Strong wings, big goals ANNUAL REPORT 2009 It has been told that Simurg, emperor of the birds, lived in the Kaf Mountains among the branches of the Tree of Knowledge. Travelers themselves on the road to truth, birds set out in search of timurg. On this difficult journey, they pass over a lifetime’s worth of coarse valleys and lose hope when they reach the last valley, the valley of destitution. Still, a small number of birds keep flying and finally succeed in reaching the Kaf Mountains, whereupon they come to realization that they themselves are Simurg, their sought-after emperor of truth, and that the strength they need already lies within them. From the very beginning, we too have looked to become Simurg. With every step we take, we aim for something higher. We advance to the future through a process of continuous renewal and development. As we reach higher under the strength our shared corporate values and expanding ambitions, we believe that the joy of beating our wing together will deliver us to the summit. CContents Corporate Financial Indicators 6 2009 Milestones 8 Mission-Vision 10 Management and Messages 12 Management System 20 Operations Total Traffic Results 38 Fleet 44 Activities 48 Subsidiaries and Joint Ventures 72 Financial Financial Ratios and Audit Reports 82 OOur Flight Network Amsterdam Athens Baku Barcelona Basel Batumi Belgrade Berlin Birmingham Brussels Bucharest Budapest Chisinau Europe North America 65 destinations New York 3 destinations Chicago Toronto Africa 13 destinations South America Sao Paulo 1 destination Addis Ababa Algiers Benghazi Cairo Cape Town Casablanca Dakar Johannesburg Khartoum Lagos Nairobi Tripoli Tunis 2 ANNUAL REPORT 2009 Cologne Helsinki Munich Skopje Copenhagen Kazan Nice Sofia Dnepropetrovsk Kiev Nuremberg Stockholm Donetsk Lisbon Odessa St.Petersburg Dublin London Oslo Stuttgart Dusseldorf Ljubljana Paris Tbilisi Ekaterinburg Lviv Prague Tirana Ercan Lyon Pristina Ufa Frankfurt Madrid Riga Venice Geneva Manchester Rome Vienna Gothenburg Milan Rostov Warsaw Hamburg Minsk Sarajevo Zagreb Hannover Moscow Simferopol Zurich Far East 18 destinations Almaty Hong Kong Middle East Ashgabat Karachi 19 destinations Astana Mumbai Bangkok Osaka Beijing Seoul Bishkek Shanghai Jakarta Singapore Delhi Tashkent Dushanbe Tokyo Abu Dhabi Kuwait Amman Madinah Aleppo Mashad Baghdad Muscat Bahrein Riyadh Beirut San’aa Damascus Tabriz Doha Tehran Dubai Tel Aviv Jeddah Adana Erzincan Malatya Adıyaman Erzurum Mardin Ağrı Eskişehir Merzifon Ankara Gaziantep Muş Antalya Hatay Nevşehir Batman Isparta Samsun Bodrum İstanbul Şanlıurfa Çanakkale İzmir Sinop Dalaman K. Maraş Sivas Denizli Kars Tekirdağ Diyarbakır Kayseri Trabzon Elazığ Konya Uşak Van 3 ANNUAL REPORT 2009 Taking strong steps to carry our deeply-rooted “corporate identity to new horizons.“ CCorporate Financial Indicators 6 2009 Milestones 8 Mission and Vision 10 Management and Messages Message from the Chairman 12 Board of Directors 14 Farewell to Candan Karlıtekin 18 Management System Quality Concept 20 Sustainability 22 Social Responsibility 22 Risk Management 24 Organizational Structure 26 Legal Statute 28 Principles of Corporate Governance and Compliance Report 30 FFinancial Indicators 6 ANNUAL REPORT 2009 1 January - 1 Januray - 31 December 2009 31 December 2008 ONGOING OPERATIONS Income from Sales 7,035,882,903 6,123,174,209 Cost of Sales (-) (5,135,949,144) (4,542,670,584) GROSS PROFIT / (LOSS) 1,899,933,759 1,580,503,625 Marketing, Sales and Distribution Costs (-) (806,503,413) (635,876,008) General Administrative Costs (-) (261,536,526) (203,813,181) Other Operating Income 91,136,104 56,690,528 Other Operating Costs (-) (199,139,482) (210,120,463) OPERATING PROFIT / (LOSS) 723,890,442 587,384,501 Share of Investment in Profit/Loss (Equity Method) 12,813,703 3,572,374 Financial Income 172,982,144 1,427,882,203 Financial Costs (-) (172,708,672) (713,373,140) PROFIT BEFORE TAX / (LOSS) 736,977,617 1,305,465,938 Tax income / (expense) (177,901,337) (171,239,727) PROFIT FOR PERIOD / (LOSS) 559,076,280 1,134,226,211 Earnings per share (Kr) / (Loss) (Kr) 0.64 1.30 Note: All amounts are expressed in Turkish Lira (TL) unless otherwise stated. Sales Income (TL) 2009 7,035,882,903 2008 6,123,174,209 2007 4,859,508,826 2006 4,051,345,129 NET PROFIT 2005 3,107,071,608 559 Operating Profit (TL) 2009 723,890,442 million TL 2008 587,384,501 2007 722,759,224 2006 206,680,100 2005 218,493,953 7 ANNUAL REPORT 2009 009 Milestones AWARDS INNOVATIONS AND DEVELOPMENTS Turkish Airlines has been “Operational Excellence” award to Turkish Technic Inc. once again nominated “The Best Airline” in its Turkish Airlines from Airbus certifies its prestige in the region Following an evaluation of the international arena Turkish Airlines was selected as the service records of its fleet’s A320 Turkish Airlines Technic Inc. became best airline in its region, receiving family of aircraft, Turkish Airlines the first aircraft maintenance and the title of “Southern Europe’s received Airbus’ “Operational repair center in Turkey to obtain the Best Airline Company” by Skytrax, Excellence” award. The award EN/AS9100 Aviation Series and the a company that evaluates airlines was presented at a ceremony held ISO9001:2008 Quality Management and airports using 750 parameters in Paris attended by airlines that System Certificates. that measure a range of service and operate Airbus’ A320 aircraft, and Turkish Airlines Technic quality standards. In recognition was an occasion for Turkish Airlines Inc., holding ISO9001:2000, of the services standards it has to put its name to yet another ISO14001:2004, ISO18001:1999 developed though its quality and international achievement. Management System Certificates customer-focused philosophy, and National/International Aircraft/ Turkish Airlines was the only airline Aircraft Components maintenance in Europe to receive 4 stars in all authorization certificates, is both a categories. leader in Turkey and an important global player. Turkish Airlines received the The EN/AS9100 Aviation Series Aircraft Finance Journal’s “2008 - Quality Management System Europen Deal of the Year” award certificate, in addition to being an with financing of aircraft. important source of prestige and Turkish Airlines received the award progress for civil aviation in Turkey, during a ceremony organized by the will also increase Turkish Airlines 29th Air Finance Conference in New Technic Inc.‘s influence in the global York. Following a survey it made aviation industry and its share in the in 2008, in which detailed analysis market. and criteria were applied to more than 350 airlines around the world Turkish Airlines, a Cargo Quality in the area of aircraft and aircraft System Member engine financing, the Airfinance On January 1, Turkish Airlines Journal, one of the world’s Cargo joined the Cargo 2000 Quality leading publications in the aviation Management System, an International financing sector, named Turkish Air Transport Association (IATA) Airlines as having the best financial enterprise that comprises nearly 50 applications in Europe. airlines, numerous cargo agencies, general service providers and information technology providers. Turkish Airlines Cargo increased its market share in the global air cargo market by its improving cargo transport time management, quality of service and level of customer satisfaction. Flights to Tiran via Milan began on June 7, and the total number of cargo flight destinations reached to 21. 8 ANNUAL REPORT 2009 NETWORK Turkey’s first mobile airline Codeshare agreements New domestic flight destinations application from Turkish Airlines: Passenger have been offered The number of domestic flight mobil.thy.com expanded flight options as a result destinations increased to 37 with Turkish Airlines, diversifying its of codeshare agreements signed the addition of Uşak (January 12), sales channels with the launch with Ethiopia, Singapore, Malaysia, Çanakkale (January 19), and Isparta of mobil.thy.com, now offers its Bosnia, Etihad, Asiana and Air Maroc (October 28). passengers the ability to perform airlines. A codeshare agreement all stages of ticketing, check-in and has also been signed between New destinations with AnadoluJet boarding procedures from their SunExpress, which is a joint venture Flights to Çorlu (Tekirdağ) began mobile phones. between Turkish Airlines and on February 27 and flights to Izmir Lufthansa, and AnadoluJet, also a began on September 28. Restructuring of business Turkish Airlines brand. processes with ERP New international flights Turkish Airlines launched an ERP Special Passengers Program destinations (Enterprise Resource Planning) partnerships Turkish Airlines added 10 new project, one of the world’s largest Turkish Airlines signed a Special international destinations in 2009, of its kind. The project aims to Passenger Program partnership increasing the total number of restructure business processes, agreement with Jet Airways and international destinations on its increase operational efficiency and Continental Airlines, under which flight network to 119. more effectively deliver products Miles&Smiles members may earn NAIROBI- Kenya (February 20) and services to passengers. The miles on flights with Jet Airways UFA - Russia (March 04) project is planned to be completed and Continental Airlines, which they MASHAD - Iran (March 15) in three years. may convert into ticket awards. SAO PAOLO - Brazil (April 05) DAKAR - Senegal (April 05) BENGHAZI - Libya (May 05) GOTEBORG - Sweden (June 29) TORONTO - Canada (July 11)