Annual Report 2020 T U R K Is H a Ir L in E S a N N U a L R E P O R T 2 0
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TURKISH AIRLINES ANNUAL REPORT 2020 ANNUAL REPORT 2020 Contents 12 Message from the Chairman 18 TURKISH AIRLINES AT A GLANCE 20 TO OUR SHAREHOLDERS 20 Financial Analysis 24 Sectoral Developments and 2021 Expectations 30 Board of Directors The world aviation industry has experienced the 33 Mission and Vision 34 Strategies and Strategic Focuses worst period of its history due to the Covid-19 36 TURKISH AIRLINES GROUP pandemic. Like all other companies in the sector, 36 Subsidiaries and Affiliates Turkish Airlines was also affected by this highly 46 Traffic Figures 48 Fleet negative operating environment. However, we are a 52 Flight Network 54 Cargo flag-carrier airline that is deep-rooted, strong and 60 Customer Experience 66 Continuing Airworthiness Management resilient. We have seen and successfully navigated 68 Catering many crises over the years. As a result, we were able 74 Ground Handling Services 76 Training to overcome these latest challenges. 84 Flight Operations 88 Istanbul Airport 90 Corporate Innovation 92 AnadoluJet As a close-knit family, we turned to each other first. 94 Commercial Partnerships with Airlines, Traffic Rights and Expanding Flight Network 98 Corporate Development and Information Technologies We formulated and executed targeted strategies 106 Human Resources from the first day of the Covid-19 crisis. During this 108 Compliance Monitoring and Sustainability Management 114 Corporate Communications difficult time, we look toward the future with hope. 118 Online Channels 120 Financial Risk Management We rank among those companies that recorded the 122 Organization Chart 124 Statement of Compliance with Corporate Governance Principles lowest revenue loss during the pandemic thanks to 125 Corporate Governance Principles Compliance Report our solid balance sheet structure. 129 Corporate Governance Information Form 136 Statement of Compliance with Sustainability Principles 137 Sustainability Approach and Incorporation’s Sustainability Management 139 Sustainability Principles Compliance Report As life begins to return to normal, we are ready 144 Sustainability Principles Information Form 158 Assessment of the Board of Directors on 2020 Results to take off again. Soon, history will start to look 159 Assessment of the Board of Directors on the Effectiveness of Board Committees back on this pandemic era. When that time 160 Legal Disclosures and Documents 161 Statement of Independency comes, Turkish Airlines will be seen as a company 164 Statement of Responsibility that confidently overcame the crisis in unity and 165 CONSOLIDATED FINANCIAL RESULTS 165 Consolidated Financial Statements as at and for the Year Ended 31 December 2020 solidarity. We soared the highest in the face of with Independent Auditor’s Report adversity driven by our commitment to excel. WE ARE OF ONE HEART WITH OUR 61 THOUSAND EMPLOYEES Unlike most other airlines, we walk hand in hand with our employees saying “We will not leave anyone behind.” We took this strong brand to the greatest heights together. We also knew that we would overcome these challenges together by remaining closely knit. Once life returns to normal, this unity will be reflected in our business results as a competitive advantage. WE TOOK PREVENTATIVE MEASURES THAT WERE RECOGNIZED FOR THEIR EXCELLENCE For safe and healthy journeys, we have taken a wide range of measures to minimize any risk before, during and after the flight. In the health safety assessment carried out in partnership with APEX and SimpliFlying, Turkish Airlines was deemed worthy of Diamond status – the highest level. Our safe travel experience during the pandemic and hygiene measures were recognized internationally for their excellence. THIS CONFIRMS TURKISH AIRLINES AS AN OFFICIAL DIAMOND AIRLINE BASED ON INDEPENDENTLY VERIFIED, VALIDATED, AND CERTIFIED AIRLINE PASSENGER HEALTH SAFETY MEASURES. WE HOSTED CARGO INSTEAD OF PASSENGERS Prior to the pandemic, Turkish Airlines flew to 319 destinations around the globe – more than any other airline. In 2020, we grounded our aircraft due to the Covid-19 pandemic. However, we broke new ground globally by including 50 of our passenger aircraft in our 25-aircraft cargo fleet. As a result, we boosted our market share the most in cargo transport. We carried 1 out of every 20 shipments worldwide in 2020. Our goal is to grow our cargo business even more and transport 1 out of every 10 shipments globally! WE BROUGHT MORE THAN FOREIGN CURRENCY TO OUR COUNTRY While conducting our business operations, we added significant value to Turkey’s economy with USD 10 billion in foreign currency. In addition, we reunited Turkish citizens stranded overseas with their home country during the pandemic. On some of our flights, the flight crew outnumbered the passengers we repatriated. We are also transporting vaccines, which require special care while in transit, to our home country. WE CONTINUE TO INNOVATE Our domestic R&D and production efforts in civil aviation proceeded to move forward during this pandemic year. Turkish Technic successfully developed Turkey's first domestic and national server and modem, following on its domestically produced aircraft seats and galleys. We are committed to developing more products that differentiate from the competition with innovative features. In the future, we promise to introduce many new features, benefits and superior quality to air passengers. Message from the Chairman Turkish Airlines was able to better navigate the highly volatile and uncertain environment during the year and positively differentiate from the competition with its operational and financial results. Dear Esteemed Shareholders, According to September 2020 data of Customers, Business Partners and the Air Transport Action Group (ATAG), Employees, by the beginning of 2021, the Covid-19 The Covid-19 outbreak, which emerged outbreak will cause some 4.8 million in China at the end of 2019 and people to become unemployed in affected the whole world in 2020, the aviation industry – about 43% of negatively affected the aviation the sector’s pre-pandemic workforce. industry as well as all other industries. Together with other sectors related to air transport such as tourism, this figure This unprecedented crisis is expected to climb to 46 million demonstrated once again that air unemployed worldwide. transport is one of the vital sectors M. İlker AYCI that keeps the wheels of the global November 2020 data of the Chairman of the Board and economy turning. The pandemic 173 International Air Transport Association the Executive Committee also forced the aviation industry to USD BILLION (IATA) indicates that total state aid face a critical issue: the importance Total Government to the global aviation industry has of emergency response time and Aid Received by the amounted to USD 173 billion. effective crisis management. Global Aviation Sector According to January 2021 data of the Since the start of the coronavirus International Civil Aviation Organization pandemic, Turkish Airlines has (ICAO), the Covid-19 pandemic caused maintained close contact with a 60% decrease in international air national and international aviation transport compared to the previous and public health authorities. We have year. The pandemic brought the world implemented every precautionary and aviation industry back to 2003 levels, preventative measure to ensure the reducing global air passenger numbers health and safety of our passengers. from 4.5 billion in 2019 to 1.8 billion in 2020. In the same period, capacity management, resource management We Navigated the Crisis Better and risk management in the aviation Than Our Competitors sector were more challenging than The Covid-19 outbreak made its first ever before. Turkish Airlines was able to major impact on the aviation industry better navigate the highly volatile and 1.8 BILLION in March 2020. One month later, the uncertain environment during the year PASSENGERS sector’s global capacity supply had and positively differentiate from the Total Passengers plunged 87% year-on-year due to the competition with its operational and Served in the pandemic. The extreme uncertainty in financial results. We also expect a faster Global Aviation travel demand has rendered demand Sector in 2020 recovery in the coming year. forecasting very difficult. Frequently changing tariffs, and therefore pricing, Aviation Sector in 2020 has made revenue management highly The Covid-19 pandemic is widely seen challenging for airlines. as the biggest global crisis since World War II. The IMF estimates that the Turkish Airlines responded to this pandemic will result in a total loss of uncertainty in 2020 by switching USD 22 trillion to the global economy to dynamic planning in passenger between 2020 and 2025. operations. As a result, we recorded the lowest decline in passenger numbers among our competitors, carrying about 28 million passengers and registering a 62.4% decrease year-on-year. 12 Turkish Airlines Annual Report 2020 13 Message from the Chairman In May 2020, the Operations Center We aim to boost the competitive Facility officially started operating advantage of Turkish Cargo, which at Istanbul Airport. The SmartIST currently operates as a Turkish Airlines investment which is the new facility sub-brand, in the international market. of Turkish Cargo is moving forward. By establishing it as a 100% Turkish Construction of the first phase of Airlines subsidiary, Turkish Cargo will As of the end of 2020, Istanbul Airport made Turkish Technic's Istanbul Airport be able to step up its new