correctly, effectively

and quickly through completing their missing occupational and personal trainings required for

maintaining their personal developments and keeping their motivations continuous and active.

Arranging the most appropriate career planning to the individuals, canalizing them to

the personal trainings required for their personal developments, ensuring fair salary

management based on the results obtained from our applied performance system and the

correct feedback to All Pegasus’s Family Members.

Pegasus’s expectations from Pegasus’s Family Members;

Pegasus expects them to be open to working discipline, teamwork, communication

awareness, results orientation, continuous innovation, change and development.

Pegasus Airlines has two slogans to its possible new recruits:

Are you ready to fly into the future with Pegasus?

Candidates applying for vacancies in Pegasus Airlines go through one or two

interviews in which the HR department and the person in charge of the relevant position are

present.

Depending on the type of position, personality and/or foreign language tests are

conducted and candidates’ references are checked.

Candidates fulfilling all the employment processes are given job proposals by the

Human Resources department.

Welcome to the Pegasus family. What’s next?

Through Pegasus Airlines corporate orientation training programs, Pegasus help all

new employees adapt easily to performing their duties in Pegasus Airlines and to learn the

methods of this new environment. Pegasus provide support in their endeavors to become a

valued member of the Pegasus family.

Pegasus Airlines uses a quote for describing its performance assessment process;

"Nobody knows the limits of their capabilities unless they try." Goethe.

Pegasus Airlines applies a capacity- and target-oriented performance management

system.

Through Pegasus’s performance management system and the right feedback,

Pegasus’s main focus is to enhance the capabilities of our employees and to ensure their

contribution to the overall corporate goals with a target-oriented evaluation process.

The information acquired during the performance assessment process ensures

Pegasus’s family members’ improved capability, thereby directing them to the required

training programs to contribute to their personal development.

Based on the above, Pegasus Airlines create the most appropriate career plan for new

employees and develop a performance-based salary and income-share system.

The income-share system is based on the distribution of compensation among

Pegasus’s employees depending on their performance and total earnings of the non-taxed net

Euro profit earned during the fiscal year, in such amounts and rates as determined by the

Board of Directors.

3.4 Competitive Advantages

Pegasus Airlines has sustainable competitive advantages because their remarkable

developments on low price, security, ground services, and continuous improvement.

Low Price

Pegasus Airlines uses yield management system on its flights. This way they can

maximize their revenue with low prices. Offering low prices means more customer and more

flights on way to customers’ demands.

Security

Pegasus Airlines has an average fleet aircraft age of 2,59 years. Also, they have very

experienced pilots and cabin crew.

Grounding Services

Pegasus Airlines offers its customers parking lot service in Istanbul. This way,

customers can get rid of the payments and procedures for parking their car.

Pegasus Airlines also have company for disable passengers, to escort them to board or

taking their baggage for them after flight.

Continuous Improvement

Pegasus Airlines mission is to reach everybody, and take them into their flights.

Everyday Pegasus tries to make this mission happened. They arrange some new routes, and

make new flights to existing routes. They recalculate their goals for making flights more

suitable and cheaper to its customers.

Pegasus Airlines also cares about comfort on its flights, using feedbacks from its

customers. They achieve and realize how they could make flights more comfortable without

increasing the ticket prices.

4. SWOT Analysis of Pegasus Airlines

The SWOT analysis is the process of analyzing organizations and their environments

based on their strengths, weaknesses, opportunities and threats.

4.1 Strengths

o Best and more stable low prices

o Parking lot services in Istanbul

o Mobile and online check-in ability

o To train their own pilots with Pegasus Flight Centre

o Experienced pilots and cabin crew

4.2 Weaknesses

o Almost all flights from Sabiha Gokcen Airport – Istanbul

o Non-free flight café

o Flights are limited to only 85 destinations

o Fleet of 39 aircrafts

o Copying some of other successful airlines behaviours

4.3 Opportunities

o Expansion to other destinations

o Buy aircrafts from producers or other firms

o Make reputation with big promotions

o Increase in tourist population

4.4 Threats

o Recession – decrease in airline travel

o Fuel prices

o Competitors – Sunexpress and Turkish Airlines

o Government’s control on taxes

5. Strategy Formulation

Pegasus Airlines has to make its new strategies in order to achieve its mission, which

was clearly defined in previous sections, as “Everybody has the right to fly”. For achieving

this mission of Pegasus Airlines, it has to grow and pursue its low price policy.

Pegasus Airlines currently makes scheduled flights with low cost model and yield

management system, which makes the ticket prices lower than its competitors and most of the

airline airlines companies. But, Pegasus Airlines has no business class in its scheduled flights,

and they have limited number of destination, and aircrafts to achieve its mission.

Pegasus Airlines also conducts two other operations in the market. First one is Pegasus

Cargo which has only limited amount of budget and market share. Second one is İzAir which

is an airline company by itself, but Pegasus Airlines is using it like a subcontractor for its new

and old destination. İzAir is like forecast tool for Pegasus Airlines. They can do flights that

they never did before and they can take flight reports and statistics for analyzing how accurate

to fly in this new flight route.

Esas Holding has shares inside a decade of other businesses, but their main business is

always Pegasus Airlines. They using other businesses to make more money to invest on

aviation. They have only one company with 100% share and it is Pegasus Airlines with İzAir.

Past 3-year Pegasus Airlines always make its assets double, so from this information

we can say Pegasus Airlines is a company who wants to grow in market. They were growing

with a constant rate of 100% per year. But, this does not mean they will grow this much rate.

It can decrease or increase depending on market share in a new year, its competitors, fuel

prices, taxes, and even the attitude of people to flying or to just Pegasus airlines.

5.1 Growing Strategy Formulation with BCG Matrix

The BCG matrix (aka B-Box, B.C.G. analysis, BCG-matrix, Boston Box, Boston

Matrix, Boston Consulting Group analysis, portfolio diagram) is a chart that had been created

by Bruce Henderson for the Boston Consulting Group in 1968 to help corporations with

analyzing their business units or product lines. This helps the company allocate resources and

is used as an analytical tool in brand marketing, product management, strategic management,

and portfolio analysis

Stars are simply main services of the company, a company’s operation are covered

90% of its whole operations. Cash Cows are side services with low budget and good return,

return from these operations are generally invested on Stars. Question Marks are what could

company do in the future, list of operations which are possible for company to achieve. Dogs

are simply operation on break-even point with a slow-growth markets.

Stars of Pegasus are Pegasus Flight Café, Some of tickets which are named Superb

and Flex. Pegasus Airlines has only economic class flights and they have three price policies,

which are campaign, superb, and flex, with the same services. Only the flex tickets give the

advantage to change flight date or cancel, the others do not give that chance to its owners.

Cash Cow of Pegasus is Pegasus Cargo. Pegasus Cargo was established simply to

make money and government obligation to carry a limited cargo per flight. They are making

money from this business, but cargo business is not their priority. They even do not think

cargo business is one their main businesses.

Question Marks of Pegasus are business class, and oversea flights. Pegasus Airlines

has neither of this two services, their biggest competitor, Turkish Airlines, has both of this

two services, but Pegasus does not have. Pegasus mission is described as ‘We believe that

everybody has the right to fly’. They are not flying oversea and they do not have business

class in their flights, so the mission statement is not accomplished completely.

Dogs of Pegasus are hotel reservation, and rental car services. They are doing these

businesses just to give their customers wider service range. They do not earn much from these

services, they have partner firms or alliances on ground to do these services for Pegasus

Airlines’ customers.

Pegasus Airlines has great degree of market share in their stars, nearly 60% of market

share. The market of low price flight tickets is growing very fast, every year nearly 25% of

growth occurred in this segment. Pegasus Airlines has low market share in their cash cow,

nearly 2-3% of market share. The cargo market is growing with a very low rate. Pegasus

Airlines has no market share in their question marks. But, the market of business class and

oversea flights is growing very fast with nearly rate of 15% in every quarter. Because, the

world is slowly becoming a small place with the effects of globalization. Pegasus Airlines has

very low market share in their dogs, nearly 0%. The market is growing fast, but Pegasus has

no intention to follow these market, because these markets are totally different from what

Pegasus does.

Because of lack information in my hand now, I can only go this far. But, Pegasus

Airlines should make forecasts about oversea flights and business class in their scheduled

flights. They can reduce the market share of low prices tickets, so they manage to get bigger

slice from business class. But, if they will earn more than they earned from low price ticket,

otherwise they will make loss. For the oversea flights they need a bigger survey, because if

they decided to do this survey, they must think all the international competitors not just

domestic competitors.

Pegasus Airlines’ final strategy should be about either to create a new market or to

exists in an existed market. Because, if something happens like a fuel crisis the company may

not be survive from this kind of a disaster. So, they need to build customer loyalty in a sector

that nobody will not be strong like Pegasus Airlines in that sector.

6. REFERANCES

Financial charts - http://report.paragaranti.com/MaliTablolar_2.aspx?hisse=

Descriptions - Management Function & Strategy 2nd edition Bateman/Zeithaml

Financial & Technological News - http://www.dunya.com [Search: Pegasus]

Flight maps - http://www.airlineroutemaps.com/

General information about Pegasus - http://www.flypgs.com/en/

Fuel prices - http://www.iata.org/whatwedo/economics/fuel_monitor/Pages/index.aspx