Financial - Turkish Airlines

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(Convenience Translation of Report and Financial Statements Originally Issued in Turkish)TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIESNotes to the Audited Consolidated Financial StatementsFor the Year Ended 31 December 2012(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)23. COMMITMENTSThe detail of the Group’s not accrued operational leasing debts related to aircrafts is as follows:31 December 2012 31 December 2011Less than 1 year 282.339.574 335.010.923Between 1 – 5 years 810.999.803 1.000.864.431More than 5 years 81.178.443 218.425.9291.174.517.820 1.554.301.283To be delivered between the years 2010-2015, the Group signed a contract for 89 aircrafts with a total value of 11,8billion US Dollars, according to the price lists before the discounts made by the aircraft manufacturing firms. 10 of theseaircrafts were delivered in 2010 and 29 of these aircrafts were delivered in 2011. To be delivered between the years 2013-2017, the Group signed a contract for 40 aircrafts with a total value of 10.5 billion US Dollars, according to the price listsbefore the discounts made by the aircraft manufacturing firms. The Group has made an advance payment of 934 millionUS Dollars relevant to these purchases as of 31 December 2012.The Group also has operational lease agreement for 23 years related with the land for the construction of aircraftmaintenance hangar which is still under construction. The liabilities of the Group related with this lease agreements areas follows:31 December 2012 31 December 2011Less than 1 year 2.081.088 1.934.234Between 1 – 5 years 16.417.472 16.440.986More than 5 years 49.973.307 54.186.97668.471.867 72.562.19624. EMPLOYEE BENEFITSShort-term employee benefits are as follows:31 December 2012 31 December 2011Salary accruals 143.879.448 127.819.504Unused vacation provision 41.066.116 11.914.374Due to personnel 3.178.359 3.525.186Labor union agreement accrual (*) - 106.364.433188.123.923 249.623.497(*)23. Labor Union Agreement negotiations started at 2 Fabruary 2012 between the Group and Turkey Civil Aviation Labor Union (HAVA-İŞ).The parties could not agree as of 31 December 2011 financial statements announcement dates. The Group has calculated and booked aprovision of TL 106.364.433 for salary increases attained to Labor Union Agreement for the period between 1 January 2011 and 31 December2011. 23. Labor Union Agreement was signed between the Group and HAVA-İŞ at 2 August 2012 and calculated salary increases were paid.44 TÜRK HAVA YOLLARI ANNUAL REPORT 2012
(Convenience Translation of Report and Financial Statements Originally Issued in Turkish)TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIESNotes to the Audited Consolidated Financial StatementsFor the Year Ended 31 December 2012(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)rovision for long-term retirement pay liability is comprised of the following:31 December 2012 31 December 2011Provisions for retirement pay liability 234.019.405 191.632.448Provision for retirement pay liability is recorded according to following explanations:Under labor laws effective in Turkey, it is a liability to make legal retirement pay to employees whose employment isterminated in such way to receive retirement pay. In addition, according to Article 60 of Social Security Law numbered506 which was changed by the laws numbered 2422, dated 6 March 1981 and numbered 4447, dated 25 August 1999,it is also a liability to make legal retirement pay to those who entitled to leave their work by receiving retirement pay.Some transfer provisions related to service conditions prior to retirement are removed from the Law by the changedmade on 23 May 2002.Retirement pay liability is subject to an upper limit of monthly TL 3,129 as of 1 January 2013(1 January 2012: TL 2,917).Retirement pay liability is not subject to any kind of funding legally. Provision for retirement pay liability is calculatedby estimating the present value of probable liability amount arising due to retirement of employees.IAS 19 (“Employee Benefits”) stipulates the development of company’s liabilities by using actuarial valuation methodsunder defined benefit plans. In this direction, actuarial assumptions used in calculation of total liabilities are describedas follows:Main assumption is that maximum liability amount increases in accordance with the inflation rate for every serviceyear. So, provisions in the accompanying financial statements as of 31 December 2012 are calculated by estimatingpresent value of contingent liabilities due to retirement of employees. Provisions in the relevant balance sheet dates arecalculated with the assumptions of 5.00% annual inflation rate (31 December 2011: 5.00%) and 7.63% discount rate.(31 December 2011: 9.5%). Estimated amount of retirement pay not paid due to voluntary leaves and retained in theCompany is also taken into consideration as 2.40% (31 December 2011: 2.13%). Ceiling for retirement pay is revisedsemi-annually. Ceiling amount of TL 3,129 which is in effect since 1 January 2013 is used in the calculation of Group’sprovision for retirement pay liability.Movement in the provision for retirement pay liability is as follows:1 January - 1 January -31 December 2012 31 December 2011Provisions at the beginning of the period 191.632.448 170.505.529Foreign currency translation adjustment 13.107.185 5.024.709Charge for the year 16.513.733 32.271.975Interest charges 7.635.445 6.220.836Actuarial loss 26.922.256 5.219.823Payments (21.791.662) (27.610.424)Provisions at the end of the year 234.019.405 191.632.448234.019.405 191.632.44845
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