annual report 2002 higher and higher... contents Highlights of the Year 2002 01 Traffic Results 08 Investments 23 Legal Status 02 Financial Results 09 Services 25 Turkish Airlines’ Mission Statement 03 Year 2002 Operations 10 Information Technology Projects 26 Message from the Chairman 04 Flight and Traffic Developments 11 Financial Review 29 Board of Directors, Council of Auditors 07 Commercial Developments 19 Terms and Abbreviations 92 Technical 21 Human Resources 22 2002 • 01 highlights of the year 2002 March 28 August 1 Two B737-800 aircraft joined the fleet. Within the scope of the agreement signed with Iran Air, code sharing services were April 15 launched on the Istanbul-Tehran-Istanbul Pristina services were launched. route. June 7 August 27 With the best utilization and service record Aviation Partners Boeing declared Turkish for the A340 aircraft, Turkish Airlines Airlines the Authorized Winglet Installation received Airbus’ "Excellence in A340 Center. Operations" award. September 16 June 10 Business Class service was introduced on the Power outlets for portable computers were Istanbul-Ankara-Istanbul flights. introduced in all A340 aircraft Business Class seats. October 28 Kuala Lumpur services were terminated, July 1 Hong Kong flights were launched. Turkish Airlines and SunExpress began code share services on Antalya-Munich-Antalya flights. 02 • 2002 TURKISH AIRLINES annual report legal status Turkish Airlines was established by The Company was included within Administration on December 5, Law No. 2186 in Ankara on May 20, the scope of privatization by the 1996. Further amendments of 1933, as the State Airlines Council of Ministers Decree No. Articles of Association which have Administration, a department of the 90/822 dated August 22, 1990 and been made and are still in force Ministry of Defense. published in the Official Gazette No. approved the Privatization 20646 dated September 25, 1990. Administration approval letter No. Its administration was turned over The new Articles of Association of 1006 dated November 8, 2002, to the Ministry of Public Works in the Company were approved by were endorsed at the Extraordinary 1935 and the name was changed to Decision No. 90/18 of the Supreme General Meeting held on January General Directorate of State Airlines Planning Council on October 30, 17, 2003. in 1938. From 1939 onwards, it 1990 and went into effect after operated under the Ministry of registration with the Trade Register Transportation. on November 5, 1990. Turkish Airlines was reorganized Under Article 35 of Law No. 4046 under Law No. 6623 in 1955 as a on Regulation of Privatization corporation managed and operated Procedures and the Amendment of under private law; it was renamed Certain Statutory Decrees published Türk Hava Yollar› Anonim Ortakl›¤› in the Official Gazette No. 22124 (Turkish Airlines Inc.). dated November 27, 1994, Turkish Airlines was redefined as a State The Company was reclassified as a Economic Enterprise and placed State Economic Enterprise by under the jurisdiction of the Statutory Decree No. 233 on Privatization Administration. The Certain State Institutions and Articles of Association were Enterprises, which was published in amended in compliance with Article the Official Gazette No. 18570 on 20/a of the aforementioned law November 9, 1984. upon approval by the Privatization before-tax profit of TL 137.3 trillion and an after-tax profit Company from the onset, of TL 104.9 trillion based on the Turkish Airlines maintained its Through rational strategies Turkish Capital Market Board profitability again in 2002, implemented continually and standards. closing the year with a record consistently as well as the team spirit that has permeated the 2002 • 03 Turkish Airlines’ mission statement Turkish Airlines’ mission as a flag carrier of Turkey is to provide air transportation service in order to: Enhance the Company’s identity as a global airline by expanding its long haul network, Improve the Company’s identity as the leading technical service provider within Turkey and the region; by enhancing the Company’s maintenance base, Improve the identity of the Company as a service provider of all kinds of strategic civil aviation services, including handling and flight training services, Maintain the Company’s leading position in domestic air transport, Provide seamless air transportation through entering into a global alliance with a flight network complementing Turkish Airline’s, aiming to improve the image of the Company abroad and to develop its marketing opportunities, Develop Istanbul Atatürk Airport as an important international hub. 04 • 2002 TURKISH AIRLINES annual report message from the chairman The year 2001 was a year of crises Company from the onset, Turkish Passenger Load Factor is the best both in Turkey and throughout the Airlines maintained its profitability indicator of effective capacity world with the civil aviation sector again in 2002, closing the year with utilization in an airline. As a result of particularly hard hit. Turkish Airlines a record before-tax profit of capacity reduction measures was one of the few airlines to end TL 137.3 trillion and an after-tax implemented in 2001, Turkish the year with a profit as the result profit of TL 104.9 trillion based on Airlines reached its best Passenger of effective cost-cutting measures the Turkish Capital Market Board Load Factor rates to date. In 2002, put into place upon timely standards. Passenger Load Factor was 70.8% assessments, well-planned capacity for domestic routes, 68.6% in utilization, a flexible fleet and the One of the most pleasing aspects of international routes and 68.9% in ability to make fast and prudent this financial achievement during total. decisions. 2002 is the fact that the operational losses of the previous years have Although there wasn’t any cargo Through rational strategies been turned into a record aircraft in its fleet, Turkish Airlines implemented continually and operational profit totaling TL 157.6 realized a record cargo haul capacity consistently as well as the team trillion. of 119,000 tons and generated a spirit that has permeated the revenue of TL 225.5 trillion. Cargo 2002 • 05 utilization also went up from 58% the “Airline Passenger Service having served Turkish Airlines for of 2001 to 68% in 2002. Commitment” promulgated by the many years with great success, will European Airlines Association. The take the Company to new heights. In 2002, Turkish Airlines began Passenger Service Commitment is I wish him great success in his implementing an accounting geared toward customer satisfaction endeavors. procedure used by many airlines and commits the airline to provide around the world conforming to the high standard of quality service to I also believe that with the support generally accepted accounting its customers before, during and and involvement of our passengers, principle of periodicity. Utilizing this after the flight. employees as well as our labor system, the price of the passenger union, our business partners and all ticket is included in the operational Turkish Airlines owes its success in institutions with which we revenue heading of the income 2002 in no small measure to cooperate, the success of Turkish statement only when service is services sales offered at its Technical Airlines will increase considerably in actually rendered, tickets not used Center, one of the region’s largest, the years to follow. are not included in the income most reliable maintenance center tables but are accounted for under and its modern and advanced Flight On behalf of the Board of Directors, future months’ revenue headings; Training Center, as well as to its the commission shares for these core business of passenger and tickets are recorded under the cargo transport. future months’ expenses caption of the balance sheet. I would like to take this opportunity to extend my thanks to our Board of Cem M. KOZLU Without this accounting procedure, Directors, first and foremost to our Chairman our before-tax profit would have General Manager Yusuf Bolay›rl›, all been TL 233.8 trillion with an after- of our managers and our colleagues tax profit of TL 156 trillion, based who have supported us by their on Turkish Capital Market Board hardwork and devotion. standards. I am confident that Abdurrahman Turkish Airlines was one of the first Gündo¤du, who has taken the flag airlines in the world to implement from Yusuf Bolay›rl›, retiring after 2002 • 07 board of directors (as of 12/31/2002) Cem M. KOZLU Chairman Yusuf BOLAYIRLI Vice Chairman and CEO Ahmet ERTU⁄RUL Member Mehmet GÖK Member Önder DO⁄U Member Alaaddin KUDAY Member Turgut BOZKURT Member council of auditors Yalç›n ER‹fi‹K Member ‹brahim PEKTAfi Member fiefik BÜYÜKYÜKSEL Member general manager Yusuf BOLAYIRLI General Manager 08 • 2002 TURKISH AIRLINES annual report traffic results Overview of Traffic Developments 1998 1999 2000 2001 2002 NUMBER OF LANDINGS 108,155 113,964 117,916 109,028 102,607 KILOMETERS FLOWN (000) 129,665 138,742 149,349 143,617 138,058 AVAILABLE SEAT-KMS (MILLIONS) 21,416 23,101 26,001 24,890 24,071 REVENUE PASSENGER-KMS (MILLIONS) 13,814 13,903 17,396 15,679 16,594 PASSENGER LOAD FACTOR (%) 64.5 60.2 66.9 63.0 68.9 AVAILABLE TON-KMS (MILLIONS) 2,974 3,117 3,502 3,574 3,285 REVENUE TON-KMS (MILLIONS) 1,481 1,578 1,976 1,968 2,118 OVERALL LOAD FACTOR (%) 49.8 50.6 56.4 55.1 64.5 REVENUE PASSENGERS (000) 10,504 10,410 12,031 10,277 10,383 CARGO (TONS) 95,010 110,598 125,742 104,778 118,906 MAIL (TONS) 4,065 4,249 4,595 4,648