Since Mehmet Nane became CEO of Turkey’s second-largest airline, low-cost carrier (LCC) Pegasus Airlines in March 2016, the country has been through a tourism ban by Russia (now removed), an attempted military coup and several terrorist attacks. He talked about the company’s prospects to Alan Dron.

Pegasus made a net loss of TL136.2 million ($36.1 million) in 2016, compared to a profit of TL111.9 million for 2015. What is 2017 looking like? 2016 was really challenging and, compared to that, I think any year is going to be much better. This year is not going to see a full recovery to 2015 levels, but it’s going to be much better than 2016.

Are tourists from Western Europe and Russia returning to Turkey yet after 2016’s 23% drop in numbers? Most visitors come from Germany, with Russia second and the UK third.  Tourists from Germany are 13% up. The highest increase in tourist numbers is from Russia. Compared to last year, it’s a five-fold increase. In 2016 we had 24 million passengers, of which 15 million were international and 8.8 million domestic. In 2017, year-on-year we have increased our number of international passengers [so far] by 18%.

How is the domestic market holding up? It’s getting stronger and stronger. Turkish Airlines is also increasing its number of passengers; we’re expanding the cake. Turkey is big: If you fly from Istanbul to the Iranian border, it’s 2¼ hours. If you fly 2¼ hours west from Istanbul, it takes you to Hungary or Austria. There’s huge potential for the future of domestic demand.

What do you see as being your most important international markets? Europe as a whole, Russia, the Middle East. We have started to fly new routes into Ukraine and to several destinations in Russia – Grozny, Samara, Nizhny Novgorod and Volgograd. We also have a lot of ‘ethnic tourism’ – Turks working in Europe who fly home on vacation. We don’t have a specific area where we will concentrate our efforts in future, but if you asked us to choose a single area, because of the income potential we would concentrate mostly on Western Europe.

You had rapid growth in ancillary revenue in 2016: is that continuing? Definitely. When you look at 2015-16, we increased our per passenger revenue [from ancillaries] by 3.7%, from €9.77 (10.93) to €10.13. We achieved 23% of our total revenue in ancillaries in 2016 and we’ll continue to prioritize this area, because we believe there’s room to grow. We would like not only to provide customers with ticketing services but a door-to-door experience, for example, providing transfers to the airport and accommodation.

You have introduced your ‘3C’ strategy. What are the main points? 3C stands for CASK, cash and capacity.  We would like to reduce CASK, have the best possible cash management and utilize capacity as efficiently as possible. The cash management structure must make a profit. If we have assets that we’re not utilizing – for example, an A320 simulator that we paid for in cash – we sold it to a simulator company and leased it back over six years. We’re talking to CFM about eight engines for sale-and-leaseback. We’re selling our old fleet for cash and putting the proceeds into new aircraft instead of using our credit line.

Pegasus flies to the UK. How are you coping with the ban on personal electronic devices (PEDs) being carried in the passenger cabin from certain countries, including Turkey? We take PEDs at the gate, put them into a special bag and give them to cargo [personnel]. It’s 3½ hours to the UK; people can survive, but they do feel that their freedom has been taken from them, even if it’s just for a small portion of their lives. If you’re going long-haul to the US and need to work, it definitely affects you if you don’t have a laptop.

Do you believe the PED ban is justified? The day after the laptop ban was brought in, there was an attack on the UK parliament. That gives the impression that the terrorism information received by the UK intelligence services was factual, and that the ban was not brought in for commercial purposes or to prevent Turkish carriers from increasing their market share.