Two tables in Turkish Airlines’ first-quarter report must be read side by side: the traffic table and the lease maturity table. One shows 21.3 million passengers, an 83.5% load factor, and 552 thousand tons of cargo+mail. The other shows TL 665.9 billion in lease liabilities. One shows that the aircraft is taking off; the other shows for whom, and on what terms, the aircraft is working.
That is why the first question for THYAO is not “how many people flew?” The first question is harsher: are these seats earning cash faster than the lease schedule demands it?
Q1 demand worked. Passenger capacity rose 9% year-on-year; in the traffic table, available seat kilometers grew 9.4%, passenger count increased 12.7%, and load factor rose 2.9 points. Turkish Cargo, according to IATA data, became the world’s largest air cargo carrier in January-March 2026 with a 6.9% market share. AJet is also working like a separate growing engine, with 5.654 million passengers and an 85.4% load factor.
But the operating result has not yet lifted cleanly off the runway. Revenue rose to TL 257.961 billion; gross profit was TL 21.568 billion. Even so, operating profit is still TL -2.451 billion. Profit attributable to the parent was TL 9.915 billion, but investment income, finance expense, and deferred tax income stand guard at the door of that profit.
| 2025Q1 | 2026Q1 | Read-through | |
|---|---|---|---|
| Revenue | TRY 176.7bn | TRY 258.0bn | 46% growth |
| Gross profit | TRY 11.7bn | TRY 21.6bn | Gross margin rose from 6.6% to 8.4% |
| Operating result | TRY -2.9bn | TRY -2.5bn | Loss narrowed, but the operating engine is still negative |
| Parent net income | TRY -1.8bn | TRY 9.9bn | Net profit is positive; investment, financing and tax bridge matter |
It would be wrong to belittle net profit. The larger mistake would be to mistake the quality of net profit for seat economics. In Q1, there is TL 21.699 billion of income from investing activities. Finance expense is TL -14.443 billion. Tax income is TL 5.448 billion; TL 5.538 billion of that is deferred tax income. In other words, THY made money, but in Q1 the core operation did not declare a clean victory on its own.
Cash speaks better. Operating cash flow was TL 43.336 billion. That is above net profit and valuable from a liquidity perspective. But the same cash flow includes a TL 43.603 billion contribution from deferred revenue. In the airline business, the customer pays first and the company delivers the seat later. That is a useful financing habit; it is not free capital. The flight will be operated, fuel will be burned, staff will be paid.
Investment cash is not light either. In Q1, cash flow from investing activities was TL -46.257 billion. TL 21.013 billion went out for tangible and intangible asset purchases. Lease liability payments were TL 24.890 billion. Interest paid was TL 9.083 billion. In this business, growth requires cash discipline before it deserves a pretty passenger chart.
The real picture of THY hardens in the fleet table. At the end of March 2026, there were 528 aircraft: 144 wide-body, 356 narrow-body passenger aircraft, and 28 cargo aircraft. That scale is an advantage in itself. But in the same table, 173 aircraft are owned, 190 are under finance lease, and 165 are operating/wet lease. Put differently, most of the aircraft count stands closer to the word “contract” than to the word “asset” shareholders like to hear.
| 2026Q1 | Evidence | Investor question | |
|---|---|---|---|
| Total fleet | 528 aircraft | 144 wide-body, 356 narrow-body, 28 cargo | Does scale become profit? |
| Owned aircraft | 173 aircraft | Fleet table | How much of the asset quality is directly owned? |
| Finance + operating/wet lease | 355 aircraft | 190 finance lease + 165 operating/wet lease | Is growth faster than the lease schedule? |
| Lease liabilities | TRY 665.9bn | TRY 85.1bn current + TRY 580.8bn non-current | Cheapness must be read with this liability |
The financial statements turn that image into numbers. Current lease liabilities are TL 85.107 billion, non-current lease liabilities are TL 580.823 billion. Total: TL 665.930 billion. Note 17 looks even further ahead: the Group will acquire 469 aircraft between 2026 and 2036, 319 firm and 150 optional; the list price is approximately USD 34.201 billion. List price is not the actual purchase price, but it does not let the investor trivialize the capital hunger ahead.
Fuel is a separate ledger. The Q1 operating report describes jet fuel as aviation’s largest cost item. 3M26 fuel expense was USD 1.546 billion; in 3M25 it was USD 1.346 billion. Consumption rose from 1.639 million tons to 1.834 million tons. Average unit cost rose from USD 821 to USD 843 per ton. Despite that, fuel’s share of operating expenses fell from 26% to 25%. There is a sign of good management here, but the line of fate is still there.
The wage side is not loose either. The 2026-2027 collective bargaining agreement brings a 14% wage increase for the first six months, with an additional increase mechanism tied to inflation changes for subsequent periods. That is not bad news; this business cannot be sustained by cheapening its labor. But for the investor, it is a clear line that must be written into the margin calculation.
THY also cannot be read with a pure private-sector reflex in governance and capital allocation. The Turkey Wealth Fund’s Class A stake is 49.12%; publicly traded Class A shares are 50.88%; the Privatization Administration holds the privileged Class C share. After Q1, the chief executive, the chief financial officer, and the chair of the board changed. In the same period, a SAF process was announced targeting a 40% stake in DB Tarımsal Enerji with an investment of approximately USD 42 million; pursuant to the decision dated 27 March 2026, the company had postponed the disclosure of the binding offer until 1 April 2026. This does not mean illegality. It means the investor should open three lines in the notebook: control, energy transition, and disclosure timing.
On the related-party side, the fuel line matters too. The Q1 operating report says widespread and continuous fuel supply/procurement transactions with TFS Akaryakıt reached a level above 10% of 2025 cost and that similar transactions in 2026 were assessed as reasonable under market conditions. In the financial notes, TFS Akaryakıt accounts for TL 5.438 billion within trade payables to related parties. For THY, this is not a small footnote; because of fuel’s place in the cost base, it is a related-party channel close to the company’s pulse.
| Item | TRY bn |
|---|---|
| Market value | 404.1 |
| Parent equity | 966.4 |
| Lease liabilities | 665.9 |
| Net financial debt* | 398.6 |
As for price, the market has already written some of these risks harshly. In market data dated 18 May 2026, the share price is TL 294.50 and market value is TL 404.137 billion. Equity attributable to the parent is TL 966.388 billion. Price/book is about 0.42x. TTM profit attributable to the parent, calculated by adding 2026Q1 profit to 2025 annual profit and subtracting the 2025Q1 loss, is TL 129.941 billion; on that basis, P/E is about 3.1x. TTM revenue is TL 1.037 trillion; price/sales is about 0.39x.
The EV/EBITDA side tells the same story in another language. Short- and long-term financial debt totals TL 813.955 billion; cash and current/non-current financial investments are TL 415.321 billion. With this simple cash and financial investment adjustment, enterprise value is about TL 802.771 billion. Using 2025 EBITDA, 2026Q1 EBITDA, and 2025Q1 EBITDA, rough TTM EBITDA is TL 193.184 billion; EV/EBITDA is about 4.2x. That does not look expensive for an airline. But if the cheapness of the multiple is read separately from the reality of leases and aircraft commitments, it gives a false comfort.
| Calculation | Result | Read-through | |
|---|---|---|---|
| Price/book | 404.1 / 966.4 | 0.42x | The market applies a 58% discount to parent book value |
| TTM P/E | 404.1 / 129.9 | 3.1x | The market heavily prices cycle earnings and balance-sheet risk |
| EV/TTM EBITDA | 802.8 / 193.2 | 4.2x | Cheapness matters if operating profit normalizes |
| 0.60x book sensitivity | 966.4 x 0.60 | TRY 579.8bn | About 43% above the current market value |
The cleaner company-specific reading is this: the market is paying TL 404.137 billion against TL 966.388 billion of parent book value. The TL 562.251 billion gap is a 58% discount to book. That discount equals 84% of the TL 665.930 billion lease liability. The market is not saying to THY, “your assets are worthless.” It is saying, “these assets will be tested by leases, fuel, wages, and a USD 34.2 billion purchase commitment.”
The bull case cannot be dismissed. In Q1 there is demand, there is load factor, there is cargo scale, and AJet is growing. The company flies to 133 countries; Istanbul’s geography is real leverage for an airline. The 2033 target is more than 800 aircraft and more than 170 million passengers. The market is not giving that target a premium; it almost seems afraid of the cost of the target. If the Q2-Q3 high season turns operating profit materially positive, the lease liability is carried efficiently together with capacity, and management shows capital discipline, 0.42x book value is too punitive. Even 0.60x book value would imply TL 579.8 billion of market value, about 43% above the current snapshot market value.
The bear case is simpler and more ruthless. The Q1 operating loss continues. The structure of net profit is not as comfortable as clean seat profit. If the 469-aircraft commitment, TL 665.9 billion lease liability, and fuel/SAF/wage risk grow at the same time, book value works for the fleet, not for the shareholder. In such a picture, the low multiple is not an opportunity; it is the caution penalty the market has written correctly.
My judgment: THYAO is Cheap. But not comfortably cheap. This is not a “buy the national airline and forget it” stock. Until operating profit is seen in the high season, the lease ledger cannot be considered proven to work in the shareholder’s favor.
This stock is for the investor who can carry cycle and balance-sheet weight. It is not for the investor who lacks the patience to read operating profit, operating cash flow, and lease liability movement together in Q2-Q3. The path to capital loss is clear: seats fill, but fuel, leases, wages, and new aircraft commitments absorb the rising revenue. The path upward is also clear: the same seats turn profitable in the high season, the lease burden spreads over capacity, and the market becomes willing to pay not just half of book, but more.
Buying THYAO is not looking romantically at the sky; it is signing that the rent ledger beneath the runway will work for the ordinary shareholder in the high season.