12 Months Financial Report - Turkish Airlines

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TÜRK HAVA YOLLARI ANONİM ORTAKLIĞINOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER, 200939 FINANCIAL INSTRUMENTS (cont’d)Derivative Instruments and Hedging TransactionsIn order to hedge important operations and cash flows in the future against financial risks, Group madeinterest rate swap contracts to convert some of the fixed-rate finance lease liabilities into floating rateand cross-currency swap contracts to convert Euro-denominated finance lease liabilities into USDollars.The changes in the fair values of those derivative instruments are directly accounted in theincome statement for the period.The floating-rate financial liabilities of the Group are explained in b.3.2. Beginning from June 2009, inorder to keep interest costs at an affordable level, considering long-term finance lease liabilities; Groupmade fixed-paid/floating-received interest rate swap contracts to fix interest rates of finance leaseliabilities whose maturities are after the second half of 2010 and account for approximately 76 % offloating rate USD and Euro denominated liabilities. Effective part of the change in the fair values of thosederivative instruments which are subject to hedge accounting for cash flows risks of floating-rate financelease liabilities are accounted in cash flow hedge fund under the shareholders’ equity.Beginning from September 2009, in order to control risk arising from fluctuations in price of fuel whichis approximately 30% of cost of sales as of 31 December 2009 and to lessen the effects of fluctuations inoil prices on fuel expenses, the Group began hedging transactions for approximately 10% of annual jetfuel consumption in 2009 . For this purpose, the Group made forward fuel purchase contracts settled oncash basis. Effective part of the change in the fair values of those derivative instruments which are subjectto hedge accounting for cash flows risks of fuel purchases are accounted in cash flow hedge fund underthe shareholders’ equityGroup’s derivative instruments arisen from transactions stated above and their balances as of 31December 2009 and 31 December 2008 are as follows:77
TÜRK HAVA YOLLARI ANONİM ORTAKLIĞINOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE PERIOD ENDED 31 DECEMBER, 200939 FINANCIAL INSTRUMENTS (cont’d)Derivative Instruments and Hedging Transactions (Cont’d)Pozitive fair31 December 2009valueNegative fairvalueTotalFixed-paid/floating received interest rate swapcontracts for hedging against cash flow risks ofinterest rate - (7.130.730) (7.130.730)Forward fuel purchase contracts for hedging againstcash flow risk of fuel prices 4.102.<strong>12</strong>0 (736.175) 3.365.945Fair values of derivative instruments for hedgingpurposes 4.102.<strong>12</strong>0 (7.866.905) (3.764.785)Cross-currency swap contracts not subject to hedgeaccounting 15.596.383 (8.935.528) 6.660.855Interest rate swap contracts not subject to hedgeaccounting 27.599.867 (28.429.739) (829.872)Fair values of derivative instruments not for hedgingpurposes 43.196.250 (37.365.267) 5.830.983Total 47.298.370 (45.232.172) 2.066.19831 December 2008Pozitive fairvalueNegative fairvalueTotalFixed-paid/floating received interest rate swapcontracts for hedging against cash flow risks ofinterest rate - - -Forward fuel purchase contracts for hedging againstcash flow risk of fuel prices - - -Fair values of derivative instruments for hedgingpurposes - - -Cross-currency swap contracts not subject to hedgeaccounting 5.068.203 (4.741.776) 326.427Interest rate swap contracts not subject to hedgeaccounting 34.530.956 (39.618.559) (5.087.603)Fair values of derivative instruments not for hedgingpurposes 39.599.159 (44.360.335) (4.761.176)Total 39.599.159 (44.360.335) (4.761.176)78
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