Turkey's wealth fund in talks over urgent support for hard-hit Turkish Airlines: sources

Istanbul

TURKEY'S wealth fund is in talks to provide emergency funding to flag carrier Turkish Airlines, one of the country's hardest-hit companies when the novel coronavirus pandemic halted nearly all flights, four sources told Reuters.

The sources close to the matter said that the company, which flies to more destinations worldwide than any other airline, could receive capital or financing support, though nothing had yet been finalised.

It was unclear how much funding the Turkey Wealth Fund (TVF) could make available in what one source called a "bailout". TVF declined to comment.

In a statement to the stock exchange, Turkish Airlines said the company had not received any information regarding talks being conducted for the provision of capital or financing support to the company.

Measures restricting movement in the wake of the pandemic have led to big losses, layoffs and closures at airlines around the world. One of the biggest, Germany's Lufthansa, agreed to a US$10 billion government bailout in June.

Turkish Airlines posted a loss of 2.23 billion lira (S$391 million) in the second quarter when lockdowns at home and abroad were most widespread. It has agreed with a labour union to cut wages by 30-50 per cent until the end of 2021 but avoided layoffs.

"It is very clear that Turkish Airlines is in need of a bailout programme. This could be capital support or financing support," one of the sources said.

The source added that TVF conducted a broader study of struggling Turkish companies in the transportation and tourism sectors, suggesting that other bailouts could be forthcoming.

TVF owns 49.12 per cent of Turkish Airlines, which has a market capitalisation of 14.6 billion lira. Its shares have dropped 31 per cent since borders were temporarily closed and domestic and international flights were halted after February.

They rose 2.5 per cent after the funding news on Friday.

Chairman Ilker Ayci said after the second quarter that the airline felt "very comfortable" with the US$1.7 billion of cash on hand, credit lines and other funding capacity it had until the beginning of 2021.

But it expects to burn up to US$350 million per month through year end, when net debt is expected to be some US$14 billion.

Finance Minister Berat Albayrak, announcing the government's three-year plan last Tuesday, said that the recovery in some sectors including tourism and transportation had not reached desired levels.

Another source told Reuters that efforts were being made for a similar style rescue for Turkish Airlines to Lufthansa.

"A sort of capital transfer or providing financing will be possible. Talks are now being held for this and the ideas for the method are being evaluated," the source said.

The company's passenger numbers tumbled 65.9 per cent year-on-year in August, company data showed. Its load factor dropped 17.2 percentage points to 67.6 per cent in the same period. REUTERS