Turkey is going through an exciting phase at the moment. In a period of global economic recession, Turkey has been the fastest growing economy in Europe, for two out of the last three years, and is even projected to post a respectable GDP growth figure of 4% for 2013. What impact would you say this economic prosperity has had on the Turkish airline industry and TAV? “adapt Need”
Between 1990 and 2000, Turkey was governed by coalition governments. During this coalition era, Turkey was a little complacent regarding the changes in the world and globalisation.
Globalisation started with the demolishing of the Berlin Wall in 1989, and Turkey did not catch up for ten years. But at the end of the 1990s, Turkey started to feel the new economic era and terms, and it started to move towards globalisation, starting with privatisation. Some small organisations started to be privatised at the end of the 1990s. Doing things at the right time in business is very important.
There was a tender in 1997 for the BOT (Build Operate Transfer) for Istanbul Atatürk Airport International Terminal. It was a really interesting opportunity for us, and we went for it, and we got the tender. Companies grow in parallel with country growth, especially in the aviation business. In the aviation business, there is a twofold correlation between GDP and the increase in passenger numbers. GDP doubles passenger numbers. If you achieve 4% GDP growth, you can achieve an 8% increase in passenger numbers.
Since 2000, with the single party government Turkey has embarked on increasing privatisation projects. Changing the public mindset towards privatisation is very important, because this is shaped by the culture, history and social understanding of the people. It is not easy to privatise an airport, because the public perceives that airport as their own – the gateway to the country. But with privatisation, you are commercialising the airport. It is a viable means of financing a government entity.
In summary, form 1990 to 2000, Turkey had lost ten years, but by the end of the 1990s we were catching up with globalisation and new economic terms took place here.
There was a crisis in Turkey, and a new single party government came in following the crisis, which was a defining moment. Then privatisation projects started. This approach created new Turkish companies, and led these new companies to grow on international level.
These international companies went to IPOs (initial public offerings) or sold shares to funds. Then the international financial institutions started to understand these private companies that were created after privatisation, and these companies started to understand the importance of corporate governance. There were only five or ten big Turkish companies in the 1990s competing on an international level. But after 2000, this number augmented steadily.
TAV was established in 1997 after the BOT tender. We saw the growth in Turkey as well as in the emerging markets around Turkey. We understood the importance of geographical proximity, cultural commonality and administrative similarities.
That is why we said that we were going to be a regional company operationally, but we were also going to be a global company financially. We are now in Macedonia, Tunisia, Saudi Arabia, the GCC (Qatar, Oman, Abu Dhabi and Dubai), Latvia and Turkey. So the strategy we set in order to achieve our objective was the right one. We put the right people in the right positions.
The government embarked on privatisation and we have four airports in Turkey, and we conveyed our knowledge to the region. At the same time, we did an IPO and broadened our investor base. Now we have large international financial institutions that are our partners.
So from the beginning, it is safe to say that you had regional or even global aspirations.
Definitely. But you cannot do this alone. We cannot say that we have done this alone. The economic environment and stability in Turkey is very important.
When we met with Dr Ertaş, the Chairman of the Capital Markets Board, he stressed the importance of confidence and trust in the underlying economy, for the growth of any country. Do you think that the recent events have damaged international perception of Turkey, and if so, what do you think needs to be done?
During the Gezi protests, there was the ACI (Airports Council International) conference in Turkey. We invited 850 delegates (CEOs and presidents) here from 1,750 airports. Everyone came, despite the protests. I sent 800 e-mails saying that there are some protests, but the protesters are demonstrating their democratic rights. They went there even, and took photographs. They understood that these protests happen all the time in the Western world and it’s a sign of democratic maturity.
When we look at our market value in the stock exchange, the protests did not have any negative effects. There have been some slight decreases in passenger numbers, but they are minimal. I cannot say that there has been a big effect on the economy. The economy is growing.
However, this does not mean that Turkey is immune to all kinds of external effects. There are lots of troubles in Syria. We are operating two airports in Tunisia, where the Arab Spring started. But when you look at it, the opportunities are there. No pain, no gain. There may be some difficulties, but especially regarding the aviation business, because of globalisation, everybody has to fly.
We could have done this interview via the internet, but you wanted to see me. That is why you came to Turkey. There are 150,000 routes in the air from Europe to other parts of the world, and there is no other type of economic activity to replace this, not even the internet. Goods and people have to fly.
So our business is a crisis-resistant business. But at the same time, our business reveals the first signs of a crisis, because we operate the gateways of countries.
You operate in six countries. I assume that your operations are streamlined to be efficient and effective, but how different do you have to be for the culture and geography as you are outlining?
As the operators of the largest gateways of countries, we take over the responsibility of representing that country. You can have an idea about the architecture, engineering, and the operational and financial capability of a country by looking at its airports. Tens of thousands of passengers get their first and last impression of a country at its airports.
We have standards, but we are tailoring the business to the local culture and economic capabilities of that specific country. We call it the “standardisation of customisation” or the “TAV method”. Globalisation has the capability to transfer capital, knowledge and information, but globalisation cannot transfer cultures. You can only integrate cultures.
That is why we are trying to integrate and articulate cultures. Being a Turkish company, we have an edge compared to our Western partners, because we are an Eastern and a Western country at the same time. TAV has managed to integrate international standards into its business culture through corporate governance. For the past three years, we’ve been at the top of the corporate governance index in Turkey.
This is very important for our international investors. To deal with your international investors, you have to know their standards as well.
TAV is really an ambassador for Turkey in many ways.
Definitely. We are not just after financial gain. We are looking for social gain for the country as well; to create employment and educate our young people and train them. Let me give you an example. In the construction industry, the latest technological advance is a software program called BIM (Building Information Modelling). You create the building virtually, and then you go to the site and do it. TAV is one of the pioneers in the Middle East using this program with our partners.
I brought in ten young Turkish engineers (new graduates) and sent them on a simulator to learn about this program. These engineers may leave our company, but that is no problem. They can train another 50 and then Turkish engineers will gain this new capability. The competitive advantage of Turkey is its human resources. We have a very young and well-educated population.
TAV is a very good brand overall, particularly in terms of its human resources. Without my team, I have no chance of making my company successful.
You recently qualified to bid for the rights to operate and reconstruct New York La Guardia Airport, which is one of the most famous airports in the world. What does this mean for TAV and what are your global aspirations?
One of my favourite books has this title What Got You Here Won’t Get You There. This is our strategy. We know that in ten years’ time, what got us here won’t get us there, so we have to change. During our first ten years, we were a regional company operationally, and a financial company globally. Now we have to be a global company operationally as well. Aeroport de Paris recently became our partner.
AdP is one of the largest airport operators in the world. They own a 38% share in TAV. This is a very important success story in the history of foreign direct investment (FDI) in Turkey. It is not a financial fund, or even a strategic partner. It is an industry partner.
Together with them, we changed our strategy a little. We realised that we can even go to the US. I say this because qualifying for a tender for an airport in the US requires top notch capabilities in all aspects. We partner with global companies, such as Goldman Sachs, which is very important for a Turkish company. There are three or four more companies that are going to participate. They are huge groups, and it is going to be a very important tender.
That is why we are very happy to get prequalification and we will work for it.
TAV is also very active in airport construction. What competencies or synergies have you been able to benefit from when building new airports, given your extensive history and experience operating airports?
Within the TAV Group we have airport operation companies, service companies and a construction company. When you look at TAV, it is a matrix style structure. Diversification is important, but there must be integration at the same time.
We provide services in all areas of airport operation, including duty-free, ground handling, IT, security and catering. These are quite different functions but they are all doing business at airports. I tell my guys that their names can be different, but their surnames are always the same. This is the most important aspect of TAV.
In this matrix style management model, there are no distinct and separate areas of responsibility but continuous communication between functions. Our motto here is ‘connectivity is productivity’. You have to be connected. It is a connected world.
Windows of opportunity are open to all these companies. Some countries in emerging markets go for privatisation, but others pay money, construct a building and go for it. We can adapt to each and every need. We are increasing revenue and decreasing costs, via economies of scope and economies of scale.
Managing this kind of matrix organisation is really hard. Using a forest as an example, I cannot do micromanagement, but I get involved with the trees in the forest. I cannot manage a forest if I do not know about the trees. I am trying to do my best to know and get connected with all these businesses.
You mentioned earlier that public mindset and opinion can be hard to control or change. TAV is already synonymous with quality and change. How are you working to strengthen the brand even further?
I am not going to tell you about the social responsibility projects. First of all, the company’s ethics are very important. Being famous is about popularity, and we are not looking to be popular. We are looking to be selected.
This is branding, and our brand is our people. Thirty years back, everyone was talking about shareholder value. After 15 years, they started talking about customer satisfaction. Now, they are talking about stakeholder satisfaction.
Our customers and employees are very important stakeholders for us. There is the CEO, the employees, customers, banks, suppliers, etc. as your stakeholders. Our approach is that if you take care of your employees, your employees will take care of your customers, and you will have happy customers.
If your customers are happy, you will have happy shareholders. So we are looking for happy employees. Employee satisfaction is the first thing. You cannot have a happy customer with an unhappy employee. So we are making our employees happy, and our happy employees are making passengers and customers happy, which gives our shareholders and stakeholders the best they want.
This is the formula – people, people, people. That is why we are really a brand in human resources at the same time.
If we were to come back here in say five years’ time to interview you, what accomplishments or achievements would you have liked to have made?
In 2000, when I left the airport, I saw Korean flags with the names of Korean companies written on them, like LG, Samsung, Daewoo etc. to welcome their president to Istanbul. I wondered if in the future there would be a Turkish company in a different country, hanging a Turkish flag up to welcome their president or prime minister.
TAV has done this in Qatar and Oman, Cairo and Macedonia. In 2000 I said that I had a dream; that we were going to operate ten airports in ten years’ time. By 2010, we were doing this. By 2010, we had 47 million passengers and we targeted 100 million passengers by 2020. Now we have 73 million passengers, and in five years’ time we will have already beat this target.
What final message would you like to send to our readers about TAV or about Turkey as a whole?
If I were an international foreign businessman, I would definitely like to invest in Turkey, because Turkey is an emerging market where you can access a very well-educated and young workforce.
There are a lot of opportunities in Turkey. I would say that there are a lot of low-hanging apples in Turkey, but in ten years, the apples will be very high up.