TAV IT

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TAV Airports Holding Annual Report 2008
TAV AIRPORTS HOLDING AND ITS SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS AT AND FOR THE YEAR ENDED 31 DECEMBER 2008
(Amounts expressed in Euro unless otherwise stated)
The Group has procedures in place to ensure that services are provided to customers with an appropriate credit history. The carrying
amount of trade and other receivables, net of provision for impairment of receivables, and the total of cash and cash equivalents,
represents the maximum amount exposed to credit risk. The Group has no significant concentration of credit risk since the
customers portfolio is diversified among a number of customers and the main customer is Turkish Airlines (“THY”) which is the flag
carrier and one of the most reputable firms in Turkey. Although collection of receivables could be influenced by economic factors,
management believes that there is no significant risk of loss to the Group beyond the provisions already recorded due to, reputation
and type of customers for the airlines (well-known reputable, international and flag carrier companies), method of sales which is
cash or credit card basis for duty free sales.
In addition, the Group receives letters of guarantee, and notes from some customers whose credibilities are low.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group uses activity-based costing to cost its products and services, which assists it in monitoring cash flow requirements and
optimising its cash return on investments. Typically the Group ensures that it has sufficient cash on demand to meet expected
operational and financial expenses, including the servicing of financial obligations; this excludes the potential impact of extreme
circumstances that cannot reasonably be predicted, such as natural disasters.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the
Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and
control market risk exposures within acceptable parameters, while optimising the return.
The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are
carried out within the guidelines set by lenders and executives of the Group as mentioned in Note 36.
i) Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. The Group
has exposure to the effects of fluctuations in the prevailing foreign currency exchange rates on its financial position and cash flows.
As at 31 December 2008, the Group had balances that are denominated in a currency other than the respective functional currencies
of Group entities, primarily the Euro, but also USD, GEL, Tunusian Dinar and TRY which are disclosed within the relevant notes to
these consolidated financial statements. The Group manages this currency risk by maintaining foreign currency cash balances. The
currency risk is managed by using of some financial intruments as mentioned in Note 38.
ii) Interest rate risk
The Group adopts a policy of ensuring that between 80 and 100 percent of its exposure to changes in interest rates on borrowings is
on a fixed rate basis. This is achieved by entering into interest rate swaps as mentioned in Note 38.