2012 ANNUAL rEporT - Turkish Airlines

2012 ANNUAL rEporTTurkish Airlines presents proudly

CONTENTS01 Who we are?02 What kind of a fleet do we have?02 Where do we fly to?06 How much value did we create?08 How did we perform in 2012?TO OUR SHAREHOLDERS10 Chairman’s Message14 Board of Directors18 Audit Committee21 Mission21 Vision22 StrategyTURKISH AIRLINES GROUP28 Subsidiaries34 Industry Developments And The Forecast For 201336 2012 Traffic Results48 FleetOur Activities52 Cargo60 Mro66 Catering70 Training74 Ground Handling Services78 Other Services88 Human Resources94 Responsibility96 Risk Management102 Organizational Chart104 Corporate Governance Principles Compliance Report

Flights toLefkosha,Beirutand Cairostarted.Firstinternationalflight on theroute Ankara-İstanbul-Athenswas put intoservice, on the12 th of FebruaryFirst Hajjflights started.Frankfurtwas addedto Ankara-Istanbul-Athens-Romeroute.Brussels,Munich, TelAviv routeshave beenput intoservice.Ankara-Istanbul-Vienna-Frankfurt routehas been putinto servicewith threeflights eachweek.Amsterdam,Belgrade andTbilisi routeshave been putinto service.Zurich,Budapestand Genevarouteshave beenput intoservice.Köln routehas beenput intoservice.

Eighty years ago, Turkish Airlines took to the skies from Turkish soil.İstanbul, Eskişehir and Ankara were the initial destinations of whathas turned out to be a splendid journey; a journey begun with just 24personnel, five airplanes and 19 seats.TheDüsseldorfandStuttgartroutesentered intoservice.The Hannoverand Hamburgroutes enteredinto service.TheCopenhagen,Berlin andNurnbergroutesentered intoservice.TheBaghdad,Tehran,Dhahranand Tripoliroutesenteredintoservice.The Cairorouteenteredintoservice.Flights tothe Far Eastbegan withthe openingof theSingaporeroute.Theimplementationof First Classservicescommenced onour Jeddah andLondon flights,and was laterincorporatedinto otherflights.The NewDelhi, KualaLumpur andLyon routesentered intoservice andthe numberof overseasdestinationsserved roseto 42.The Helsinki,Tunisia,Algiers, Oslo,Basel and NewYork routeentered intoservice. The4 th continentbecomesserved by NewYork flights.

The Tokyo,BangkokandMoscowroutesenteredintoservice.BahrainandStrasbourgroutesenteredintoservice.The Benghaziand Budapestroutes enteredinto service.OsakaandTiranaroutesenteredintoservice.With theaddition of theAirbus 340s,direct flights toTokyo becomepossible and areoperated withthree serviceclasses; First,Business andEconomy Class.The Tbilisi,Sarajevo andJohannesburgroutes enteredinto service.Flights toprominentcities of theFar East,such asShanghaiand Seoulbegan.The NewDelhirouteenteredintoservice.The Pristinaroute enteredinto service.The Casablanca,Lisbon, Oslo andAstana routesentered intoservice.Flights fromIstanbul andAntalya wereinauguratedto London’sStanstedAirport.

The Ljubljana,Abu Dhabi,Dushanbe,Rostov, Sana,Donetsk,Tabriz, Kazan,Belgrade, St.Petersburg,Helsinki,Muscat, Venice,Dublin, Riga,Addis Ababa,Khartoum,Yekaterinburg,Dnepropetrovsk,Mumbai, Minsk,Osaka, Dohaand Lagosroutes enteredinto service.The Batum,Johannesburg,Capetown, andMedina routesentered intoservice.The Aleppo,Birminghamand Baghdadroutes enteredinto service.TurkishAirlinesbecame amember ofglobal airlinenetwork StarAlliance.The Nairobi,Ufa, Mashhad,Dakar,Sao Paolo,Benghazi,Goteborg,Toronto, Lvivand Jakartaroutes enteredinto service.The Accra,Bologna, Dares Salaam,Entebbe,Nakhchivan,Podgorica,Sochi andWashingtonroutesentered intoservice.SkytraxratedTurkishAirlines theWorld’s Bestfor economyclassservice.TheGuangzhou,Shiraz,Valencia,Erbil,Toulouse,Malaga,Genova,Basra,Thessaloniki,Napoli, AlNajaf, Kabul,Suleymaniah,Islamabadand Torinoroutesentered intoservice.Douala, Yaounde,Kinshasa, Djibouti,Hurghada, SharmEl-Sheikh, Abidjan,Mombasa, Sebha,Nouakchott,Niamey, Kigali,Mogadishu,Kilimanjaro, BuenosAires, Ganja,Aalborg, Billund,Bremen, Leipzig,Novosibirsk, Bilbao,Edinburgh, Osh,Maldives, UlanBator, Isfahan,Kermanshah, Taif,Yanbu and Adenroutes entered intoservice.Turkish Airlines, crowned with the “BestAirline in Europe” award two years in a row, isone of the largest global flight networks with217 destinations in 96 countries.Turkish Airlines will further this steadygrowth with fresh goals and new successes.

Turkish Airlines, distinguished by its dynamic human resourcesnumbering 15,857 employees, its young fleet of aircraft andits pioneering strategies, achieved its historically highest seatoccupancy rate in 2012.Turkish Airlines, Inc. was founded in 1933in Turkey. Its main fields of activity arethe performing of all types of domesticand international passenger and cargo airtransportation.Turkish Technic was established on 23May 2006 as a wholly-owned subsidiaryof Turkish Airlines. The company conductsits activities aimed at becoming animportant regional air transport technicalmaintenance base, supplying the aviationindustry with whatever maintenance,repair, and technical and infrastructuresupport it may require.As of the end of 2012 the total numberof employees working for Turkish Airlinesstood at 15,857. Forty captain pilotsof different nationalities are on duty.The Group’s 9 joint business units areappreciated with receiving share method.Turkish Airlines flies to 36 domestic and181 foreign airports, which brings thetotal number to 217 destinations. In 2012,airline companies limited their capacity toa large extent in an attempt to maintaintheir seat occupancy ratio. In starkcontrast, despite increasing its capacity,Turkish Airlines has still registered itshistoric best load factor. Thanks to thisstrategy, which increases profitability,Turkish Airlines carried 23 millioninternational passengers in 2012. Amongthis number, nine million were transferpassengers, with connection flights.Shareholding StructureOther(Public)Republic Of Turkey, Prime Ministry,Privatization Administration

MALAGATORONTOCHICAGONEW YORKLOS ANGELESWASHINGTON DCHOUSTONEDINBURGHMANCHESTERDUBLINBIRMINGHALONDONBRPATOULBILBAOBARCELMADRIDLISBON VALENASCASABLANCANOUAKCHOTTDAKAROABIDJANASAO PAULOBUENOS AIRES2003 2004 2005 2006 2007

AGADUSSELDORFCOLOGNETURINNURENBERGDAMASCUSNECEFKERMANSHAHSULAYMANIYAHOSLOEKATERINBURGSTOCKHOLM HELSINKIGÖTEBORGST. PETERSBURGAALBORGBILLUNDKAZANRIGAUFATER COPENHAGENMINSKASTANAHAMBURGNGHAM LEIPZIGWARSAW MOSCOWBREMENN AMSTERDAM BERLINHANNOVERKIEVBRUSSELSL’VIVDNEPROPETROVSKFRANKFURT PRAGUESTUTTGARTBUDAPESTDONETSKCHISINAUBASELMUNICHROSTOVPARIS ZURICH VIENNAODESSAALMATYGENEVALYONZAGREBMILANSIMFEREPOLLJUBLJANA BELGRADEBISHKEKGENOA VENICE SARAJEVO BUCHARESTTOULOUSESOCHI OSHPODGORICANICE BOLOGNAPRISTINA SOFIABATUMISKOPJETBILISIARCELONA ROME TIRANANAPLES THESSALONIKIIDBAKUTASHKENTGANJALENCIAISTANBUL NAKHICHEVANATHENSTABRIZ ASHGHABAD DUSHANBEMOSUL TEHRANLEFKOŞA ALEPPO ARBILALGIERS TUNISMASHADBAGHDAD ISFAHANTRIPOLIBEIRUTKABULSHARMISLAMABADSABHA MISRATABANGHAZIBASRATEL AVIVEL-SHEIKH AMMANALEXANDRIAKUWAITCAIRO DAMMAM SHIRAZBAHRAINADOHAKARACHIHURGHADA YANBU RIYADH DUBAIDHAKAABU DHABIMADINAH MUSCATJEDDAHADENKHARTOUMMUMBAITAIFSANAADJIBOUTIMALÉNIAMEYOUAGADOUGOUANLAGOSACCRAYAOUNDÉDAOULAKINSHASAADDIS ABABAMOGADISHUENTEBBENAIROBIKILIMANJAROKIGALIMOMBASADAR ES SALAAMNEW DELHINOVOSIBIRSKULAN BATORBEIJINGBANGKOKSHANGHAISEOULGUANGZHOUHONG KONGHO CHI MINH CITYSINGAPOREJAKARTATOKYOOSAKAJOHANNESBURGCAPE TOWNTotal number of destinations2008 2009 2010 2011 2012

Wide-bodyFleet ageA330-200, 7 aircraftA330-300, 10 aircraftA340-300, 7 aircraftB777-300ER, 12 aircraftNarrow-bodyFleet ageB737-900, 9 aircraftB737-800, 59 aircraftB737-700, 14 aircraftB737-400, 3 aircraftA320, 28 aircraftA321, 32 aircraftA319, 14 aircraftCargoTotal numberof aircraftAveragefleet ageA310-304F, 3 aircraftA330-200F, 4 aircraft

where dowe fly to?As of the end of 2012, Turkish Airlines offered flights to 217 citiesin 96 countries, with the number of airports served reaching 219.5North America2South America84 26Far EastEurope + CIS31Middle East33AfricaDomesticRoutesInternationalRoutesTotalNumber ofCountries36181 217 96Flight routes opened in 201234In 2012, Turkish Airlines flights to 13 destinations in Africa, sevenin the Middle East, six in Europe, three in the CIS, one destination inthe Far East, one in Southern Asia and one in the USA commenced.In addition to 32 international routes, Turkish Airlines opened twodomestic routes and added 34 new nodes to its flight map. Thanksto this performance, it broke its own record of 2011.4 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines, breaking records each year, will continueto strengthen Turkey’s bonds with the world by openingnew routes in 2013 as well.Turkish Airlines carried 37,997,786regularly scheduled passengers in2012 and hosted 166,152 on additionalflights. The Company conducted 3,079Hajj and Umrah (pilgrimage) flightscarrying 419,396 passengers. To takebetter advantage of spare capacity in theCompany’s timetable, 2,647 charter weremade, through which a total of 462,093passengers were carried.In scheduled flights 41% of TurkishAirlines passengers are domestic. And inthe international market, among the totalnumber of scheduled and additional flights,approximately 13.5 million passengersoriginate from Europe.Total Passengers BreakdownTotal Passenger Breakdownby regionInternational Routes57.2%Domestic Routes40.5%Charter1.2%1.1%Hajj-Umrah (pilgrimage)Europe58.8%Middle East16.0%Far East12.7%Africa7.6%4.5%0.5%North AmericaSouth America5

how much value didwe create?2011 2012Income from Sales 11,812,549,908 14,909,003,818Cost of Sales (-) (9,803,269,512) (11,893,596,710)Gross Profit/Loss 2,009,280,396 3,015,407,108Marketing and sales costs (-) (1,284,859,256) (1,593,367,677)Administrative costs (-) (365,283,678) (374,221,814)Other operating income 160,190,646 600,682,892Other operating costs (-) (396,680,737) (43,666,621)Operating Profit 122,647,371 1,604,833,888Share of investments’ profit/loss (equity method) 10,074,016 5,149,234Financial income 264,238,277 162,136,645Financial costs (-) (251,070,672) (414,741,611)PROFIT BEFORE TAX 145,888,992 1,357,378,156Tax (Expense) / Income (127,372,360) (224,010,923)Profit For Period 18,516,632 1,133,367,233Earnings per share/ Loss (Kr) 0.02 0.946 TURKISH AIRLINES 2012 ANNUAL REPORT

Sales Revenues (billion TL)Net Profit for the Year (million TL)2012 14.9 20121,1332011 11.8 2011 18.526% 6,024%Total Assets (billion TL)Total Number of Employees2012 18.8 201215,8572011 16.4 201115,73715% 0.8%Passengers CarriedSeat Capacity2012 39 million 201236,5042011 32.6 million 201133,00720% 10%7

how did weperform in 2012?Passenger numbers rose to 39 million in 2012.39 MILLIONThe total passenger number, which was at 32.6 million in2011, grew up 20% to 39 million in 2012.In 2012 flights to 34 new destinations were inaugurated.34THY 2 nd largest carrier in Europe2.In 2012, flights to a total of 34 new destinations, of which32 (13 Africa, seven Middle East, six Europe, three CIS, oneFar East, one South Asia, and one USA) are international andtwo are domestic, were inaugurated.Turkish Airlines is the 5 th largest carrier in worldwide and the2 nd largest in Europe by destination number.ASK (Available Seat Kilometer) increased by 18.4% to 96.1 billionin 2012.96.1 BILLIONAvailable Seat Kilometer (ASK) of Turkish Airlines was at81.2 billion in 2011. It increased by 18.4% to 96.1% in 2012.RPK (Revenue Passenger Kilometer) increased by 26.3 % to 74.4 billion.74.4 BILLIONRevenue Passenger Kilometer was at 58.9 billion in 2011. Itincreased by 26.3% to 74.4 billion in 2012.8 TURKISH AIRLINES 2012 ANNUAL REPORT

Despite the impact of the global economiccrisis, growth of the Turkish aviationindustry continued in 2012, outperformingthe global industry average considerably.The number of passengers utilizing Turkishairports rose by 11% when compared to theprevious year. Meanwhile, Turkish Airlinessurpassed the Turkish average in 2012,increasing passenger number by 20% andcargo transportation by 21%. And despitethe unfavorable conditions other airlinesare experiencing; Turkish Airlines becameone of the largest growing airlines both interms of passenger and cargo capacity,thanks to its planned growth strategy.Turkish Airlines, geared at progressingtowards the top of the list of the world’slargest airlines, was distinguished by itsperformance in various rankings in 2012.The company ranked in 3 rd place in termsof passenger number among Europeanairlines, and is among the first 12 airlinesin terms of international passengernumber.In 2012, the Company’s successesresulted in increased profitability. It hasalso maintained its resolve to becomethe world’s best and largest carriers bydestination number. It plans to be amongthe top 100 brands worldwide, and toincrease quality standards to and become a5 star airline within the next 5 years.20%Turkish Airlines outpaced the Turkishaverage for 2012 by increasing passengernumber by 20% and cargo transportationvolume by 21%.Revenue Management System haschangedReflecting globalization and the inherentcompetition among global actors; theRevenue Management System has changedin parallel to developments in fare structureand marketing strategies, with one of themost advanced systems implementedin the world. The new system providesus the opportunity to control revenuesderived from connecting flights by utilizingmore advanced scientific forecasting andoptimization models. As of January 2013the new Revenue Management System,which will provide a far more advancedstructure, comes into operation. It will beimplemented for over two years, duringwhich time it is estimated to result in arise in passenger revenues of 02% - 0.5%.And apart from its positive contributionto profitability targets, the system is alsodestined to boost customer satisfaction.Revenue Management business procedureshave been restructured in line withsustainable growth strategies. The projectis expected to contribute both to theCompany’s income and also generatemillions of dollars in foreign currencyinflow to Turkey in 2013.9

CHAIRMAN’SMESSAGE10

Turkish Airlines registered notable success at the 2012 SkytraxAwards, with nearly 20 million air travelers voting it the “BestAirline in Europe”, for the second year running, as well as “BestAirline in Southern Europe” and “Best Premium Economy ClassAirline Seat”.Esteemed stakeholders,Turkish Airlines has completed anotheryear marked by fresh developments andachievements. In 2012, we continued toposition our company within the frameworkof our long term strategy, growing further andcreating added value for our stakeholders.In terms of the economic climate, and fromthe perspective of the aviation industry,2012 was a difficult year. Continuingeconomic instability in developed markets,primarily in Europe, as well as fuel pricefluctuations and a relative rise were themain factors that made for a challengingyear. On the other hand, large and mediumsized players, surviving the shocks of theglobal crisis, increased their competitivenessand continued to structure their business.This had a significant effect both on marginsand the competitive environment in 2012.Considering these developments, TurkishAirlines continued strong and effectivepositioning in line with its long termstrategic plan, created according to“Turkey’s 2023 Vision”. Many novel projectsand achievements were realized. In 2012we preserved our previously won gains,registered new achievements and presentedfresh values. Turkish Airlines registerednotable success at the 2012 Skytrax Awards,with nearly 20 million air travelers voting itthe “Best Airline in Europe”, for the secondyear running, as well as “Best Airline inSouthern Europe” and “Best PremiumEconomy Class Airline Seat”.Our passenger number of 32,650thousand in 2011, rose by 19.6% to39,045 thousand in 2012. In the sameperiod, Available Seat Kilometer (ASK)climbed 18.4% to 96,124 million.As Turkish Airlines we increased our salesby 26% over the previous year to TL 14.9billion and gross operating profit by 192%to TL 1,048 million. Our net profit, whichamounted to TL 18.5 million in 2011,reached TL 1,133 million in 2012.Along with the financial data itself, thebasic indicators of the aviation industryconfirm our successful performance in2012. Our passenger number in 2011 of32,650 thousand, rose by 19.6% to 39,045thousand people. IATA’s forecast for the2012 increase was at around 5.3%. TurkishAirlines ranked third among AEA memberson this performance. In 2012, compared tothe previous year, available seat kilometer(ASK) rose by 18.4% to 96,124 million.Despite the rise in ASK, the passengerload factor continued to grow on a rise of4.8 percentage points to 77.4% at end-2012. Utilization ratios clearly confirm oursuccessful performance. Our fleet utilizationrose by 5% to 12:12, including leasedaircraft.TO OUR SHAREHOLDERS11

CHAIRMAN’S MESSAGETurkish Airlines, operating flightsto 217 nodes in 2012, flies to morecountries than any other airline inthe world.We reached important milestones in fleetand flight network terms, on which wehad placed particular emphasis. We tookimportant steps towards making Istanbul,historically a regional center, into a true airtravel hub. In terms of fleet size, we closedthe year of 2011 with 179 aircraft, whichmakes us all the more proud to announcethat the number had risen to 202 by the endof 2012. We own one of the world’s youngestand most dynamic fleets, with an averageage of 6.6 years. New generation long andmedium-range aircraft have been added toour fleet. These have enabled us to provideservice to still more destinations worldwide,contributing to our operational efficiencythrough fuel economy.We have gained important advantagesthrough our strong fleet structure, flightnetwork and market variety, thanks touninterrupted investment. We formedthe basis of our flight network strategy tobolster our presence in developed markets,and to become the key player in developingregions. This said, we also strengthenedour presence in developing regions, suchas Africa, Asia and the Middle East. In2011 we had a total of 185 flight nodes(150 international and 35 domestic lines),whereas in 2012 we had flew to 217 points(181 international, 36 domestic lines). Westarted to offer flights to 33 points in Africa,With its young fleet, dynamic humanresources, and subsidiaries with considerablecompetence in their fields, Turkish Airlineswill continue to create value and utilize globalopportunities.26 in the Far East, seven in ContinentalAmerica and 31 in the Middle East. Thanksto these investments and developmentsTurkish Airlines now flies to more countriesthan any other airline in the world. Inaddition we became the second airline bydestination number where flights are offeredfrom one center, and the 5th largest airlinein terms of flight network. Putting our focuson developing markets had both economicand social consequences, as we providedthose countries with a connection to world.And with the help of these investments weincreased our international to internationaltransfer passenger number by 44% to 9million. And what’s more, by enablingthese countries to become a part of theglobalized world from an economic andsocial perspective, we reconfirmed ourcommitment in to social responsibility.According to IATA data, it is forecast thatinternational passenger number will haveincreased by 331 million by 2016. Themain axis of this increase will pass throughdeveloping countries. I firmly believe that12 TURKISH AIRLINES 2012 ANNUAL REPORT

we will benefit greatly from this potential,thanks to our strategy regarding transferpassengers, flight network and geographicallocation.As Turkish Airlines we continued ourinnovative business practices in 2012. Thelevel of comfort offered in our “BusinessClass Cabin Concept” surpasses the FirstClass cabins of many rival airlines. Inaddition, we managed to exceed theexpectations of our passengers with thesheer variety of our culinary offerings andservice quality. We also transferred ourrefined international passenger LoungeIstanbul concept to the international arena.We plan to open our first lounge of similarconcept in Moscow in 2013.We continued our technological innovationsin 2012, which included the introductionof many innovations, such as Internetaccess and live football broadcasts duringlong flights. We also presented innovativesolutions in operational fields. This includedthe completion of the initial phase of SAPsystem integration, a worldwide projectthat increased efficiency in many areasranging from reporting to cost control. Oursubsidiaries contributed significantly to ourculture of innovation with their cooperationand increasing technical expertise in 2012.It was a fruitful year in terms of brand andpositioning. Our advertising campaignbuilt around the “Globally Yours” message,together with our sponsorship agreementsregistered a major impact. We alsocontinued to make a greater contribution tosociety through sponsorship across manyfields, including sports, the arts, and socialactivities, thus further positioning ourbrand. Today Turkish Airlines is perceivedworldwide as a prestigious and welcomingbrand.MILLION 9We increased our international-to-internationaltransfer passenger number by 44% to nine million.Our valued stakeholders,In realizing these investments that have ledto growth and development, we managedto raise income and in particular increaseprofitability. This is an indication of thefinancial and strategic health of ourCompany, and of its effective positioning.According to IATA forecasts, there will bea global market structure in place that ispositive and open to improvement by 2016.If we add to this our country’s determinationof the last few years to register tremendouseconomic performance, we begin to seethe opportunity ahead of us more clearly.As Turkish Airlines, we are well positionedfor healthy growth, value creation and theutilization of the opportunities these presentin our market. I would like to underlinethat we are determined to take our growthrealized in 2012 still further in 2013.None of these developments would of coursebe possible without the trust of our investors,the loyal courtesy of our passengers, andthe remarkable warmth and dedication ofour employees. I therefore take this occasionto express my sincere thanks to all ourstakeholders, who contributed to TurkishAirline’s success in 2012. It is my sincerehope that 2013 proves to be another yearbrimful of fresh successes for our country andour company alike, and I respectively thankyou all for working to make this happen.Hamdi TopçuChairman of the Board and Chairman of theExecutive CommitteeTO OUR SHAREHOLDERS13

BOARD OF DIRECTORSHamdi TopçuChairman of the Board and Chairman of theExecutive CommitteeMr. Topçu was born in Çayeli, Rize in 1964.In 1986, he graduated from the MarmaraUniversity, receiving a degree in Economicsand Administrative Sciences. He is a certifiedfinancial advisor. Mr. Topçu retains his positionson the Turkish Football Federation AuditingCommittee and as Chairman of the Board ofDirectors of the Company’s subsidiaries; THYTurkish Technic, THY DO&CO Catering Services,TGS Ground Services, THY Opet Aviation Fuelsand HABOM Aviation Maintenance Repair andModification Center. Hamdi Topçu is married andhas four children.Prof. Dr. Cemal ŞanlıVice Chairmen of the Board of Directors andExecutive CommitteeMr. Şanlı was born in Manisa in 1950. In 1977 hegraduated from the Faculty of Law of İstanbulUniversity, and in the same year began to workas an Assistant at the İstanbul University LawSchool. In 1985 he received his Doctorate ofLaw for his thesis “International CommercialArbitration”. He completed his PhD dissertationon International Arbitration at the Institute ofAdvanced Legal Studies affiliated to LondonUniversity. In 1987, he became AssistantAssociate Professor, in 1990 Associate Professor,and in 1996 full Professor. He is currentlythe head of the International Private LawDepartment of the Faculty of Law at İstanbulUniversity. Prof. Şanlı is a Board Member in theCompany’s subsidiaries, THY Turkish Technicaland HABOM Aviation Maintenance Repair andModification Center. He has published manybooks, articles and monographs in the fieldof international private law, and especiallyinternational arbitration. Cemal Şanlı is marriedand has four children.He received his Doctorate on InternationalArbitration at the Institute of Advanced LegalStudies affiliated to London University.14 TURKISH AIRLINES 2012 ANNUAL REPORT

PhD. Temel KotilMember of the Board of Directors and ExecutiveCommittee, CEOMr. Kotil was born in Rize in 1959. In 1983 hegraduated from the Aeronautical EngineeringDepartment at İstanbul Technical University(ITU). In 1986, he received his first Master’sdegree in the United States from the AircraftEngineering Department of Michigan UniversityAnn Arbor, followed in 1987 by his secondMaster’s degree in Mechanical Engineering,and his Doctorate in Mechanical Engineeringin 1991 at the same university. From 1991-93Kotil established and managed the Aviationand Advanced Composite Laboratories of ITU’sFaculty of Aeronautics and Astronautics, wherehe also served as Assistant Professor andAssociate Professor. From 1993-94 he servedas Department Faculty Vice President and asFaculty Assistant Dean. Mr. Kotil also served asHead of the Research, Planning and CoordinationDepartment of the Istanbul MetropolitanMunicipality. He then served as a guest professorat Illinois University, and then as DepartmentHead at the Research and EngineeringDepartment of AIT Inc. New York. In 2003 hebegan his career with Turkish Airlines as VicePresident of the Technical Department. In 2005Mr. Kotil was appointed General Manager. And in2006, he was elected as a member of the IATABoards of Directors. In 2010, he was appointed asa Board Member of the Association of EuropeanAirlines and as Vice President in 2012. Mr. Kotil,married with four children, has authored manyarticles and publications.Mehmet BüyükekşiMember of the Board and CorporateManagement CommitteeBorn in Gaziantep in 1961, Mr. Büyükekşigraduated from the Faculty of Architecture atYıldız Technical University in 1984. He attendedBusiness Administration courses at the MarmaraUniversity and Business Administration andEnglish courses in the UK. In addition tobeing a Board Member of Turkish Airlines,Mr. Büyükekşi is the President of the TurkishExporters’ Assembly (TİM), a member of theBoard of Directors of Türk Eximbank, of theİstanbul Chamber of Industry (ISO), the İstanbulDevelopment Agency, the İstanbul Leatherand Leather Products Exporters’ Association(İDMİB), and the Energy Efficiency Association(ENVERDER), and is the General Coordinator ofZiylan Group. Mr. Büyükekşi has been a boardmember at the Turkish Leather Foundation(TÜRDEV), Organized Industrial Zones andTechnology Development Regions (TOBBİS),International Commerce Center Inc. (TOBTIM),and Turkish DO&CO. He was the president of theTurkish Association of Footwear Manufacturers,Chairman of the İstanbul Leather and LeatherProducts Exporters’ Association (İDMİB), aswell as the Founding Chairman of the TurkishFootwear Industry Research Development andEducation Foundation (TASEV) from 1997-2008.He is married and has three children.TO OUR SHAREHOLDERS15

BOARD OF DIRECTORSMuzaffer AkpınarMember of the Board and Financial AuditCommitteeBorn in 1962, and a graduate of Saint-MichelFrench High School and the Bosphorus UniversityDepartment of Management Science. Hisprofessional career commenced in 1986 whenhe became the founder shareholder of PentaTextile. In 1993 he was appointed CEO of KVKMobil Telefon Hizmetleri A.Ş.. Subsequently,Mr. Akpınar served as the CEO of MV HoldingA.Ş. and played an active role in the creation ofFintur Holding BV. Between the years of 2002and 2006 Mr. Akpınar served as the CEO ofTurkcell. He is an independent Board Member ofTurkish Airlines and serves as Chairman of theBoard at Dost Energy, as Vice Chairman of MVHolding, Chairman of the Board at Portmobiland as a Member of the Board of Kimya Teknik.He remains an entrepreneur and investor inthe fields of renewable energy, technology,chemicals and construction. Mr. Akpınar ismarried and has two children.İsmail GerçekMember of the Board, Financial Audit andCorporate Management CommitteeBorn in Çan, Çanakkale in 1963, he graduatedfrom the Public Administration Departmentof the Ankara University Faculty of PoliticalSciences in 1985. He received his MA in theUSA in 1994. His career began in the position ofassistant inspector at the Ministry of FinanceReview Committee in the same year. Until 1998he worked as a finance inspector and financeinspector general. And from 1995-1997 Mr.Gerçek was deputy assistant District Treasurerin Istanbul and has pursued his career as achartered accountant since 1998. He is anindependent Board Member at Turkish Airlinesand Member of the Audit Committee at JointFunds Bank Inc., a Member of the Board ofTrustees at Fatih Sultan Mehmet FoundationUniversity, and Auditor at the ParticipationBanks Association of Turkey.16 TURKISH AIRLINES 2012 ANNUAL REPORT

Gülsüm AzeriMember of the Board and CorporateManagement CommitteeGülsüm Azeri is a graduate of BoğaziçiUniversity, at the Department of ChemicalEngineering with an MS Degree in IndustrialEngineering from the same university. Shespeaks fluent German and English. During akey part of her career, Mrs. Azeri was a seniorexecutive at Şişecam. She held the posts ofŞişecam Chemicals Group President from1994-1998, Şişecam Glassware Group Presidentfrom 1999-2007 and Şişecam Flat Glass GroupPresident from 2007-2011. And from 1994 to2011 she was an Executive Committee memberof Şişecam. Currently, Mrs. Gülsüm Azeri isCEO and Board Member of OMV Petrol OfisiA.Ş. and OMV Gaz ve Enerji Holding A.Ş., andwas chairperson of OMV Petrol Ofisi HoldingA.Ş. From 2004-2008, she was the Chairpersonof the European Glass Federation GlasswareCommittee, and from 2009-2011 was a memberof the Board of Directors of Glass for Europe, theEuropean Flat Glass Manufacturers’ Association.Mrs. Azeri has been a member of the Board ofDirectors at the Istanbul Chamber of Industry(ISO), an Executive Committee Member of theTurkish Exporters Assembly (TIM), a member ofthe Board of Directors and Executive Board ofthe Foreign Economic Relations Board of TheUnion of Chambers and Commodity Exchangesof Turkey (DEIK). She also represented the privatesector on the Board of the Ethics Council of thePrime Ministry of Turkey. In April 2011, she waselected as member of the Board of Directors ofTurkish Airlines. Mrs. Azeri is married and hastwo children.Naci AğbalMember of the BoardMr. Ağbal was born in Bayburt in 1968. Hegraduated from the Public AdministrationDepartment of the Istanbul University Faculty ofPolitical Sciences in 1989. In 1998 he receivedhis MBA from Exeter University in the UK. In 1989he became Assistant Inspector at the Ministryof Finance, in 1993 Inspector at the Ministry ofFinance, and in 1999, became Inspector General.Having served as Vice President of the FinancialReview Committee, he was appointed Head ofDepartment at the Inland Revenue in 2003,and served as a Ministerial Advisor in 2004. In2006 Mr. Ağbal was appointed acting GeneralManager of Budget and Financial Control at theMinistry of Finance, and Vice President of theInland Revenue in the same year. In 2009 hebecame the Undersecretary of Finance. He is alsoa member of the Council of Higher Education andof the Board of Trustees at Yesevi University. Mr.Ağbal is married with two children.TO OUR SHAREHOLDERS17

Prof. Dr. Mecit EşMember of the Audit CommitteeProf. Dr. Mecit Eş, born in 1953 in Samsun;received his degree from the Istanbul UniversitySchool of Economics in 1974. Having held severaloffices, he commenced his academic projectsand received his Doctorate in 1985. He becameAssociate Professor in 1990 and Professor in1986. And having then worked at DumlupınarUniversity from 1992 and 2012, Mr. Eş continueshis academic studies as a Professor of theAcademy of Commercial Sciences at IstanbulCommerce University He has published manybooks and articles, and is married with threechildren.İbrahim Halil KırşanMember of the Audit CommitteeA Mining Engineer by profession, Mr. Kırşanwas born in Gercüş, Batman in 1964. In1987 he received his degree from the 9thSeptember University in first place in his year.As an academic he commenced work at theMTA Mineral Research & Exploration GeneralDirectorate. In 1992 he received his Master’sDegree at the Mining Engineering faculty ofHacettepe University. Then from 1993-1995he worked at the General Directorate of MiningAffairs In 1998 he graduated as a PublicAdministration Specialist of the specializationin public administration post graduatecourse at the Turkey and Middle East PublicAdministration Institute. On 14 September1999 he was appointed Department Head ofthe Department of Feasibility Studies at the“MTA General Directorate. On 24 March 2000 Mr.Kırşan was appointed Attorney Assistant GeneralManager of the MTA General Directorate. Aftersome years as an attorney, he briefly providedconsultancy to a government ministry. Andafter 23 years of service at the MTA GeneralDirectorate, he was appointed General Managerand member of board of Başkent Natural GasDistribution A.Ş. On 26 November 2010 he wasappointed Vice President of the Prime MinistryPrivatization Administration. And as of 28December 2012 he became a Member of theAudit Committee at Turkish Airlines.TO OUR SHAREHOLDERS19

20 TURKISH AIRLINES 2012 ANNUAL REPORT

MISSION• To develop the Company’s standing as a global airline by expanding thecoverage of its long-range flight network.• To develop the Company’s standing by developing its technicalmaintenance unit into a major regional resource.• To develop the Company’s standing as a service provider in allstrategically important aspects of civil aviation, including groundhandling services and flight training.• To defend the Company’s standing as the leader of the domestic airlineindustry.• To provide an uninterrupted and superior flight service by entering into acollaborative agreement with a global airline alliance that complementsits own network so as to advance its international image and marketingabilities.• To safeguard and improve upon İstanbul’s reputation as a regionalaviation hub in its capacity as the flag carrier of the Republic of Turkey inthe civil aviation industry, to be a leading European airline and an activeglobal player by virtue of its flight safety and security record, and itsproduct diversity, service quality, and competitive edge.VISION• Sustained growth of above the industry average• A zero accident and crash record• The most envied service levels worldwide• Unit costs equal to those of low-cost carriers• Sales and distribution costs of below industry averages• Loyal customers who manage their own reservation, ticketing, and boardingformalities themselves• Personnel who constantly develop their qualifications with an awareness of theclose relationship between benefits for the Company and the added value thatthey contribute• A sense of entrepreneurship that creates business opportunities for fellowmembers in the Star Alliance and takes advantage of the business potentialprovided by them• A management team, whose members identify with modern governanceprinciples, and who distinguish themselves by being mindful of the bestinterests of shareholders and all stakeholders alikeTO OUR SHAREHOLDERS21

STRATEGYFlight networkİstanbul’sgeographicallocationTurkish Airlines implements effectivenetwork and marketing strategies toincrease profitability in parallel to growth,and to meet capacity increase objectives.The Company is expanding its network byadding new destinations, having becomeacknowledged worldwide for its expansionstrategy. Turkish Airlines is positionedas the largest carrier worldwide and the2nd largest by international destinationnumber. Indeed, in the summer seasonof 2012 Turkish Airlines became the 5thlargest carrier worldwide by destinationnumber. In the winter season, the Companysurpassed its competitors to become the5 th largest airline in terms of flight networkthanks to the thirty four new destinationsadded by the end of 2012, which marked ahistoric high for the Company.İstanbul, being a transfer point on Europe-Middle East, Europe-Far East and Asia,Europe-Africa, and America-Middle Eastlines, reduces flight time and introducesthe flexibility to use a variety of fleets ofdiverse capacity. Thanks to its geographicalposition, İstanbul offers connection ofcloser proximity when compared with otherpotential transfer points. İstanbul bridgesboth East and West, which enables theuse of a narrow body fleet, thus providinga considerable cost advantage andcontributing to competitive superiority.22 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines is increasingly preferred with each passingday, and has continued to grow accordingly. The Companyfollows an effective strategy of turning industry-relatedopportunities to its advantage thanks to its robust commercialcharacteristics. In fact, Turkish Airlines is advancingconfidently towards its goal of consolidating its positionamong the leading airlines in the global market.Growth strategyin AfricaUnlimitedcustomersatisfactionTurkish Airlines plans for growth in theAfrican region, where aviation is growingrapidly. As of the end of 2012, the Companyflies to 33 airports in 23 countries. In thefuture Turkish Airlines plans to increase theconnection between Africa and the rest ofthe world as the main carrier, contingentupon aircraft availability and flightauthorization.Turkish Airlines, with its extensiveworldwide and ever increasing flightnetwork, has advanced successfully in theindustry. The Company’s core principlesare those of respect for the individual andunlimited customer satisfaction. TurkishAirlines, distinguished by its young,technically advanced and reliable fleet,has evolved into a leading airline brandpreferred worldwide for its innovativeapproach to customer satisfaction.TO OUR SHAREHOLDERS23

STRATEGYTowards becomingthe largest transferhub worldwideA global brandfocusing itsstrengths on thecustomerİstanbul, which geographically serves asa natural bridge between East and Westis one of the fastest growing aviationcenters worldwide. International passengernumber, transferred over Istanbul, TurkishAirlines’ main center, is increasing rapidly.Indeed, Istanbul Atatürk Airport ranksamong the top 15 cities worldwide in termsof planned and scheduled internationalpassenger capacity. Turkish Airlines,seeking to grow further at the İstanbul hub,plans to reallocate certain of domestic andinternational flights from Sabiha GökçenAirport to Atatürk Airport in 2013. Indeed,the Company is advancing confidentlytowards its goal of making Istanbul one ofthe largest transfer points. In 2012, ninemillion international passengers arrivedfrom one point via Turkish Airlines andtransferred over Istanbul to fly to anotherinternational destination. Notably, thisnumber is 44% higher when compared to2011.Today Turkish Airlines is a global brand. Thecompany made a great progress thanksto its geographical position advantage,measures taken against crisis and costcutting policies, high service qualityagainst low operational costs, emphasisput on customer satisfaction, successfulsubsidiaries, strong flight network andorganic growth strategies.24 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines operates according to exacting internationalservice standards, at each level of the service chain, andat every point where the Company meets the customer. Allpassengers are hosted by attentive and trained personnel whoembody the Company’s goal of promoting Turkish hospitalityworldwide.SubsidiariesSuperior ServiceQualityTurkish Airlines had just one subsidiaryin 2003. Yet today it has directedits operational success to corporatedevelopment and become a corporationwith 12 subsidiaries. The Company’sstrategy is to forge strategic alliances andcreate sub-brands to advance its industrialsuccess. It will continue to implementthis strategy with fresh alliances in 2013.Turkish Airlines, a global network carrierand member of the Star Alliance, isdedicated to providing even better serviceover the coming years, thanks to theextensive opportunities and flight choices itoffers to its members.Globalization has brought about theneed for continuous travel; therefore,airline travel, having become increasinglywidespread, has brought accelerationand growth to the industry. TurkishAirlines, in light of this opportunity,responds to customer demand with apolicy of superlative service quality. TheCompany operates according to exactinginternational service standards, at eachlevel of the service chain, and at every pointwhere the Company meets the customer.All passengers are hosted by attentiveand trained personnel who embody theCompany’s goal of promoting Turkishhospitality worldwide. The “Globally Yours”message was created accordingly. TheCompany worked hard to offer the bestpossible service to its 39 million passengersin 2012. Indeed, Turkish Airlines plans totake its customer-orientated approachfurther still with new projects in 2013.TO OUR SHAREHOLDERS25

STRATEGYBrand AwarenessLow OperationalCostThe year of 2012 was a fairly successful onein terms of brand awareness, wherein thecompany realized many important projectsto further develop its global brand image.In addition to effective and successfulcampaigns in the social media, newbrand investments through sponsorshipagreements and advertisements ofworldwide impact were realized. In recentyears, Turkish Airlines has made extensiveuse of the most popular communicationchannels in disseminating corporate newsin the fastest possible manner, to bettercommunicate with its passengers andbecome a part of their daily lives.Turkish Airlines continues its costmanagement projects, in order to realizethe substantial turnover goal of TL40 billion, with high profitability andreduced sensitivity to increasing costs.In accordance with its savings strategy,the fleet age is kept young and effective,and fuel saving measurements taken. Inaddition to this, and ranking among theCompany’s most important strategiesare efforts to increase the share of saleschannels in order to decrease sales costs,and to invest in cost cutting technologies,and increase the efficiency of personneland procedures.26 TURKISH AIRLINES 2012 ANNUAL REPORT

TO OUR SHAREHOLDERS27

SUBSIDIARIESTHY Turkish TechnicTurkish Technic offers maintenance, repairand technical support to Turkish Airlines,as well as to more than 100 domestic andinternational airlines. Established in 2006,the company is a wholly-owned subsidiaryof Turkish Airlines.With its subsidiary operations and morethan 2,000 employees, Turkish Technicconducts its activities with the goal ofbecoming an important regional airtransport technical maintenance base bysupplying the full range of maintenance,repair, and technical and infrastructuresupport the aviation industry requires.SunExpressFounded in 1989, SunExpress is a jointventure of Turkish Airlines and Lufthansa,in which each holds a 50% stake. It is themarket leader in charter flights betweenGermany and Turkey.Having inaugurated flights in 1990, thecompany has served the charter market formany years. It began flying the Antalya-Frankfurt route as the first privately ownedairline in Turkey to operate regularlyscheduled international flights. Today thecompany has a fleet of 23 aircrafts andserves its customers with 1,695 employees.28 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines bolsters its strength and market dominance,by reducing costs through reliance on subsidiaries, thusenabling operational flexibility and increasing quality andefficiency. Additionally, it provides service to other companies,thereby transforming its subsidiaries into profit centers.Turkish OPET Aviation FuelsTurkish OPET Aviation Fuels, established in2009, is a joint venture of Turkish Airlinesand OPET Petrolcülük A.Ş, in which eachholds an equal stake. It provides jet fuelstorage and supply services at İstanbulAtatürk and other airports in Turkey.The company commenced operations on 1July 2010. In addition to aviation fuels ofevery kind, it also engages in the domesticand international sale, importation,exportation, distribution, and transport ofchemicals, lubricants, and paints.Turkish Ground ServicesThe company provides ground handlingservices at İstanbul Atatürk Airport and atfive other airports in Turkey. Established in2009 as a joint venture of Turkish Airlinesand HAVAŞ Havaalanları Yer HizmetleriA.Ş. in which each holds a 50% stake,TGS (Turkish Ground Services) has been inoperation since the beginning of 2010.TGS serves approximately 70 domestic andinternational airlines in addition to TurkishAirlines at Turkey’s İstanbul Atatürk,Ankara Esenboğa, İzmir Adnan Menderes,Antalya, Adana, and İstanbul SabihaGökçen airports. TGS, employing over7,000 personnel, has to date served groundservices to more than 400 thousand flightsto high international standards.TURKISH AIRLINES GROUP29

SUBSIDIARIESTHY Turkish DO & COThe Company provides catering servicesto Turkish Airlines, and to more than sixtyother domestic and international airlines.Commencing operations in 2007, TurkishDO&CO is a joint venture of Turkish Airlinesand DO&CO Restaurants & Catering AG, inwhich each holds a 50% stake.Headquartered at İstanbul Atatürk Airport,it provides catering services to domesticand international airlines out of kitchensoperating at nine locations in Turkey. Thesekitchens turn out around 140,000 mealsa day, each choice of which is carefullyprepared by Turkish DO&CO’s own culinarystaff. Turkish DO&CO has been responsiblefor substantial improvements in cateringservice quality aboard Turkish Airlinesaircraft.Pratt&Whitney THY Turkish EngineCenter (TEC)This company, established in 2008,provides aircraft engine maintenance,repair, and overhaul services to customersin Turkey and its hinterland. It is ajoint venture of Turkish Airlines andUnited Technologies, a subsidiary ofPratt&Whitney, in which Turkish Airlinesholds a 51% stake. Operating out of ahigh-tech, environmentally-friendlymaintenance center with an area of around25,000 m² at İstanbul Sabiha GökçenInternational Airport, TEC has the capacityto perform maintenance on more than 200aircraft engines a year.30 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines continues to strengthen global brand identitywith its qualified and experienced personnel and subsidiaries,on its way to becoming a leader in the aviation industry.Goodrich Turkish Airlines TechnicalService CenterAt the Gebze facilities, high quality servicesfor maintenance and repair of nacelles,thrust reversers, related parts and rotablesupport is provided. Established in 2010,the Goodrich Turkish Airlines TechnicalService Center is a joint venture of TurkishTechnic (40%) and TSA-Rina Holdings(60%), the latter a subsidiary of GoodrichCorporation.The Goodrich Turkish Airlines TechnicalService Center aims to be an importantplayer in the industry by providingmaintenance and repair services meetinginternational standards to Turkish Airlinesand other international airline companies,underpinned by technical certification.Turkish Cabin Interior SystemsIndustries Inc.This company aims to take a share of worldmarkets with the cabin interior systemproducts that it manufactures. Formedin 2011, stakes of 30%, 21%, and 49%are held respectively by Turkish Airlines,Turkish Tecnic and Türk Havacılık ve UzaySanayi A.Ş. (TUSAŞ -TAI).TCI’s objective is to undertake thedesign, manufacture, logistical support,modification, and marketing of aircraftcabin interior systems and components,and to win a share of internationalmarkets with the goods and services that itproduces.TURKISH AIRLINES GROUP31

SUBSIDIARIESAircraft Seat Manufacturing Industry &Trade Inc.A joint venture with the Assan Hanil Group,the company was set up to design andmanufacture airline seats, and to make,modify, market, and sell spare parts toTurkish Airlines and other internationalairline companies. Formed in 2011, stakesof 50%, 45%, and 5% are respectively heldby Assan Hanil Group, Turkish Airlines, andTurkish Tecnic.HABOM Aviation Maintenance, Repairand Modification CenterThis facility, established in Kurtkoy SabihaGokcen International Airport, aims tobecome the largest center in the region,providing the services of maintenance,repair and modification. The company wasestablished in 2011 as a wholly-ownedsubsidiary of Turkish Airlines.HABOM’s principal business activitiesconsist of buying, selling, renting, leasing,maintaining, repairing, and modifyingany and all manner of aircraft and aircraftequipment, as a full range of aviationrelatedequipment, instruments, andengines; it also provides a comprehensivespectrum of training activities relatedto such undertakings, including, but notlimited to seminars and courses.32 TURKISH AIRLINES 2012 ANNUAL REPORT

TURKBINE Technical Gas TurbinesMaintenance & Repair Inc.The company is a collaboration that derivesits strength from international experience,technically competent personnel andstrong brand underpinning. Established in2011, it is a joint venture of Turkish Technicand Zorlu O&M Enerji Tesisleri İşletme veBakım Hizmetleri A.Ş., in which each holdsan equal stake.THY Aydın Çıldır Airport Management Inc.The company was established in 2012as a wholly-owned subsidiary of TurkishAirlines. Yet to commence operations, itwas established to operate Aydin ÇıldırAirport, provide aviation training, organizesports-training flights and conduct allactivities related to the transportation ofpassengers with aircraft types appropriateto prevailing runway length.The signed agreement envisions theprovision of maintenance, repair, andoverhaul services for a variety of aircraftengines that are beyond the activityscope of existing subsidiaries, and alsofor industrial gas turbines used at powerplants.TURKISH AIRLINES GROUP33

INDUSTRYDEVELOPMENTS ANDTHE FORECAST FOR 2013Growth rates, which were fairly low at the beginning of 2012,reached 5.3% overall, thus becoming a positive indicator for theaviation industry.Middle Eastern carriers contributedmarkedly to international traffic, astheir numbers exceeded domestic trafficon 15.4% growth. European and NorthAmerican Airline companies, affected bythe Euro-zone crisis, respectively closedthe year of 2012 on 5.3% and 1.3% growth.When these numbers are compared withthe 2011 data for these carriers (9.5% and4.1%) we observe a downward trend ingrowth rates.Domestic airline companies completedthe year on 4% growth rates. China (9.5%)and Brazil (8.6%) distinguished by stronggrowth rates and the US domestic linemarket, with its low growth rate, representshalf of overall domestic line transfers.Air cargo transfer has suffered in theclimate of global crisis. During the year, thenegative impact of maritime transport onits aviation counterpart is also noteworthy.Yet despite the negative conditions of airtransportation, certain airlines managed toclose the year on positive growth rates. Theincreased rates of Middle East and AfricanAirlines for the cargo segment of 14.7%and 7.1% are a positive indication for theindustry. Indeed, high cargo capacityutilization rates for the fourth quarter of2012 gave the impression that the year of2013 will be one of success.Passenger MarketInternational FlightsWhen occupancy rates throughout theyear are observed, we note developmentin all airline companies. This developmentin international air traffic signals positivechanges for the market over the comingperiod. Airline companies closed the lastquarter of the year on limited growth of0.6%, and this trend is expected to developfurther in the coming periods.When compared to 2011, the 6%improvement in international air transferis a positive indication for the industry.Middle Eastern companies, which makethe largest contribution to the growth rate,accounted for one third of market growthin 2012.34 TURKISH AIRLINES 2012 ANNUAL REPORT

Middle East carriers closed 2012 in firstplace on a 15.4% growth rate in theinternational market. They increased theirgrowth rate when compared to the previousyear, based upon which, signal growth isanticipated for the coming period.Domestic FlightsThe industry experienced a positive yearin terms of occupancy rates in domesticlines. There has been a growth of 4% inoverall flights. And when taking the tryingglobal economic conditions and rise in fuelprices into consideration, 2012 actuallyclosed positively. China posted the mostdistinguished growth rate, when the overallinternational market is analyzed, at 9.5%,followed by Brazil on 8.6% growth.2013 Financial ForecastsFollowing the rapid decline in the firstquarter of 2012, the rising financialperformances of airlines have beenobserved in the second and third quarters.Global economic stagnation and high fuelprices were reminiscent of the years of2006 and 2007 for airline companies. Yetduring the year these companies managedto reduce costs and develop themselves inindustry terms. This resulted in better thanexpected financial performances. Industryprofitability forecast for 2012 rose fromUSD 4.1 billion to USD 6.1 billion, which isviewed as a positive indicator for the sector.Performance expectations for 2013 aremuch higher when compared to 2012.In 2013, the forecast for industry basedprofit after tax is at USD 8.4 billion. Andwhile an increase in fuel prices is expectedwhen compared to 2012, there is also theanticipation of an improvement the globaleconomic environment.Although the growth figure for 2012is below the 5.9% seen in 2011, it stillrealized above the 5% average of thepast 20 years.This said, the aviation industry is forecastsustaining a negative impact. GrossDomestic Product (GDP) and Net Profitratios after tax are expected to run inparallel in 2013.Despite the difficult economic conditionsfaced by the aviation sector major airlinecompanies are expected to continue theirgrowth acceleration in 2013. Indeed, themore powerful players will intensify theirstrength, while weak ones will withdrawfrom the market.TURKISH AIRLINES GROUP35

2012 TRAFFICRESULTSDuring 2012 Turkish Airlines took important steps in makingIstanbul one of the most important centers of the aviationworld.Total passenger (000)39,045Total passenger load factor(%)77.4Total revenuepassenger-km (million)74,410Total availableseats-km (million)96,12436 TURKISH AIRLINES 2012 ANNUAL REPORT

Domestic revenue passenger(000)15,906Domestic availableseats-km (million)12,012International revenuepassenger (000)23,139International availableseats-km (million)84,112TURKISH AIRLINES GROUP37

2012 TRAFFIC RESULTS47%increaseTHY strengthened its standing, especiallywith passenger increases in developingregions; rising 47% in Africa, 25% in the FarEast and 20% in the Middle East.Total Traffic Results2012 2011 2010 2009 2008 2007Revenue passenger (000) 39,045 32,648 29,119 25,102 22,597 19,636Available seats-km (million) 96,124 81,193 65,100 56,574 46,343 41,619Revenue passenger-km (million) 74,410 58,933 47,950 40,130 34,265 30,251Passenger load factor (%) 77.4 72.6 73.7 70.9 73.9 72.7Number of destinations 219 196 174 158 145 142Number of landings 308,384 270,618 245,226 213,953 189,328 168,899Kms flown (000) 542,339 419,113 358,370 311,869 262,124 232,147Cargo (Ton) 454,293 375,042 302,983 230,709 191,934 177,508Mail (Ton) 16,570 12,796 10,973 7,351 6,956 6,714Excess baggage (Ton) 3,683 4,170 3,629 3,734 3,752 3,462Available ton-km (million) 14,288 11,926 9,036 7,795 6,147 5,535Revenue ton-km (million) 9,425 7,467 5,894 4,784 3,993 3,549Overall load factor (%) 66.0 62.6 65.2 61.4 65.0 64.138 TURKISH AIRLINES 2012 ANNUAL REPORT

Domestic Flights Traffic Results2012 2011 2010 2009 2008 2007Revenue passenger (000) 15,906 14,488 13,645 11,692 11,063 9,984Available seats-km (million) 12,012 11,164 10,437 9,038 8,488 8,117Revenue passenger-km (million) 9,465 8,584 8,007 6,819 6,417 5,924Passenger load factor (%) 78.8 76.9 76.7 75.4 75.6 73.0Number of destinations 37 44 42 38 34 33Number of landings 128,541 120,677 112,842 97,697 92,593 87,162Kms flown (000) 77,567 70,757 65,576 56,313 53,372 51,016Cargo (Ton) 37,152 34,415 35,353 33,037 34,305 35,518Mail (Ton) 2,948 3,025 3,971 3,549 3,427 3,555Excess baggage (Ton) 1,521 1,879 1,700 1,450 1,589 1,538Available ton-km (million) 1,372 1,273 1,191 1,047 1,000 946Revenue ton-km (million) 887 813 757 652 615 570Overall load factor (%) 64.7 63.9 63.6 62.3 61.5 60.3International Flights Traffic Results2012 2011 2010 2009 2008 2007Revenue passenger (000) 23,139 18,160 15,474 13,410 11,534 9,652Available seats-km (million) 84,112 70,029 54,663 47,536 37,855 33,502Revenue passenger-km (million) 64,945 50,349 39,943 33,311 27,848 24,327Passenger load factor (%) 77.2 71.9 73.1 70.1 73.6 72.6Number of destinations 182 152 132 120 111 109Number of landings 179,843 149,941 132,384 116,256 96,735 81,737Kms flown (000) 464,772 348,356 292,794 255,556 208,752 181,131Cargo (Ton) 417,141 340,627 267,630 197,672 157,629 141,990Mail (Ton) 13,622 9,771 7,002 3,802 3,529 3,159Excess baggage (Ton) 2,162 2,291 1,929 2,284 2,163 1,924Available ton-km (million) 12,916 10,653 7,845 6,748 5,147 4,589Revenue ton-km (million) 8,538 6,654 5,137 4,132 3,378 2,979Overall load factor (%) 66.1 62.5 65.5 61.2 65.6 64.9TURKISH AIRLINES GROUP39

2012 TRAFFIC RESULTSTotal Kms flown (000)16%137,392147,491Past Decade -Yearly Increase, onaverage168,901207,2022003 2004 2005 2006 2007 2008 2009 2010 2011 2012Passenger load factor (%)67.070.271.568.772.773.9232,14670.973.772.677.4262,124311,869358,370419,114542,3392003 2004 2005 2006 2007 2008 2009 2010 2011 201240 TURKISH AIRLINES 2012 ANNUAL REPORT

Total revenue passenger carried (000)Last Decade -Yearly Increase, on16%average10,42011,99114,13416,94619,63622,59725,10229,11932,64939,0452003 2004 2005 2006 2007 2008 2009 2010 2011 2012ASK and RPK ImprovementAvailable seats-km (million)Revenue passenger-km (million)24,04016,11326,48118,59429,80521,31736,93425,38341,61930,25146,34334,26656,57440,13065,10047,95081,19358,93496,12474,4102003 2004 2005 2006 2007 2008 2009 2010 2011 2012TURKISH AIRLINES GROUP41

2012 TRAFFIC RESULTSNew DestinationsWithin the framework of growth strategies Turkish Airlines added 34 new destinations in2012. The company, flying to more countries than any other airline in the world, becamethe 5 th largest carrier worldwide and the 2 nd largest in Europe by destination number.In 2012 flights to 15 new destinations in Africa were launched by Turkish Airlines.15Ouagadougou, Douala, Yaounde, Kinshasa, Djibouti, Hurghada, Sharm ElSheik, Abidjan, Mombasa, Sebha, Nouakchott, Niamey, Kigali, Mogadishu, andKilimanjaroIn 2012 flights to Buenos Aires in South America began.1Buenos AiresIn 2012 flights to three new destinations in the Far East were launched by Turkish Airlines.3Osh, Maldives, Ulan BatorIn 2012 flights to eight new destinations in Europe were launched by Turkish Airlines.8Ganja, Aalborg, Billund, Bremen, Leipzig, Novosibirsk, Bilbao, andEdinburghIn 2012 flights to five new destinations in the Middle East were launched by Turkish Airlines.5Isfahan, Kermanshah, Taif, Yanbu, AdenIn 2012 flights to two new domestic destinations were inaugurated.2Iğdır, Kütahya42 TURKISH AIRLINES 2012 ANNUAL REPORT

TURKISH AIRLINES GROUP43

2012 TRAFFIC RESULTSMarketing and Sales ActivitiesTurkey, currently positioned among the20 largest economies in the world, andwith a constantly developing economicand demographic structure, has registeredsignificant improvements in the aviationindustry over the past decade.Turkish Airlines flies to more countries thanany other airline in the world and has the5th largest flight network. The company isthe flag carrier brand of Turkey, and holdsthe Best Airline in Europe title.Turkey, as Turkish Airlines’ direct market,constitutes its core business region.Nonetheless, within the framework of theglobal aviation industry, this market aloneis insufficient to acquire the desired volumeand market position. Therefore, growthand a strengthening of market positionrequire a strategy of global orientation; inother words, the partnership needs to takeadvantage of other associated markets.In this context, Turkish Airlines operatesflights to many new points in transitmarkets supplementary to the localmarket, while increasing the frequencyof use at existing points. In so doing, theCompany succeeds in positioning itselffavorably, thanks to robust marketingstrategies, a broad flight network andcapacity increase. As of the end of 2012,its flight network covers 217 points in 96countries. Turkish Airlines, while extendingpenetration through a capacity increase,also enriched product variety offered tocustomers, by adding new destinations toits flight network.Turkish Airlines continued to grow atIstanbul Atatürk Airport, and to offer morecomfortable and express travel throughIstanbul Sabiha Gokcen Airport (SAW) andAnkara Esenboga (ESB) based flights. Italso takes advantage of opportunities inemerging markets.PerformanceDue to its structure, the aviation industryis susceptible to the economic and politicaldevelopments occurring in any region ofthe world. Economic recession and politicaltransition, especially the developmentsobserved in Syria, have decreased demandfor air transport. Yet despite the negativeinfluences, Turkish Airlines succeeded inincreasing passenger number in 2012 aswell. Passenger numbers for the January-December 2011 period were at 32.6 million.And in one year an increase of 19.6% wasrecorded, whereby the number reached 39million.In terms of international flights, TurkishAirlines has just completed a successfulyear. When compared to 2011, the numberof passengers in “Business/ComfortClass” rose by 34%, while International toInternational Transfer passengers rose by44%. Meanwhile, passenger load factor roseby 5 points to 77.4% in the same period.44 TURKISH AIRLINES 2012 ANNUAL REPORT

ActivitiesArgentinean soccer superstar LionelMessi was named Brand Ambassador forTurkish Airlines.Turkish Airlines, continuing itsinternational brand awareness projects,signed a deal with Argentinean starLionel Messi, the world’s most valuablesoccer player, who became its new BrandAmbassador. Messi’s commercial shot withfamous basketball player Kobe Bryantbroke all viewing records.Customer satisfaction safeguardedagainst economic crisis.Turkish Airlines has sustained its growth,despite global economic crisis, thanksto its successful dedication to customersatisfaction. Customers feel that theyreceive value for money from TurkishAirlines, both in ground services and duringthe flight itself.Best Airline, EuropeCustomer satisfaction is reflected in theawards Turkish Airline has garnered.Skytrax, evaluating airline companies andairports according to diverse parameters,selected Turkish Airlines as the BestAirline, Europe for the second time in arow according to the criteria of service andquality standards. The goal is to continuethis success in 2013 as well.Turkish Airlines left its imprint on theSkytrax Awards, 2012.• Best Airline, South Europe• Best Airline, Europe• Best Premium Economy Class AirlineAward, 2 nd place• Best Premium Economy Class CateringAward, 2 nd placeTURKISH AIRLINES GROUP45

Yesterday, we placedour dreams in a couple ofaircraft…1031016573832003 2004 2005 2006 200746 TURKISH AIRLINES 2012 ANNUAL REPORT

Today, with 202 aircraft weown one of the largest fleetsworldwide.179202153132127 Total number of aircraft2008 2009 2010 2011 2012TURKISH AIRLINES GROUP47

FLEETTurkish Airlines’ current expansion process is being governedby its 2008-2023 Fleet Projection program. Following theannouncement in October 2008, regarding the purchasing ofa total of 105 aircraft (75 confirmed with options on a further30), the Company ordered 65 narrow-body and 22 wide-bodypassenger, plus five cargo aircraft.211%The Turkish Airlines fleet, whichconsisted of 65 aircraft back in 2004,has grown by 211% to 202, with thepurchase of a further 23 aircraft.6.6As of the end of 2012 the number ofaircraft in the Turkish Airlines fleetstood at 202, with an average fleet ageof 6.6 years.Turkish Airlines continues to work on its goalof acquiring the youngest and most modernfleet in Europe. The Company flies to morecountries than any other airline in the world,and has the 5th largest flight network.Moreover, Turkish Airlines continues tosupport its fleet with new aircraft purchases.In 2012 Turkish Airlines took pride inadding the 200th aircraft to its fleet andstrengthening its position in internationalaviation industry. As of the end of 2012, thenumber of aircraft in the Turkish Airlinesfleet was 202, with an average fleet age of6.6 years. Turkish Airline’s fleet, which hadconsisted of 65 aircraft back in 2004, hadgrown by 211% to 202 aircraft in 2012.While taking the cost analysis intoconsideration, Turkish Airline purchasesaircrafts that meet growing passenger trafficand changing customer needs, emphasizepassenger comfort and safety, that areequipped with the latest technology, andthat are economical and environmentallysensitive. Accordingly, the Companycontinues to take important steps towardsstrengthening the Turkish Airlines brand.The fleet expansion period, which beganwith the purchase decision for 51 aircraftin 2004 and which was strengthenedby optional purchase orders becomingdefinite, is continued in the 2008-2023 FleetProjection.Following the announcement in October2008 regarding the purchase of a total of105 aircraft (75 confirmed with options on a48 TURKISH AIRLINES 2012 ANNUAL REPORT

further 30), the Company ordered 65 narrowbodyand 22 wide-body passenger, plus fivecargo aircraft.In consequence of the 2012-2020 fleetplanning decision, 20 B777-300ER and 20A330-300 aircraft have been ordered, whichwill meet the demand for long haul aircraftin the coming period. Aircraft ordered in2012 will be delivered between 2013 and2017.The Company updates fleet plans atthe end of each year, within the scopeof the following strategies: Exploitingopportunities, risk management,sustainability, dynamic capacity planning,a broadening of the flight network andincreased frequency. During the year,aircraft numbers are revised accordingto deliveries and demand and fleetrejuvenation needs. Interim solutions arealso implemented, such as using leasedaircraft in light of market conditions, whichdoes not increase fleet age or damage theintegrity of aircraft.23Turkish Airlines, broadening its flightnetwork and increasing passengernumber with each passing day, and onthe strength of its significance in the airtransfer industry, added 23 new aircraftto its fleet.TURKISH AIRLINES GROUP49

FLEETFleet (as of end-2012)Total CapacityAircraft Type Number Fleet age (Seat)Commercial AircraftA340-300 7 16.7 1,890A330-200 7 7.7 1,812A330-300 10 1.7 2,890B777-300ER 12 2.0 4,044A319-100 14 4.7 1,854A320-200 28 5.7 4,502A321-200 32 3.2 5,950B737-400 3 20.9 450B737-800 59 8.7 9,767B737-700 14 6.8 1,986B737-900 9 0.7 1,359Cargo AircraftA310-300F 4 24.4 -A330-200F 3 1.7Total 202 6.6 36,504Commercial Aircraft - Average Age 6.4Turkish Airlines Fleet CharacteristicsYoungComfortableLatest TechnologyEfficientDynamicFlexibleFamily RELATEDEnvironment-friendlyCompetitiveReliable50 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines, broadening its flight network and increasingpassenger number with each passing day, and on the strengthof its significance in the air transfer industry, added 23 newaircraft to its fleet.Total Seat Capacity14,41917,93117,59422,23823,54928,03033,00736,5042005 2006 2007 2008 2009 2010 2011 2012Daily Utilization Rate10:2110:3111:1311:4011:3912:0211:3812:122005 2006 2007 2008 2009 2010 2011 2012TURKISH AIRLINES GROUP51

CARGO52 TURKISH AIRLINES 2012 ANNUAL REPORT

In parallel to the worldwide decline, there was a loss in unitrevenue of 4.9%; yet the total revenue of Turkish Cargo rose by12.7%. Turkish Cargo increased carried freight revenue by 5.7%to USD 49 million.The year of 2012 was a difficult oneworldwide in terms of cargo transportation,where high oil prices and economicrecession affecting world economies inparticular had a negative impact.Due to a low global growth rate of around2% and a weakly rising international tradevolume in the previous period; globalair cargo transportation has followed adownward trend since its record of 16billion ton-km registered in June 2010.The June 2012 figure is 1 billion ton-kmlower when compared to two years ago.International cargo revenues have fallensignificantly over the past year. Cargorevenues, attained via the (IATA) CASSsystem of the International Air TransportAssociation, regarding “inbound” and“outbound” transfers, have regressed toUSD 8 billion from USD 9 billion over thepast 15 months.Despite these industrial challenges, TurkishCargo has not compromised on quality,having managed to carry a 21% largercargo volume than in the previous year.And while, a 4.9% loss in unit revenuewas recorded in parallel to the worldwidedecline, the total revenue of Turkish Cargorose by 12.7%.21%IncreaseTurkish Cargo has not compromised onquality, having managed to carry a 21%larger cargo volume than in the previousyear.Turkish Cargo increased carried freightrevenue by 5.7% to USD 49 million.TURKISH AIRLINES GROUP53

CARGO16%IncreaseTurkish Airlines has increased its carriedcargo volume by 16% on average over thepast 10 years.Cargo+Mail Development (Ton)122,822134,851144,974159,873184,222198,890238,060313,956387,838470,8632003 2004 2005 2006 2007 2008 2009 2010 2011 201254 TURKISH AIRLINES 2012 ANNUAL REPORT

In 2012 Turkish Cargo managed to carry 21% more cargo thanthe previous year. And while, a 4.9% loss in unit revenue wasrecorded in parallel to the worldwide decline, the total revenueof Turkish Cargo rose by 12.7%. Turkish Cargo increased carriedfreight revenue by 5.7% to USD 49 million.Cargo breakdown by region (%)South America1.2%Africa8.6%North America8.3%Middle East11.1%38.3%EuropeFar East32.5%Quarterly Global CASS Revenue (million USD)6,0005,0004,0003,0002,0001,00002011 Q3 2011 Q4 2012 Q1 2012 Q2 2012 Q3OutboundInboundTURKISH AIRLINES GROUP55

CARGOTurkish Cargo Main Indicators2011 2012 2012/2011Total Income (USD) 642,083,593 723,530,840 12.7Total Carried Freight (ton) 387,838 462,468 19.2Unit Income R/Y (USD) 1.64 1.56 (4.9 )In 2012 Turkish Cargo continued to develop its fleet and flight network structure. Havingstarted out with six cargo aircraft in 2011, as of the end of 2012 the number had risento seven (A310-300F, four aircraft, A330-200F, three aircraft). Moreover, the number ofdestinations to which Turkish Cargo makes scheduled cargo flights rose from 33 to 38 inthe same period.56 TURKISH AIRLINES 2012 ANNUAL REPORT

In 2012 Turkish Cargo realized the largest freight ton sales to Turkey, the Far East andEurope-1 regions.Sales based tonnage percentage by cargo regionAfrica1.8%Europe 121.2%Europe 27.6%Turkey33.1%Far East25.4%Middle East5.0%America5.9%In income terms, the Far East, Turkey and Europe-1 regions were the highest generatingregions in 2012.Additionally, in 2012, 67 charter flights were operated, of which 62 were commercial(Helsinki charter flight, which is transferred to scheduled flights is excluded), while fivewere charitable. As a result income of USD 6,001,870 has been achieved through theseflights.Sales based income percentage by cargo regionAfrica1.4%Europe 121.5%Europe 26.9%Turkey22.2%Far East38.2%Middle East3.5%America6.3%TURKISH AIRLINES GROUP57

CARGOTurkish Cargo introduced many innovations during 2012. Theseprojects beginning with products and services and extending tonew terminal construction confirm the vision of the company.Turkish Cargo, 2012 InnovationsWarehouse Project, the construction ofthe new cargo terminal station, will startin April 2013. This project will carry theCompany to new forefronts of internationalcargo transportation. The terminal willbe constructed on an area of 45,000 m 2 ,and will have an annual cargo capacityof 1.2 million tons. The opening of theterminal is planned for the second quarterof 2014. For the increasing demand in thisperiod, an extra cargo storage area is beingconstructed on an area of 10,000 m 2 to becompleted by June 2013.Meanwhile, the Company’s existing cargoIT infrastructure has been improved. TheTACTIC system implemented for cargoprocess management over the past 20years is set to be superseded by the COMIS(Cargo Operations Management andInformation System) Project, planned tocommence at the beginning of 2013.According to the plan, the tender processfor the Cargo RM (Revenue Management)Project, expected to leverage Turkish Cargorevenues, is planned to be completedwithin 2013.Tonnage Increase Factor by cargo region in 20120.64.97.713.724.222.023.9Africa Europe 1 Europe 2 Far East Middle East America Turkey58 TURKISH AIRLINES 2012 ANNUAL REPORT

TURKISH AIRLINES GROUP59

MRO60 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Technic’s four hangars in İstanbul and Ankara, atwhich it provides maintenance and repair services for airlinecompanies, have a total combined enclosed space of 73,500 m ² .The services that Turkish Technic provides itscustomers primarily consist of line, station,and component maintenance. In addition toTurkish Airlines aircraft, the company alsomakes component pool services available tothe fleets of other carriers. The number ofComponent Pool service customers reached10 in 2012.Turkish Technic’s four hangars in İstanbuland Ankara have a total combined enclosedspace of 73,500 m², at which it providesmaintenance and repair services for airlinesand VIP jet operators. Turkish Technic providesmaintenance and repair services, throughcomponent shops specialized in everything,from station maintenance, engines, APU(auxiliary power units) to landing gear. Thishas enabled it to become a leading regionalaircraft maintenance center. And while it’smost important customer is Turkish Airlines,Turkish Technic also serves more than 600other companies located on four continents.Turkish Technic provides line and stationmaintenance services for the followingaircraft: Boeing 737 Classic and NextGeneration (NG), Boeing 777, Airbus A320series, Airbus A300, Airbus A310, Airbus A330,Airbus A340, Gulfstream G-IV, Gulfstream550, Cessna 172, and Diamond DA42. Inaddition, it has the ability to conduct afull range of maintenance-repair serviceson an aircraft including landing gear,avionics components, hydraulic/pneumaticcomponents, brake systems, tires and rims,and mechanical components. In brief, TurkishTechnic offers all necessary maintenance andrepair activities at its own facilities for theaforementioned aircraft.600While it’s most important customer isTurkish Airlines, Turkish Technic also servesmore than 600 other companies located onfour continents.2,000Over the past 2 years, Turkish Technic hasemployed 2,000 people. Thirty percent ofthe company’s sales derive from customersbesides Turkish Airlines.TURKISH AIRLINES GROUP61

MROImportant Activities in 2012Turkish Technic to grow with HABOMFollowing the completion and launch ofthe HABOM Project, set to become onethe largest maintenance repair centersinternationally, Turkish Technic is tosignificantly increase its capacity, and aimsto boost revenues to USD 1.5 billion in 2015.With this revenue target, Turkish Technicis expected to rise to 6 th place among theinternational maintenance and repaircompanies by 2015.The company is keen to make moreeffective use of the experience and skillsthat it has acquired over the years, as wellas of its highly-qualified and well-trainedemployees, to maximize the strategicbenefits of its geographical location, andto take greater advantage of a rapidlygrowing domestic and international aviationmarket. With this in mind Turkish Technichas decided to establish a new internationalaviation maintenance and repair centerat İstanbul Sabiha Gökçen InternationalAirport.Named HABOM (Havacılık Bakım Onarımve Modifikasyon Merkezi / AviationMaintenance, Repair and Overhaul Center),the bulk of the construction was completedin 2012. HABOM will have 370,000 m² ofenclosed space, and will be capable ofperforming simultaneous maintenanceon 11 narrow-body and three wide-bodyaircraft. With an investment cost of closeto USD 450 million, The HABOM complexincorporates state of the art technology,and all modern and essential amenities, andis designed around the campus concept.In addition to maintenance and repairactivities, this campus will be hostingTurkish Cabin Interior Systems IndustriesInc., and will become an important aviationcampus both in Turkey and worldwide.In 2012 more than 700 technicians andengineers were employed, with the bulkfalling into the former camp. Total personnelworking for the HABOM Project have nownumber of 1,300, with ongoing on thejob training being provided. The launchof HABOM’s maintenance activities isscheduled for 2013.Within the framework of the 2010-2015Strategic Plan Turkish Technic intends toexceed the range of traditional suppliersof aviation maintenance and repairsservices: its goal is to also become a design,manufacturing, and R&D company.The Turkish Engine Center (TEC) isTurkish Technic’s first joint venture withglobal aircraft engine manufacturerPratt&Whitney. The center continuedits maintenance operations in 2012 andincreased the number of customers servedbeyond Turkish Airlines. The GoodrichTurkish Service Center (GTTSC), TEC’s othersubsidiary received EASA Part 145 andFAR 145 certification, and continued itsmaintenance operations.Through TURKBINE Technical Gas TurbinesMaintenance & Repair Inc., a joint venturewith Zorlu O&M, Turkish Technic conductedmaintenance and repair operations onindustrial gas turbines in 2012. Thecompany has completed the application forPart 145 certification in regards to CF6-80aircraft engines.62 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Cabin Interior Systems Industries(TCI Kabin İçi Ekipmanları) the joint venturecompany of Turkish Technic and TUSAŞcompleted its first product Boeing 737-800galley prototype in 2012. The design offive galleys for Airbus A330 type aircrafthas been completed, with 83% of theprogram finalized. Once this product hasgone through the Boeing Supplier process,it is planned for inclusion in the certifiedsupplier list within 2013.Aircraft Seat Manufacturing Industry &Trade Inc completed the production of aneconomy class aircraft seat prototype forthe Boeing 737-800. Furthermore in 2012, itobtained ADOA Design Approval certificationfrom EASA and took the initial steps towardsbecoming a Boeing Supplier. Plans exist toobtain POA and ETSO certification from EASAwithin 2013 and to formally commence theBoeing Supplier Process.The forecast size of the internationalmaintenance and repair market is USD 49.549.5BillionThe forecast for the internationalmaintenance and repair market isUSD 49.5 billion in 2012.billion in 2012. It is expected to have grownby 68.4% by 2022.Upon the completion and launch of theHABOM Project, Turkish Technic will haveincreased its capacity substantially, andaims to increase its revenue to USD 1.5billion. And when compared to 2011 income,Turkish Technic was positioned 12 th amongmaintenance and repair companies. The2015 goal is to rank in 6 th place.TURKISH AIRLINES GROUP63

Yesterday, we hadhundreds of customers…10.412.014.217.019.72003 2004 2005 2006 200764 TURKISH AIRLINES 2012 ANNUAL REPORT

But today we have millions.Total number of passengers (million)32.63926.929.222.62008 2009 2010 2011 2012TURKISH AIRLINES GROUP65

CATERING66 TURKISH AIRLINES 2012 ANNUAL REPORT

Since the introduction of Turkish Airlines’ new catering conceptin 2007 by Turkish DO&CO, the overall level of passengersatisfaction has risen from 49% to 98%.TURKISH DO&CO“Flying Chefs” win recognition.The “Flying Chefs”, who have served onall long haul flights of Turkish Airlinessince 2010, have won recognition fromour passengers. These Flying Chefsenrich peerless flavors with strong visualpresentation, thereby making a greatcontribution to customer satisfaction whenflying Turkish Airlines.A joint venture of DO&CO and TurkishAirlines, Turkish DO&CO has been servingthe Turkish market since 2007. TurkishDO&CO currently provides service to around60 airlines operating in and beyond Turkey.Having grown rapidly along with TurkishAirlines the company now controls arounda 70% share of the in-flight cateringmarket in Turkey.Recognizing best quality and highestpossible passenger satisfaction as itskey priorities, the catering concepts andapproaches which Turkish DO&CO employsfor Turkish Airlines are informed bytraditional notions of Turkish hospitality.Menus feature select choices fromtraditional Turkish cuisine, as well astempting offerings from around the world.139,000CateringIn the 2012 summer schedule, themaximum number of meals served on oneday was 139,000 on 400 aircraft.Specially-trained cabin personnel onevery flight abide by strict rules in servingpassengers. Along with this fresh cateringconcept, the latest equipment has alsoentered use aboard Turkish Airlines aircraft.TURKISH AIRLINES GROUP67

CATERINGAll meals are hand-prepared daily by Turkish DO&CO usingnone but the best and freshest ingredients available, and infull compliance with the highest international standards ofhygiene.98%Since the introduction of Turkish Airlines’new catering concept in 2007 by TurkishDO&CO, the overall level of passengersatisfaction has risen from 49% to 98%.Another aspect of this new concept isFlying Chefs, a service that has beenintroduced on all of Turkish Airlines’ longdistanceflights since 2010. Currently, 210Flying Chefs work on the Turkish Airlinesfleet, with the service having earnedwelcome passenger feedback. In October2012, this service started to be offeredduring short distance international flightson the A321 aircraft type of the THY fleet.To measure in-flight service qualityand spot potential problems, surveysare regularly conducted to determinepassenger satisfaction. According to theresults of these surveys, since TurkishDO&CO started operating in 2007,passenger satisfaction has risen from 49%to 98%.DO&CO aboard Turkish Airlines’ economyclassflights was ranked the best inthe world. In a similar Skytrax surveyconducted in 2011, Turkish DO & CO’scatering service on all business-, premiumeconomy-, and economy-class TurkishAirlines flights was selected as the world’ssecond-best. And in an evaluation ofthe catering service, Turkish DO&CO wasselected the world’s second-best in 2012.Having undergone a complete renovation,the Turkish Airlines International CIPLounge at Atatürk Airport reopened forservice under the management of TurkishDO&CO on 20 July 2011 as Lounge İstanbul,since which time it has served more thanone million passengers.In a survey conducted in 2010 by Skytrax,the catering service provided by Turkish68 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish DO&CO bases its catering concept for Turkish Airlineson venerable notions of Turkish hospitality.Decorated and furnished in a style thatreflects Turkey’s rich cultural heritage,Lounge İstanbul is capable of fully meetingall the needs of passengers of every age.Occupying 3,000 m² of indoor space,the lounge features such amenities as acinema, a pita house, a library, privaterelaxation rooms, an olive garden, a kids’playroom, and much more. Turkish DO&COemploys a staff of 90 people to providearound-the-clock service to passengers atLounge İstanbul.DO&CO RestaurantTurkish DO&CO launched restaurantservices at the Milas-Bodrum InternationalTerminal as of May 2012. “Henry” a fastgrowing DO&CO brand, made its debutin the Turkish market as a part of thisconcept. This restaurant operates aTake Away concept and includes menusprepared with fresh and organic ingredientsThe Bodrum Food Market, which offers avariety of concepts on a 1,000 m 2 area,features both fast food and a wide selectionof traditional Turkish cuisine prepared infront of guests, as well as Asian cuisine thathas won popularity among our guests forits prompt service.232,000FlightsIn 2012, 51 million meals were served ona total of 232 thousand flights, from ninepoints in Turkey.In 2012, 51 million meals were served fora total of 232 thousand flights, from ninepoints in Turkey. And in the 2012 summerschedule, the maximum number of mealsserved on one day was 139,000 on 400aircraft.TURKISH AIRLINES GROUP69

TRAINING70 TURKISH AIRLINES 2012 ANNUAL REPORT

The Turkish Airlines Aviation Academy, providing servicetraining for its personnel, became internationally recognized inthe training services arena in 2012.Turkish Airlines Aviation AcademyThe Turkish Airlines Aviation Academycontinues to supply training given byapproximately 60 highly experiencedinstructors, who are experts in theirrespective fields. The company has offeredprofessional aviation training since 1982under the Turkish Airlines roof, and is themost important aviation training centerin Turkey. The Academy is located on an8,600 m 2 enclosed space, containing 28classrooms, a conference room with 125seat capacity, two simulation classes andan examination room. At the Academysimultaneous training can be given to 800people.The Turkish Airlines Aviation Academy tookan important step at the international levelby being selected as a Regional TrainingPartner and IATA Certified Training Centerin 2011. Thus, the Academy became thefirst and only strategic partner of IATA inTurkey. It provides training opportunities inIstanbul to aviation industry personnel inTurkey and other regional countries.The Academy is well aware of theimportance of training for the globalaviation industry, and meets the standardsof ISO 9001 Quality Management Systemscertification. There are 2,000 courses andseminars on average, offered annually byspecialist instructors. The center suppliestraining to around 35,000 people a year.Additionally 50,000 people are offeredtraining opportunities by distance learning.4,068During 2012 training was provided to 4,068cockpit personnel.The year of 2012 has been a crucial one forthe Aviation Academy, which has continuedto develop thanks to its technical trainers,who make the practical knowledge andexperience they have accumulated overthe years available to the industry. Havingfocused from inception on in-service trainingand offering training to its personnel, theTurkish Airlines Aviation Academy becameinternationally recognized in the trainingservices arena in 2012.The Turkish Airlines Aviation Academy hasbeen registered as an Approved AviationAcademy by all international bodies thataccredit companies providing such training.The Academy, as an IATA Regional TrainingPartner and IATA Approved Training Center,as well as a member of the ICAO TrainAirPlus Program, became a center recognizednot only in Turkey, but also internationally,having garnered a wide range of certificationand training types in its portfolio. Uponexamination by EASA auditors, the Academyflawlessly passed inspection in terms ofits technical training offered within thescope of EASA 147 and obtained permanentauthorization for the following year.TURKISH AIRLINES GROUP71

TRAININGThe Flight Training Center, which was launched with onesimulator in 1994, has successfully continued to provide servicemeeting national and international standards since then.Turkish Airlines Aviation Academy offerstraining at the national and internationallevel in the following fields:• Technical Training• Reservation Training• Ticketing Sales• Cargo Operation Sales• Passenger Services Training• Ground Handling Training• Management and Personal DevelopmentTraining• IATA Training• English Language Training• Computer Training• Other TrainingIn order to use its resources moreefficiently in 2013, a new and multifunctionalcomputer program has beenpurchased for the Aviation Academy,within the framework of proactive planningpractice. Again, towards the same goal, aninvestment of USD 1 million is reserved forthe renovation of fixed tangible assets.Turkish Airline Flight TrainingCenterThe Flight Training Center has been theresponsible unit for all flight-related trainingprovided to the Company’s cockpit and cabinpersonnel. At the same time , the centerprovides training services for internationalcustomers through internationalauthorization certification. The FlightTraining Director, acts as a direct report postholder for the Turkish Airlines CEO subject toPart FCL, EU-OPS and SHT-OPS1.The Flight Training Center has successfullydelivered services that meet national andinternational standards since 1994. Andwith its eighteen years of experience in thefield, it supplies training to around 20,000people each year.The center set out by providing trainingservices with one simulator at the currentfacility. Yet today it is equipped with 14training aircraft (ten single-engine CessnaC-172s, two twin-engine Diamond DA42s, and two jet-engine Cessna CitationC510s), as well as six full flight simulators(FFS), two cabin emergency evacuationtrainers (CEET), one flight and navigationprocedures trainer (FNPT II), three FlightTraining Devices (FTD), two Door TrainingDevices (A320 DT, B777 DT), one Real TimeFire Fighting Trainer (RTFFT), two cabinservices trainers (CST), and three computerbased trainers (CBT); this in addition to34 classrooms, one Ditching Pool andan auditorium. In short, it has become aprofessional training facility that servesnational and international customers, whilealso providing ongoing flight training toTurkish Airlines personnel.The growth momentum that TurkishAirlines has achieved in the course of thepast decade creates opportunities for theFlight Training Center to collaborate withits business partners. In line with this, thecenter works continuously with domesticand international simulator centers, andother training agencies and organizationsin the sector in order to support greatermarket integration.72 TURKISH AIRLINES 2012 ANNUAL REPORT

Professional TrainingAlong with the rapid growth of its fleet, inorder to meet operational demands andmaintain its cockpit and cabin trainingstandards, simulators and training aircrafthave been acquired and training timeincreased.The Flight Training Center has beencertified by the Turkish Civil AviationAuthority as a Type Rate TrainingOrganization (TRTO) and Flight TrainingOrganization (FTO). All simulators used intraining are certified by EASA.During 2012 training was provided to 4,068cockpit personnel in at least one of 29different areas, with particular attentionbeing given to conversion type, andrecurrent training activities; and owingto the first-time recruitment of foreignnational pilots with the introductionof Turkish Airlines’ B777 fleet, thesenewcomers were successfully integratedinto the company through basic, as wellas corporate culture training. The FlightTraining Academy (FTO), a part of the FlightTraining Center, provided training to 157cadet pilots through activities that includedthe use of international resources in 2012.Cabin training is carried out by the CabinTraining Department in 13 differentcategories, including first-aid anddefibrillator training.In addition to intercompany training,during 2012 the Flight Training Centercontinued to provide training to thepersonnel of 49 different companies (24cockpit, 25 cabin) operating across a broadregion in Asian, Caucasian, Middle Eastern,North African, and European countries.The center also engaged in academiccooperation and developed businesscollaboration models with such respectednational and international traininginstitutions as İstanbul TechnicalUniversity, Anadolu University, the TurkishAeronautical Association, CappadociaVocational College and the Florida Instituteof Technology and Aviation School.In order to sustain the internationallycompetitive strength of the Flight TrainingCenter, the realization of projects launchedwith its own resources is planned for 2013.TURKISH AIRLINES GROUP73

GROUND HANDLINGSERVICES74 TURKISH AIRLINES 2012 ANNUAL REPORT

During 2012 TGS provided ground handling services to 406,857domestic and international flights. In 2013 it intends toincrease market share and serve 493,900 flights.Founded with an agreement signed on 12March 2009, Turkish Ground Services (TGS)is a joint venture of Turkish Airlines andHAVAŞ (an airport ground handling servicescompany), in which each controls a 50%stake.TGS, becoming operational on 1 January2010, currently conducts operations atsix airports in Turkey: İstanbul Atatürk,İstanbul Sabiha Gökçen, Ankara Esenboğa,İzmir Adnan Menderes, Antalya and Adana.During 2012 TGS provided groundhandling services to 406,857 domestic andinternational flights. In 2013 it intends toincrease market share and reach 493,900flights with the launch of the Bodrum andDalaman stations. Employing close to7,000 personnel and with an equipmentpark of more than 4,165 units, TGS providesground handling services and operationsthat meet exacting international qualitystandards.TGS qualified for international ISO9001:2008 Quality Certification in 2012.The company’s service quality andcompliance with these standards werecertified by independent audits conductedby TÜV Thüringen and MEYER at itsheadquarters, and at all six stations.4,165EquipmentEmploying close to 7,000 personnel andwith an equipment park of more than4,165 units, TGS provides ground handlingservices and operations that meet exactinginternational quality standards.TGS obtained ISO 14001 EnvironmentalManagement System Quality Certificationfor its headquarters and six stations fromTÜV Thüringen; OHSAS 18001 OccupationalHealth and Safety Management SystemQuality Certification from TÜV Thüringen(Germany), and ISO 10002 CustomerComplaints Management System QualityCertification from AQA International,thus confirming its sensitivity in thesefields. TGS also emphasizes social andenvironmental aspects of quality, havingobtained Airports Friendly to the DisabledCertification for its SAW-ADB stations andGreen Airport Certification for its AYT-ADAstations.TURKISH AIRLINES GROUP75

GROUND HANDLING SERVICESQualityTGS’s upper management is sensitive tonational and international legislation andregulations, in addition to its scrupulousattention to commercial ethics. To enablecustomers and employees to meet inpursuit of common goals, and in light ofthe company’s duties and common valuesregarding the future and shared corporateculture, it announces its quality policy asfollows:VisionTo be an industry leader and preferredground handling company with its servicequality, reliability and competition power.MissionTGS’s mission is to provide ground handlingservices with the following goals:• To expand TGS’s ground handlingstructure and acquire a global groundhandling company identity.• To enable appointment and managementof personnel employed at TGS bymanagers, who possess trainingstandards in line with national andinternational regulations.• To becoming a leader in the provisionof any kind of service related to groundhandling industry,• To enable an approach of reliable, highquality and uninterrupted servicethat will develop the Ground HandlingService image and leverage marketingopportunities;• To transform TGS Ground HandlingCompany into an important organizationin the national and international arena inthe medium term.• To become a reputable, reliable andpreferred organization in groundhandling operations, both at the nationaland international level;• To give the best possible operationalservice within the scope of groundhandling services responsibilities,• To follow the basic principle of customersatisfaction;• To observe the developments ofemployees, and to encourage them andincrease their education level,• To take precautions safeguarding the lifeand property of passengers,• To serve internal and external customerswith a personnel pool capable ofcomprehensively exploiting thelatest technology, and who are highlyspirited, motivated and well versed ininterpersonal relations.76 TURKISH AIRLINES 2012 ANNUAL REPORT

TURKISH AIRLINES GROUP77

OTHERSERVICES78 TURKISH AIRLINES 2012 ANNUAL REPORT

AnadoluJet became the most influential actor in rendering airtransportation more widespread in Turkey, through the servicesand projects it carried out.AnadoluJetThe number of domestic passengerstransported by the airline industry risesby over 15% annually. In 2008, whenAnadoluJet was founded, the numberof domestic airline passengers was 18million, and yet in 2012 it had reached 33million. AnadoluJet is among those brandsto have increased its passenger number.In particular, Ankara based domestic lineoperations have recorded considerablegrowth since inception. In 2008, 2.2 millionpassengers were carried on Ankara flights,but in 2012 the number reached 4 million.With the flights at Sabiha Gökçen Airport,AnadoluJet carried 5.3 million passengersin 2012.As of 2012 AnadoluJet has a 17% marketshare of domestic lines. The companycarries 46% of the traffic, apart from theprimary market of Istanbul. It enjoys arobust 58% market share in Ankara, and in2012 AnadoluJet in fact set the capital cityas its primary target market. The companyalso has a considerable share of the localmarket and other cities. In its SabihaGökçen Airport (İstanbul) operations, whereAnadoluJet has not followed a growthstrategy, it has a smaller share of 11%.The year of 2012 may be considered asuccessful one for AnadoluJet in terms ofpassenger number growth and commercialperformance. And while no decrease incosts has materialized; through increased535Million TLCarrying 5.3 million passengers in 2012AnadoluJet posted TL 535 million inpassenger revenue during the same period.income, AnadoluJet has improved itsprofitability performance and achievedpost passenger revenue of TL 535 million.AnadoluJet has realized a particularlyimportant project over the past year.Accordingly, in order to decrease flightcosts, SunExpress aircraft are to be usedinstead of the AnadoluJet fleet throughthe “wet lease” method. The first leasingoperation started in March 2012, with 10leasing operations having followed byyear end. And as of the year-end, amongAnadoluJet’s 17 aircraft fleet, 10 have beenwet leased from SunExpress. The remainingseven aircraft are planned to be takenout of the fleet within the first quarter of2013 and replaced by leased aircraft fromSunExpress. During the growth processof AnadoluJet future aircraft demandis planned to be met through the samemethod.TURKISH AIRLINES GROUP79

OTHER SERVICESThe Turkish Airline’s Call Center serves in Turkish, English,German, Italian and Russian.Call Center (444 0 849) andCustomer RelationsThe Call Center is one of the mostimportant marketing and sales channels ofTurkish Airlines. Within the organizationalstructure services are bought from twodifferent companies, Assistt Rehberlikve Müşteri Hizmetleri A.Ş. and VodatechBilişim Proje Danışmanlık Sanayi ve DışTicaret Ltd. Şti., at five locations.The reasons for such outsourcing includeraising the level of service, improvingservice quality, and reducing operationalcosts. Thus, while giving service, activationspeed for the necessary source increase issimultaneously achieved.The center achieved a call response rateof 90% in 2012, and its service period roseconsiderably within the same period. In2012 there was a 24% rise in the number ofcalls, with the number responded to risingby 14%, and the average amount of timecreated up by 26%.Compared with 2011, the revenuegenerated through sales was up by 2%,while there was an overall 1% fall in thenumber of tickets sold.The Turkish Airlines Call Center continuedto respond to international reservationand sales calls routed from callers locatedin the United States, England, Germany,France, Russia, Switzerland, Holland,Denmark, Austria, Cyprus, Italy, Norway,Belgium and South Africa. Calls originatingin Australia, Ireland, Ukraine, Nigeria,China, Finland and Amman also began tobe routed to the center in 2011. The centeris taking steps toward becoming a globaloperation, and operates in Turkish, English,German, Italian and Russian.In September 2010 a customer satisfactionsurvey was added to the call center’sinteractive voice response system in orderto begin a service quality evaluation .The survey results confirmed that 96%of callers were satisfied with the serviceprovided. The reasons for dissatisfactionwere queried and analyzed, and based onthese responses, action was taken andmarked service improvements introduced.In 2012 the average number of complaintsper 1,000 passengers decreased by 6%.Awarded website (e-commerce)In order to reach the individual customersegment, the Company’s website and thirdparty travel sites are also used, in additionto local and international travel agencies.Turkish Airlines makes direct sales via itsInternet address “thy.com”.80 TURKISH AIRLINES 2012 ANNUAL REPORT

Internet sales are promoted through e-mailannouncements, banners, billboards,and “early bird” campaigns, as well as intelevision and cinema advertisements.Campaigns with the new “Wingo”application have also become widespread.During this process it is crucial for thewebsite to be user friendly. In 2012, theAltın Örümcek (Golden Spider) web awardwas lifted in the e-commerce category for“thy.com”, and “mobil.thy.com”, developedfor mobile platforms and “Fly Turkish”applications. These applications enableTurkish Airline services to be accessedinstantly and easily.In the corporate segment, and withinthe scope of the Turkish Corporate Club(TCC) program, an increasing number ofcustomers are being reached throughagreements. Many businessmen, who havebeen invited to Istanbul for the NICT MiddleEast Organization, organized especially forMiddle Eastern corporate customers, hadthe opportunity to get acquainted with thecompany.Miles&SmilesThe number of Turkish Airlines’Miles&Smiles program members increasedby 20% to three million in 2011.Through channels other than loyaltyprograms, miles sales to member andpartner companies and the cobrand creditcard application, the Miles&Smiles programoffers indirect revenues to the Company,thereby consistently increasing financialreturns.In order to increase Miles&Smilesmembers’ satisfaction and add new incomeitems, the following implementations wererealized this year: Bonus Miles Sales, theConversion of Bonus Miles to Status Miles,the Extending Family Miles Account, andthe Conversion of Miles to Money, as wellas the Bring your friend campaign and theReactivation of miles.Turkish Airlines had a credit cardpartnership with GarantiBank in effect as of2000, and which continued as Shop&Milesuntil 2012. This year a new agreementwas signed, whereby the partnership willcontinue as the Miles&Smiles credit cardfor the next five years. With this credit cardagreement, revenue of approximately USD500 million is expected in return for milesgiven to card owners over the coming fiveyears.Thanks to the new implementations andcampaigns realized throughout this year,Miles&Smiles won two Freddie Awards; onein the Program of the Year (Europe andAfrica) and the other in Co-branded creditcard categories. Freddie Awards have beenrecognized as the airline industry’s Oscarin special passenger programs since 1998.Miles&Smiles took second place in theMega Awards organized in the USA in theCampaign of the Year category.Miles&Smiles, enabling members toearn and use miles with program partnercompanies, continued to increase theadvantages available to its members byadding seven new companies in 2012.Thanks to agreements with 26 airlines,16 hotels, eight vehicle rental companies,two car transfer companies, two healthservice chains, one telecommunicationsfirm and an insurance company, customersatisfaction and contribution to theCompany’s revenue streams grows furthereach day.TURKISH AIRLINES GROUP81

OTHER SERVICES82 TURKISH AIRLINES 2012 ANNUAL REPORT

The Technological Transformation Program, set for completionin 2015, will change application inventory, and hence the wayof doing business by 80%.Latest TechnologyThe Company’s Transformationthrough Technology on the growth pathcontinues asTurkish Airlines transforms its supportingrole into one of partnership, which inturn induces changes and innovation intechnology related services. Nowadays,technology directly impacts a company’scompetitive edge, and we are ever morefrequently in contact with the end user witheach passing day.Along with this vision and understanding,Turkish Airlines’ mission in terms ofinformation technology is as follows:• To differentiate the Company withinnovations and enable it to become anindustrial pioneer,• To meet technological demands in themost effective manner, in all operationalareas of the Company,• To actively support work processes andsustain work continuity at the highestpossible level,• To offer services that increase operationalefficiency, contribute to the buildingof an efficient operational culture, andto achieve a cost advantage for theCompany,• To increase customer satisfaction, byemphasizing the customer-orientedperspective in all services offered,• To ensure that new products andcampaigns reach customers in the fastestpossible way through the most appropriatetechnologies, thereby increasing theCompany’s marketing and sales agility.There is an information technology productor service in place for virtually each workprocess. Service areas and organizationalstructure have been designed in parallel tothese procedures.With more than 200 offices, the technologyinfrastructure of the entire Company ismanaged, while supporting user servicesare also provided. There are more than300 corporate applications in support ofour work processes, which are developedfurther to meet evolving requirements.Turkish Airlines, which in 2004 embarkedon the most remarkable growth trajectoryin the industry, has since extended itsflight network and increased its fleet andpassenger number continuously. Growth inservices has necessitated a transformationin technological infrastructure, both inscope and quality.Within this framework, implementationof a comprehensive plan, which includestransformation of work process supportingcorporate applications and technologicalinfrastructure, began in 2009. Through thistransformation program, a developmentand transformation of service quality,customer satisfaction and work processesin operational efficiency areas aresystematically addressed. As planned, thisTechnological Transformation Program,to be completed in 2015, will changeapplication inventory, and hence the wayof doing business by 80% or will prompttheir initial use. Projects set to increasethe efficiency of work processes and offerTURKISH AIRLINES GROUP83

OTHER SERVICESTurkish Airlines manages operational technologies with a teamof 375 people. The cost item created is considerably below theaviation industry average.considerable savings are also expected tobe completed within the framework of theTechnological Transformation Program in2013.Use of resourcesTurkish Airlines manages its informationtechnology operations with a team of375 people, accounting for 2.3% of totalpersonnel. The cost ratio of InformationTechnology in overall costs was at 0.9% in2012. And according to research conductedby SITA, this ratio was at around 2.3% inother airlines in 2011. This indicates thatthe Company is managing InformationTechnology operations less costly andmore efficiently when compared with theindustrial average.Commercial SolutionsSales ChannelsOperational SolutionsFlight ManagementCorporate DevelopmentWork Intelligence andReportingReservation System Team Management Combined SolutionsFinancial SolutionsRevenue ManagementCRIm and LoyaltyPassenger OperationsGround HandlingOperationsCargo OperationsInfrastructure and OperationDemand and PortfolioManagementCorporate ArchitectureAccounting andFinanceLogisticsHumanResourcesNetwork and LineProfitabilityBack Office SolutionsUser SupportServicesWork ContinuityTechnologicalInfrastructureSystem andInformation Security84 TURKISH AIRLINES 2012 ANNUAL REPORT

TURKISH AIRLINES GROUP85

YESTERDAY, we startedour journey with 24personnel…10.23910.95610.95610.3241.8791.64110.4531.0181.2901.0942003 2004 200586 TURKISH AIRLINES 2012 ANNUAL REPORT2006 2007

Today, we are a STRONGAND EFFICIENT team of 15,857people.15.73715.85714.2061.96211.52012.7501.9692.0502.0752.462Number of personnelNumber of passengers per employee2008 2009 2010 2011 2012TURKISH AIRLINES GROUP87

HUMANRESOURCES88 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines’ greatest asset is its human resources, and theCompany has transformed the dynamism of its young cadreinto an international success story.Turkish Airlines is distinguishedinternationally by its success rate andrelated growth trend. And in parallelto this ongoing process are importantdevelopments in human resourcesmanagement. The Company has takenbold steps towards building a moderninfrastructure for human resourcesmanagement. Comprehensive projectsthat will lead to managerial and culturalchanges are implemented within theCompany. In short, Turkish Airlines’greatest asset is its human resources,and the Company has transformed thedynamism of its young cadre into aninternational success story.Demographic Information on thepersonnelAs of the end of 2012, 15,857 peoplewere employed at Turkish Airlines. Theaverage employee age is 36, and 48% arefemale, while 52% are male. On its path tobecoming the best airline worldwide, andcurrently recognized as the best airline ofEurope Turkish Airlines looks confidentlyto the future on the strength of its youthfulemployees.15,857PersonnelAs of the end of 2012, 15,857 people wereemployed at Turkish Airlines. The averageemployee age is 36, and 48% are female,while 52% are male.Personnel are employed as cockpit, cabinand ground staff in respect to their mainduty areas. Human Resources are allocatedas follows: 16% as cockpit personnel, 35%as cabin personnel, and 41% as groundpersonnel. In 2012, the average length ofemployee service at the Company was 8.4years, while personnel number per aircraftwas at 79.TURKISH AIRLINES GROUP89

HUMAN RESOURCESNumber of Employees as per Year and Change Ratios2007 2008 2009 2010 2011 2012Change Ratio (%) 1.2 10.2 10.7 11.4 10.8 0.8Number of personnel 10,453 11,520 12,750 14,206 15,737 15,857Yıllara Göre Kadın-Erkek Çalışan Dağılımı (%)2007 2008 2009 2010 2011 2012Female 49 48 48 52 49 48Male 51 52 52 48 51 52Distribution of Employees in respect to their main duty areasGround Handling Personnel49%Cockpit Personnel16%Cabin Personnel35%90 TURKISH AIRLINES 2012 ANNUAL REPORT

Distribution of Employees in respect to their educationPrimary School1.29%High School27.99%Vocational Studies13.16%University53.70%Master’s Degree3.74%Post Graduate0.12%Distribution of Employees in respect to their experience0-4 Years41%5-9 Years25%15-19 Years15%20 Years and more9%10-14 Years10%TURKISH AIRLINES GROUP91

HUMAN RESOURCESThe objective of the Cultural Unity Project is to analyze theexisting culture of Turkish Airlines and thereafter preservevalue adding characteristics and reject those of negativeimpact.Cultural Unity and Common BehavioralModel Project: This project has beenlaunched in line with changes estimatedto take place in Turkish Airlines’ corporateculture in parallel to its successes overrecent years. This project aims to establishthe cultural values that will carry TurkishAirlines into a much more successfulfuture. The project is set to embraceall employees and develop a commonbehavioral model to be internalizeduniversally within the Company. During theinitial phase of this project, carried out in2012, numerous workshops, interviews andmeetings were arranged, from which arosethe new cultural values that Turkish Airlineshas wholeheartedly embraced.Culture, Ethics and EmploymentCore cultural values of Turkish Airlines:• Team Collaboration• Hospitality• Agility• Family Concept• TrustCultural ValuesIn the Cultural Unity Project, the existingculture of Turkish Airlines was analyzed.The aim was to preserve all value addingcharacteristics and reject those of negativeimpact. This project, encompassing theentire corporation, enabled the five corecultural values of the company to emerge.These can be summarized as TeamCollaboration, Hospitality, Agility, theFamily Concept and Trust.Contribution to EmploymentThanks to its policies, Turkish Airlinescontinue to contribute to nationalemployment. The Company managedto exploit incentives to the fullest extentthrough appropriate workforce allocation.Indeed, it has been awarded by the SocialSecurity Authority for paying the highestpremium, and for being a debt free entity.92 TURKISH AIRLINES 2012 ANNUAL REPORT

TURKISH AIRLINES GROUP93

RESPONSIBILITY94 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines’ objective is for future generations to inherita livable environment. As such, the company is engaged in avariety of initiatives without endangering flight safety andsecurity.Fuel Management and TheEnvironmentAlthough advances in technology havemade many aspects of our everyday livesincreasingly convenient, they have alsoposed ever greater risks for the natural,and hence human, environment. Thegreenhouse gas emissions produced bymany advanced industries not only causepollution, but also play a significant role inclimate change.According to IATA-published figures, it isestimated that the total number of peopletraveling by air between 2009 and 2014will reach 3.5 billion. Turkish Airlines istaking the necessary steps to do its ownpart towards minimizing, to the greatestpossible degree, the adverse impact thatsuch an increasing number of passengershave on the environment. Its environmentalpolicy calls, while also, and always, givingmaximum attention to flight safetyand security, feature ongoing efforts toachieve the most appropriate levels of fuelconsumption, and hence to leave a cleanerand more livable environment for futuregenerations through the most efficient useof natural resources.During 2012, Turkish Airline’s efforts tomake the most efficient use of fuels, andthus reduce greenhouse gas emissions,while never losing sight of flight safety.These efforts resulted in a year-on-yeardecline of 21,800 tons in the amount offuel consumed, while the amount of CO 2generated decreased by approximately68,700 tons. These gains were achievedlargely through more efficient in flightpiloting practices, as well as througha significant reduction in total aircraftweight by only taking on as much fuel asnecessary for a flight.68,700DecreasedTonnageDuring 2012 there was a decline of 21,800tons in the amount of fuel consumed, whilethe amount of CO 2 generated decreased byapproximately 68,700 tons.TURKISH AIRLINES GROUP95

RISK MANAGEMENTFinancial Risk ManagementWithin the framework of its financial riskmanagement policies, the Company hasdefined the following elements of risk asfundamental to the health of its future cashflows and liquidity:• The possibility of the Company beingprevented from achieving its businessobjectives by changes taking place inits short-, medium-, and long-term cashposition, and in its portfolio investments.• The financial impact of changes inaviation fuel and carbon emissioncertificate prices.• The financial impact of changes in themarket value of aircraft financing, of FXdenominateddebt, and on cash owing tointerest rates movements.• The possibility that earnings andexpenditures may be mismatched owingto differences in the exchange rate of onecurrency against another.• The potential for losses in the eventthat a domestic or foreign financialinstitution, or its counterparties,default on deposit, derivative, or othertransactions.To manage such risks, priority is given tomaking use of natural hedging methods.In situations where this approach provesinsufficient or impractical, recourse ismade to financial risk hedging in derivativemarkets through the employment ofstrategies developed to protect theCompany against potential risks arisingfrom possible movements in commodityprices and/or in currency-exchange andinterest rates. The effectiveness of existingstrategies developed to hedge against suchfinancial risks is constantly monitoredby the Turkish Airlines Treasury and RiskManagement Commission, such thatalterations and improvements may beeffected to account for changes in marketconditions.Cash Flow Risk ManagementCash flow risk is defined as the potentialfor medium- and long-term movements(incoming and outgoing) in the Company’sportfolio investments and/or cash positionsto prevent the Company from achieving itsbusiness objectives. Financial transactionsin the aviation industry tend to be of amuch longer term nature than in manyother lines of business. Consequently,having a sound cash management policyis one of the Company’s prime issues ofconcern.To enable the Company to most effectivelymanage its medium- and long-termliquidity and financial risks, EUR, USD,and TL cash flow projections are made andupdated monthly. For these projections,the Company’s exchange rate and fuelprice forecasts for the period ahead arereconsidered and revised monthly so asto ensure that the information on whichprojections are based is both currentand reliable. The results of cash flowprojections are presented to the TurkishAirlines Treasury and Risk ManagementCommission, thereby providing it with96 TURKISH AIRLINES 2012 ANNUAL REPORT

essential information on which tobase the Company’s investment andfinancing decisions. Each month’s actualperformance figures are also compared andcontrasted with the projections, and theresults of these studies analyzed.Commodity Risk ManagementFuel price risk managementThe Company makes use of swap- andoption-based derivative instrumentsto mitigate the impact of fuel pricemovements on its aviation fuel costs, andto ensure that such costs are at least keptwithin predetermined limits where theycannot actually be anchored. In order toshield both its profitability and cash flowsagainst volatility that may arise fromfuel market movements, changes andpotential future prices of past crude oiland jet fuel, as well as price correlationsand their own price volatilities are takeninto consideration for analytical purposes.Turkish Airlines, with contractual amountscorresponding to around 50% of itsannualized jet-fuel consumption figuresas projected for the next twenty-fourmonths, and using various instruments fordetermined price ranges, through swapswritten on crude oil and band derivativeinstruments with four barriers are used togradually prevent financial risks. Whenmarket prices exceed pre-determined levelsand there is an expectation that these pricelevels will not be in force for long, relatedtransactions are put hold by the Company.Hedging plan implementation methodology (%)24610815131917292725232150484644424038353331M+1 M+2 M+3 M+4 M+5 M+6 M+7 M+8 M+9 M+10 M+11 M+12 M+13 M+14 M+15 M+16 M+17 M+18 M+19 M+20 M+21 M+22 M+23 M+24TURKISH AIRLINES GROUP97

RISK MANAGEMENTTurkish Airlines petroleum market pricing scenario (as of 31 December 2012)150USD/barrel1401301201101009080706060 70 80 90 100 110 120 130 140 150Market PriceTurkish Airlines PriceUSD/barrel• When the price of a barrel of crude oil is USD 150 the cost to the company is USD 145.• When the price of a barrel of crude oil is USD 120 the cost to the company is USD 118.• When the price of a barrel of crude oil is USD 90 the cost to the company is USD 91.• When the price of a barrel of crude oil is USD 60 the cost to the company is USD 64.• When the price of a barrel of crude oil is USD 30 the cost to the company is USD 34.98 TURKISH AIRLINES 2012 ANNUAL REPORT

Carbon Emissions Risk ManagementEffective as of 1 January 2012, theaviation industry was included within thescope of the European Union EmissionTrading Scheme (EU-ETS). As a result ofthis inclusion, Turkish Airlines (like allother airlines flying in or out of Europeanairports) is required to comply with EU ETSregulations.Under this emission trading scheme,airlines must buy Carbon Credits in themarket in situations where they exceedthe maximum carbon emission limitprescribed by the authorities to which theyare responsible. According to this, TurkishAirlines has developed hedging strategiesto protect itself against financial risks thatmight arise from its having to purchasesuch credits. The plan is to make use ofderivative instruments as a means ofmitigating this risk.Within this scope, and as one that executesEUA, EUAA, ERU and CER transactions, theCompany has obtained certificates to beused within certain periods in 2012 and2013.Interest rate risk managementUnder the heading of interest rate riskmanagement activities, the Companykeeps regular track of possible changesin its costs arising from interest ratemovements by monitoring and analyzingthe FX markets, managing its debtstructure, and determining its sensitivity tointerest rate movements based on analysesof the weighted average terms of its debtexposure. In order to better manageinterest rate risk, the Company engages inhedging with the aim of locking the interestrates on part of its debt portfolio for theduration of loans where possible, or atleast of ensuring that interest rates remainwithin a predetermined band where not.At the same time, the Company managesthe interest rate risk arising as a resultof the yield-focused assessments of itscash holdings in order to optimize therelationship between maturities andreturns. Priority is given to cash flowplanning. And while seeking to maximizereturn potential, yield projections aredeveloped by making use of market dataregarding the possible course that interestrates may be taking in order to generatethe best returns in the near future.TURKISH AIRLINES GROUP99

RISK MANAGEMENTExchange rate risk managementExchange rate risk is defined as thepotential for changes taking place inthe Company’s cash flows and revenueson account of movements in exchangerates. The Company secures a substantialvolume of its earnings in Euros, but alsoincurs significant expenditure in USdollars and Turkish liras. Such a revenueand expenditure structure exposes theCompany to serious risk arising fromrelative movements in these currencies’exchange rates, which have been quitevolatile of late, and are likely to remain sogoing forward.Turkish Airlines’ exchange rate riskmanagement activities focus on reducingthe impact of exchange rate volatility byensuring that the relative currency mixesof its income and expenditure items arereasonably proximate. To this end, theparticular currency (or currency mix) onthe basis of which a contract is to be signedis determined in such a way as to balancethe Company’s ingoing and outgoingrevenue streams and avoid the emergenceof situations that are disadvantageousto it. Hedging is the primary method ofrecourse in managing the Company’sexchange rate risk exposure. In addition tothe aforementioned measures, derivativeinstruments may also be deployed tomanage exchange rate risks in situationswhere hedging is insufficient or impractical.Furthermore, while the bulk of its exchangerate risk exposure stems from relativemovements in EUR, USD, and TL rates,Turkish Airlines also has sizeable earningsand expenditures denominated in otherforeign currencies. These positions arealso managed through hedging and/orderivative contracts as circumstanceswarrant, in order to minimize theCompany’s exposure to such risks.Counterparty Risk ManagementIn order to limit the impact of the ongoingglobal economic on Turkish Airlines,the nature of whose business requiresit to interact with many domestic andinternational financial institutions acrossa broad range of commercial spheres,a variety of measures are taken to dealwith its exposure to the risk of default byone or more of the counterparties withwhich it has dealings. Accordingly, theCompany adheres to an approach thatinvolves abiding by equally-applicable,objective criteria for each counterpartywith which there is a deposit or derivativerelationship. The underlying aim is toreduce counterparty risk on a long-termbasis. The Company enters into agreementswith financial institutions to cover the risksarising from derivative contracts.100 TURKISH AIRLINES 2012 ANNUAL REPORT

When entering into deposit andderivative agreements, attention is givento the credit risk ratings assigned tofinancial institutions by internationalrating agencies. Wherever possible,the Company avoids dealing with anyfinancial institution whose rating is belowa predetermined threshold. In the case ofthose financial institutions that surpassthe threshold, the Company assigns limitsbased on risk levels determined accordingto a specified credit risk assessmentmethodology, and works with them onthat basis. The credit ratings of financialinstitutions with which the Company hasdealings, and their assigned limits, arealso reviewed periodically. Should it beascertained that a financial institution’scredit rating has deteriorated, or wherecredit default spreads (CDS) increase,transactions with the related organizationare closely scrutinized. And should thecredit rating fall below specified limits, theCompany keeps a much closer watch on itsdealings with that concern, and may evenunilaterally sever its relationships if need be.To manage the credit risk to which itmay be exposed through the use ofderivative instruments, the Companyenters into framework agreements withdomestic financial institutions, into ISDA(International Swaps and DerivativesAssociation) agreements with foreignfinancial institutions, and into otheragreements and conventions as may bedeemed necessary. Issues specificallyrelated to credit risk management aregoverned by a separate CSA (creditsupport annex) agreement. Based on suchagreements, credit risk is reduced throughoffsets that take place at regular intervals.TURKISH AIRLINES GROUP101

ORGANIZATIONALCHARTSUBSIDIARIESDIRECTORATEBOARD OF DIRECTORSEXECUTIVE COMMITTEECEOMANAGER FLIGHTSAFETYQUALITY ASSURANCEDIRECTORATESECURITY DIRECTORATETECHNICAL DIRECTORATELINE MAINTENANCEDIRECTORATEVP CEO (HUMAN RESOURCES)VP CEO (FINANCE)VP CEO (INVESTMENT ANDTECHNOLOGY)PERSONNEL MANAGEMENTDIRECTORATEFINANCE DIRECTORATEINVESTMENT MANAGEMENTDIRECTORATEEMPLOYMENT ORGANIZATION ANDPROJECTS DIRECTORATEACCOUNTING DIRECTORATECORPORATE DEVELOPMENT &IT DIRECTORATETRAINING DIRECTORATEGENERAL PURCHASINGDIRECTORATEINTERNATIONAL RELATIONS &ALLIANCES DIRECTORATESOCIAL AND ADMINISTRATIONDIRECTORATECREW PLANNING DIRECTORATE102 TURKISH AIRLINES 2012 ANNUAL REPORT

MGR. PRIVATE OFFICEEXECUTIVE ASSISTANTMEDIA RELATIONSOFFICEINSPECTION BOARDDIRECTORATEFLIGHT TRAININGDIRECTORATELEGAL OFFICEVP CEO (FLIGHT OPERATIONS) VP CEO (COMMERCIAL) VP CEO (MARKETING AND SALES)FLIGHT OPERATIONS DIRECTORATE(CHIEF PILOT)CARGO DIRECTORATECORPORATE COMMUNICATIONDIRECTORATECABIN CREW MANAGINGDIRECTORATEGROUND OPERATIONSDIRECTORATEPRODUCTION PLANNINGDIRECTORATEINTEGRATED OPERATIONCONTROL DIRECTORATEREGIONAL FLIGHTS DIRECTORATEREVENUE MANAGEMENTDIRECTORATECATERING DIRECTORATEMARKETING AND SALES (1 stREGION) DIRECTORATEMARKETING AND SALES (2 ndREGION) DIRECTORATEMARKETING AND SALES(DOMESTIC) DIRECTORATETURKISH AIRLINES GROUP103

CORPORATE GOVERNANCEPRINCIPLES COMPLIANCEREPORT1. Declaration of Compliance with the Principles of Corporate GovernanceThe Company has embraced the concept of ethical rules, transparency, fairness,responsibility and accountability, as well as promoting Turkey and the Turkish Aviationsector internationally by fully upholding the Principles of Corporate Governance of theCapital Markets Board (CMB), and continues practices to increase its level of compliance.PART I - SHAREHOLDERS2. Shareholder Relations UnitThe Investor Relations Department, which reports directly to the CFO, has been establishedas a unit to oversee the communication of accurate, consistent and timely informationto our national and international investors, maintaining communication and exchanginginformation with the Board of Directors and capital market supervisors and participants,as well as monitoring compliance with regulations and Articles of Association for theexercising of shareholders rights, and the compliance of public disclosures with all kinds ofregulations.The Shareholder Relation Unit attended nine Investors Conferences and Road shows andheld 11 teleconferences to share financial, operational and strategic developments withinvestors and analysts. In These conferences and teleconferences, held at the Companyheadquarters, or investors’ offices, were attended by 295 investors/analysts from 162organization and funds. Contact information for the Investor Relations Unit Personnel:Duygu İnceözInvestor Relations ManagerTel: +90 212 463 6363 Ext.:13630Fax: +90 212 465 23 07E-mail: duyguinceoz@thy.comÖzge ŞahinInvestor Relations SpecialistTel: +90 212 463 6363 Ext.:11841Fax: +90 212 465 23 07E-mail: ozges@thy.com104 TURKISH AIRLINES 2012 ANNUAL REPORT

3. Shareholder’s Right to Obtain and Evaluate InformationDuring the year of 2012, 573 requests for information were submitted to our Companyby e-mail. In addition to those requests, a large number of investors and shareholderswere provided with information by telephone. The Company does not discriminate amongshareholders in the exercising of shareholders’ rights to obtain and evaluate information.Additionally, the Company has an Investor Relations page on its current website,where investors and other stakeholders can access information on it, in order to allowboth shareholders and other stakeholders to exercise their right to obtain informationeffectively. Subject to Capital Markets Law, Provisional Article 6, which was amended byLaw 6111 Article 157; published in the Official Gazette on 25 February 2011 and enteringinto force; all share certificates of our shareholders that are kept physically, will betransferred to our Company, if not recorded by 31 December 2012. At the aforementioneddate all shareholders rights regarding these share certificates expire automatically. Thisannouncement has been published in the Investor Relations section of our Company’swebsite.4. Information on the General Assembly MeetingPursuant to Article 6 of our Articles of Association, all share certificates of our Companyare registered and categorized into two groups: A and C. There is only one outstandingGroup C share, which belongs to the Privatization Administration of the Prime Ministry(PA), or in the event that such duties of the PA are transferred, to the transferee institution.Currently, 49.12% of Group A shares belongs to the PA, while 50.88% are traded publicly.In the course of 2012;• An Ordinary General Assembly Meeting was held on 7 May 2012 to review 2011 accountsand operations. Shareholders representing TL 610,224,617.96 of our Company’s TL 1billion 200 thousand issued share capital attended the Ordinary General Assembly. Nomedia representatives were present.• An extraordinary General Assembly meeting was held on 10 October 2012. At themeeting pursuant to the Communiqué Serial: IV, No: 56 of the Capital Markets Board onthe Definition and Enforcement of the Corporate Governance Principle, the amendmentsto Article 6., 10., 11., 14., 15., 17., 29, removal of the current provisional Article 1., 2.,3. and the addition of Article 41 and provisional Article 1 to the Company’s Articlesof Association, as well as the election of two Board of Directors members and thesubmission of Audit Committee membership selection for Board of Directors approvalwere voted on. Shareholders representing TL 738,369,329.55 of our Company’s TL 1billion 200 thousand issued share capital attended the Extraordinary General Assembly.No media representatives were present.Invitation to the extraordinary and ordinary meetings was announced in the TurkishCommercial Gazette and a national newspaper, including details of the agenda, andfurthermore the same was announced in the Investor Relations section of the Companywebsite. As per article 437 of the Turkish Commercial Code (TCC), consolidated financialtables, annual report and proposals for the method of distribution of net income ismade available to shareholders at the Company Head Office at least 15 days prior tothe Ordinary General Assembly, accompanied by the report to be issued by auditors. Atthe General Assembly Meeting, existing practice endeavors to respond to shareholderTURKISH AIRLINES GROUP105

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORTquestions verbally, and to address more comprehensive questions in writing; however,since no questions requiring a written answer were received during this period, verbalexplanations were deemed adequate.General Assembly minutes and attendance list are announced to the public on the sameday on the Public Disclosure Platform and are available in the Investors’ Relations sectionof the Company’s web site for shareholder information. General Assembly minutes ofprevious years and other documents are also available in the same section of our website.Within the framework of our donations Policy as adopted by the General Assembly,a separate item in the General Assembly is discussed and information given on thedonations is given during the period. The Donation Policy of our Company is available onour website in the Investor Relations section.The powers of authority of the General Assembly are set out in Article 27 of our Articles ofAssociation; as such, the General Assembly is that body holding the powers of authority asstipulated in the TCC and other laws.5. Voting Rights and Minority RightsVoting Rights are set out in Article 31 of our Articles of Association, as below.“Each shareholder or proxy attending the ordinary or extraordinary Shareholders AssemblyMeetings will be vested with one vote for each share, provided that the provisions of Article6/d of the Articles of Association are reserved.” Under Clause 5 of Article 14 of our Articlesof Association;The Board member representing Group C shares is required to attend the meeting, and hisaffirmative vote is required for the effectiveness of the resolutions of the Board of Directorsregarding the following issues:Resolutions that will clearly have an adverse effect on the mission of the Incorporation asindicated in Article 3.1 of the Articles of Association;• Any suggestion to be made to the Shareholders Assembly for any modification of theArticles of Association;• Increase of the share capital;• Approval of the transfer of registered shares and registration of the transfer in the ShareRegister;• Any transaction, based on each contract, which exceeds 5% of the total assets of theIncorporation as indicated in the latest balance sheet submitted to the Capital MarketsBoard, and which is directly or indirectly binding for the Incorporation, any resolutionwhich will place the Incorporation under any form of commitment, (provided that inthe event that the public share in the Incorporation has decreased below 20% of theIncorporation’s share capital, the provisions of this clause will automatically terminate);• Merger, termination or liquidation of the Incorporation;Any resolution on the cancellation of any flight route, or for a remarkable decrease in thenumber of flights, excluding those routes which do not generate revenue to meet its ownoperating costs based on exclusive market conditions, or through other sources.106 TURKISH AIRLINES 2012 ANNUAL REPORT

The privileges of the Group C share may only be limited by the High Commission ofPrivatization, or any other public institution which has assumed such duties.No mutually-affiliated relationship exists with any other company. Our Articles ofAssociation do not contain provisions for accumulated voting.6. Dividend RightsThe determination and distribution of profits from our Company are set forth in Article 36of our Articles of Association. There are no privileges in dividend participation.The General Assembly shall determine the time and method of payment of dividends inaccordance with the directives of the Capital Markets Board. In this regard, our Company’sdividend distribution policy as formulated by the Board of Directors by taking the strategictargets, growth trend, financial needs and the expectations of the shareholders of theIncorporation into consideration, and under the provisions of the Turkish CommercialCode, Capital Markets Law, other related legislation and its Articles of Association, andthe Incorporation will basically distribute profit at the minimum ratio determined bythe Capital Markets Board by means of cash and/or bonus shares, and upon taking intoconsideration the potential of the Incorporation to distribute profit. This policy is availableon our Company website.7. Transfer of SharesArticle 6 of our Articles of Association; (Shareholders Nature)The shares held by foreign shareholders may not exceed 40% of the issued share capital ofthe Incorporation. In calculating the rates of the shares held by foreigner shareholders, therate of foreign shareholding in the shares held by the shareholder holding Group A shares,which are not open to the public, will be taken into consideration too.Foreign shareholder shall mean;• Foreign natural, or legal persons;• Turkish companies where over 49% of the share capital is owned by foreigners;• Turkish companies in which the majority of members of administrative andrepresentative boards are not Turkish citizens, and in which the majority of votes are notheld by Turkish partners according to their respective Articles of Association;• Turkish companies under actual control of the aforementioned.In order to ensure that the aforementioned share rate limitations on foreign partnersis compiled within the provisions of the Articles of Association, the Incorporation willregister foreign shareholders and their related share rates in separate sections of the ShareRegister.It is obligatory to promptly notify the Incorporation of any share purchase and salereaching 1% of the issued share capital of the Incorporation. Moreover, those shareholderswho have reached or exceeded the maximum foreign shareholding rates as indicatedin the Articles of Association, are obliged to promptly notify the Incorporation as theybecome aware of this. The purpose of such notification is to trace the foreign element andany extraordinary share movements thereof, and to ensure that the Board of Directorsexercises its powers with regards to these. Notification alone will not suffice in order tobecome a shareholder without registration in the Share Register, and only those recordspresent in the Share Register will be relied on in such cases.TURKISH AIRLINES GROUP107

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORTIn cases where it is understood through notifications, or through other means that thetotal shares held by foreign shareholders have exceed 40% of the issued share capitalof the Incorporation, the Board of Directors will be under obligation to promptly notifythe related shareholders at the latest within 7 (seven) days, starting from the latestshare transfer, to dispose of those shares that exceed the foreign shareholding limit, inamounts and rates to be in conformity to the foreign shareholding limit. Otherwise, theIncorporation will be entitled to apply any of the measures indicated below. The foreignshareholder to whom the notice to dispose of its exceeding shares has been served, will beunder obligation to sell such shares which have caused the foreign shareholding limit tobe exceeded, to a person who is not included under the foreign shareholder definition inthe Articles of Association, within the period stated in the notification. In the event thatsuch shares are not disposed of, despite notification, the Board of Directors will be underobligation to meet within 3 (three) days, and to take a resolution to cover the measuresindicated below with regard to the shares exceeding the limit.(i) To redeem the nominal value, the shares held by the foreign shareholder that havecaused the foreign shareholding limit to be exceeded, by decreasing the share capital:With this purpose, the Incorporation will first notify the shareholder who has exceed theforeign shareholding limit that his shares will be redeemed. Where such notification maynot be served, it will be announced in two newspapers published in the location where thehead office of the Incorporation is located. Expenses related to such redemption will becollected from the shareholder who has caused the redemption, through deduction fromthe redemption amount.(ii) In cases where the total share rate of the foreign shareholder exceeds the limitindicated in the Articles of Association, the Board of Directors will be entitled to increasethe share capital in order to reduce the rate of the shares exceeding the limit. In thiscase, new shares may be issued by limiting the preferential purchase options of existingshareholders according to the rules of the Capital Markets Board.As stipulated in this Article, in cases where the total share rate of the foreign shareholderexceeds the limit, the Board of Directors is entitled to choose the resolution to covermeasures to reduce the rate of shares to the permitted limit.Reasoning for The Article: The reasoning for the rule in this Article is provided in the finalparagraph of Article 7 of our Articles of Association, and in the paragraph below. Theregulations to which our Company is subject in its capacity as an airline, and to which itmust adhere, are also explained.An airline company that does not qualify as Turkish on account of provisions listed inArticles 31 and 49 of Turkish Civil Aviation Act No. 2920 may not obtain an operatinglicense or, if it does possess an operating license, such operating license shall be revokedin the event that it ceases to qualify as Turkish due to such factors or events as thetransfer, or sale of shares of the airline, or due to the majority of the members of its Boardof Directors being foreign, etc.108 TURKISH AIRLINES 2012 ANNUAL REPORT

) In order for flights to be possible from one state to another, that is, to secure rightsto international traffic, bilateral inter-governmental aviation treaties must first beexecuted between the two given countries, and the majority ownership of the airline to bedesignated by the Turkish Government and the control of such company must lie in thehands of Turkish citizens (natural or legal persons). The criteria of nationality that qualifiesour Company as Turkish is a also a sine qua non condition for holding the right to trafficunder the bilateral aviation treaties executed between states.Hence, since the right of traffic may only be granted to an airline domiciled in Turkey,if the majority of its shares of effective control thereof belong to Turkish citizens orcompanies, and since in the event such airline ceases to qualify as Turkish (or it fails toprove that it has not ceased to do so, or if other contracting states to which flights will bemade fail to believe that it has not done so) then the relevant airline shall lose its right totraffic, the criterion of nationality is an element of vital importance for an airline.Hence, Article 6 of our Articles of Association contains provisions governing the foreignelement in order to ensure that our airline’s operating license and also our internationaltraffic rights are secured, as explained above. The terms of the limitations imposed on theforeign shareholding ratio for the protection of the traffic rights of our Company are basedon the criterion of nationality, should such limit be exceeded.Article 7 of our Articles of Association; (Shareholders Nature)Transfer of shares is subject to the provisions of the Turkish Commercial Code, CapitalMarkets regulations and Civil Aviation regulations.The transfer of registered shares will be effective with regard to the Incorporation uponregistration in the Share Register. The shareholders will be under the obligation to evidencewhen required, and according to the format determined by the Board of Directors, theiridentities and nationalities and, if available, the “Foreign shareholding” relation asindicated in Article 6, before registration of the registered shares in the Share Register.Until registration of the share transfer in the Share Register, the holder registered in theShare Register will be deemed as the holder of the shares by the Incorporation. Sharetransfers will be registered in the Share Register upon resolution of the Board of Directors.The Board of Directors may refrain from registering any share transfers in the shareRegister in cases which are not consistent with the Articles of Association, or the law, orwithout indicating any reason thereof.Share transfers which are not in compliance with the foreign shareholding rate limits asindicated in Article 6 above, may not be registered in the Share Register. The Board ofDirectors will be under obligation to reject the registration of such share transfers in theShare Register. Share transfers which are not registered in the Share Register by the Boardof Directors will not be recognized by the Incorporation, and the related transferee will notbe authorized to become a shareholder. The affirmative vote of the member, appointed tothe Board of Directors to represent the Group C share is required in the resolutions of theBoard of Directors to affirm the share transfer, and to register this in the Share Register.The Group C share may be transferred to any Turkish public institution substantiallyhaving the same powers granted to the Prime Ministry Privatization Directorate by LawNo: 4046. In case of such a transfer this will promptly be registered in the Share Registerwithout requirement for any Board of Directors resolution.TURKISH AIRLINES GROUP109

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORTThe Board of Directors will be under obligation to limit the transfer of the shares toforeigners, in order to comply with the provisions of Civil Aviation and/or other laws it issubject to, and with the limitations as indicated in the Articles of Association, and to avoidendangering the traffic and cabotage rights held by the Incorporation.PART II - PUBLIC DISCLOSURE AND TRANSPARENCY8. Public Disclosure PolicyOur Board of Directors has established a Disclosure Policy to share information on theperformance and forward looking developments within the scope of generally acceptedaccounting principles and Capital Markets Legislation (CML), Capital Markets Board andIstanbul Stock Exchange regulations and Capital Markets Board Corporate GovernanceGuidelines in a fair, complete, accurate and comprehensible manner equally withcapital market participants, and to always maintain an active and open dialogue.The Board of Directors is authorized to and responsible for enforcing, supervising anddeveloping Disclosure Policy. Turkish Airlines’ basic policy is to give correct, complete,understandable, cost effective and easily accessible information and explanations,in equal conditions, excepting commercial secrets, to shareholders, capital marketsparticipants, personnel and customers. The comprehensive public disclosure policy of ourCompany as approved by the Board of Directors may be found on our Company’s website.The basics of public disclosure of the forward looking statements are covered in theDisclosure Policy. Where the Incorporation becomes aware that the expectations in theforward looking statement will not materialize the Incorporation shall disclose this to thepublic and revise its expectations accordingly. Our Company made 61 Material Disclosuresduring the 2012 fiscal year in accordance with the CMB’s Directive Series: VIII, No: 54 onPublic Announcements of Special Circumstances, and no supplementary announcementswere required by the CMB and ISE regarding such announcements. Our Company has usedits best efforts to ensure that its material disclosures were communicated to investors,deposit holders, agencies and organizations simultaneously, in due course, and in anunderstandable, accurate and interpretable form. Since no Material Disclosure was madeby our Company that was not delivered in a timely manner, no sanctions were imposed bythe CMB or ISE during the applicable period. Furthermore, since our Company shares arenot listed on any International Stock Exchange, no Material Disclosures were made to anyInternational Stock Exchange.9. Company Website and Its’ ContentsOur Company’s web address is www.turkishairlines.com, and the Investors’ Relations pagemay be found on it. The website also has an English version. The Company’s informationon the web site should be equal and/or consistent with the disclosures pursuant to relatedarticles of legislation; it may not contain contradicting or deficient information. TheInvestor Relations page, covers the following subjects listed in the Corporate GovernancePrinciples; Shareholding Structure, General Assemblies agenda, proxy specimens,attendance list, additional information, minutes of meetings, annual reports, financial110 TURKISH AIRLINES 2012 ANNUAL REPORT

statements, commercial operating data, company presentations, Corporate GovernanceGuidelines, details on the Board of Directors, Material Disclosures, Code of ethics, policies(profit sharing policy, disclosure policy, remuneration policy) information regardingrelated parties transactions, share information, analyst information, Trade RegisterInformation, Articles of Association, Board Committees (Financial and Corporate), contactinformation and Frequently Asked Questions. Investors can send an e-mail to ir@thy.com,under the Investor Relations section to register any question or opinion.10. Annual ReportOur Company’s Board of Directors prepares a detailed Annual Report in advance of theGeneral Assembly each year for submission to related stakeholders for informativepurposes. In addition, and pursuant to CMB Directive Series XI No: 29, quarterly activityreports are prepared and publicly announced. The aforementioned reports containinformation listed in the Corporate Governance Principles.PART III - STAKEHOLDERS11. Informing the StakeholdersIn our announcements to the public of information regarding our Company, in additionto forecast and material disclosure announcements, other information and statementsdeemed to be of interest to other beneficiaries are delivered in a timely and clearmanner through the appropriate communication channels. In addition to stakeholdersand investors, suppliers, financial institutions and other interested parties may obtaininformation about our company via press releases, activity reports and our website.Personnel receive information regarding the Company’s general practices and operationsthrough internal announcements via the Company intranet site, which is actively used. Inaddition, the monthly magazine Empathy is published for inter-company communication.The internal communication channels of our Company are designed to be open to allstakeholders, with contact information also announced on the Company’s web site.There is no Company practice that in any way obstructs stakeholders in contacting theCorporate Executive Committee or Audit Committee.12. Stakeholders taking part in managementOur Company organizes management meetings regularly each year. Personnel fromeach supplier level, the national and international managers of our Company, uppermanagement and the Board of Directors participate in these meetings. Opinions areexchanged on relevant matters both at these meetings, by workshops and panels.In addition, a proposal system is used in our Company. Through this system, employeescan propose opinions for improvement and development within the Company, with thoseproposals deemed appropriate being implemented.13. Human Resources PolicyOur Company adheres to the Human Resource Procedure established by our Board ofDirectors. With sub-units structured along these procedures, all personnel activities arerealized within the framework of legislation.TURKISH AIRLINES GROUP111

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORTRelations with employees are realized through the Personnel Relations Directorate.Mr. Ebubekir Baysal, as Chief of Personnel Relations, is responsible for improvingcommunication with employees, as well as for answering questions, solving problemsand making announcements of interest to all employees. Questions and complaints,reaching the Directorate through various means are solved in coordination with the relateddepartments. To date, among notifications made to the Ethics Line Board, which is theapplication point for our Company’s employees with regards to discrimination and conflictof interest, several applications have included cases of direct or indirect discrimination. Inorder to resolve these applications, the Ethics Committee has decided to listen to relatedpersonnel, in terms of gathering the opinions of relevant departments, thereafter actingupon the results received. Analysis and evaluation is ongoing. Job descriptions in theircurrent form are available on THY’s intranet pages. All employees can access their jobdescription via the intranet page. An Awards Procedure, covering inter-company awardingcriteria has been prepared. In addition, a Performance Management System Guidelinehas been prepared that covers performance criteria. Performance Management Procedurepreparations are ongoing. Within this scope employees obtain information both on awardsand performance related matters.In addition, our Company’s personnel are unionized, and as such work under a collectivebargaining system. Employee/employer relations are conducted in an effective andresults-oriented manner at all levels and on any subject concerning collective bargainingand personnel and representatives appointed by the union in numbers and percentages asspecified in the latest legislation and by union directors. Additionally, training services areprovided to all our personnel.14. Code of Ethics and Social ResponsibilityOur Company continues its practices in accordance with its flag carrier identity, with theprovided service quality and social responsibility, both domestically and internationally.Our Board of Directors has prepared a Code of Ethics within the framework of CorporateGovernance Principles, which is also published on our website. In addition, jobdescriptions are prepared for employees. It is required that they behave along acceptedprinciples in business life, and to be respectful in their words and deeds with regards tolegislation, ethical values, social norms and the environment. An Ethics Line Board hasbeen established to enable the Company’s employees to report actions that fall below thethreshold of ethical standards.There has been no case against the Company in Turkey regarding environmental damage.112 TURKISH AIRLINES 2012 ANNUAL REPORT

PART III - STAKEHOLDERS15. Structure of the Board of Directors and its FormationThe Board of Directors is comprised of nine members elected by the General Assembly. Atleast eight out of nine Board Members should be elected from among Class A shareholderswith the highest vote, and one member should be chosen from among the Class C shareshareholders. At least six Board Members, including the Board Member representing theClass C share, must be Turkish citizens. The term of office for Board members is 2 (two)years. The General Assembly may terminate the membership of a Board Member beforethe end of his/her term. Board Members whose term has expired may be reelected.Three members of the Board of Directors are appointed to the Executive Committee, andthe other six are non-executive members. Among the non-executive Board of Directorsthree are independent members of the Board. Since the aviation industry has a dynamicnature, were the Board of Directors and President of the Executive Committee the sameperson, it would create uniformity. Therefore, at our Company the President of the Boardof Directors and Executive Committee is the same person, and the CEO is not the Presidentof the Board of Directors.Information on the Members of the Board as of 31.12.2012:Name SurnameHamdi TopçuProf. Dr. Cemal ŞanlıTemel Kotil Assoc.Prof.Mehmet BüyükekşiMuzaffer Akpınarİsmail GerçekGülsüm AzeriNaci AğbalMehmet Nuri YazıcıStart dateOffice of the officePresident, Board ofDirectors 01.01.2010Vice President,Board of Directors 01.01.2010CEO, Member of theBoard 22.04.2005Member of theBoard 03.03.2004Member of theBoard 24.04.2007Member of theBoard 08.04.2011Member of theBoard 08.04.2011Member of theBoard 10.10.2012Member of theBoard 10.10.2012Status ofIndependencyExecutiveMemberExecutiveMemberExecutiveMemberExecutiveMemberIndependentMemberIndependentMemberIndependentMemberExecutiveMemberExecutiveMemberCommitteesparticipated and officeExecutive Committee /PresidentExecutive Committee /Vice PresidentExecutive Committee /MemberCorporate ManagementCommittee / MemberFinancial AuditCommittee / MemberFinancial AuditCommittee / Member,Corporate ManagementCommittee / MemberCorporate ManagementCommittee / MemberThe résumés of Board Members, their office tenure and duties beyond the Company arepresented in the Annual Report and under the Investor Relations section of the Company’swebsite. Independency Declarations of independent members are announced publicly viathe Public Disclosure Platform and are attached to the annual report.TURKISH AIRLINES GROUP113

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT16. Activities of the Board of DirectorsThe activities of the Company’s Board of Directors are specified in Article 14 of the Articlesof Association;The Board of Directors shall meet whenever necessary and at least once a month in everycircumstance. The meeting venue will be at Company headquarters. Other venues may bechosen by a Board decision. Matters to be discussed at Board meetings shall be specifiedon an agenda to be communicated to Board Members prior to the meeting. Invitations toBoard meetings shall be made at least three days prior to the actual meeting. Board ofDirectors meets, with a quorum of at least six members. Decisions of the Board of Directorsrequire the positive votes of at least five members. Members, who have not attended fourconsecutive meetings, or six meetings in one year without excuse accepted by the Boardof Directors, or for a justified reason are considered to have resigned from office.Matters rendered effective with participation at a meeting of Board Members representingShare class C, and who vote positively are mentioned under the organization of the 5thsection of this report.According to Corporate Governance Principles of the CMB, in all related party transactions,and when granting colleteral, pledge and mortgage to third parties, transactions are incompliance with CMB legislations.During 2012, the Board of Directors met 43 times and passed 268 decisions. Among thediscussed matters, there are no related party transactions or transactions of importantnature, which are not approved by independent board members and that requiresubmission to the General Assembly.17. Committees within the Board of Directors, Number, Structure and IndependenceThe following committees have been formed under the organization of the Board ofDirectors within the framework of TCC and CMB legislation. Committees for Nomination,Assessment of Risk at Early Stage, and a Pricing Committee have not been formed.Instead it was approved for these duties to be transferred to the Corporate GovernanceCommittee. The members of the Financial Audit Committee and Corporate GovernanceCommittee have been determined by the Board of Directors and publicly announced. Theassinged positions, and working principles are set by the Board of Directors.Turkish Airlines Corporate Governance CommitteePresident: İsmail GerçekMembers: Mehmet Büyükekşi, Gülsüm AzeriThe Corporate Management Committee reports directly to the Board of Directors. Itsupports and helps the Board of Directors with practices in the following areas: TheCompany’s compliance with internationally approved Corporate Management Principles,determining Board of Directors and Senior Managers, evaluation of wages, awards andperformances and career planning, as well as investor relations and public disclosurematters. The Corporate Management Committee reviews the system and processes formedand will be formed for performance increasing management practices, evaluates them andgives recommendations.114 TURKISH AIRLINES 2012 ANNUAL REPORT

Turkish Airlines Financial Audit CommitteePresident: İsmail GerçekMember: Muzaffer AkpınarThe Financial Audit Committee directly reports to the Board of Directors. It supportsand assists the Board of Directors in the following areas: The compliance of Companypractices with national and international codes and legislation, improving work processesthrough audit and coordinating work on information transparency. The Audit Committee isresponsible for taking all precautions necessary for any kind of internal and external auditto be executed in a sufficient and transparent manner; and to carry out the duties, subjectto Capital Markets Board legislation. Financial Audit Committee members are selectedfrom among Independent Board Members.18. Risk Management and Internal ControlAn effective risk management strategy at our Company is critical in taking under controlpotential risks inherent in the airline industry, which is prone to fierce competition, andto ensuring sustainable growth. In an effort to provide a reasonable degree of securityagainst possible shocks by minimizing sensitivity to fluctuations, particularly thoserelating to fuel and carbon emission prices, interest rates cash flow and exchange rates,as well as counterparty risk, the Financial Risk Management Department devises theCompany’s Financial Risk Management strategy, and works towards the management ofactual/potential financial risks the Company is exposed to.Addressed as a matter of first priority within this framework, hedging in relation tofuel prices, amongst the Financial Risks the Company is exposed to, commenced inJune 2009. From November 2009, the hedging ratio was increased and the transactionmaturity extended, while the instruments used were diversified and the strategy updatedfrom January 2011, in addition to an increased hedging ratio and extended transactionmaturity; hedging is ongoing within the framework of the relevant strategy. In order tominimize the impact of exchange rate fluctuations, regarded as a major risk element inview of the Company’s field of activity, and to keep under control the risks that can arisefrom potential differences between forecast and actualized income and expenses onthe basis of exchange rates, a proactive exchange rate policy is implemented based firstand foremost on natural risk management for exchange rates, taking into account theinvestment of the available cash portfolio.In addition, the Company established its liability in relation to carbon emissions, laiddown the strategy to protect against carbon emission risk, and works as necessary withinthe framework of the Carbon Emission Trading System.In the period ahead, the Company intends to update the existing methodology andcontinue active control of fuel price, exchange rate, interest rate, and carbon emissionrisks, and the credit risk of financial institutions with our Company.TURKISH AIRLINES GROUP115

CORPORATE GOVERNANCE PRINCIPLES COMPLIANCE REPORT19. Strategic Targets of the CompanyThe Board of Directors shall approve the strategic targets set out by the management andcontinuously and effectively monitor these targets, as well as the activities of the Companyand its past performance. In doing so, the Board shall strive to ensure compliance withinternational standards, and wherever necessary, take preemptive action to potentialproblems. The mission of the Company as it appears in Article 3 of the Articles of Associationis indicated below:a) To develop the Company’s standing as a global airline by expanding the coverage of itslong-range flight network.b) To develop the Company’s standing by making its technical maintenance unit a majorregional technical maintenance resource.c) To develop the Company’s standing as a service provider in all strategically importantaspects of civil aviation, including ground handling services and flight training.d) To defend the Company’s standing as the leader of the domestic airline industry.e) To provide uninterrupted, and superior-quality flight service by entering into a collaborativeagreement with a global airline alliance that will complement its own network in such a way asto advance the Company’s international image and enhance its marketing abilities.f) To defend and improve upon İstanbul’s reputation as a regional aviation hub.In its capacity as the flag carrier of the Republic of Turkey in the civil aviation industry, to be aleading European airline and an active global player by virtue of its flight safety and securityrecord, its product diversity, its service quality, and its competitive stance.Our company Vision;a. Continue sustained growth above the industry averageb. A zero accident and crash recordc. The most envied service levels worldwided. Unit costs equal to those of low-cost carrierse. Sales and distribution costs below industry averagesf. Loyal customers, who take care of their own reservation, ticketing, and boarding formalitiesthemselvesg. Personnel who constantly develop their qualifications with the awareness of the closerelationship between the benefits for the Company and the added value that they contributeh. A sense of entrepreneurship that creates business opportunities for fellow members in theStar Alliance, and takes advantage of the business potential provided by themA management team, whose members identify with modern governance principles andare distinguished by being mindful of the best interests not just of shareholders, but of allstakeholders.20. Financial RightsAll kinds of rights, benefits and remuneration and the criteria to determine them, as well asthe basics of remuneration are written in the Remuneration Policy of our Company. This policyis publicly disclosed and published on our website. There are no explanations on a personalbasis, however there is a distinction between the Board of Directors and Senior Managers.Remuneration of the Board of Directors is determined by the General Assembly. BoardMembers may not obtain any loan or debt from the Company.116 TURKISH AIRLINES 2012 ANNUAL REPORT

TURKISH AIRLINES GENERAL MANAGEMENT BUILDINGAtatürk Hava Limanı Yeşilköy 34149 Istanbul/TURKEYTel: +90 212 463 6363 Fax: +90 212 465 2121Reservation: 444 0849e-mail: customer@thy.com (Customer Relations)ir@thy.com (Investor Relations)This annual report is printed on 100% recycled paper and with environmental-friendly technologies.