Third’s a charm: Ambitious plans for a new Istanbul airport are gaining traction

Efforts to position Istanbul as a global aviation centre are gaining momentum, and Turkish Airlines (THY) is helping to lead the way through international network expansion. Equally important, major projects are moving ahead to upgrade the city’s airport infrastructure, which is straining under the pressures of rapidly increasing demand. The most ambitious of these infrastructure projects, by a wide margin, calls for the development of a third airport at cost of more than $9bn – a proposal which is drawing a characteristic mix of excitement, investor interest and criticism in-country.

Filling Up

Istanbul already has two bustling and fast-growing international airports. Istanbul Atatürk Airport (IST), located in Yeşilköy on the city’s European side, is the larger of the two; IST handled 45m passengers in 2012, a 20% increase year-on-year (y-o-y). Aircraft movements at IST reached 348,00 in 2012, up 16% yo-y; of these movements, about 33% were domestic and 67% were international. This made IST one of the world’s busiest airports. By passenger traffic, IST ranked an impressive 20th globally in 2012, ahead of Shanghai Pudong International Airport (21) in China, and behind Madrid Barajas Airport (19) in Spain. Perhaps more significantly, the 21% y-o-y growth at IST made it the fastest-expanding airport among the top 30 worldwide, putting it ahead of Dubai (13.2%), Jakarta (12.1%), Bangkok (10.6%) and Singapore (10%).

Despite the government’s plan to build a fourth runway at IST that would double capacity, rapid growth has created worries about congestion. Rising activity at Sabiha Gökçen (SAW) – Istanbul’s second airport – has also generated concerns. SAW handled 14.9m passengers in 2012, up 8.4% y-o-y, making it the fastest-growing airport (in the 10m-25m passenger category) in the “World Airport Traffic Report”. Though some have proposed building a second runway at SAW to expand capacity, this project has yet to get off the ground.

Interested Parties

Policy makers believe the answer is to develop a third airport in Istanbul. But not just any airport – the plan, as outlined by the Ministry of Transport, Maritime Affairs and Communications, is to construct a three-runway facility near the Black Sea coast that will boast a passenger capacity of 90m when phase one of construction is finished in 2017. Once all works are completed, capacity may reach 150m, making the third airport one of the largest in the world. As plans for the third airport have intensified, so too has investor interest in the project.

As of March 2013, 17 groups had applied to the General Directorate of State Airports Authority to receive tender specifications (costing TL100,000 [€43,180] each), generating TL1.6m (€690,880) in receipts for the state. For its part, the state was guaranteeing a minimum revenue of €6.3bn over the first 12 years to the winning bidder, which would need to raise capital through equity financing for the 25-year build-operate-transfer project without insurance from the Treasury against losses.

The bidders had not been named at the time of writing, but local press was reporting that AIC Group ( owner of Atlasjet), Alarko Holding, Hacı Ömer Sabancı Holding, Koç Holding, Limak Holding and TAV Airports Holding (operator of IST) were among the Turkish applicants. Foreign investors were reportedly seeking joint ventures with some of these local players, and the project was said to be attracting interest from Western pension funds, which have become more attracted to Turkey’s infrastructure market following the country’s investment grade rating from Fitch. According to the authorities, over the next decade domestic infrastructure spending will reach $250bn, about two-thirds of which will need to come from international sources.


Nonetheless, prospective investors should proceed with a degree of caution, given the delays, cancellations and uncertainties that have affected previous transport projects in Turkey (see overview). Given the immense scale of the venture – and the likelihood of cost overruns – there may also be bankability issues. In fact, extant local financial institutions are already struggling to keep pace with rising project finance demand in the domestic market. Meanwhile, Turkey can no longer count on significant project funding from European banks, which are under pressure to curtail lending in the wake of the eurozone debt crisis.

Risk assessments should also incorporate the possibility of negative publicity, which has already appeared in the local media. In November 2012, leaders from the Chamber of Urban Planning and the Chamber of Environmental Engineers voiced concerns to the press over the third airport project due to its alleged ecological impact. These groups argued, for example, that the proposed site contains vital city forest cover and water resources that would be damaged by construction. They also claimed that the project would hasten urbanisation in northern Istanbul, thereby increasing the city’s population beyond a sustainable level.


Perhaps equally important are the project’s benefits. In the view of some industry players, building a third airport in Istanbul would not only help ease congestion, but also remove a barrier to aviation sector competition and growth. “There is no room at Atatürk Airport or Sabiha Gökçen for new airlines to enter the market,” Atlasjet CEO Sami Alan told OBG. “Atlasjet is also affected, with supply limits imposing some constraints on our business development plans.”

By supporting airline expansion, the third airport could also help the aviation industry to further increase its positive economic footprint. From 2003 to 2012, total turnover in the sector jumped nearly seven-fold from $2.5bn to $17bn, according to figures from the General Directorate of State Airports Authority of Turkey. This supported the creation of thousands of employment opportunities in the nation. According to transport officials, developing the airport will directly create some 80,000 jobs during construction and 120,000 permanent jobs once the facility is fully operational.

In addition, supporters of the project point to the role it would play in further promoting tourism – a business that contributes about 11% to the nation’s GDP. As indicated by statistics from the Ministry of Transport, Maritime Affairs and Communications, in 2010 68.3% of foreign visitors came via air transport, compared to only 24.3% by road and just 7.2% by sea. By 2023, the country aims to host some 50m visitors per year, making it one of the world’s top five tourist destinations (see tourism chapter).

Hub Potential

In the big picture, the third airport is designed to transform Istanbul into a global aviation hub capable of competing with the likes of Abu Dhabi and Dubai in the UAE, and Doha in Qatar. As Alan notes, the new airport will benefit from some substantial competitive advantages relative to these sites. “Few cities in the world are located in such close proximity to so many major markets,” he said. “Istanbul is a natural aviation centre from which nearly two dozen countries can be reached by travelling less than 1000 km.” Given expansions at regional competitors, however, deep pockets may be as important as lofty ambition.

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The Report: Turkey 2013

Transport & Logistics chapter from The Report: Turkey 2013

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