Turkish Airlines upbeat despite fuel cost surge and stock price fall

• Expects $3.5bn fuel bill increase
• Fast-growing cargo is ‘natural hedge’
• Business ‘not structurally impaired’

Turkish Airlines has been among the many losers in a near month-long slump on Istanbul’s bourse, as investors fret over the impact of soaring fuel costs on the country’s flag carrier.

Yet the airline’s long-term prospects remain undimmed, thanks to Turkey’s geographic location and a fast-growing cargo business, according to Çağla Meryem Değer, an Istanbul-based equities analyst.

“The disconnect between fundamentals and price comes down almost entirely to fuel costs,” she said.

Senior executives say the US-Israeli war with Iran – which has driven the airline’s fuel bill higher – has not altered its expansion plans.

Turkish Airlines shares hit an all-time high of 353 lira ($7.65) in February, but have since fallen 12 percent to trade at 292 lira on Thursday, far below analysts’ consensus price target of 442 lira.

Ahead of 2026, Turkish Airlines estimated that Brent crude would average $65 per barrel this year. If Brent averages $90-$95 – as the carrier now expects – its annual jet fuel bill will be $3.5 billion higher than previously thought.

This week, the International Air Transport Association forecast that elevated jet fuel costs would nearly halve annual global aviation profits.

Yet this “is a cyclical headwind, not a structural one” for Turkish Airlines, said Değer. “Turkey’s geographic position is a durable competitive advantage that no competitor can replicate, and it underpins both the passenger transfer hub model and the cargo business.

“When energy prices normalise, the operating leverage in this business is significant. The air cargo operation remains under-appreciated. Istanbul’s location makes it a natural transit point for intercontinental freight, and that franchise has been building quietly while the market focused on fuel costs.”

The airline hedges about 40 percent of its fuel bill. This, together with fuel surcharges that equate to about 50 percent of additional jet fuel costs, means it is “able to cover a significant portion of our [additional] fuel expenses”, chairman Murat Şeker told an analyst call.

He said the overall “negative impact” of the Iran war would be $200 million – far lower than the increase in the fuel bill.

The near-closure of the Strait of Hormuz has boosted air freight demand, with Turkish Airlines’ first-quarter cargo revenue rising 30 percent to $769 million.

Salvation in cargo

“Our cargo business serves as a natural hedge, much as it did during previous periods of disruption,” chief financial officer Metin Gülşen told analysts.

The airline paused flights to 10 countries that, combined, represented about 6 percent of its capacity. Instead, it increased flights to Asia, where load factor rose 11 percentage points to 94 percent in the first quarter.

This helped it to carry 21 million passengers during the period, up 13 percent year on year, while quarterly revenue rose 21 percent to nearly $6 billion.

Şeker said the disruption and higher costs arising from the Iran war would “definitely not” affect the airline’s long-term expansion plans. Its fleet will expand from 530 to around 610 aircraft by the end of 2027.

The airline’s price-to-earnings ratio is just 2.8. In contrast, Turkish low-cost carrier Pegasus trades at a P/E ratio of 9.7 and the overall stock market’s P/E ratio is nearly 19, SimplyWallSt estimates.

Turkish Airlines made a first-quarter net profit of $227 million, versus a loss of $44 million a year earlier.

Further reading:

• Budget airlines ‘could be first casualties’ if Iran war drags on
• Iraq lost $15,000 per hour due to airspace closure
• AirAsia delays opening of Bahrain base

Turkish Airlines carried nearly 93 million passengers last year, up 9 percent versus 2024, achieving a load factor of 83 percent. Free cash flow rose by nearly one-third to $2.5 billion.

“These are not the numbers of a structurally impaired business,” said Değer.

She described aviation as Turkey’s most compelling sector from a risk-reward perspective.

Analysts on average forecast that Turkish Airlines will generate nearly $26 billion in annual revenue this year – up from $24 billion in 2025 – and $30 billion in 2027, according to SimplyWallSt.