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.)31 December 2011Profit / (Loss) Before TaxIf foreign currencyappreciated 10 %If foreign currencydepreciated 10 %1 - US dollar net asset / liability 92.335.570 (92.335.570)2- Part of hedged from US dollar risk (-) - -3- US dollar net effect (1 +2) 92.335.570 (92.335.570)4 - Euro net asset / liability (279.042.074) 279.042.0745 - Part of hedged from Euro risk (-) - -6- Euro net effect (4+5) (279.042.074) 279.042.0747 - GBP net asset / liability 1.364.293 (1.364.293)8- Part of hedged from GBP risk (-) - -9- GBP net effect (7 +8) 1.364.293 (1.364.293)10 - Other foreign currency net asset / liability 30.437.050 (30.437.050)11- Part of hedged other foreign currency risk (-) - -12- Other foreign currency net effect (10+11) 30.437.050 (30.437.050)TOTAL (3 + 6 + 9 + 12) (154.905.161) 154.905.161b.3.2) Interest rate risk managementGroup has been borrowing over fixed and variable interest rates. Considering the interest types of the current borrowings,borrowings with variable interest rates have the majority but in financing of aircrafts performed in the last years, Grouptries to create a partial balance between borrowings with fixed and variable interest rates by increasing the weight ofthe borrowings with fixed interest rate in condition of the suitability of the cost. Due to the fact that the variable interestrates of the Group are dependent on Libor and Euribor, dependency to local risks is low.Interest Rate Position Table31 December 2012 31 December 2011Instruments with fixed interest rateFinancial Liabilities 5.311.293.033 3.928.078.910Financial Instruments with Variable Interest RateFinancial Liabilities 3.355.700.565 3.984.803.923Interest Swap Agreements not subject to Hedge accounting (Net) - (59.611)Interest swap agreements subject to Hedge accounting (Net) - (62.888.643)As indicated in Note 39, the Group as of 31 December 2012 fixed the interest rate for TL 284,578,858 of floating–interestratedfinancial liabilities via an interest rate swap contract.70 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.)Interest rate sensitivityThe following sensitivity analysis is determined according to the interest rate exposure in the reporting date andpossible changes on this rate and it is fixed during all reporting period. Group management checks out possible effectsthat may arise when Libor and Euribor rates, which are the interest rates of the borrowings with variable interest rates,fluctuate 0.5% and reports these to the top management.In condition that 0.5% increase in Libor and Euribor interest rate and all other variables being constant:Loss before tax of the Group, which belongs to the twelve-month-period, will increase by TL 16,778,503 (as of 31December 2011 profit before tax will decrease by TL 19,924,020). In contrast, if Libor and Euribor interest rate decreases0.5%, loss before tax for the six-month-period will decrease by the same amounts.Moreover, as a result of the interest rate swap contracts against cash flow risks, in case of a 0,5% increase in the Liborand Euribor interest rates, the shareholders’ equity of the Group will increase by TL 13,823,126 without the deferredtax effect. In case of a 0.5% decrease in the Libor and Euribor interest rates, the shareholders’ equity of the Group willdecrease by the same amount without the deferred tax effect.b.3.3) Fuel prices sensitivityAs explained in Note 39, Group made forward fuel purchase contracts in order to hedge cash flow risks arising from fuelpurchases beginning from 2009. Due to forward fuel purchase contracts subject to hedge accounting, as a result of a10% increase in fuel prices, the shareholders’ equity of the Group will increase by TL 63,778,860 excluding the deferredtax effect. In case of a 10% decrease in fuel prices, the shareholders’ equity of the Group will decrease by TL 60,668,805excluding the deferred tax effect.39. FINANCIAL INSTRUMENTSFair Values of Financial InstrumentsFair values of financial assets and liabilities are determined as follows:• In standard maturities and conditions, fair values of financial assets and liabilities which are traded in an activemarket are determined as quoted market prices.• Fair values of derivative instruments are calculated by using quoted prices. In absence of prices, discounted cashflows analysis is used through applicable yield curve for maturities of derivative instruments (forward and swaps).71
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