In its April 11, 2019 edition The Economist magazine, one of my favourite reads, published the following article Turkish Airlines takes on Emirates, Etihad and Qatar Airways. I can’t comment on the conclusions that it arrives at because the analysis is meaningless. It is important for readers to understand why this is so to better enable them to make judgements about the content. In my article I am not arguing for or against a particular airline, I wish them all the best. I am simply pointing out the flaws in the article’s arguments, with all due respect to the author and to a great magazine.
Using the right measure for growth rates
The first issue is the following statement “Turkish [Airlines] is growing at an annual rate of 30%, unlike its Gulf rivals, whose expansion has stalled or gone into reverse (see chart).”
As always, when comparing growth rates one needs to look at multiple factors. An important factor is the base one is starting from. In this case the measure used in the article is passengers carried in absolute terms and the base seems fair enough. The question is does the measure make sense? It doesn’t for several reasons. With regards to presenting the graph the main issue with the base is that Turkey has a population of circa 79 million whilst the UAE and Qatar have a combined population of 12 million. Turkish (the airline) is carrying circa 100% of its population per annum whilst Etihad, Emirates and Qatar (airways) are carrying circa 900% of their populations annually. That is a huge difference.
The second issue is what does total number of passengers mean? Clearly in the end success will be measured financially. But even intermediate measures would be more meaningful. Carrying the same number of passengers but with lower plane occupancy rates and / or higher number of flights is a bad thing.Continue reading