12 Months Financial Report - Turkish Airlines

TÜRK HAVA YOLLARI ANONİM ORTAKLIĞINOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER, 200938 NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.3) Market risk management (cont’d)b.3.2) Interest rate risk managementGroup has been borrowing over fixed and variable interest rates. Considering the interest types of thecurrent borrowings, borrowings with variable interest rates have the majority but in financing of aircraftsperformed in the last years, Group tries to create a partial balance between borrowings with fixed andvariable interest rates by increasing the weight of the borrowings with fixed interest rate in condition ofthe suitability of the cost. Due to the fact that the variable interest rates of the Group are dependent onLibor and Euribor, dependency to local risks is low.Interest Rate Position Table31 December 2009 31 December 2008Instruments with fixed interest rateFinancial Assets – Time Deposits 1.149.329.053 1.768.820.216Financial Liabilities 1.825.552.349 1.960.602.178Financial Instruments with Variable Interest RateFinancial Liabilities 1.162.613.775 1.256.692.286Interest Swap Agreements not subject to HedgeAccounting (net) (829.874) (5.087.603)Interest swap agreements subject to hedge acounting (Net) (7.130.730) -As indicated in Note 39, the Group as of 31 December 2009 fixed the interest rate for TL 877.507.548 offloating–interest-rated financial liabilities via an interest rate swap contract.Interest rate sensitivityFollowing sensitivity analysis is determined according to the interest rate exposure in the reporting dateand possible changes on this rate and it is fixed during all reporting period. Group management checksout possible effects that may arise when Libor and Euribor rates, which are the interest rates of theborrowings 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:Profit before taxes of the Group, which belongs to twelve-month-period, will decrease for TL 6.283.461(as of 31 December 2008 it will decrease by TL 6.283.461). In contrast, if Libor and Euribor interest ratedecreases 0, 5%, Profit Before Taxes for six-month-period will increase with the same amountsMoreover, as a result of the interest rate swap contracts against cash flow risks, in case of a 0,5% increasein the Libor and Euribor interest rates, the shareholders’ equity of the Group will increase by TL18.318.580 without the deferred tax effect. In case of a 0,5% decrease in the Libor and Euribor interestrates, the shareholders’ equity of the Group will decrease by the same amount without the deferred taxeffect.73