2009 Annual Report - Turkish Airlines

It has been told that Simurg, emperor of the birds, lived in theKaf Mountains among the branches of the Tree of Knowledge.Travelers themselves on the road to truth, birds set out insearch of timurg. On this difficult journey, they pass over alifetime’s worth of coarse valleys and lose hope when theyreach the last valley, the valley of destitution. Still, a smallnumber of birds keep flying and finally succeed in reachingthe Kaf Mountains, whereupon they come to realization thatthey themselves are Simurg, their sought-after emperor oftruth, and that the strength they need already lies withinthem. From the very beginning, we too have looked to becomeSimurg. With every step we take, we aim for somethinghigher. We advance to the future through a process ofcontinuous renewal and development. As we reach higherunder the strength our shared corporate values andexpanding ambitions, we believe that the joy of beating ourwing together will deliver us to the summit.

ContentsCorporateFinancial Indicators 62009 Milestones 8Mission-Vision 10Management and Messages 12Management System 20OperationsTotal Traffic Results 38Fleet 44Activities 48Subsidiaries and Joint Ventures 72FinancialFinancial Ratios and Audit Reports 82

3ANNUAL REPORT 2009CologneCopenhagenDnepropetrovskDonetskDublinDusseldorfEkaterinburgErcanFrankfurtGenevaGothenburgHamburgHannoverHelsinkiKazanKievLisbonLondonLjubljanaLvivLyonMadridManchesterMilanMinskMoscowMunichNiceNurembergOdessaOsloParisPraguePristinaRigaRomeRostovSarajevoSimferopolSkopjeSofiaStockholmSt.PetersburgStuttgartTbilisiTiranaUfaVeniceViennaWarsawZagrebZurichAdanaAdıyamanAğrıAnkaraAntalyaBatmanBodrumÇanakkaleDalamanDenizliDiyarbakırElazığErzincanErzurumEskişehirGaziantepHatayIspartaİstanbulİzmirK. MaraşKarsKayseriKonyaMalatyaMardinMerzifonMuşNevşehirSamsunŞanlıurfaSinopSivasTekirdağTrabzonUşakVanAlmatyAshgabatAstanaBangkokBeijingBishkekJakartaDelhiDushanbeHong KongKarachiMumbaiOsakaSeoulShanghaiSingaporeTashkentTokyoAbu DhabiAmmanAleppoBaghdadBahreinBeirutDamascusDohaDubaiJeddahKuwaitMadinahMashadMuscatRiyadhSan’aaTabrizTehranTel AvivFar East18 destinationsMiddle East19 destinations

“Taking strong steps tocarry our deeply-rootedcorporate identity to newhorizons.“

CorporateFinancial Indicators 62009 Milestones 8Mission and Vision 10Management and MessagesMessage from the Chairman 12Board of Directors 14Farewell to Candan Karlıtekin 18Management SystemQuality Concept 20Sustainability 22Social Responsibility 22Risk Management 24Organizational Structure 26Legal Statute 28Principles of Corporate Governance andCompliance Report 30

009 MilestonesAWARDSINNOVATIONS AND DEVELOPMENTSTurkish Airlines has beennominated “The Best Airline” in itsregionTurkish Airlines was selected as thebest airline in its region, receivingthe title of “Southern Europe’sBest Airline Company” by Skytrax,a company that evaluates airlinesand airports using 750 parametersthat measure a range of service andquality standards. In recognitionof the services standards it hasdeveloped though its quality andcustomer-focused philosophy,Turkish Airlines was the only airlinein Europe to receive 4 stars in allcategories.Turkish Airlines received theAircraft Finance Journal’s “2008Europen Deal of the Year” awardwith financing of aircraft.Turkish Airlines received the awardduring a ceremony organized by the29 th Air Finance Conference in NewYork. Following a survey it madein 2008, in which detailed analysisand criteria were applied to morethan 350 airlines around the worldin the area of aircraft and aircraftengine financing, the AirfinanceJournal, one of the world’sleading publications in the aviationfinancing sector, named TurkishAirlines as having the best financialapplications in Europe.“Operational Excellence” award toTurkish Airlines from AirbusFollowing an evaluation of theservice records of its fleet’s A320family of aircraft, Turkish Airlinesreceived Airbus’ “OperationalExcellence” award. The awardwas presented at a ceremony heldin Paris attended by airlines thatoperate Airbus’ A320 aircraft, andwas an occasion for Turkish Airlinesto put its name to yet anotherinternational achievement.Turkish Technic Inc. once againcertifies its prestige in theinternational arenaTurkish Airlines Technic Inc. becamethe first aircraft maintenance andrepair center in Turkey to obtain theEN/AS9100 Aviation Series and theISO9001:2008 Quality ManagementSystem Certificates.Turkish Airlines TechnicInc., holding ISO9001:2000,ISO14001:2004, ISO18001:1999Management System Certificatesand National/International Aircraft/Aircraft Components maintenanceauthorization certificates, is both aleader in Turkey and an importantglobal player.The EN/AS9100 Aviation Series- Quality Management Systemcertificate, in addition to being animportant source of prestige andprogress for civil aviation in Turkey,will also increase Turkish AirlinesTechnic Inc.‘s influence in the globalaviation industry and its share in themarket.Turkish Airlines, a Cargo QualitySystem MemberOn January 1, Turkish AirlinesCargo joined the Cargo 2000 QualityManagement System, an InternationalAir Transport Association (IATA)enterprise that comprises nearly 50airlines, numerous cargo agencies,general service providers andinformation technology providers.Turkish Airlines Cargo increased itsmarket share in the global air cargomarket by its improving cargo transporttime management, quality of serviceand level of customer satisfaction.Flights to Tiran via Milan began on June7, and the total number of cargo flightdestinations reached to 21.8ANNUAL REPORT 2009

NETWORKTurkey’s first mobile airlineapplication from Turkish Airlines:mobil.thy.comTurkish Airlines, diversifying itssales channels with the launchof mobil.thy.com, now offers itspassengers the ability to performall stages of ticketing, check-in andboarding procedures from theirmobile phones.Restructuring of businessprocesses with ERPTurkish Airlines launched an ERP(Enterprise Resource Planning)project, one of the world’s largestof its kind. The project aims torestructure business processes,increase operational efficiency andmore effectively deliver productsand services to passengers. Theproject is planned to be completedin three years.Codeshare agreementsPassenger have been offeredexpanded flight options as a resultof codeshare agreements signedwith Ethiopia, Singapore, Malaysia,Bosnia, Etihad, Asiana and Air Marocairlines. A codeshare agreementhas also been signed betweenSunExpress, which is a joint venturebetween Turkish Airlines andLufthansa, and AnadoluJet, also aTurkish Airlines brand.Special Passengers ProgrampartnershipsTurkish Airlines signed a SpecialPassenger Program partnershipagreement with Jet Airways andContinental Airlines, under whichMiles&Smiles members may earnmiles on flights with Jet Airwaysand Continental Airlines, which theymay convert into ticket awards.New domestic flight destinationsThe number of domestic flightdestinations increased to 37 withthe addition of Uşak (January 12),Çanakkale (January 19), and Isparta(October 28).New destinations with AnadoluJetFlights to Çorlu (Tekirdağ) beganon February 27 and flights to Izmirbegan on September 28.New international flightsdestinationsTurkish Airlines added 10 newinternational destinations in 2009,increasing the total number ofinternational destinations on itsflight network to 119.NAIROBI- Kenya (February 20)UFA - Russia (March 04)MASHAD - Iran (March 15)SAO PAOLO - Brazil (April 05)DAKAR - Senegal (April 05)BENGHAZI - Libya (May 05)GOTEBORG - Sweden (June 29)TORONTO - Canada (July 11)LVIV - Ukraine (July 27)JAKARTA - Indonesia (September04)As one of the world’s most prestigious airlines, striving to bethe very best in every area, Turkish Airlines gains strengthwith each milestone on its ascent to the top.9ANNUAL REPORT 2009

ission andisionmissionTo become the preferred leading European air carrier with a globalnetwork of coverage thanks to its strict compliance with flight safety,reliability, product line, service quality and competitiveness, whilstmaintaining its identity as the flag carrier of the Republic of Turkey inthe civil air transportation industry.10ANNUAL REPORT 2009

visionTo become an air carrier with;• a continued growth trend over industry average• zero major accidents/crashes• most envied service levels worldwide• unit costs equating with low cost carriers• sales and distribution costs below industry averages• a personnel constantly developing their qualifications with the awarenessof the close relationship between the benefits for the company and theadded value that they contribute• an entrepreneurship that creates business opportunities for fellowmembers in the Star Alliance and takes advantage of the business potentialprovided by them• a staff well adapted to modern governance principles by observing thebest interests of not only shareholders but also stakeholders11ANNUAL REPORT 2009

M essage from the Chairman12ANNUAL REPORT 2009

Continuing to grow in2009 despite the crisisDear investors and shareholders,In 2009, financial and commercial performance closely mirroredoverall macroeconomic balances. Severe reverberationsemanated from the global crises, which turned into the worsteconomic year on record since World War II, and which the IATAreported as having caused significant financial losses.Despite the sector’s overall negative picture, Turkish Airlinescontinued to progress successfully. Building its strategies basedon long-term goals and visions - rather than short-term gains -our company turned the crisis atmosphere into an opportunity,becoming the fastest growing airline of all member airlines inthe European Airlines Association. Turkish Airlines added to thismomentum by expanding its share of existing markets throughorganic growth, and by creating new markets that bring in risingnumbers of new potential new passengers.Today, Turkish Airlines, with its comprehensive flight networkand strong schedule structure, has further reinforced its identityas a global airline. The fact that more than one third of ourinternational passengers used Istanbul as their connection pointhas strengthened our company’s status as a network carrier.In 2009, the Turkish Airlines brand, with its young fleet, qualityin-flight catering services, friendly personnel and security andsafety standards that surpass international standards, was thepreferred airline for 25.1 million passengers, and while the IATAannounced a 3.5% contraction in passenger demand, TurkishAirlines grew by an impressive 11%.In an environment where the sector’s unit revenues have been ona marked downward trend due to deteriorating global economicconditions, our company has reduced costs through a disciplinedfinancial structure and as a result maintained its profitability.In 2009, Turkish Airlines was among Europe’s most profitableairlines, with a total profit of TL 559 million.Our investments have served as the catalyst for Turkish Airlines’growth. Ten new international destinations were added to theflight network in 2009. In addition to individual aircraft purchasingand leasing, the ordering process was completed on a total of 89aircraft - 25 of which are optional – under our fleet renewal andexpansion master program encompassing a total of 105 aircraft.Under this program, aircraft will begin entering our fleet inSeptember and generate balanced and effective growth both insingle and double-corridor aircraft though 2014.Through our investments in technical training, we aim to turnIstanbul into a bona fide aviation training center. Our companycompleted the ordering process for two more training jets and alsopurchased simulators that will continue providing training servicesboth to our airline’s own pilots and to those of other airlines thatwe serve. Our pilots that graduate from the flight academy, whichprovides world-class training, are a source of great pride to us.Alongside our main investments in the development of our fleetand routes, projects aimed at strengthening our brand image alsodeserve emphasis. In addition to the “Feel Like a Star” advertisingcampaign featuring Kevin Costner, in which we highlight thatthe services we offer our passengers are fit for the stars, wesigned sponsorship agreements that once again validate us as anairline preferred by the very best in the world. We were furthermotivated by the fact that our high quality and service standardswere found to be worthy of the “Best airline in South Europe”Skytrax award, regarded as the Oscars of the aviation sector.Our company’s achievements have been reflected in theincreasing value of our shares, which are traded on the IstanbulStock Exchange and rose by a colossal 395% in 2009. At the startof 2009, our market value was 945 million TL, and by the end ofthe year reached 4,988 million TL. Share in Turkish Airlines werethe most profitable investment vehicle compared either to otherstocks traded on the IMKB or other airline company stocks onexchanges throughout the world.Turkish Airlines understands that its greatest assets are itsdetermined, dynamic and devoted employees, and thus placesgreat importance on projects that improve the living standardsof our personnel. By providing all of our employees with privatehealth insurance and increasing salaries by 6% before the startof the Collective Labor Agreement term, we have further boostedthe motivation of our personnel - the architects of our success.Turkish Airlines has taken off to a roaring start in 2010, and its comingachievements will also command strong attention. I would like toexpress my gratitude to our investors for their support and to all mycolleagues, who have made great contributions to the achievementsof our company and put forward their best efforts in making TurkishAirlines one of the most highly respected airlines in the world today.Hamdi TOPÇUChairman of the Board, Turkish Airlines13MGMT. AND MESSAGES

Board of DirectorsHamdi TopçuChairman of The BoardProf. Dr. Cemal ŞanlıVice Chairman of The BoardTemel Kotil, Ph.D.Member of The BoardPresident & CEO14ANNUAL REPORT 2009

Hamdi TopçuChairman of The BoardMr. Topçu was born in Çayeli, Rize in 1964. He graduated fromMarmara University in 1986, receiving his degree in Economicsand Administrative Sciences. He began a certified accountingpractice in Kartal in 1986, and continues his work as anaccountant and financial advisor. Mr. Topçu is married withfour children.Prof. Dr. Cemal ŞanlıVice Chairman of The BoardMr. Şanlı was born in Manisa in 1950. He graduated from theFaculty of Law of Istanbul University in 1977 and received his titleas a Doctor of Law with the publication of his thesis “InternationalCommercial Arbitration” in 1985.He completed his Ph. D. his thesis on International Arbitrationat the “Institute of Advanced Legal Studies” associate with theUniversity of London. In 1987, he became Assistant AssociateProfessor, in 1990 Associate Professor, and in 1996 full Professorat Istanbul University’s of Law. He is currently the head of theInternational Private Law Department of the Faculty of Law atIstanbul University. He is married and has four children.Temel Kotil, Ph.D.Member of The Board and President & CEOBorn in 1959, Mr. Kotil graduated from AeronauticalEngineering Department at Istanbul Technical Universityin 1983. In 1986, he completed his first masters degree inthe United States from the Aircraft Engineering departmentof Michigan University, his second masters degree inMechanical Engineering in 1987, and his Ph.D in MechanicalEngineering in 1991. Following his work, Mr. Kotil servedas Assistant Associate Professor and Associate Professorat Istanbul Technical Univesity in the Faculty of Aircraft andSpace Sciences. In 2003, he began his carrier with TurkishAirlines as Vice President of the Technical Department. In2005, he was appointed General Manager of Turkish Airlines,and in 2006, he was elected as a member of the IATA Boardsof Directors. Mr. Kotil is married with four children.15MGMT. AND MESSAGES

Orhan BirdalMember of The BoardMr. Birdal was born in Kemahin 1958, in 1980 graduated fromthe Istanbul I.T.I.A College ofJournalism and Public Relations,and in 1990 completed hisgraduate degree from the SocialSciences Institute of MarmaraUniversity. Between 1976 – 1978Mr. Birdal served on the TurkishAgricultural Equipment Boardand beginning in 1982 carriedout various duties at DHMİ. As of2007, he assumed the position ofGeneral Manager and Chairmanof the Board of DHMİ (GeneralDirectorate of State AirportsAuthority), which he presentlycontinues. On April 17, 2008 hewas elected as a Member of theBoard of Directors of TurkishAirlines. Mr. Birdal is married andhas four children.Muzaffer AkpınarMember of The BoardBorn in 1962, Mr. Akpınarattended the French Saint-MichelLycee and graduated from theDepartment of ManagementScience of Bosphorus University.He began professional career as afounding partner of Penta Tekstilin 1986 and in 1993 was appointedas the CEO of KVK Mobil TelefonHizmetleri A.Ş. Mr. Akpınar laterserved as CEO of MV Holding A.Ş.and played an active role in thecreation of Fintur Holding BV. Mr.Akpınar served as the GeneralManager of Turkcell betweenJanuary 1, 2002 July 2006. He ismarried and has two children.Dr. Turan ErolMember of The BoardBorn in 1961 in Trabzon, Mr.Erol graduated from KaradenizTechnical University in 1985 andreceived his masters’ degree fromMiddle East Technical University.In 1996, he completed his Ph.D inEconomics at Erasmus University inthe Netherlands. Mr. Erol served asan assistant professor at BaşkentUniversity between 1997-1998, andas associate professor from 1998-2003. In 2003, he was appointed asa member of the Capital MarketsBoard (CMB), and in December of2004 was elected as Vice Presidentof the CMB, holding this positionuntil June of 2007. Mr. Erol nowserves as Chief Advisor to thePresident. He is married with twochildren.Mehmet BüyükekşiMember of The BoardMr. Büyükekşi was born inGaziantep in 1961 and graduatedfrom the Faculty of Architectureof Yıldız Technical Universityin 1988. He has participatedManagement Courses at MarmaraUniversity, and in Managementand English courses in Englandin 1998. He currently holdspositions as Vice Chairman of theExporters Council of the IstanbulChamber of Industry, Member ofthe Board Directors of EximBank,and Member of the Directors ofthe Turkish Leather Foundation.Mr. Büyükekşi is the GeneralCoordinator of the Zilyan Group.He is married and has threechildren.16ANNUAL REPORT 2009

İsmail GerçekAuditing Commitee MemberBorn in Çanakkale in 1963,Mr. Gerçek graduated in 1985from Ankara University, inthe Department of PublicAdministration of the Faculty ofPolitical Sciences. In that sameyear, he began working as DeputyFinance Inspector Committee ofthe Ministry of Finance. Between1992 – 94, he completed hisMaster of Arts degree in Moneyand Banking in the United Statesas well as post – graduatestudies in finance. Since 1998,he has worked as a partner ancertified public accountant in anaccounting firm. He is marriedand has two children.Prof. Dr. Ateş VuranAuditing Commitee MemberMr. Vuran was born in Istanbulin 1944. He graduated from theIstanbul Academy of Economicand Commercial Sciences, andconducted studies at Italy’sPerugia University in 1966 – 1967.He received his Ph.D. in 1974,became an associate professor in1978, and full Professor in 1984in the Departments of Statisticaland Numerical Methods. In1971, founded Turkey’s firstprivate airline company (AnadoluHavacılık ve Turizm A.Ş.). He iscurrently the Rector of IstanbulUniversity of Commerce andheads the Department of TourismManagement within the Faculty ofCommercial Sciences at IstanbulUniversity Commerce. He ismarried with two children.Naci AğbalAuditing Commitee MemberMr. Ağbal was born in Bayburtin 1968. He graduated fromthe Department of PublicAdministration of the Facultyof Political Sciences of IstanbulUniversity in 1989. Between 1996– 1998, he completed an MBAprogram at Exeter University inEngland. He is now engaged ina Ph.D Program in Managementat the Institute of Social Sciencesof Ankara University. Mr. Ağbalcurrently continues his duties asGeneral Manager of Budget andFinancial Control in the Ministryof Finance. He is married with twochildren.17MGMT. AND MESSAGES

Farewell to Candan Karlıtekin18ANNUAL REPORT 2009

He was not only an executive, but also a true friend. We shared inalmost every moment of happiness and sadness. The contributionsof Candan Karlıtekin signature will forever remain in bold under eachpositive decision made by the company.Hamdi TopçuHe made very valuable contributions to our company as its Chairman.I thank him for his services on behalf of the entire Turkish Airlinesfamily.Ph.D. Temel KotilWe thank him for transforming Turkish Airlines from a national andregional airline into a global company and brand.Orhan BirdalA very good businessman, an excellent executive, and a kind personwith a very pure heart. I wish him all the very best.Muzaffer AkpınarA warm-hearted and enthusiastic Chairman of the Board of Directors,who loved his job and to which he brought clear a horizon and vision.Farewell to Candan Karlıtekin …İsmail GerçekHis name Candan means “heartfelt”; but it is through his vigorouspersonality that Candan Karlıtekin put his signature to the countlessachievements of Turkish Airlines during his term as the Chairman ofthe Board from 2004 to the end of 2009, which he served with obviouslove for his work, as a master executive and with a colorful personalitydevoted to education. Even though we say farewell to him at the endof 2009, we know that our routes will cross on another flight. We owehim a debt of infinite gratitude for the value and vision he brought toTurkish Airlines.Turkish Airlines Employees19MGMT. AND MESSAGES

Q uality Concept20ANNUAL REPORT 2009

Quality through sustainabilityand maximum securityTurkish Airlines strives to be among the world’s leading airlines brands, andit is committed to a quality policy of sustainability and maximum security. Tothis end, it has developed quality and safety standards that its growth requiresin cooperation with national and international authorities.As it continues its rapid growth, Turkish Airlines tookfurther steps to improve quality and safety without evercompromising its standards. As a result of its work onquality and management systems, Turkish Airlinessuccessfully passed all of the approval processesconducted by national and international authorities.Management systemOne of the basic duties of an airline company is to ensurea hassle-free experience by continually improving theproducts and services it offers to its customer, thus creatinglasting customer satisfaction. In order to achieve this, theoperational and commercial processes must be managed inan integrated fashion. Turkish Airlines takes this approach,and since May 2006 has held the TS-EN ISO 9001:2000Quality Management System Certificate, which was renewedin 2009 as the TS-EN ISO 9001:2008. Having received thisnew certificate, Turkish Airlines’ quality standards werevalidated both by the Turkish Standards Institute and theinternational certification network IQNet, of which it is amember. Turkish Airlines is committed to leaving behinda clean environment for subsequent generations and isworking on an ISO 14001 Environment Management SystemProject, while also placing priority on its employees throughits work on OHSAS 18001 Work Health and Safety.Flight safetyTurkish Airlines successfully satisfied the nearly 900criteria specified in the IOSA (IATA Operational SafetyAudit) program in 2005 (organization and managementsystem, flight operations, operational control andflight departure management, technical, cabin, groupoperations, cargo and security) and received the IOSACertificate. In 2009, AQS performed the validity renewalaudit for this certificate, which was completed with zeroadverse findings.Quality and assuranceThe conformity of flight and ground operations to TurkishAirlines’ regulations and national and internationalstandards are controlled through yearly planned andnon-planned audits. In addition, operational training units(both flight and ground) provide quality assurance audits.In 2009, 792 audits were conducted, and Turkish Airlinesalso successfully passed external audits carried out by theCivil Aviation General Directorate, EASA, JAA Mast Team,France Civil Aviation and British Civil Aviation Authorities.21MANAGEMENT SYSTEM

S ustainabilityTurkish Airlines’ vision of sustainability is based onbeing a leading, global and respected institution thatconducts itself in line with its responsibility towardsenvironmental, economic and social development. Forlong-term corporate sustainability, the implementationof resource and risk management is essential toputting in place responsible environmental and climatepractices, as well as providing for the well-being,development and security of human resources.Social ResponsibilityTurkish Airlines’ carbon reduction environmental implementationshad the equivalent impact of planting one million trees. The practicesintroduced under the Fuel Savings Project were implemented acrossall operations.As one of the most important contributors to global warming, fossil fuel usage is coming under increasingscrutiny, and airlines are looking to adopt renewable energy models within the shortest time. TurkishAirlines recognizes that older generation aircraft release higher carbon emissions, consume more fuel,and create more noise pollution, and it conducts itself with the awareness of its responsibility to theenvironment, operating a young fleet whose age is below the sector’s average.Under the “Fuel Savings Project,” which was launched in order to bring about the highest fuel efficiency,work began on the monitoring, control and reduction of fuel consumption values. In implementing theproject, great care has been taken to ensure that fuel consumption reduction measures are carried outby those units whose paramount responsible is flight safety. Through practices such as the reduced ofthe use of the APU (Auxiliary Power Unit), take offs and landings with a low flap configuration, reducedaircraft weight, increased engine wash intervals, and reduced cabin and catering weights, approximately360,000 fewer tons of carbon was emitted compared to prior years - a benefit equal to the planting ofnearly 1 million trees per year.22ANNUAL REPORT 2009

Leaving good marks on nature23MANAGEMENT SYSTEM

Risk ManagementFinancial Risk Management (FRM) was initiated under the EnterpriseRisk Management (ERM) project, which Turkish Airlines is conductingin order to evaluate the company’s financial risks and implement riskhedging strategies.The financial effects of changes in jet fuel prices has been defined as “commodity price risk”; losses that may arise fromfinancial loans, receivables and investments as “credit risk”; fluctuations in the market value of aircraft financing, debtsin foreign currency and the market value of cash as “interest risk”; and the various foreign currency rates in the incomeand expense calculations as “foreign exchange rate risk.” As a result of decisions to establish fixed commodity prices andfixed loan interest rates, strategies to hedge against the above risks were developed in derivative markets.Commodity price risk managementTurkish Airlines Risk Hedging Strategy (16 Months)Commodity price management aims to mitigate the effectof fuel price variations on jet fuel costs by fixing the costof jet fuel within a specific band or at a single price, thusminimizing the consequences of adverse conditions thatmay arise in the fuel market. Risk hedging has beenimplemented in a staged manner, with the use of derivativeinstruments for crude oil (barrels) and jet fuel (Mtons) oncontract amounts corresponding to approximately 20% ofTurkish Airlines’ forecasted annual jet fuel requirements.20%19%18%16%15%14%13%11%10%9%8%6%5%4%3%The “Petroleum Market Pricing Scenario” graph, below,shows scenarios covering a risk-hedging period forTurkish Airlines’ fuel prices and related estimated fuelcosts in the event of supply changes in the Brent crudeoil market.M+1M+2M+3M+4M+5M+6M+7M+8Turkish Airlines Petroleum Market Pricing Scenario*(as of February 1, 2010)M+9M+10M+11M+12M+13M+14M+151%M+16Market Price180Market PriceTurkish Airlines Price150120906024ANNUAL REPORT 20093030 60 90 120 150 180USD/BarrelTurkish AirlinesPrice

Managing risks well underuncertain circumstances- When the price of a barrel of crude oil is $180, the cost to the company is $174,2- When the price of a barrel of crude oil is $150 the cost to the company is $145,9- When the price of a barrel of crude oil is $120 the cost to the company is $117,7- When the price of a barrel of crude oil is $90 the cost to the company is $89,4- When the price of a barrel of crude oil is $60 the cost to the company is $61,1- When the price of a barrel of crude oil is $30 the cost to the company is $32,9The graph below, which compares Turkish Airlines’ fuel costs in 2008 with those in 2009, shows the change in variouscosts factors.2008-2009 Turkish Airlines’ Fuel Cost Variations (as of February 1, 2010)2,52,00,31,50,90,30,0041,01,81,50,50,0Fuel Costs2008ConsumptionCost Exchange Rate Risk HadgingActivitiesFuel Costs2009Credit risk managementIn response to the effects of the international economic crisis spanning 2008 and 2009, Turkish Airlines signed agreementsfor deposit and derivative transactions with financial institutions it does business with in order to protect against any futurecredit risks.Taking into consideration the credit risk ratings of financial institutions, Turkish Airlines has assigned its own limits tothose institutions that remain above the credit risk threshold. The assigned limits have been periodically updated and thehealth of any institution whose credit rating slips is monitored closely.In order to manage the credit risk that can arise as the result of using derivative products, Turkish Airlines signed anInternational Swaps and Derivatives Association (ISDA)” agreement and other required agreements with its counterparties.Issues relating to the management of credit risks were dealt with in the “Credit Support Annex (CSA)” section of theagreement. As provided by the agreement, credit risk was reduced though reconciliation operations for certain periods.Interest rate risk managementTurkish Airlines’ interest rate risk management activities include the regular monitoring and analysis of the interest ratemarket, setting fixed loan interest rates, conducting sensitivity analyses on interest rate variations and tracking probableinterest-derived cost adjustments.Foreign exchange rate risk managementTurkish Airlines’ international operations necessitate the denomination of revenues and expenditures in many foreigncurrencies. In order of descending magnitude, revenues are in EUR, USD and TL and expenditures in USD, TL and EUR. Inorder to minimize the effects of foreign currency fluctuations, which are a serious risk factor, an active foreign exchangerate policy has been implemented.25MANAGEMENT SYSTEM

O rganizational Structure“Turkish Airlines’ soundand strong organizationalstructure rapidly adapts tochanging conditions andincreasing competition.”26ANNUAL REPORT 2009

Board of DirectorsExecutive CommitteePresident & CEOMgr. Office of CEODir. Inspection BoardLegal CounsellorDir. CorporateCommunicationsDir. Corporate Developmentand Information TechnologyDir.Quality AssuranceDir. InvestmentManagementPress CounsellorDir. Flight TrainingDir. TecnicalDir.Ground OperationsDir. Regional FlightsMgr. Aviation SafetyMgr. Flight SafetyExe. Vice President(Human Resources)Exe. Vice President(Financial)Exe. Vice President(Commercial)Exe. Vice President(Flight Operations)Dir. PersonnelDir. FinanceDir.Production PlanningDir. Flight Operations(Chief Pilot)Dir. TrainingDir. AccountingDir. RevenueManagementDir. Cabin CrewManagingDir. Social &Administrative AffairsDir. General Purchasingand CateringDir. Marketing &SalesDir. OperationsCoordinationDir. CargoDir. Business Devolopment& Agreements27MANAGEMENT SYSTEM

Legal Statute1933Turkish Airlines was founded in Ankara pursuant to law No. 2186 asthe “State Airlines Administration” and commenced operationsunderthe authority of the Ministry of Defense.1935In 1935, authority was transferred to the Ministry of PublicWorks, and in 1938 the Administration was renamed the “GeneralDirectorate of State Airlines,” with authority transferring to theMinistry of Transportation in 1939.1955In 1955, pursuant to Law No. 6623, the State Airlines wasrestructured as a corporation governed by the provisions of privatelaw and continued its operations under the name of “Türk HavaYolları Anonim Ortaklığı”.1984As a Public Economic Institution (KIK), the Company fell withinthe scope of Decree Law 233 Regarding Certain Public Bodies andInstitutions published in Official Gazette No.18570 on November 9,1984.28ANNUAL REPORT 2009

1990Pursuant to Council of Ministers’ Resolution No.90/822 dated August22, 1990 and published on September 25, 1990 in Official GazetteNo. 20646, the Company was placed among KIKs to be privatizedunder the scope of Law 3291. The Company’s Articles of Associationwere structured in accordance with its new status and approved bythe Higher Planning Authority via decision No. 90/18 dated October30, 1990, and on November 5, 1990 the Article of Association wereentered into the Commercial Register.1994-2005The Company was included within the scope of Law No. 4046Concerning the Structuring of Privatization Activities andAmendments to Certain Decree Laws, which was published in OfficialGazette No. 22124 dated November 27, 1994. Pursuant to Article35 of the above-mentioned law, the Company was reclassified as aState Economic Enterprise under the Ministry of the PrivatizationAdministration. In order to comply with the provisions of theabove-mentioned law, the Articles of Association were amended inaccordance with Article 20(a) of the said law, and approved by thePrivatization Administration on December 5, 1996. The amendmentsto the Articles of Association received the approval of the CapitalMarkets Board by Decision No. 33/953 dated July 5, 2002 and weredeemed suitable via Authorization No. 1006 of the PrivatizationAdministration dated November 8, 2002. The amendments wereentered into force following acceptance by an extraordinary sessionof the General Assembly on January 17, 2003.2006The share of the government’s ownership in Turkish Airlines fellbelow 50% as a result of a public offering in May, and thus endedTurkish Airlines’ legal status as that of a state corporation.29MANAGEMENT SYSTEM

Principals of Corporate Governanceand Compliance Report1. Declaration of Compliance with Principles of Corporate GovernanceThe Company has embraced the concept of fairness, transparency as well aspromoting Turkey and Turkish Aviation sector internationally by upholding fullyto these Principles of Corporate Governance of Capital Market Board (CMB)2. Shareholder Relations UnitThe Investor Relations Department, which reports to the CFO, has beenestablished as an unit that oversees the communication of accurate andtimely information to our investors, maintaining relations and exchanginginformation with capital market supervisors, monitoring capital increases andpublic offering transactions and organizing presentations and informationalmeetings for domestic and international investors. Contact information forthe Investor Relations Manager, Suna ÇELEBİ, is as follows: Contact Details:Phone 212- 463-6363, Extension 3630, Fax 212-465-2307, E-mail ir@thy.com3. Shareholder’s Right to Obtain and Evaluate Information50.88% of our Company’s share is Free Floating at Istanbul Stock Exchange(ISE). During the year 2009, 258 requests have been submitted to our Companyby e-mail. All of the requests mostly related to financial and operationaldata, were responded to without delay. In addition to those requests, a largenumber of investors and shareholders were provided with information bytelephone. The Company does not discriminate among shareholders on theissue of exercise of shareholders’ right to obtain and evaluate information. TheCompany has created a web site in order to allow shareholders to exercisetheir right to obtain information effectively.4. Information on General Assembly MeetingPursuant to Article 6 of our Articles of Association, all share certificates of ourCompany are registered and are categorized into two groups: A and C. Thereis only one outstanding Group C share, which belongs to the PrivatizationAdministration of the Prime Ministry (OIB) incase such duties of OIB aretransferred then the transferee institution. Presently, 49.12% of Group Ashares belong to OIB, and 50.88% are traded publicly.In the course of 2009:1. An Extraordinary General Assembly was held on January 22, 2009 that servedto bring our Company’s Shareholders’ Agreement into conformity with the NewTL, as required by the decision of the Capital Markets Board. Shareholdersrepresenting 92,900,317.66 TL of the 175 million TL of our Company’s issuedshare capital attended the Extraordinary General Assembly.2. An Ordinary General Assembly was held on May 4, 2009 to review 2008accounts and operations. Shareholders representing 90,414,562.66 TL ofthe 175 million TL of our Company’s issued share capital attended theOrdinary General Assembly.Invitations to both the Ordinary and Extraordinary General Assembly werepromulgated by way of announcements in the agenda of the Trade RegistryGazette and in one newspaper circulated across the country, as well asthrough announcements on the Investor Relations page of our website.Pursuant to Article 29 of our Articles of Association, we are under no obligationto send notification of the meeting date by registered mail to shareholdersholding share certificates traded on the stock exchange.No time period has been stipulated for holders of registered shares to placenotification with the share register in order to secure participation in thegeneral assembly. Other conditions relating to this matter are set forth inArticle 7 of our Articles of Association, as follows:Transfer of shares is subject to the provisions of Turkish Commercial Code,Capital Market regulations and Civil Aviation regulations.Transfer of registered shares will be effective with regard to the Incorporationupon registration in the Share Register. The shareholders will be under theobligation to evidence when required, according to the format as determinedby the Board of Directors, their identities and nationalities and, if available, the“Foreign shareholding” relation as indicated in Article 6, before registration ofthe registered shares in the Share Register.Until registration of the share transfer in the Share Register, the holderregistered in the Share Register will be deemed as the holder of the sharesby the Incorporation.Share transfers will be registered in the Share Register upon resolution of theBoard of Directors. The Board of Directors may refrain from registering anyshare transfers in the Share Register in cases which are not in consistency withthis Articles of Association or the law or without indicating any reason therefore.Share transfers which are not in compliance with the foreign shareholdingrate limits as indicated in Article 6 above, may not be registered in the ShareRegister. The Board of Directors will be under the obligation to reject theregistration of such share transfers in the Share Register. Share transferswhich are not registered in the Share Register by the Board of Directorswill not be recognized by the Incorporation and the related transferee willnot be granted to be a shareholder. The affirmative vote of the member,appointed to the Board of Directors to represent Group C share is required inthe resolutions of the Board of Directors to affirm the share transfer and toregister this in the Share Register.Group C share may be transferred to any Turkish public institution substantiallyhaving the same powers granted to the Prime Ministry Privatization Directorate byLaw No: 4046. In case of such a transfer then this will promptly be registered in theShare Register without requirement for any resolution of the Board of Directors.The Board of Directors will be under the obligation to limit the transfer of theshares to the foreigners, in order to comply with the provisions of Civil Aviationand/or other laws, it is subject to, and with the limitations as indicated in thisArticles of Association and to avoid from endangering the traffic and cabotagerights held by the Incorporation.As per article 362 of the Turkish Commercial Code (TCC), the incomestatement, balance sheet, annual report and proposals for the method ofdistribution of net income will be made available to shareholders at the HeadOffice of the Company at least 15 days prior to the Ordinary General Assembly,accompanied by the report to be issued by auditors.In General Assembly Meetings, existing practice endeavors to respond toshareholder questions orally and to address more comprehensive questionsin writing; however, since no questions requiring a written answer wereencountered during these period, verbal explanations were deemed adequate.The powers of authority of the General Assembly are set out in Article 27 of ourArticles of Association; as such, the General Assembly is that body holding thepowers of authority as stipulated in TCC and other laws. Outside of this article,there is no provision in the Articles of Association calling for resolutions byGeneral Assembly on matters of material importance.Under Article 14 of our Articles of Association, the validity of any resolution tobe adopted by the Board of Directors on the matters listed below is contingentupon the participation of the Board member representing the Group C share inany meeting where such resolutions are to be adopted and upon that membercasting an affirmative vote.- Resolutions which will clearly adversely affect the mission of theIncorporations as indicated in Article 3.1 of this Articles of Association;- Any suggestion to be made to the Shareholders Assembly for any modificationin the Articles of Association;- Increase of the share capital;- Approval of transfer of registered shares and registration of the transfer inthe Share Register;- Any transaction, based on each contract, which exceeds 5 % of the totalassets of the Incorporation as indicated in the latest balance sheet submittedto the Capital Market Board and which is directly or indirectly binding forthe Incorporation, any resolution which will bring the Incorporation under anycommitment, (provided that in case the share of the public in the Incorporationhas decreased below 20% of the Incorporation’s share capital, then theprovisions of this clause will automatically terminate);- Merger, termination or liquidation of the Incorporation;- Any resolution about the cancellation of any flight route or for a remarkabledecrease in the number of flights, excluding the routes which do not even haverevenue to meet its own operating costs based on exclusive market conditionsor through other sources.- The privileges of Group C share may only be limited by the High Commissionof Privatization or any other public institution which has taken over such duties.Minutes of General Assembly Meetings are made available to shareholderswithin our Company all the time and are delivered to shareholders upon30ANNUAL REPORT 2009

equest. Furthermore, General Assembly minutes and attendance list aremade available on the Investors’ Relations section of our website.5. Voting Rights and Minority Rights1. Voting Rights are set out in Article 31 of our Articles of Association, asappearing below.“Each shareholder or proxy attending the ordinary orextraordinary Shareholders Assembly Meetings will be vested with onevote for each share, provided that the provisions of Article 6/d of thisArticles of Association are reserved.2. Under Clause 5 of Article 14 of our Articles of Association, It is required forthe Board member representing Group C share to attend the meeting andhis affirmative vote is required for the effectiveness of the resolutions ofthe Board of Directors regarding the followings issues:- Resolutions which will clearly adversely affect the mission of theIncorporations as indicated in Article 3.1 of this Articles of Association;- Any suggestion to be made to the Shareholders Assembly for anymodification in the Articles of Association;- Increase of the share capital;- Approval of transfer of registered shares and registration of the transferin the Share Register;- Any transaction, based on each contract, which exceeds 5% of the totalassets of the Incorporation as indicated in the latest balance sheet submittedto the Capital Market Board and which is directly or indirectly bindingfor the Incorporation, any resolution which will bring the Incorporationunder any commitment, (provided that in case the share of the public inthe Incorporation has decreased below 20% of the Incorporation’s sharecapital, then the provisions of this clause will automatically terminate);- Merger, termination or liquidation of the Incorporation;- Any resolution about the cancellation of any flight route or for aremarkable decrease in the number of flights, excluding the routeswhich do not even have revenue to meet its own operating costs based onexclusive market conditions or through other sources. The privileges ofGroup C share may only be limited by the High Commission of Privatizationor any other public institution which has taken over such duties.3. Under Article 10 of our Articles of Association, The Board of Directorswill consist of 7 members appointed by the Shareholders Assembly. It isobligatory to appoint 6 members of the Board of Directors, by electingamongst the candidates nominated by the Group A shareholders havinghighest votes, and to appoint one member by electing amongst thecandidates nominated by the Group C shareholder.Below principles will apply in the nomination of the candidates by the GroupA shareholders:a) In case the rate of being open to public is 15% (including), then theshareholders holding the Group A shares open to public will have the rightto nominate one of the 6 members granted to Group A shares.b) In case the rate of being open to public is 35% (35% and more), then theshareholders holding the Group A shares open to public will have the rightto nominate two of the 6 members granted to Group A shares.c) In order to be able nominate candidates for the Board of Directors by theshareholders holding Group A shares open for public, they are required to berepresented at the rate of minimum 2% of the total issued share capital ofthe Incorporation during the Shareholders Assembly in which the membersof the Board of Directors will be elected. Calculation of the aforementionedrate of 2% will be based only on the Group A shares open for public.Shareholders holding Group A shares open for public will determine thecandidates nominated for the Board of Directors in a special meeting. In thismeeting only shareholders holding Group A shares open for public, not heldby the public, will be entitled to nominate candidates. In case shareholdersholding Group A shares open for public are not represented in the rate of2% at the Shareholders Assembly, then the right of such shareholders tonominate candidates for the Board of Directors, will be used by the othershareholders holding Group A shares not open for public according to therules of Turkish Commercial Code and Capital Market.d) In the event of any vacancy in any membership of the Board of Directors dueto any reason like death, resignation, dismissal or cease of membership, thensuch vacant position will be occupied by the election of the Board of Directorsmade in compliance with Article 315 of Turkish Commercial Code. In the eventof any vacancy in the Board of Directors due to any of the aforementionedreason, then the shareholders holding the group shares entitled to nominatethe candidate office of which is then vacant, will be entitled to nominate acandidate for the vacant position and the Board of Directors will elect thiscandidate for this vacant position. In the event that the shareholders holdingGroup A shares open for public may not nominate any candidate for the vacantposition in the Board of Directors then Group C shareholder will be entitled tonominate a candidate for the vacant position or in case Group C share has beenconverted to Group A share, then the shareholders holding Group A sharesnot open for public will be entitled to nominate a candidate for the vacantposition. In the election for the vacant position of the candidate nominated bythe shareholders holding Group A shares open for public, the rates of 15%,35% and 2% as indicated in paragraphs (a), (b) and (c) above will not be takeninto consideration. The appointment of the successor member of the Boardwill be submitted to the approval of the following Shareholders Assembly. TheBoard member approved by the Shareholders Assembly will continue the Officeperiod of the predecessor member.e) In the event information is given that any Board member representinga legal person has no more relation with that legal person or in the eventsuch legal person transfers its shares to a third party, then this memberwill be deemed to have resigned, and provisions of paragraph (d) hereofwill apply in nominating a candidate for the vacant position.f) In the event of any modification in this Articles of Association and creationof new share groups, the right granted to the shareholders holding GroupA shares open for public to nominate 2 Board members as indicated inparagraphs (a) and (b) above may not be cancelled or modified, unless theaforementioned modification is approved by the shareholders representing65 % of the issued share capital.4. No mutually-affiliated relationship exists with any other company.5. Representation of minority shares in management is carried out inaccordance with Article 10 of our Articles of Association, as specified above.6. Our Articles of Association do not contain provisions for accumulated voting.6. Dividend Policy and Timing of DistributionThe determination and distribution of profits from our Company are set forthin Article 36 of our Articles of Association, as follows.The net profit, as indicated in the annual balance sheet, found after deductingfrom the revenue of the Incorporation, the amounts required to be paid orreserved by the Incorporation like general expenses and various depreciationsand the taxes required to be paid by the Incorporation, following the deductionof the losses of the past years, will be distributed in the following priority:a) Legal reserve fund in the rate of 5% will be reserved. Our Dividend Policy ispublished at our web site.b) First dividend in the rate and amount as determined by Capital MarketBoard will be deducted from the balance.c) After deducting from the net profit the amounts indicated in clauses (a)and (b) above, the Shareholders Assembly will be entitled to resolve either todistribute as second dividend or to reserve as extraordinary reserve fund, theentire or any portion of the balance.d) Second reserve fund will be reserved according to Article 466, paragraph 2,clause 3 of Turkish Commercial Code in the rate of one tenth of the amountfound after deducting the profit share in the rate of 5% of the issued sharecapital from the amount resolved to be distributed to the shareholders andthose entitled to participate the profit.e) Unless legal reserves required by law and the first dividend determined in theArticles of Association for the shareholders are reserved, no resolution may beadopted to reserve other reserve funds, to transfer profit to the coming year, andunless first dividend is paid in cash and/or in share certificates, no resolution maybe adopted to distribute profit to the privileged shareholders in profit distribution,to the holders of participation, founder and ordinary interest certificates, tothe members of the Board and officers, employees and workers, to the trustsestablished for various purposes and similar persons and/or institutions.The General Assembly shall determine the time and method of payment of31MANAGEMENT SYSTEM

dividends in accordance with the directives of Capital Market Board. In thisregard, our Company’s dividend distribution policy as formulated by the Boardof Directors by taking the strategic targets, growth trend, financial needs andthe expectations of the shareholders of the Incorporation into consideration andunder the provisions of the Turkish Commercial Code, Capital Markets Law,other related legislation and its Articles of Association, and the Incorporationwill basically distribute profit at the minimum ratio determined by the CapitalMarkets Board by means of cash and/or bonus shares and upon taking ofthe potential of the Incorporation to be able to distribute profit, it is alwayspossible for the Board of Directors to resolve for distributing profit above theminimum ratio and submit it to the approval of the General Assembly and theprofit share distribution shall be carried out within their legal terms.7. Transfer of SharesArticle 6 of our Articles of Association;Shareholders NatureThe shares held by the foreigner shareholders may not exceed 40% of theissued share capital of the Incorporation. In calculating the rates of the sharesheld by the foreigner shareholders, the rate of foreign shareholding in theshares held by the shareholder holding Group A shares which are not open forpublic will be taken into consideration as well.Foreign shareholder shall mean:- foreign natural or legal persons;- Turkish companies, share capital of over 49% of which are owned byforeigners;- Turkish companies in which majority members of administrative andrepresentative boards are not Turkish citizens and in which majority votes arenot on Turkish partners according to their articles of associations;- Turkish companies under actual control of the aforementioned.In order to ensure that the aforementioned share rate limitations on the foreignerpartners will be complied with the provisions of the Articles of Association, theIncorporation will use separate parts for foreign shareholders in registering theshareholders and their related share rates in the Share Register.It is obligatory to promptly notify the Incorporation of any share purchaseand sale reaching to 1% of the issued share capital of the Incorporation.Moreover, the shareholders who have reached or exceeded the maximumforeign shareholding rates as indicated in this Articles of Association, areobliged to promptly notify the Incorporation as they become aware of this. Thepurpose of such notification is to follow the foreigner element and remarkableshare movements and to ensure the Board of Directors to perform its powersbased on these, and only notification will not result with the nature of being ashareholder unless registered in the Share Register, and only the records inthe Share Register will be relied on in such cases.In cases where it is understood through the notifications or through othermeans that the total shares held by the foreigner shareholders have exceed40% of the issued share capital of the Incorporation, then the Board of Directorswill be under the obligation, to promptly notify the related shareholders latelywithin 7 (seven) days, starting from the latest share transfer, to dispose of theshares which exceed the foreign shareholding limit, in amounts and rates to bein conformity to the foreign shareholding limit and otherwise the Incorporationwill be entitled to apply any of the measures indicated below. The foreignshareholder to whom the notice to dispose of its exceeding shares has beenserved, will be under the obligation to sell such shares which have caused theforeign shareholding limit to be exceeded, to a person who is not included inthe foreign shareholder definition in this Articles of Association, within theperiod stated in the notice. In case such shares are not disposed despite thenotification, then the Board of Directors will be under the obligation to meet in3 (three) days and to take a resolution to cover the measures indicated belowin regard to the shares exceeding the limit.(i) To redeem with the nominal value, the shares held by the foreignshareholder which has caused the foreign shareholding limit to be exceed,through decreasing the share capital; with this purpose, the Incorporationwill first notify the shareholder who has exceed the foreign shareholding limitthat his shares will be redeemed. In case such a notice may not be servedthen the fact will be announced in two newspapers published at the placewhere the head office of the Incorporation is located. Expenses related withsuch redemption, will be collected from the shareholder who has caused theredemption, through deduction from the redemption amount.(ii) In cases where the total share rate of the foreign shareholder is over thelimit indicated in this Articles of Association, then the Board of Directors willbe entitled to increase the share capital in order to reduce the rate of theshares exceeding the limit. In this case, new shares may be issued by limitingthe preferential purchase options of the existing shareholders according to therules of the Capital Market Board.REASONING FOR THE ARTICLE:The reasoning for the rule in this Article is provided in the final paragraph ofArticle 7 of our Articles of Association and in paragraph below. The regulationsto which our company is subject in its capacity as an airline and to which itmust adhere are also explained.a) An airline company that does not qualify as Turkish on account of provisionslisted in Articles 31 and 49 of Turkish Civil Aviation Act No. 2920 may not obtainan operating license or, if it does possess an operating license, such operatinglicense shall be revoked in the event it ceases to qualify as Turkish due suchfactors or events such as the transfer or sale of shares of the airline or dueto the majority of the members of its Board of Directors being foreign, etc.b) In order for flights to be possible from one state to another, that is, tosecure rights to international traffic, bilateral inter-governmental aviationtreaties must first be executed between the two given countries, and themajority ownership of the airline to be designated by the Turkish Governmentand the control of such company must lie in the hands of Turks (natural orlegal persons). The criteria of nationality that qualifies our company as Turkishis a also a sine qua non condition for holding the right to traffic under thebilateral aviation treaties executed between states.Hence, since the right of traffic may only be granted to an airline domiciledin Turkey if the majority of its shares of effective control thereof belong toTurkish citizens or companies, and since in the event such airline ceases toqualify as Turkish (or it fails to prove that it has not ceased to do so or if othercontracting states to which flights will be made fail to believe that it has notdone so) then the relevant airline shall lose its right to traffic, the criterion ofnationality is an element of vital importance for an airline.Hence, Article 6 of our Articles of Association contain provisions governing theforeign element in order to ensure that our airline’s operating license and alsoour international traffic rights are secured, as explained above. Accordingly,restrictive rules were set out in terms of the limitations imposed on the foreignshareholding ratio for the protection of the traffic rights of our Company basedon the criterion of nationality, should such limit be exceeded.2- Articles of Association Article 7 (Transfer of Shares)Transfer of shares is subject to the provisions of Turkish Commercial Code,Capital Market regulations and Civil Aviation regulations.Transfer of registered shares will be effective with regard to the Incorporationupon registration in the Share Register. The shareholders will be under theobligation to evidence when required, according to the format as determinedby the Board of Directors, their identities and nationalities and, if available, the“Foreign shareholding” relation as indicated in Article 6, before registration ofthe registered shares in the Share Register.Until registration of the share transfer in the Share Register, the holderregistered in the Share Register will be deemed as the holder of the sharesby the Incorporation.Share transfers will be registered in the Share Register upon resolution of theBoard of Directors. The Board of Directors may refrain from registering anyshare transfers in the share Register in cases which are not in consistency withthis Articles of Association or the law or without indicating any reason therefore.Share transfers which are not in compliance with the foreign shareholding ratelimits as indicated in Article 6 above, may not be registered in the Share Register.The Board of Directors will be under the obligation to reject the registration of suchshare transfers in the Share Register. Share transfers which are not registeredin the Share Register by the Board of Directors will not be recognized by theIncorporation and the related transferee will not be granted to be a shareholder.The affirmative vote of the member, appointed to the Board of Directors torepresent Group C share is required in the resolutions of the Board of Directors toaffirm the share transfer and to register this in the Share Register.32ANNUAL REPORT 2009

Group C share may be transferred to any Turkish public institution substantiallyhaving the same powers granted to the Prime Ministry Privatization Directorate byLaw No: 4046. In case of such a transfer then this will promptly be registered in theShare Register without requirement for any resolution of the Board of Directors.The Board of Directors will be under the obligation to limit the transfer of theshares to the foreigners, in order to comply with the provisions of Civil Aviationand/or other laws, it is subject to, and with the limitations as indicated in thisArticles of Association and to avoid from endangering the traffic and cabotagerights held by the Incorporation.8. Company Public Disclosure PolicyOur Board of Directors has established Disclosure Policy to share informationon the performance and forward looking developments within the scope ofgenerally accepted accounting principles and Capital Market Legislation (CML),Capital Markets Board and Istanbul Stock Exchange regulations and CapitalMarkets Board Corporate Governance Guidelines in a fair, complete, accurateand comprehensible way with the capital market participants equally and keepan active and open dialogue always available.Turkish Airlines’ policy to give correct, complete, understandable, analyzableand cost effective easily accessible information, except trade secrets, to thecapital market participants and personnel about its activities and relatedstrategies, critical subjects, risks and developments. The comprehensivepublic disclosure policy of our Company as approved by the Board of Directorsmay be found on our Company’s website.9. Material DisclosureIn addition to the financial statements and notes to financial statements for 2009,our Company made 64 Material Disclosure in accordance with CMB’s DirectiveSeries: VIII, No: 54 on Public Announcements of Special Circumstances, and nosupplementary announcements were required by the CMB and ISE regardingsuch announcements. Our company has used its best efforts to ensure that itsmaterial disclosures were communicated to investors, deposit holders, agenciesand organizations simultaneously, in due time and in an understandable,accurate and interpretable form. Since no Material Disclosure was made byour Company that was not delivered in a timely manner, no sanctions wereimposed by the CMB or ISE during the applicable period. Furthermore, since ourCompany shares are not listed on any International Stock Exchange, no MaterialDisclosures were made to any International Stock Exchange.10. Company’s Website and Its ContentsOur Company’s web address is www.thy.com.tr, and the Investors’ Relationspage may be accessed via this website. The website also has an English version.The Investor Relations page contains information on shareholding composition,Minutes of General Assemblies, proxy specimens, annual reports, financialstatements, commercial operating data, presentations, Corporate GovernanceGuidelines, details on the Board of Directors, Material Disclosures, shareinformation, analyst information, Articles of Association, Board Committeesand contact information. Furthermore, a section with live data as well ashistorical data on Share performance of the Company procured from a datadistribution company is available on the relevant page.11. Disclosure of Natural Person(s) with Final Controlling ShareholdingNo natural person exists with final controlling shareholding in our Company.12. Disclosure of Ultimate Controlling Individual(s)Board of Directors, Auditors, CEO, Executive Vice Presidents, ExecutiveAssistant, Investor Relations Manager, Press Consultant, Director ofAccounting, Director of Finance, Director of Investment Management, Directorof Corporate Communications, as well as all staff of these Directors areprohibited from revealing any knowledge acquired during their terms of dutyand fields of operation That could be used to the advantage of third parties oradvantage of themselves.13. Informing the StakeholdersIn our announcements to the public of information regarding our Company, inaddition to forecast and material disclosure announcements other informationand statements that are deemed to be of interest to other beneficiaries aredelivered to the public in a timely and clear manner through the appropriatecommunications channels.Not only stakeholders and investors, but also suppliers, financial institutions andother interested parties may obtain information about our company via our website.Personnel receive information regarding the Company’s general practices andoperations through internal annoucements through the Company intranet site.14. Human Resource PolicyOur Company adheres to a Human Resource Code established by our Boardof Directors, and the Company act in accordance with Labor Law No. 4857regarding the personnel policies. In addition, our Company’s personnel areunionized and as such work under a collective bargaining system. Employee/employer relations are conducted in an effective and result-orientedmanner at all levels and on any subject concerning collective bargainingand representatives appointed by the union in numbers and percentages asspecified in Article 34 of Unions Law No. 2821 and by union directors. Trainingservices are provided to all our personnel. No complaints of discriminationhave been received from any employee.15. Relations with Customers and SuppliersSince the Company is an IATA member, ticket sales are subject to certainrules and regulations determined by IATA. In addition, forms for complaintsand suggestions are made available to customers on board and at all airportsand these are evaluated in an effort to improve customer satisfaction. Otherefforts geared toward customer satisfaction include the practice of allowing acommitment and penalty-free 24-hour option for changes or cancellations onreservations made over phone, assistance provided to passengers with specialneeds or with disabilities, meeting basic passenger needs at times when flightsare grounded during delays, taking the necessary measures to facilitate checkin.Customer satisfaction principles adopted by the Company in direct passengerrelations form the basis of the agreements signed with agencies. Only agenciesthat comply with these principles are allowed to work with Turkish Airlines.Agencies that do not comply with the rules are issued the necessary warnings andthe business relationship is terminated in the event of repeated violations. TheCompany engages in the purchase of goods and services in accordance with thePurchasing/Sale Regulations that have been drawn up with the resolution of theCompany’s Board of Directors and revised regularly since 1952 . Announcementsfor tenders are made in newspapers that have highest circulation nationwidewithin the timeframes set forth by Company, and also announced on the websitewww.thy.com. Procedures have been documented via Customer RelationshipManagement (CRM) for areas relating to customer loyalty analysis, globalcustomer research, corporate prestige research and the hidden customerprogram, and implementation of the “hidden customer” program aimed at qualityimprovement has begun. Our company became a Star Alliance member to improveboth customer satisfaction and our global mage. Cooperation still continues withmember airlines of the Alliance to improve international products and services andto participate an global information sharing and auditing mechanisms.Customer grievances may arise due to faults that occur from time to time inour Company’s operations and services. We strive to address such grievancesand restore satisfaction in the shortest possible time, and are looking to createa faithful customer profile. Our Customer Relations Department is engagedin efforts towards these ends. In order to complete work quickly and enablevarious departments to communicate findings from their own studies to theCustomer Relations Directorate in as soon as possible, the company as wholehas adopted a Department Performance assessment system, whose statisticsare monitored by General Management.16. Social ResponsibilityThe Company continued to operate by its service quality and social responsibilityphilosophy, keeping its leading position both in the country and abroad. Nolawsuits have been filed against the Company in Turkey on the ground ofcausing environmental damage.17. Structure of the Board of Directors, its Formation and IndependentMembersThe Board of Directors is comprised of seven members elected by the GeneralAssembly. Six Board Members are required to be elected from among thecandidates receiving the highest number of votes in the election held by ClassA shareholders. The other member is nominated by the Class C shareholder.At least five Board Members, including the Board Member representing theClass C share, must be Turkish citizens. The term of office for Board membersis two years. The General Assembly may terminate the membership of a BoardMember before the end of his/her term. Board Members whose term hasexpired may be reelected.33MANAGEMENT SYSTEM

Members of the Board in 2009:Candan KARLITEKİN - Chairman of the BoardHamdi TOPÇU - Deputy Chairman of the BoardPh.D. Temel KOTİL - Member of the Board and General ManagerProf. Dr. Cemal ŞANLI - Member of the BoardOrhan BİRDAL - Member of the BoardMuzaffer AKPINAR - Member of the BoardMehmet BÜYÜKEKŞİ - Member of the Board18. Qualifications of Board MembersThe criteria for Board membership are specified in Article 11 of the Company’sArticles of Association. In addition, Article 4/i of Law No. 4046 stipulates that inorganizations to be privatized, Board Members shall be graduates of fouryearhigher education programs. Care is taken to comply with the provisionsof Articles 3.1.1, 3.1.2 and 3.1.5 of Section IV of the Corporate GovernancePrinciples concerning the appointment of Board Members. Qualifications ofthe Company’s Board Members are in accord with these articles. Article 11and Provisional Article 1/c of the Articles of Association are quoted below.ARTICLE 11Persons to be elected to the Board shall not have been placed under legalrestraint; a Company where they owned an interest or worked as a manager shallnot have been declared bankrupt or insolvent; they shall be a shareholder of theCompany and shall not have been convicted of an infamous crime or any othercrime specified in the Civil Aviation Law. If a member who is not a shareholder iselected, that individual may only assume duties after having become a shareholder.The General Assembly may grant permission for the cases defined in Articles334 and 335 of the Turkish Commercial Code.Board Members representing Class C shares and at least five members(including those who represent Class C shares) must be Turkish citizens.Provisional Article 1/cWith the exception of the provisions outlined in the Paragraph “d” belowconcerning elections to be held among candidates nominated by Class Ashareholders in accordance with Law No. 4046, the Chairman of the Boardof Directors, Board Members, Auditors and the General Manager shall beappointed upon the proposal of the Privatization Administration or the approvalof the authorized Minister. This is carried out on the condition that they cansatisfy the conditions set forth in the Law, and that the state’s stake in theCompany does not fall to below 50%.19. Mission and Vision and Strategic Targets of theCompanyThe Board of Directors shall approve the strategic targets set out by themanagement and continuously and effectively monitor these targets, theactivities of the Company and its past performance. In doing so, the Boardshall strive to ensure compliance with international standards and wherevernecessary, take action before problems arise. The mission of the Company asit appears in Article 3 of the Articles of Association is indicated below:a) To strengthen the Company’s position as a global airline by expanding itslong-distance flight network,b) To position the Company as a technical services provider by transforming itsmaintenance unit into a leading maintenance base for the region,c) To promote the Company’s identity as a service provider in all areas ofstrategic civil aviation, including handling and flight training,d) To maintain the Company’s leading status in domestic air transportation,e) To provide seamless, high-quality air transportation services bycollaborating with a global airline alliance that complements its network inorder to further improve the Company’s image abroad and increase marketingopportunities andf) To make Istanbul an important hub.In addition, through its leadership position in the Civil Aviation Transport (SHT)sector of the Republic of Turkey, to be a premier European airline with globaloperations which is preferred for its flight safety, security, product range,service quality and competitive approach.Vision:a) Maintaining the growth trend that exceeds sector averagesb) Zero accidentsc) An understanding of service that captures the world’s attentiond) Unit prices that are competitive with those of low-cost carrierse) Sales and distribution costs that are below sector averagesf) Loyal customers who carry out reservation, ticketing and boarding activitiesthemselves.g) Personnel who understand that the added value they create is directlyproportional to the Company’s gains and who are committed to their owndevelopmenth) A commercial approach that creates business for partners who aremembers of the Star Alliance and which harnesses the potential that thosepartners offeri) Management that is recognized for its embrace of the principals of modernmanagement, respecting the interests of its shareholders and all otherstakeholders.20. Risk Management and Internal ControlThe airline industry by its nature is a high risk sector, and we believe thateffective risk management systems at our Company are critical to ensuringsustainable growth. In this regard, plans are being implemented for theformation of a Financial Risk Management structure within our Company thatwill provide a reasonable degree of security against fluctuations particularlyrelating to fuel prices, interest rates, and exchange rates. The Corporate RiskManagement Department, which was formed in 2008, is currently engaged therequired preparatory work for this purpose. The Corporate Risk ManagementDepartment has the overall responsibility of coordinating the relevant unitsof the Company in identifying and effectively managing both financial andother important areas of risk. The Corporate Risk Management Departmentis currently laying down the Financial Risk Management strategy as a matterof first priority. Immediately following the completion of this process, workwill begin on the establishment of an operational, strategic and external riskmanagement framework to support our Corporate Risk Management strategy.The Company has an internal control mechanism in place that is implementedby the relevant units. Matters such as the correct pricing of tickets sold byemployees or agencies, the compliance of foreign offices’ accounting recordswith the Company’s regulations and the correct and prompt fulfillment oftax obligations are all matters dealt with in this scope. The Company makesevery effort to ensure that all records are accurate according to the Companyregulations and directives. The Company is, in addition, subject to annualinspections by the Prime Ministry’s Supreme Inspection Board. Separately,the Company is being audited by three auditors appointed in theGeneral Assembly Meeting:İsmail GERÇEK - Member of Auditing BoardNaci AĞBAL - Member of Auditing BoardProf. Dr. Ateş VURAN - Member of Auditing BoardTwo auditors shall be elected from among Class A shareholders and oneauditor shall be the candidate nominated by the Class C shareholder. Theauditors have a one year term of office. An auditor whose term has expiredmay be reelected.Class A Auditors shall be determined in the following manner:a) In the event that the proportion of publicly traded shares is 35% or more,the rights granted to Class A shareholders to elect two auditors shall belongto shareholders holding publicly-traded Class A shares.b) Shareholders holding publicly traded Class A shares may nominate acandidate for membership of the Board of Auditors, provided they representat least 2% of the total increased capital by attending the General AssemblyMeeting in which the election of the Board of Directors elections took place.Only publicly traded Class A shares shall be considered in the calculation ofthis 2%. Shareholders holding publicly traded Class A shares shall determinetheir candidates for Board of Auditors membership in a meeting held betweenthem. The right to nominate a candidate in this meeting shall belong to the34ANNUAL REPORT 2009

holders of Class A shares which are publicly traded but not owned by thestate. In the event that the holders of publicly traded Class A shares do notrepresent 2% at the General Assembly Meeting, these shareholders’ rightsto nominate candidates for Board of Auditors membership shall be exercisedby those shareholders holding Class A shares which are not publicly traded,in accordance with the Turkish Commercial Code and Capital Markets BoardRegulations.c) In the event of a vacancy on the Board of Auditors due to the death, resignationor dismissal of one of its members or otherwise, the vacant position shall befilled by means of an election to be held by the Board of Auditors in accordancewith Article 351 of the Turkish Commercial Code. If the holders of publiclytraded Class A shares have not nominated a candidate for the vacant positionon the Board of Auditors, the right to nominate a candidate shall belong to theClass C Shareholder. If the Class C share has been converted into a Class Ashare, the right to nominate shall belong to the shareholders holding ClassA shares that are not publicly traded. In such an election carried out to fillthe position vacated by the candidate nominated by shareholders holdingpublicly traded Class A shares, the percentages of 35% and 2% as referencedin paragraphs “a”, “b” and “c” shall not be taken into consideration.d) In the event that these Articles of Association are later amended or newshare classes created, paragraphs “a” and “b” above defining the right ofshareholders holding publicly traded Class A shares to determine two auditorsshall not be annulled or modified, unless such modification has been approvedby shareholders representing at least 65% of the capital.The duties of the Auditors are to examine the Company’s general transactionsand budget and assume the responsibilities stipulated in the TurkishCommercial Code. Auditors are authorized and assume the responsibility tosubmit proposals to the Board of Directors, to ensure that the Company ismanaged efficiently and its interests protected, call a general meeting in theevent of vital and urgent matters, determine the agenda of such a meeting anddraw up the report specified in Article 354 of the Turkish Commercial Code.Auditors are responsible for fulfilling the duties assigned to them by law andthe Articles of Association in a satisfactory manner.21. Responsibilities of Board Members and Directors ArticleArticle 15 of the Articles of Association defines the power and responsibilitiesof the Board of Directors and Article 19 defines the power and responsibilitiesof the General Manager.Article 15. The Board of Directors represents and manages the Company.The Board of Directors is responsible for all tasks that are not assigned inthe General Meeting by law, as well as the duties laid out in the Articles ofAssociation, and it is granted all authority which these duties may require.As set out in Article 319 of the Turkish Commercial Code, the Board ofDirectors may assign all or part of its management and representation powersto one or more of its members, to a general manager, assistant generalmanager, a manager or managers who are not members of the Board, or mayform executive committees comprising of Board Members or non-membersto exercise its powers and fulfill its duties. All financial and other informationrequired for the Board of Directors to fulfill its duties as well as Boardproposals and attachments shall be submitted in a timely manner.All financial and other information needed for the Board of Directors to fulfillits duties as well as Board proposals and attachments shall be submitted in atimely manner. Article 19. The duties and powers of the General Manager shallbe determined by the Board of Directors. The General Manager is required tobe diligent in fulfilling his or her duties, and shall be held responsible for anybehavior or actions which contravene this duty.22. Activities of the Board of DirectorsThe activities of the Company’s Board of Directors, specified in Article 14 ofthe Articles of Association, are as follows:The Board of Directors shall meet whenever necessary and at least once amonth. The meeting venue will be at Company headquarters; other venuesmay be chosen by a Board decision.Matters to be discussed at Board meetings shall be specified in an agenda thatwill be communicated to Board Members prior to the meeting.Invitations to Board meetings shall be made at least three days before theactual meeting.The quorum for Board meetings is five members. Board decisions shall betaken with the affirmative vote of at least four members. A member who hasfailed to attend four consecutive Board meetings without a valid reason, or hasnot participated in six meetings over the course of a year shall be consideredto have resigned.Unless one of the members has requested a meeting, Board decisionsmay also be taken following the proposal of one of the members regardinga specific issue and with the written approval of all members. The validityof Board decisions is contingent on their having been set out in writing andsigned. Failure to reach a quorum for a decision on any issue shall be treatedas a rejection of the proposal in question.The validity of the decisions to be taken by the Board of Directors on thefollowing matters requires the presence and affirmative vote of the BoardMember representing Class C shares at the meeting during which the decisionwas taken.- Decisions that would clearly adversely affect the Company’s mission, as setout in Article 3.1 of the Articles of Association;- Proposals to the General Assembly Meeting for an amendment to the Articlesof Association;- Capital increases;- Approval of the transfer of registered shares and the recording of this in theshare ledger;- All transactions and decisions concerning direct or indirect commitmentson behalf of the Company for more than 5% of the total assets appearing inthe previous year’s financial statements submitted by the Company to theCapital Markets Board per each contract (this provision shall be automaticallyannulled when state-owned shares fall below 20% of the Company’s capital);- The merger of the Company with other companies, its termination orliquidation;- With the exception of those routes which are exclusively affected by marketconditions, or those that cannot cover their operational costs with otherresources, decisions concerning the termination of a route or a significantreduction in the number of flights.The privileges of the Class C share may only be restricted by the SupremePrivatization Board or a state agency that has taken over its duties. In2009, the Board held 72 meetings and made 254 decisions. The validity ofBoard decisions is subject to their having been written up and signed. Theorganization and communication of Board activities, the determination of thenumber of Board meetings, the following up of proposals made to the Boardand the drawing up of agendas are all duties of the General Secretariat.23. Prohibition to Deal and Compete with the CompanyDuring the reporting period, Board Members were prohibited from dealingand competing with the Company in accordance with Articles 334 and 335 ofthe Turkish Commercial Code. In addition to these prohibitions, there are alsorules set out in Section 11 of Turkish Airlines’ Human Resources RegulationsNo. 07-001, which prohibits Company personnel from providing services toother organizations24. Code of EthicsOur Company has set forth its Code of Ethics within the scope of the Principalsof Corporate Governance, which is published on our Website.25. The number, structure, and independency of the Board CommitteesThe Board of Directors’ Financial Audit Committee is comprised of Mr. HamdiTOPÇU, Prof. Dr. Cemal ŞANLI and Mr. Mehmet BÜYÜKEKŞİ. The CorporateGovernance Committee, which audits the implications regarding the corporategovernance principles, is comprised of Mr. Muzaffer AKPINAR and Mr. OrhanBİRDAL.26. Remuneration Paid to Board MembersBoard Member remuneration is set by the General Assembly. Board Membersmay not obtain any loan or debt from the Company.35MANAGEMENT SYSTEM

“We believe that thestrength we need to bebetter and more successfulexists within us.“

OperationsTotal Traffic Results 38Fleet 44ActivitiesHuman Resources 48Cargo 54Production Planning 58Marketing and Sales 60Information Technologies 62Business Development 66Subsidiaries and Joint VenturesAnadoluJet 72Turkish DO&CO 74Turkish Technic Inc. 76TGS (Turkish Ground Service) 80

Total Traffic ResultsAs the effects of the financial crisis onthe airline industry peaked in 2009 andtraffic volumes dropped, low-cost airlinecompanies made significant marketinroads by lowering fares and expandingtheir price-sensitive customer portfolios.In an effort to lower operational costsand budgets, businesses reduced traveland increased their use of alternativetechnologies, such as videoconferencingand teleconferencing, reflecting a need tospend cautiously in the face of economiccrisis.While the Association of EuropeanAirlines lost passengers at a rate of5.8% and global commerce shrankdramatically in 2009, Turkish Airlinesgrew by 11.1%, carrying 25.1 millionpassengers.38ANNUAL REPORT 2009

Europe’s fastest growingairlineP A S S E N G E RG R O W T H1 1 . 1 %Turkish Airlines, with its young fleet, top qualitycatering, friendly personnel and high security andsafety standards, continued its rapid ascent in 2009as the top preference by passengers. In 2009, TurkishAirlines was the fastest growing airline company inEurope, growing 11.1% and carrying 25.1 millionpassengers, while the Association of EuropeanAirlines saw average passenger numbers fall by 5.8%and global commerce shrank dramatically. Operatinga fleet of 132 aircraft, Turkish Airlines has displayedits business success through its network, charter andHadj-Umrah operations.Total Passengers Carried (000)Total Passenger Breakdown14,13416,94719,63622,59725,102Hadj-Umrah Charter1.3% 1.2%Domestic 46.4% 51.2%International2005 2006 2007 2008 2009Past 5-Year Performance in Figures2005 2006 2007 2008 2009Number of flights 127,137 152,536 168,899 189,328 213,953Kms flown (000) 168,902 207,202 232,147 262,124 311,869Available seat kms (million) 29,805 36,934 41,619 46,343 56,574Revenue passenger - kms (million) 21,317 25,383 30,251 34,265 40,130Load factor (%) 71.5 68.7 72.7 73.9 70.9Available ton - kms (million) 3,986 4,874 5,535 6,147 7,795Revenue ton - kms (million) 2,590 3,019 3,549 3,993 4,784Overall load factor (%) 65.0 61.9 64.1 65.0 61.4Revenue passengers (000) 14,134 16,947 19,636 22,597 25,102Cargo (tons) 140,559 155,863 177,508 191,934 230,709Mail (tons) 4,415 4,010 6,714 6,956 7,351Excess Baggage (tons) 3,714 3,673 3,462 3,752 3,734Personnel (year - end total) 11,121 10,324 10,453 11,520 12,75039ANNUAL REPORT 2009

D O M E S T I CG R O W T H5 . 7 %Number of DomesticPassengers (000)7,1978,9069,98411,06311,692Turkish Airlines continued to increase the number of itsdomestic destinations and flight frequencies in 2009, postinga 5.7% increase in the number of domestic passengers. 11.7million domestic passengers, which account for 46.6% of ourtotal passengers, experienced the pleasure of comfortable,convenient and economical flights on Turkish Airlines to 37destinations throughout the country. In addition to expandingits domestic flight operations, Turkish Airlines has made asignificant impact by establishing the AnadoluJet brand, andis rapidly improving and growing.2005 2006 2007 2008 2009Domestic Flights2005 2006 2007 2008 2009Number of flights 65,448 78,910 87,162 92,593 97,697Kms flown (000) 36,049 45,282 51,016 53,372 56,313Available seat kms (million) 5,457 7,123 8,117 8,488 9,038Revenue passenger - kms (million) 4,016 5,213 5,924 6,417 6,819Load factor (%) 73.6 73.2 73.0 75.6 75.4Available ton - kms (million) 647 806 946 1,000 1,047Revenue ton - kms (million) 394 504 570 615 652Overall load factor (%) 60.9 62.5 60.3 61.5 62.3Revenue passengers (000) 7,197 8,906 9,984 11,063 11,692Cargo (tons) 29,233 32,085 35,518 34,305 33,037Mail (tons) 1,088 1,295 3,555 3,427 3,549Excess Baggage (tons) 1,490 1,460 1,538 1,589 1,45040ANNUAL REPORT 2009

I N T E R N A T I O N A LG R O W T H1 6 . 3 %Number of InternationalPassengers (000)6,9378,0419,65211,53413,410In 2009, the number of international passengers flying withTurkish Airlines rose by 16.3%, confirming its status as a globalairline that commands a comprehensive flight network and strongschedule structure. Transporting 13.4 million passengers to119 destinations in 5 continents, Turkish Airlines has proven itsability to succeed, even during the crises in 2009. Internationalpassengers account for 53.4% of the total passengers carried byTurkish Airlines.2005 2006 2007 2008 2009International Flights2005 2006 2007 2008 2009Number of flights 61,689 73,626 81,737 96,735 116,256Kms flown (000) 132,852 161,920 181,131 208,752 255,556Available seat kms (million) 24,348 29,811 33,502 37,855 47,536Revenue passenger - kms (million) 17,301 20,170 24,327 27,848 33,311Load factor (%) 71.1 67.7 72.6 73.6 70.1Available ton - kms (million) 3,339 4,068 4,589 5,147 6,748Revenue ton - kms (million) 2,196 2,515 2,979 3,378 4,132Overall load factor (%) 65.8 61.8 64.9 65.6 61.2Revenue passengers (000) 6,937 8,041 9,652 11,534 13,410Cargo (tons) 111,326 123,777 141,990 157,629 197,672Mail (tons) 3,327 2,715 3,159 3,529 3,802Excess Baggage (tons) 2,224 2,213 1,924 2,163 2,28441ANNUAL REPORT 2009

PGAA S S E N G E RR O WF R IT H I NC A4 9 . 1 %While other airline companies reduced theircapacity in response to the economic downturnin 2009, the effects of which were more severethan the 1980-82 recession, the 1991 Gulf Warand the September 11 World Trade Centerattacks, Turkish Airlines took bold steps, addingnew destinations and expanding its capacity.Across all regions, lead by Africa and NorthAmerica, the increase in capacity has been metby passenger demand with noteworthy success.As industrial production and global trading wentinto deep decline in 2009 and the EuropeanAirlines Association endured an unprecedented16.5% drop in air cargo traffic, Turkish Airlinesposted the largest increase of all airlines, with19.6% growth in cargo figures.Passenger Breakdown by RegionN. America S. AmericaAfrica2.4% 0.3%Far East 6.4%Middle East11.5%15.0%64.4%EuropeChange in available Change in revenue Change in number Change in cargo +seat kms (%) passenger kms (%) of passengers (%) mail (tons) (%)MIDDLE EAST 35.3 24.4 26.3 27.2EUROPE 18.5 13.4 13.2 10.2FAR EAST 28.3 22.3 22.9 51.9N. AMERICA 39.0 37.6 36.3 14.6AFRICA 58.1 49.8 49.1 64.1S. AMERICA - - - -42ANNUAL REPORT 2009

FleetTurkish Airlines, aiming to offer the highestquality service and maximum passenger comfort,boasts a fleet that is younger than the sectoraverage. Turkish Airlines continued to expandits fleet under its “2009-2023 Fleet Projection”project, and has expanded its fleet 103% overthe past five years, reaching a fleet size of 132at the end of 2009. In the commercial aircraftmarket, in which new generation models withthe latest technological equipment compete witheach other, Turkish Airlines continued to pursuea purchasing strategy of ongoing expansion withever younger aircraft. While at the beginning of2009 the average age of our fleet of 127 aircraftwas 6.27 years, by the end of 2009 the fleet sizeincreased to 132 aircraft and the average age fellto 6.19 years.Fleet as of year-end 2009 Number Fleet Age Total CapacityAircraft Type(Seat)A340 9 13.15 2,451A330 7 3.57 1,812A320 22 2.99 3,512A321 21 3.80 3,985A319 4 3.87 528B737-800 51 6.44 8,487B737-700 6 3.01 894B737-400 4 17.57 632B777 4 2.39 1,248Cargo AircraftA310-304 4 21.53 -Total 132 6.19 23,54944ANNUAL REPORT 2009

Young, comfortable,technological fleetTotal Seat Capacity2009200823,54922,23820072006200514,41917,59417,931Turkish CargoAnadoluJet3%7%90%Turkish AirlinesAlongside the revised fleet plans at the end of2008, orders announced in October 2008 for 105aircraft, 75 of which are final and 30 of which areoptional, remained active. Orders were placed for10 A330-300 and 12 B777-300ER type aircraft, withdelivery planned between 2010 and 2012. While workcontinuing on the procurement of narrow fuselageaircraft, with the order of a 22-wide fuselage aircraft,two A330-200F type cargo aircraft orders wereplaced and scheduled for delivery in 2010 and 2011.In order to meet periodic demand and fleet renewalneeds, the chartering of aircraft has served as aninterim solution, provided that neither the integrityof the aircraft family nor the average fleet aged iscompromised.45ANNUAL REPORT 2009

Number of aircraft 9Fleet Age 13.15Total Seat Capacity 2,451Hours Flown 40,815Kms Flown 29,182,860Utilization 12:35Maximum Range11,952 km.Maximum Cargo Capacity 44,836 kg / 152.80 m 3A340Number of aircraft 7Fleet Age 3.57Total Seat Capacity 1,812Hours Flown 32,000Kms Flown 23,396,097Utilization 14:07Maximum Range12,000 km.Maximum Cargo Capacity 37,578 kg / 105.95 m 3A330Number of aircraft 21Fleet Age 3.8Total Seat Capacity 3,985Hours Flown 86,393Kms Flown 49,357,399Utilization 11:54Maximum Range3,350 km.Maximum Cargo Capacity 9,435 kg / 37.42 m 3A321Number of aircraft 22Fleet Age 2.99Total Seat Capacity 3,512Hours Flown 91,759Kms Flown 48,871,086Utilization 11:27Maximum Range3,350 km.Maximum Cargo Capacity 9,435 kg / 37.42 m 3A320Number of aircraft 4Fleet Age 3.87Total Seat Capacity 528Hours Flown 15,758Kms Flown 7,394,269Utilization 10:48Maximum Range3,350 km.Maximum Cargo Capacity 6,786 kg / 27.62 m 3A31946ANNUAL REPORT 2009

Number of aircraft 51Fleet Age 6.44Total Seat Capacity 8,487Hours Flown 223,245Kms Flown 387,529,942Utilization 12:00Maximum Range4,755 km.Maximum Cargo Capacity 8,408 kg / 45.05 m 3B737-800Number of aircraft 6Fleet Age 3.01Total Seat Capacity 894Hours Flown 12,396Kms Flown 5,357,595Utilization 10:04Maximum Range5,940 km.Maximum Cargo Capacity 5,178 kg / 27.3 m 3B737-700Number of aircraft 4Fleet Age 17.57Total Seat Capacity 632Hours Flown 11,991Kms Flown 6,067,983Utilization 08:38Maximum Range3,350 km.Maximum Cargo Capacity 7,491 kg / 39.22 m 3B737-400Number of aircraft 4Fleet Age 2.39Total Seat Capacity 1,248Hours Flown 15,132Kms Flown 11,320,655Utilization 13:25Maximum Range14,685 km.Maximum Cargo Capacity 57,784 kg / 201.6 m 3B777-300ERNumber of aircraft 4Fleet Age 21.53Total Seat CapacityHours Flown 8,782Kms Flown 5,374,406Utilization 06:19Maximum Range8,980 km.Maximum Cargo Capacity 36,000 kg / 200 m 3A310Cargo47ANNUAL REPORT 2009

Turkish Airlines; the successof employeesThe corporate vision and values that Turkish Airlines shares withits employees have played major roles in the company’s successfulemergence from the global economic crisis and competitiveenvironment of 2009.Turkish Airlines’ human resources development strategy and its investments in in-house training and personnelmotivation lie at the foundation of the success of the company, which maintained its competitive edge and leadingposition in 2009. In tandem with the company’s accelerating growth, in 2009 the number of employees alsoincreased by 10.7%, reaching 12,750. In order to strengthen team spirit among employees and ensure continuingtrust and harmony, a “Personnel Relations Office” was established, through which employees communicate theirneeds and expectations. Private health insurance has been provided to employees and their families, and measuresto guard against global epidemics were implemented meticulously. Health scans and disinfection operations wereconducted regularly, along with ongoing training activities for the prevention of on-the-job accidents.Turkish Airlines, which has embraced the principle of service focusedon customer satisfaction, seeks to balance employee satisfactionand corporate benefits, and has developed an approach to humanresources that is predicated on work experience.Effective employment and enterprise resource planningThe “Turkish Airlines Human Resources Management System” software has been implemented in order to meet thegrowing need to shorten and facilitate follow-up on employment processes. As a first step, the flight attendant employmentprocess was restructured, allowing selections to be finalized in two days, and nearly 50,000 applications received in 2009were processed in a faster and more reliable manner.The rising need for experienced pilots due to fleet expansion has necessitated the employment of foreign pilots, which hasbeen done with the cooperation of international companies specializing in the field. The human resources infrastructurefor the Enterprise Resource Planning (ERP) project to be initiated in 2010 was completed.In line with its customer satisfaction-oriented service philosophy, Turkish Airlines hired more people with knowledgeof local languages such as Korean, Japanese and Chinese. The adaptation process for newly-employed personnel wascarried out through corporate culture training.P E R S O N N E LG R O W T H1 0 . 7 %49ACTIVITIES

Personnel Breakdown by Work StatusPersonnel Breakdown by Title10,3243.2%96.8%10,4531.0%99.0%11,5203.5%96.5%2006 2007 2008FULL TIME PART TIMEDoes not include Turkish Technic Inc.12,7504.6%200995%Number of PersonnelManager 692Pilot 1,622Cabin Crew 3,925I.T. Personnel 195Foreign Office 1,403Engineer, Lawyer, Doctor 136Expert, Dispatch, Trainer 771Technician 73Officer 3,319Worker 614TOTAL 12,75050ANNUAL REPORT 2009

Personnel Breakdown by GenderPersonnel Breakdown by Unit10,32450.5%10,45351.2%11,52051.8%12,75051.6%Number ofPersonnelDepartments Affiliated with The Board of Directors 4Departments Directly Affiliated with General Manager 3,087Deputy General Management (Human Resources) 347Deputy General Management (Financial) 416Deputy General Management (Commercial) 2,966Deputy General Management (Flight Operations) 5,93049.5%48.8%48.2%48.4%TOTAL 12,7502006200720082009FEMALEMALEDoes not include Turkish Technic Inc.51ACTIVITIES

F light TrainingNew investments have expanded the Turkish Airlines Flight TrainingCenter into a facility providing professional services to customers bothwithin Turkey and abroad.52ANNUAL REPORT 2009

Flight Training Center isgrowingIOSA and all other similar planned and non-planned audits in 2009were passed with zero incidents of nonconformity.The Turkish Airlines Flight Training Center, which providesflight training for cockpit and cabin personnel, renewedits technical equipment with up-to-date technologiesand improved its infrastructure to keep up with TurkishAirlines’ growth rate.Having started out with one simulator in 1995, the TurkishAirlines Flight Training Center has since transformed intoa facility that now offers 8 training aircraft, 4 simulators, 1CEET, 1 FNPT II, 2 CST, 4 CBT classes and 24 classrooms.In 2009, the Flight Training Center placed orders for 2 newsimulators, and plans to remain abreast and integratedwith the market by exchanging training sessions with 14simulators and traffic centers abroad.People-oriented investment in the servicesectorWhile other airline companies have postponed investmentsin operational and training services in the wake of theglobal crisis, Turkish Airlines kept its cockpit and cabintraining standards up to speed with the rapid growth of itsfleet, purchased new simulators and training aircrafts, andincreased the training times for its cockpit and cabin crew.Training sessions are provided across 22 differentcategories, including with first-aid and defibrillator training.Nearly four thousand cockpit crew completed theirconversion, type and recurrent trainings. The adaptationprocess for foreign pilots joining Turkish Airlines for theB777 fleet was supported by corporate culture training.The Flight Training Academy operating within the FlightTraining Center increased its capacity 330% and approachedthe capacity to meet pilot rotations. An increase of 200%with six fleets in total is predicted for 2010.Training was provided for 24 different companies operatingin Asia, the Caucasus, the Middle East, North Africa andEurope. Academic cooperation was initiated with reputableacademic institutions such as Istanbul Technical University,Culture University and Anatolia University with objective ofdeveloping models for increasing productivity and quality.The Turkish Airlines Flight Training Center, which isIQNet-approved and has met quality standards such asTSE 9001, 18001 and 14001, is an authorized TRTO andFTO by the SHGM, an authorized First Aid Center throughthe Ministry of Health and an authorized EducationalInstitution through the Ministry of National Education.53ACTIVITIES

Cargo54ANNUAL REPORT 2009

Speed and quality inair cargo serviceIn 2009, Turkish Airlines Cargo increased its cargo volume by 19.7%,achieving a 57% share of the Turkish air cargo market.In order to mitigate the impact of the ongoing globaleconomic crisis in 2009, Turkish Airlines Cargo, aiming toenhance its presence in regions with growing economies,improved its effectiveness in the transit market by makingits passenger and cargo flight schedules compatible.Having established a flexible schedule structure thatchanges according to cargo potential, maximum utilizationis ensured by enjoining destinations with low cargopotential. A flexible product policy allows for changesaccording to market demand. These measures allowedTurkish Airlines Cargo to increase the amount of cargoit carried by 19.7% and claim a 57% share of the Turkishair cargo market. Turkish Airlines Cargo posted thehighest growth rate among member airlines of the AEA(Association of European Airlines), with a 32% growth inits scheduled cargo traffic.Turkish Airlines transported approximately 238,000 tonsof cargo across the world, generating revenues of $304million. A total of 179,000 and 59,000 tons of cargo wascarried in the cargo compartments of passenger airplanesand cargo airplanes, respectively.Four A310-200 cargo airplanes, each with a 38-ton capacity,make scheduled cargo flights to a total of 22 destinations,including five flights per week to Maastricht and Frankfurt,three flights to Tel Aviv, Milan, Zurich and Paris, 2 flightsto Almaty, New Delhi, Tbilisi, Damascus, Amman, Madrid,Beirut, Cairo and Cologne, and one flight to London, Dubai,Algeria, Casablanca, Pristine, Tiran and Tripoli.Destination countries with the most intensive cargo trafficwere Germany, England, France and the Netherlands inEurope, and Thailand, Japan, China and India in the FarEast. Routes with the greatest amount of cargo volumetransported were (in order) Frankfurt, Maastricht, Delhi,Tel-Aviv and London.Membership to the Quality Management GroupTurkish Airlines Cargo, offering high quality, fast and safeservice in the intensively competitive cargo market, andbeing committed to continuous service quality standardsand customer satisfaction, joined “Cargo 2000 QualityManagement Group” on January 1, 2009 as a corporatemember. Membership in this group, which consists of nearly50 airlines, numerous forwarder companies, handlingorganizations and information technology providers, bringsaccess to a powerful system where all cargo movementsare traceable at every stage. The marketing strengthderived from being a member of a IATA-registered brandand the commitment to the international standard thatthe organization sets down have given a boost to TurkishAirlines’ effectiveness in the market.Electronic supply chain: e-freightIn cooperation with the IATA, Turkish Airlines Cargoguides and supports customs and local agencies, and itis continuing its efforts to bring the e-freight application,which is designed to establish an electronic, faster and lesscostly cargo supply chain and end the use of documentsin the air cargo sector, into full operation in the shortestpossible time.Cargo and Mail Development (Tons)C A R G OG R O W TH144,974159,873184,222198,890238,0601 9 . 7 %2005 2006 2007 2008 200955ACTIVITIES

Cargo Traffic2008 2009 09/08(%change)Number of flights 189,328 213,953 13.0Passenger flights 186,733 210,990 13.0Cargo flights 2,595 2,963 14.2Cargo+Mail (tons) 198,890 238,060 19.7Passenger flights (tons) 144,154 178,511 23.8Cargo flights (tons) 54,736 59,549 8.8Cargo+Mail revenue (000 USD) 323,952 304,279 -6.1Passenger flights (000 USD) 232,213 229,954 -1.0Cargo flights (000 USD) 91,739 74,325 -19.056ANNUAL REPORT 2009

Breakdown of Regional Cargo TrafficBreakdown of Regional Cargo RevenueN. America S. AmericaAfricaFar EastMiddle EastFar East%265.1%14.5%4.5%26.1%0.9%48.9%EuropeMiddle EastAfrica33%10%7% 6%America44%Europe57ACTIVITIES

Production PlanningPlanned increases in frequency on existing routes have made theprospect of flying with Turkish Airlines even more attractive.58ANNUAL REPORT 2009

Innovation, developmentand growthF L I G H TD E S T I N A T I O N S1 5 613 new destinations have been added to the flight network, bringingthe total number of destinations to 156 including 37 domestic and 119international destinations.As it continues to position itself in the competitive globalaviation industry as one of the world’s leading brands,Turkish Airlines has engaged in a series of innovations anddevelopments in its production planning activities in 2009.The introduction to its fleet of B777-type aircraft, onwhich Turkish Airlines offers first-class services, andthe addition of Sao Paulo - the first destination in SouthAmerica - further improved product diversity and customersatisfaction. In addition to scheduled flight operationsfrom Antalya to Paris, Düsseldorf and Stockholm, flightsfrom Eskişehir to Brussels were launched. Due to everrisingpassenger traffic at Atatürk International Airport,Istanbul’s rapidly growing Sabiha Gökcen Airport hasbeen increasingly used with the addition of alternativeinternational flight frequencies to Amsterdam, London(Stansted), Stuttgart, Cologne, Moscow, Hannover andBerlin (Schönefeld).Turkish Airlines in Haj, Umrah, charter andprivate rental flightsIn 2009, 321,000 passengers traveled on Haj and Umrahflights, generating revenues of approximately $98.5million. Supplementary flights generated revenues of$19.5 million, of which 44% was from domestic flightsand 56% was from international flights. Charter flights,which carried 629,000 passengers, brought in revenues ofapproximately $161.5 million.An expanding flight network and newdestinationsIn 2009, Turkish Airlines started flying to 13 newdestinations, 10 international and 3 domestic.New DestinationsUtilization10,2110,4411,1311,4011,39Nairobi (NBO) - Kenya February 20, 2009Ufa (UFA) – Russia March 4, 2009Mashad (MHD) - Iran March 15, 2009Dakar (DKR) - Senegal April 5, 2009Sao Paulo (GRU) - Brazil April 5, 2009Benghazi (BEN) - Libya May 5, 2009Gothenburg (GOT) – Sweden June 29, 2009Toronto (YYZ) – Canada July 11 2009Lviv (LWO) – Ukraine July 27, 2009Jakarta (CGK) – Indonesia September 4, 2009Uşak (USQ) January 12, 2009Çanakkale (CKZ) January 19, 2009Isparta (ISE) October 28, 20092005 2006 2007 2008 200959ACTIVITIES

Marketing and SalesTurkish Airlines has increased the capacity of its flight network through theaddition of new destinations and increased frequencies.60ANNUAL REPORT 2009Despite the global economic crises, Turkish Airlinesincreased its number of destinations around theworld to 156 airports, including 3 new domestic and 10new international flights in 2009, taking bold steps toconsolidate its global position in the airline industry.Turkish Airlines has successfully competed with theworld’s leading airline companies in their own regionsand increased capacity through the addition of newdestinations and frequencies to its existing flight network.Through pricing policies that dovetail with target marketsand passenger profiles, Turkish Airlines ensured that itsincreasing capacity met with the corresponding demand.Flying is now easier with mobil.thy.comImprovements made to the www.thy.com internet portalreflect improving information technologies and changingcustomer needs and have provided time saving andconvenience. Sales over the Internet increased 2% overthe previous year. As part of its effort to diversity saleschannels, Turkish Airlines launched the mobil.thy.comapplication, allowing passengers to perform each stage ofthe ticketing process via mobile phone.Codeshare agreements were entered into with EthiopiaAirlines, Etihad Airlines, Malaysian Airlines, AsianaAirlines, Singapore Airlines, Bosnia – Herzegovina Airlinesand Air Maroc, strengthening network structure andattracting new customers. These agreements providedalternative access to markets in Africa, the Middle East,the Far East, and the Balkans.

Multi-faceted serviceIn recognition of its commitment to high quality services and a customerorientedphilosophy, Turkish Airlines was the sole European airline toreceive four stars in all categories.Turkish Airlines views flight safety and service qualityas two indispensible factors, and it has made efforts toimprove check-in and boarding processes through theimplementation of advanced technology that improve ontimetakeoff performance. Despite its expanding networkstructure and increasing number of passengers, TurkishAirlines has maintained a consistent level of successin luggage delivery services. It has received Airbus’“Operational Excellence Award,” which evaluates airlinecompanies based on criteria that consider the numberof aircraft in the fleets, the daily utilization rates of theaircraft, technical trustworthiness and minimization ofdelays for operational reasons over the past two years.Turkish Airlines was selected as the best in the regionby Skytrax, which evaluates airlines and airports using750 parameters that cover services rendered and qualitystandards, and it has awarded the title of “The Best AirlineCompany in South Europe”. With its high quality servicesand customer-oriented philosophy, Turkish Airlines wasthe sole airline to receive four stars in all categories.An active player in global competitionIn 2009, Turkish Airlines became a major player in worldaviation. The number of passengers choosing the pleasureof flying with Turkish Airlines in the international marketincreased by 16% to 13.4 million. Despite the overallcontraction in the aviation industry due to the impact ofthe global economic crises, Turkish Airlines increased itscapacity by 22% and its load factor rose to 71%. TurkishAirlines continued to pursue a strategy of flight networkexpansion and achieved a 15% increase in sales revenues,which reached 7 billion TL.8.3 million passengers flew to Europe, the most commondestination. With the addition of Göteburg, Lviv and Ufa tothe flight network, the total number of passengers flyingto Europe increased by 13% and the region brought inrevenues of 2.6 billion TL.Continued growth in the Middle East, Far Eastand AfricaIn terms of passenger traffic, the Middle East grew fasterthan any other region in 2009. In particular, the marketsconnecting the Middle East with the Far East, Europe andAfrica have led the way in bringing about a 43% increase inthe number of international passengers. Compared to theprevious year, the capacity serving the region grew 35.3%and the number of passengers rose 26.3%, resulting ina 22% increase in revenues to 858 million TL. With theaddition of Meshed - Turkish Airlines’ third destinationin Iran - to the flight network in 2009, the number ofdestinations in the Middle East grew to 19.The Far East is another region that has seen high growthrates, which Turkish Airlines has responded to withincreased capacity, particularly on flights to Bombay, Delhiand Hong-Kong. A 28.3% increase in capacity was matchedwith a 23% increase in the number of passengers. Withthe addition of Jakarta, a magnet for faith-based tourismand high in commercial potential, to the flight network,the total number of destinations in the region rose to 18.Turkish Airlines experienced the highest level of growthin Africa, where the number of passengers increased by49%. The market abounds with opportunities, and flightswere launched to Nairobi, Bingazi and Daccar, increasingcapacity by 58% and bringing the total number of flightdestinations to 13. These new destinations led to a 49%increase in the number of passengers over the prior year,as well as a 49% increase in revenues.Turkish Airlines added Toronto as its third destination inNorth America, where it experienced a 36.3% rise in thenumber of passengers and increased capacity by 39%.Flights to Sao Paulo, Turkish Airlines’ latest and onlydestination in South America, successfully achieved anaverage load factor of 60%.61ACTIVITIES

Information Technology62ANNUAL REPORT 2009

Effective information technology deliveringinnovation and competitive strengthCutting-edge and performance-enhancing information technologysolutions have been implemented in response to increasing businessprocess needs.The size of the global airline information technology marketis €7.8 billion annually. America and the EMEA (Europe,the Middle East and Africa) have the largest share of themarket, with €2.8 billion each. These are followed by theAsia-Pacific, with a market size of €2.2 billion.Outsourced contracting services account for 40% of thevolume in the airline information technology market. Thesector is showing a growing trend in which a portion ofthe information technology services are obtained throughservice providers, and such outsourced services areexpected to continue to increase.In line with global trends, Turkish Airlines outsourcessome information technology services when necessary forcost savings and efficiency. Turkish Airlines determines itsoutsourcing strategy in order to control externally-sourcedinformation technology sources within the company.In the wake of the global economic crisis, cost reductionmeasures have taken priority in the airline industry, andthus applications and technology that would result in costsavings get more attention. Competition in the industry,meanwhile, has put rising pressure on the need to increaserevenue and customer satisfaction. As such, investmentsin information technology are needed now more than ever,and despite the overall contraction of the airline industryin general, the market for airline information technologycontinues to grow.SITA (Specialists in Air Transport Communications and ITSolutions) foresees that as a result of the economic crisis,the priority investment areas for information technology inthe airline industry will center on applications that wouldreduce costs, followed by applications that would increaserevenues.Priority Areas of Investment in Information Technology forThe Airline SectorAirline Information TechonologyMarkets (billion EUR)Percentage of companies, based on priority assessment of investment purpose.(Source: SITA Airline IT Trends Survey, 2009)Cost -reducingDelivery of new products and services andrevenue - increasingMost preferredLeast preferred57% 26% 12% 3%43% 31% 20% 3%Improvement in Customer Services 42% 40% 15% 1%Increase in Personnel Efficiency 34% 44% 21% 1%Sector Rules and Regulations 32% 34% 28% 3%Information Technology Compatibility 14% 32% 41% 13%0% 20% 40% 60% 80% 100%3.002.502.001.501.000.500.002.80 2.80 2.20AmericaEMEA(Europe-Middle East-Africa)Asia-Pacific63ACTIVITIES

Full support for business processes and functionality with the very bestIT solutionsThe airline industry features complex business processes,and therefore high performance information technologysolutions are required to maintain a competitive edge andachieve sustainable growth targets. In this respect, ongoingwork is underway to maximize the efficiency of TurkishAirlines’ business processes, design decision-makingprocesses that function in the fastest and the most effectivemanner, and support the implementation of solutions anddecisions that most effectively contribute to Turkish Airlines’pursuit of competitive strength and sustainable growth.The Information Technology Department is responsiblefor determining areas of corporate development in linewith strategic targets, defining the scope of projects, andcoordinating project management and business processowners in the resulting restructuring processes. As such,it has launched several customer satisfaction-orientedprojects in 2009 aimed at cost reduction and revenueincrease, reflecting the growing sensitivity of the aviationindustry to the impact of the global economic crisis.Among these projects, the ERP (Enterprise ResourcePlanning) project, a broad-based project with major goals,was one of the most important developments of 2009. Theinstallation and development stages of the ERP project, tobegin in 2010, will be outsourced within the framework ofan agreement made with SAP Turkey.64ANNUAL REPORT 2009

Additionally, there have been important developmentsin 2009 on the O&D (Origin and Destination) and MRO(Maintenance, Repair and Options) projects. Alongsidethese main projects, further projects are being prepared tomeet the company’s needs and technological requirements,and these are scheduled for completion in 2010.As Turkish Airlines continues its investment planning, newdevelopments and trends in technology and in the airlineindustry are closely tracked in order to ensure that wellalignedstrategies are formed.65ACTIVITIES

Your office in the skyCall center costs fell by 46%, and the call completion rate increased to95%.With its new user-friendly design, the Turkish Airlines website - available in 24 languages through 40 local sites -increased turnover by 37% over the prior year, with anincrease of 73% in the number of tickets sold.Passengers are now able to use the “3D Secure” paymentoption for hotel reservation services and online shopping.The numbers of visitors to Turkish Airlines’ websiteincreased by 73%, and the management of the customersupport line is now being conducted over a more effectiveand measurable integrated management system.Fast and accessible service: mobil.thy.commobil.thy.com gives passengers the ability to inquire intoschedules, make reservations, purchase mobile tickets fordomestic flights, and perform check-in, luggage, cargo,bonus ticket and Miles&Smiles operations via their mobilephones.In the process of selecting the digital marketing agent,the originality of the competition pitch created by TurkishAirlines made a large worldwide impact, earning therecognition of the world’s leading digital media companies,including Fast Company, Adverblog, and Brand Republic.Turkish Airlines, which is featured in social networks suchas Twitter, Friendfeed, Slideshare, Facebook, and Flickr,has taken important steps in reinforcing its interactionwith customers.A point of contact for service and solutions:Turkish Airlines Call CenterAs of February 2, 2009, outsourced services have beenprovided by Assistt Rehberlik ve Müşteri Hizmetleri A.Ş.and Vodatech Bilişim Proje Danışmanlık Sanayi ve DışTicaret Ltd. Şti., and the Turkish Airlines Call Center hasnow reached activation speed for the resource increaserequired for service from three different locations.In February, the reservation system switched its softwareapplication to Quickres. In doing so, graphical interfacingimproved, efficiencies increased and personnel trainingprocesses became shorter.A Miles upgrade service was added to the Miles ticket salesservice offered through the Call Center. The Call Center,which responds to international calls from the UnitedStates, England, Germany, France, Moscow, Switzerland,the Netherlands and Italy, now also responds to calls fromDenmark, Austria and Cyprus.Call Center costs fell by 46%, while the call completionrate increased to 95%. Both the number of calls answeredand minutes generated increased by 4%, and the numberof tickets sold rose by 9%. The Call Center generated1.78% of Turkish Airlines’ total ticket sales and accountedfor 4.48% of the total number of tickets sold.67ACTIVITIES

“New applications andagreements enhancedthe Miles&Smiles SpecialPassenger Program, whichnow boasts 50 partners and1.8 million members.“Turkish Airlines, a member of the Star Alliance, successfully passed allof its audits in 2009 and now aims to achieve Pollux status, the highestmembership level.Turkish Airlines’ membership in the Star Alliance hasbeen an important stepping stone in the company’s goal ofbecoming a worldwide brand. The “Post-integration audit,”which assesses integration with the minimum conditionsfollowing entry into the Star Alliance, and the “Self-Verification” audit, in which members audit themselvesonline, were both successfully concluded.The Pollux, Castor and Wasat packages, which are the threenew membership status levels offered by the Star Alliancein 2010, were evaluated, and the decision was made toadvance to “Pollux” status, the highest level. Accordingly,the required work on the “Star Alliance Main Agreement 4 thAmendment” was initiated.Turkish Airlines offered its passengers the ability touse Miles&Smiles privileges through Special PassengerProgram agreements it has entered into with leadingorganizations in a number of fields, first and foremost thetourism sector.The diversity of services that Turkish Airlines offers itspassengers was enriched through mutual FFP partnershipagreements with new Star Alliance members ContinentalAirlines and Brussels Airlines, and with a Special PassengerProgram partnership agreement with Jet Airways.Ongoing promotions offered by Turkish Airlines throughoutthe year have served both to increase member satisfactionas well as maintain a lively and active program.68ANNUAL REPORT 2009

Parade of the starsNon-stop convenience with Miles&SmilesTurkish Airlines changed its method of distributingMiles&Smiles cards, and now sends out membership cardsfollowing the first flight taken with either Turkish Airlinesor a Star Alliance member airline. In May, a Miles&Smilesdesk was set up in the international flights terminal ofAtatürk Airport in order to provide instant membershipcard services, and members were given the option ofperforming Miles&Smiles operations via mobil.thy.com.A new service also now transmits any missing flightinformation entered into the system to members’ emailaddresses via an automatic information message.Domestic travel agencies are now able to processMiles&Smiles domestic award tickets, and a condition wasintroduced to accompanying ticket awards that requiresaccompanying passengers to travel together with theMiles&Smiles member on the outbound portion of theirvoyage.The “Last Minute Upgrade” feature offered to Elite andElite Plus card holders under the Miles&Smiles SpecialPassenger Program has now also been made available toClassic and Classic Plus card holders.69ACTIVITIES

The Star Alliance offers passengers comprehensiveand safe air transport with approximately 20,000 dailydepartures to more than 1,000 destinations in 171countries and 954 CIP lounges.Alliance membership discussions are underway with theAfrican flag-carrier Ethiopian Airlines, the Chinese flagcarrierChina Eastern airlines and the Latin Americanflag-carriers TACA, COPA and Avianca.In 2009, Continental Airlines and Brussels Airlines joinedthe Star Alliance, while Air India, Aegean Airlines and TAMcontinued their integration process.70ANNUAL REPORT 2009

Synergy: the source ofcompetitive powerAvailable Seat - KmsOneworldRevenue Passenger - KmsOneworld15.4% 15.6%Sky Team16.1%42.5%OthersSky Team16.6%41.6%Others26.0%26.3%Star AllianceStar AllianceThe Star Alliance is bringing new products to market inorder to facilitate its passengers’ travel options. Theseproducts are divided into two general categories - personaland corporate.Individual Products:• Round the World Fares• 2 Circle Fares• 9 AirpassesCorporate Products:• Corporate Plus• Meeting Plus• Convention PlusMore than 3,000 customers per month reach Turkish Airlines’ website viathe Star Alliance website, bringing them the benefits of Turkish Airlines’online opportunities.Starting in 2009, the Star Alliance has given passengers the option of purchasing member airline tickets through its ownwebsite (www.staralliance.com), under the slogan “Book and Fly.”Monthly Traffic Routed to Member Websites from The Star Alliance Website6,2521,4492,5829,2856591,0513582691,5385,8273,5491,7933,3944382,5101,6873,8861,5916,4326,9103,0631,79811,7654,69917,638AC BC CA CO FM JK JP KF LH LX MS NH NZ OS OU OZ SA SK SN SQ TG TK TP UA US71ACTIVITIES

72ANNUAL REPORT 2009

Transport to Anatolia at jetspeedTurkish Airlines, which places the utmost importance on quality of serviceand customer satisfaction, has turned AnadoluJet into one of Turkey’smost preferred brands.AnadoluJet connects the four corners of Turkey with flightoperations based out of Ankara, and through its affordableproduct policy and convenient flight schedules has carved outa strong market position, becoming one of Turkish Airlines’preferred brands. AnadoluJet flies to 25 destinations everyday of the week and offers passengers an economic andcomfortable means of travel, featuring complimentary inflightmeal service and an onboard monthly publication, the“AnadoluJet Magazine”.AnadoluJet goes internationalAnadoluJet has succeeded in taking the pleasure of itsservices abroad, adding new international destinations toits flight network in 2010 and continuing to move forward inbecoming an international brand.AnadoluJet completed the year having carried 2.8 millionpassengers on its domestic flights at an 80% load factor, andwith a load factor of 65% on international flights that beganin June, has now joined the global competitive marketplace.AnadoluJet’s promotional activities have played an importantand effective role in increasing brand awareness. Theseactivities include ongoing transportation sponsorship of variousconcerts and arts organizations in Anatolia, particularly inAnkara. It has expanded its sponsorship of the “AnadoluJet inSupport of Anatolian Teams” campaign that supports Anatolianathletic teams. AnadoluJet also participates in national andinternational fairs and other similar events in cooperation withagencies, tour operators, tourism operators and city cultureand tourism offices, creating opportunities to forge face-to-facerelationships with its passengers.Anatolia’s young and dynamic airlineAnadoluJet has the youngest fleet in the skies, with three B737-800s and six B 737–700s, and in 2009 it continued to addnew flight operations to its network and increase frequencies.Scheduled flights from Ankara to Çorlu Airport began inFebruary, from Ankara to Istanbul’s Sabiha Gökçen Airportin June, and from Ankara to Cyprus in October. For the2009-2010 winter schedule, flights were scheduled for eachday of the week from Sabiha Gökçen Airport to Diyarbakır,Elazığ, Erzincan, Erzurum, Konya, Trabzon and Van.In 2009, AnadoluJet’s flight network comprised flightsfrom Ankara to Adana, Adıyaman, Antalya, Batman, Çorlu,Diyarbakır, Elazığ, Erzincan, Erzurum, Gaziantep, Hatay,İstanbul Sabiha Gökçen, İzmir, Kahramanmaraş, Kars,Kıbrıs, Malatya, Mardin, Muş, Samsun, Şanlıurfa, Trabzon,Van and in the summer schedule to Bodrum and Dalaman;and from Istanbul Sabiha Gökçen to Diyarbakır, Elazığ,Erzincan, Erzurum, Konya, Trabzon, Van and in the summerschedule to Bodrum and Dalaman.AnadoluJet simplifies the luxury services of aviation withoutcompromising international standards and flight safety,offering fares that accommodate its customers’ budgets.Among various fare promotions that support its economicpricing policy, AnadoluJet continued its “first 29 seats for59 TL” campaign.The net address for young people: “jetgenc.net”Through its JetGenç project, AnadoluJet gives universitystudents under 24 years old the opportunity to travel at a25% discount.AnadoluJet supported the project with various promotions,and delivered a message to university students that theyshould not wait for life after 25.Promotions are accessible through the www.anadolujet.com and www.jetgenc.net websites, where young peoplein universities can win one free flight for every 10 flights,purchase all tickets using a student member passwordregistered to their accounts and win bonus tickets onAnadoluJet.AnadoluJet periodically organizes aviation events thataim to promote and popularize aviation and create careeropportunities for students.73SUBSIDIARIES

With Turkish DO&CO, customersatisfaction has risen from 49% to 93%.Turkish DO&CO was founded in 2007 as a partnershipbetween Turkish Airlines and the Austrian catering companyDO&CO, and it has since achieved great acclaim with itsdiverse menu catering to a variety of tastes and with thegreat care it gives to the details of service. Turkey’s marketleader with a commanding 70% share, Turkish DO&COoperates from 9 locations (İstanbul - Atatürk ve SabihaGökçen, Ankara, Antalya, İzmir, Bodrum, Trabzon, Dalamanand Adana) and provides catering services for more than 60airlines and nearly 650 daily flights.Turkish DO&CO produces an average of 25 million meals peryear under 1,500 menus, striving to offer the highest qualityproducts and service. Working to bring out the flavors ofthe world’s cuisines, Turkish DO&CO also gives a specialplace on its menus to foods unique to Turkey, such as shishkebabs, karnıyarık (aubergines with meat filling), mantı(Turkish style ravioli), imambayıldı (cold aubergines withvegetable filling), lentil patties, beğendi (aubergine puree)and cheese rolls. The quality of service and the importanceplaced on customer requests have shown up in surveys ofcustomer satisfaction, which has risen to 93% from 49%.Guest satisfaction Questionaire. International Flights: 93%Materials used for offerings 95%Freshness of food 93%Food quality 93%Size of portions 93%Temperature of foods 92%Meeting your taste expectations 92%Appetizing appearence of foods 92%Variety of food 92%74ANNUAL REPORT 2009

The gourmetentertainmentGuest satisfaction Questionaire. Domestic Flights: 92%Materials used for offeringsSize of portionsTemperature of foodsFreshness of foodMeeting your taste expectationsAppetizing appearence of foodsFood qualityVariety of food94%92%91%89%89%88%88%82%Turkish cuisine meets the worldPurchases of catering service abroad were curtailedin certain terminals, after a decision was made to loadmeals in a staged manner for round-trip flights departingfrom Turkey,. This practice boosted worldwide promotionof Turkish cuisine and increased our competitive strengththrough higher in-flight meal service quality and reducedcosts. Turkish Airlines, which never compromises on thequality of its service and the products they contain, hascompleted the in-flight meal loading process for roundtrip departures from Turkey at 101 terminals.With the launch of First Class services on medium rangeand ocean crossing flights, new First Class menus havebeen added to the in-flight meal services.The transfer of materials management to Turkish DO&COas way of improving quality and procurement thoughintegrated catering services has been an important stepin the adoption of a per-passenger cost approach.75SUBSIDIARIES

Turkish Technic Inc.76ANNUAL REPORT 2009

Safe flightsTurkish Technic Inc. aims to carve out a large share of the aviationindustry’s maintenance & repairs market with new projects.Turkish Technic Inc. has achieved prominence through itsexperience and extensive engineering know-how in theincreasingly competitive environment of the maintenance& repairs market. In 2009, Turkish Technic Inc. furtherstrengthened its market position thought a customerorientedoperating philosophy that has been at the core ofits quality policy since the day it was founded.Turkish Technic Inc. commands an 85% share of the $550million Turkish maintenance and repair market, whoseglobal size in 2009 was $44 billion and is expected to reach$65 billion by the 2020s.As of year-end 2009, Turkish Technic Inc. employed a totalof 2,519 personnel, of which 61.3% hold technical licenses,and it continues to invest in its human resources - one ofthe most important contributors to its success and growth.Services provided both domestically and abroadTurkish Technic Inc., which in 2009 carried out nearly 1,800letter checks in its two hangars at Ataturk Airport, generatedbusiness of approximately 1,000,000 A/S through its heavymaintenance activities alone. The engine workshop completed74 engine maintenance works, 38 of which were shop visits and36 were overhauls, and it generated approximately 100,000A/S. The APU workshop performed 42 APUs, the landinggear workshop performed 81 landing gear overhauls, andthe component workshops performed approximately 43,000component overhauls. Turkish Technic Inc. also continued toprovide maintenance services for VIP craft in its Ataturk AirportVIP Hangar. Over 100 maintenance works were provided forforeign customers.Ankara Esenboğa HangarThe construction of the Ankara Esenboğa Hangar wascompleted in August of 2009, and the facility is now ready foroperation in its 7,000 m 2 closed area with a capacity of 3 narrowfuselage craft. The facility plans to handle line maintenanceservices such as A and L for narrow fuselage craft and Clevel heavy maintenance, landing gear replacements, enginereplacements and aircraft painting. One slot of the hangar,which can accommodate 3 narrow fuselage aircraft, is alsoreserved for nightly line maintenance services such as Aand/or L. The same slot is anticipated to handle non-plannedaircraft service, failed aircraft and VIP aircraft. The other 2slots are reserved for C level heavy maintenance services onTurkish Airlines and AnadoluJet aircraft and the aircraft offoreign customers. These slots are also planned to handlelanding gear replacements, engine replacements and aircraftpainting operations.New gainsIn 2009, Turkish Technic Inc. obtained authorization forGulfstream 550 ESB+IST Base Maintenance, Gulfstream IV ESBBase Maintenance and Diamond DA42 NG Base Maintenance.With the addition of the 777-300ER to the Turkish Airlinesfleet, all required works - such as tool and training -were completed, line maintenance and A maintenancecapabilities were put in place and additional work on Cmaintenance capability continued.Under the scope of Total Care, Turkish Technic Inc. hastaken on the technical obligations of foreign companies. Byassigning technicians to these companies’ main bases, asound continuity of technical operations has been ensured.An IFE maintenance group of avionics technicians wasestablished for the professional maintenance of the IFEsystems in aircraft configurations. The group meets theaircraft upon flight completion, corrects any failures anddelivers the system to the crew in operating conditionunder the “meet and greet” philosophy.For the follow-up of repeat failures, the procedures forthe Repetitive Defect Alert System – REDAS program,which was created by studying the procedures of otherinternational companies, reached completion stage.77SUBSIDIARIES

Turkish Technic Inc., serves a variety of customers throughout the world, andcontinues to expand its domestic and foreign customer portfolio.Cabin developmentsIn 2009, numerous studies were carried out on cabinimprovements. All seat covers for the fleet may now bemanufactured by domestic companies that are authorizedas sub-contractors, and new seat covers were sewn for40 aircraft. Companies with JAR 21 authorization beganproduction of parts used in the cabin, which have a highreplacement rate and pose procurement difficulties, andcosts were reduced by 15% -25%. Projects by the R&D groupled to the creation of new tool designs that deliver enhanceworking ease, time savings and increased productivity. Theseat-lifting apparatus and the A330/A340 B/C seat carry toolare among the projects implemented.Full engineering supportTechnical comparisons of candidate aircraft types andconfiguration assessments for selected aircraft types wereconducted as part of the selection process for wide andnarrow fuselage aircraft.For internal cabin configuration changes made tosome of the aircraft in Turkish Airlines’ fleet and in thepreparation of engineering publications produced by EASAapproveddesign organizations, project management andengineering support was provided for the implementationof modifications made by Turkish Airlines.The required engineering support was provided for theinstallation of the curved wing feature in 24 aircraft, 22without provision and 2 with provision. Effective work wasalso carried out to obtain testing capability for the V2500engine, on which a full performance maintenance wasmade for the first time.Maintenance programs were revised by increasing the Amaintenance interval for Turkish Airlines’ A330 and A340 aircraftfrom 600 FH to 800 FH and by increasing the S maintenanceinterval for the A340 aircraft from five years to six years.78ANNUAL REPORT 2009

TEC (Turkish Engine Center)As part of Turkish Technic Inc.’s strategy to establishpartnerships with manufacturers that provide knowhowand technology transfer, the Turkish Engine Center(TEC), which is the first subsidiary jointly established withPratt&Whitney, began operations in December 2009. Underthe Turkish Technic Inc. - Pratt&Whitney partnership, amodern engine center was built, providing a window onthe future and featuring a green-building constructionconcept in which work health and safety precautions havebeen taken to the highest level and flow lines that allow forsimple production techniques fast TAT times. TEC, whichis designed to perform revisions on 250 engines per yearat its full capacity, covers an area of 25,000 m 2 and sits in alot totaling 10 hectares.An agreement has been reached with TEC for heavymaintenance and repair services on the CFM56-3C/-5C/-7Bseries engines fitted on Turkish Airlines’ Airbus 340 andBoeing 737 aircraft and the V2500-A5series engines fittedon the Airbus 320 aircraft.HABOM (Aviation Maintenance Repairs andModifications Center)All preparations were completed for the HABOM project,which gathers the majority of Turkish Airlines technicalprojects under one roof. The first stage of the project,planned for launch in the first quarter of 2010, coversnarrow fuselage hangars and is targeted for completionin 18 months. The facility will have a closed area ofapproximately 370,000 m 2 , and has an impressive designthat comprises hangars, component workshops, andtraining and social buildings capable of simultaneouslyserving 12 narrow fuselage aircraft and three wide fuselageaircraft. The project that will be the industry’s largestmaintenance and repairs center in the region is anticipatedto provide employment for 3,000 personnel when it reachesfull operating capacity.79SUBSIDIARIES

VISIONTaking its market leadership in Turkey into the internationalarena and distinguishing itself by maintaining the highestlevels of customer satisfaction though cost savings and highquality of service.MISSIONTo become a global player in the ground services industry,delivering cost savings to customers and achieving thehighest level of operational efficiency.GOALSTurkish Ground Service, a consortium between TurkishAirlines and Havaş (TAV Holding), aims to achieve first localand then global status in its sector, by offering high qualityservice and undisputable cost savings.Turkish Ground Service (TGS) began operating in December31, 2009 as a 50-50 joint venture partnership betweenTurkish Airlines and HAVAŞ, the ground services companyof TAV Havalimanı Holding.The company’s 4,000 personnel began providing ramp(aircraft and cargo) services principally at Istanbul AtatürkAirport and Ankara Esenboğa, İzmir Adnan Menderes,Antalya and Adana Şakirpaşa airports, and aims to employ5,000 personnel by the end of its first year.The company will begin providing passenger and operatingservices at İzmir Adnan Menderes Airport on March 1, 2010,at Ankara Esenboğa Airport on May 1, 2010 and at İstanbulAtatürk Airport on October 1, 2010, and it will continueexpanding to other airports following the completion of itsmarket research.80ANNUAL REPORT 2009

Service from theground to the skyThe company will provide services for the aircraft of domesticand foreign airlines with over 300,000 flight frequencies – firstand foremost Turkish Airlines and AnadoluJet – and aims tobecome one of the world’s best ground operations companies.TGS’s target turnover for its first year is approximately TL 100million, and the company plans to expand into Europe and theMiddle East in the medium term.While bringing employment opportunities to hundreds ofpeople, TGS’s entry into the market will enhance the market’scompetitive environment and lead to higher customersatisfaction.SERVICES:• Passenger services• Cargo control services• Ramp services• Postal services• Communications• Cargo services• Representation, management and supervision services81SUBSIDIARIES

“Our achievements lay thefoundation for our goals. Ournumbers tell the stories of theroads we have traveled.“

FinancialFinancial Ratio and Audit ReportsFinancial Ratios 85Consolidated Financial Tables andIndependent Auditor’s Report 86

Ongoing Investment and GrowthIn 2009, while the world's leading airline companies cut down capacityas a result of the severe global economic crisis, Turkish Airlines grewboth operationally and financially. Operating profit increased 12% to832 million TL, and sales revenues grew by 15%, reaching 7 billion TL.Posting a net profit of 559 million TL, Turkish Airlines continuedmethodically bringing its investments to fruition in 2009.Under the scope of the 2008-2023 fleet expansion projection of a totalof 105 airplanes, final orders were issued for 64, including 22 doublecorridorlong-range airplanes, 40 single-corridor short and mediumrangeairplanes and 2 wide-body cargo airplanes. These airplanes willbe added to the fleet in 2014. In 2009, the number of airplanes in thefleet grew 4%, from 127 to 132. International routes accounted for 79%and domestic routes for 21% of revenues from scheduled service. Inparallel to a 22% increase in available seat kilometers, the number ofpassengers grew 11% to 25,099,000 and cargo transport increased 20%to 238,000 tons. To the effects of an increase in capacity, the load factorfell 3.1 points to 70.9%.Turkish Airlines continues its work to carry the success of 2009 intofuture years.

Financial Ratios31 December 2009 31 December 2008LIQUIDITY RATIOSCurrent Ratio 1.44 1.58Acid Test Ratio 1.36 1.52Cash Ratio (Incl. fixed deposits) 1.35 1.17FINANCIAL STRUCTURE RATIOSDebt/Assets Ratio 0.60 0.62Equity/Assets Ratio 0.40 0.38PROFITABILITY RATIOSNet Profit Margin %8 %19Operating Profit Margin %10 %10EBITDAR Margin %24 %22EBITDA Margin %17 %17EBIT Margin %12 %12Interest Coverage Ratio 7.11 7.0285ANNUAL REPORT 2009

DRT Bağımsız Denetim veSerbest MuhasebeciMali Müşavirlik A.Ş.Sun PlazaNo: 2434398 Maslakİstanbul, TürkiyeTel: (212) 366 6000Fax: (212) 366 6010www.deloitte.com.trAUDITOR’S REPORTTo the Board of Directors ofTürk Hava Yolları A.O.We have audited the accompanying consolidated balance sheet of Türk Hava Yolları A.O. and itssubsidiary (together the “Group”) as at 31 December 2009 and the related consolidated statement ofcomprehensive income, consolidated change in shareholder's equity statement and consolidated cashflow statement for the year ended 31 December 2009, and a summary of significant accounting policiesand other explanatory notes.Management Responsibility on Financial StatementsThe management is responsible for preparation and fair presentation of these financial statements inaccordance with accounting standards published by Capital Markets Board. This responsibility includes:designing, implementing and maintaining internal control relevant to the preparation and fair presentationof financial statements that are free from material misstatement, whether due to fraud or error; selectingand applying appropriate accounting policies; and making accounting estimates that are reasonable inthe circumstances.Auditor's ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit.We conducted our audit in accordance with auditing standards published by the Capital Markets Board.Those standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the financial statements are free from material misstatement. Anaudit involves performing procedures to obtain audit evidence about the amounts and disclosures in theconsolidated financial statements. The procedures selected depend on the auditor's judgment, includingthe assessment of the risks of material misstatement of the financial statements, whether due to fraudor error. In making those risk assessments, the auditor considers internal control relevant to the Group'spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the Group's internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the Group, as well as evaluatingthe overall presentation of the financial statements.Member of Deloitte Touche Tohmatsu86ANNUAL REPORT 2009

Auditor's Responsibility (cont'd)We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.Financial statements of Gunes Ekspres Havacılık A.Ş. and THY DO&CO Ikram Hizmetleri A.Ş. thatare joint ventures of the company and accounted on the equity method have been audited by otherindependent audit firms. %0, 7 of total assets of accompanying financial statements is contributed bythose companies. Those statements were audited by other auditors whose reports have been furnishedto us and our opinion, insofar as it relates to the amounts included for these entities is solely based onreports of the other auditors.ConclusionIn our and other audit firms' opinion, accompanying consolidated financial statements of the Group asof 31 December 2009 and for the year then ended have been properly prepared, in all material respectsin accordance with generally accepted accounting standards issued by Capital Markets Board.Without qualifying our opinion, we would like to draw attention to the following matter:As it is explained in detail in Note 41, the Group has classified the financial statements for the yearended 31 December 2008 and balance sheet as of 1 January 2008.Istanbul, 5 April 2010DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.Member of DELOITTE TOUCHE TOHMATSUBerkman ÖzataPartnerMember ofDeloitte Touche Tohmatsu87ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıConsolidated Balance Sheet as of 31 December 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)AuditedAuditedAudited (Restated Note 41) (Restated Note 41)ASSETS Note 31 December 2009 31 December 2008 1 January 2008Current Assets 2.799.855.184 2.620.279.393 1.487.528.554Cash and Cash Equivalents 6 1.096.111.869 504.905.721 480.196.215Financial Assets 7 222.298.370 1.442.632.862 292.020.000Trade Receivables 10 445.381.881 349.144.133 245.539.019Other Receivables 11 743.393.375 61.673.958 305.855.757Inventories 13 148.995.932 98.359.291 113.740.571Other Current Assets 26 143.673.757 163.563.428 50.176.992Non-current Assets 5.772.234.243 5.290.955.322 3.434.915.521Other Receivables 11 664.360.128 22.808.881 21.756.328Financial Assets 7 1.750.943 1.750.943 3.016.564Investments Accounted for Using theEquity Method 16 152.052.556 43.637.924 38.370.043Investment Property 17 48.810.000 48.130.000 53.700.000Tangible Assets 18 4.811.019.050 5.055.984.137 3.238.003.554Intangible Assets 19 10.669.612 11.162.602 6.801.172Deferred Tax Assets 35 - 1.986.324 3.193.155Other Non-current Assets 26 83.571.954 105.494.511 70.074.705TOTAL ASSETS 8.572.089.427 7.911.234.715 4.922.444.075The accompanying notes form an integral part of these consolidated financial statements.88ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıConsolidated Balance Sheet as of 31 December 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)AuditedAuditedAudited (Restated Note 41) (Restated Note 41)LIABILITIES Note 31 December 2009 31 December 2008 1 January 2008Current Liabilities 1.949.243.312 1.653.906.994 1.186.652.969Financial debt 8 412.266.841 419.289.229 228.918.371Other financial liabilities 9 46.078.943 45.000.251 877.628Trade payables 10 560.801.478 435.109.211 364.523.991Other payables 11 156.633.381 115.967.007 83.387.054Current tax liabilities 35 2.419.544 4.185.809 19.981.215Provisions 22 7.287.354 7.460.396 4.779.221Employee benefit obligations 24 54.734.480 47.818.425 39.664.361Passenger flight liabilites 26 586.525.279 487.393.997 379.676.586Other current liabilities 26 122.496.012 91.682.669 64.844.542Non-current Liabilities 3.177.965.889 3.270.740.625 1.887.889.627Financial debt 8 2.575.899.283 2.798.005.235 1.595.842.462Other payables 11 8.941.613 7.865.284 7.058.322Provision for retirement pay liability 24 151.875.562 142.459.082 131.959.011Deferred tax liability 35 362.243.105 291.289.291 128.930.080Other non-current liabilities 26 79.006.326 31.121.733 24.099.752SHAREHOLDERS' EQUITYEquity Attributable to Shareholders of Parent 3.444.880.226 2.986.587.096 1.847.901.479Share capital 27 875.000.000 175.000.000 175.000.000Inflation difference on shareholders' equity 27 1.123.808.032 1.672.901.479 1.739.005.871Share premium 27 - - 895.492Restricted profit reserves 27 22.686.727 - 61.014.406Differences from currency translation 27 4.641.339 4.459.406 -Cash flow hedge fund (-) 27 (1.751.329) - -Retained Earnings 27 861.419.177 - (393.511.064)Net Profit/(Loss) for the Period 27 559.076.280 1.134.226.211 265.496.774TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 8.572.089.427 7.911.234.715 4.922.444.075The accompanying notes form an integral part of these consolidated financial statements.89ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıConsolidated Statement of Comprehensive Income for The Year Ended31 December 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)AuditedAudited (Restated Note 41)Notes 31 December 2009 31 December 2008Sales revenue 28 7.035.882.903 6.123.174.209Cost of sales (-) 28 (5.135.949.144) (4.542.670.584)GROSS PROFIT / (LOSS) 1.899.933.759 1.580.503.625Marketing. sales and distribution expenses (-) 29,30 (806.503.413) (635.876.008)Administrative expenses (-) 29,30 (261.536.526) (203.813.181)Other operating income 31 91.136.104 56.690.528Other operating expenses (-) 31 (199.139.482) (210.120.463)OPERATING PROFIT / (LOSS) 723.890.442 587.384.501Share of investments' profit/ (loss) accounted forusing the equity method 16 12.813.703 3.572.374Financial income 32 172.982.144 1.427.882.203Financial expenses (-) 33 (172.708.672) (713.373.140)PROFIT / (LOSS) BEFORE TAX 736.977.617 1.305.465.938Tax (expense) / income (177.901.337) (171.239.727)Current tax expense (-) 35 (104.523.367) (7.673.685)Deferred tax (expense) / income 35 (73.377.970) (163.566.042)PROFIT / (LOSS) FOR THE YEAR 559.076.280 1.134.226.211OTHER COMPREHENSIVE INCOME / (EXPENSE)Differences from currency translation 181.933 4.459.406Cash flow hedge fund (2.189.161) -Tax income on items in other comprehensive income 437.832 -OTHER COMPREHENSIVE INCOME/ (EXPENSE) (AFTER TAX) (1.569.396) 4.459.406TOTAL COMPREHENSIVE INCOME/ (EXPENSE) FOR THE YEAR 557.506.884 1.138.685.617Earnings/(Loss) per share (Kr) 36 0.64 1.30The accompanying notes form an integral part of these consolidated financial statements.90ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıConsolidated Statement of Change in Shareholders’ Equity for The Year Ended 31 December 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)InflationDifference on Restricted Differences Net profit / TotalShareholders' Share Profit from currency Cash flow loss for Retained shareholders'Issued capital Equity premium Reserves translation hedge fund the period earnings equityAs of 31 December 2007 175.000.000 1.739.005.871 895.492 61.014.406 - - 265.496.774 (393.511.064) 1.847.901.479Transfer of previous years' profit to retained earnings - - - - - - (265.496.774) 265.496.774 -Ofset of differences in shareholder's equity and inflationdifference with retained earnings - (66.104.392) (895.492) (61.014.406) - - - 128.014.290 -Total comprehensive income for the year - - - - 4.459.406 - 1.134.226.211 - 1.138.685.617As of 31 December 2008 175.000.000 1.672.901.479 - - 4.459.406 - 1.134.226.211 - 2.986.587.096Transfer of previous years' profit to retained earnings - - - - - - (1.134.226.211) 1.134.226.211 -Transfer of previous years' profit to reserves - - - 22.686.727 - - - (22.686.727) -Dividends paid - - - - - - - (99.213.754) (99.213.754)Capital increase 700.000.000 (549.093.447) - - - - - (150.906.553) -Total comprehensive income for the year - - - - 181.933 (1.751.329) 559.076.280 - 557.506.884As of 31 December 2009 875.000.000 1.123.808.032 - 22.686.727 4.641.339 (1.751.329) 559.076.280 861.419.177 3.444.880.226The accompanying notes form an integral part of these consolidated financial statements.91ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıConsolidated Statement of Cash Flow for The Year Ended 31 December 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)CASH FLOW FROM OPERATING ACTIVITIES 1 January- 1 January-Notes 31 December 2009 31 December 2008Net profit before taxes 736.977.617 1.305.465.938Adjustments to obtain net cash flow generated fromoperating activities:Depreciation and amortization 18-19 347.051.580 286.265.401Provision for retirement pay liability 24 26.356.395 23.354.581Interest income 32 (159.789.136) (123.120.093)Profit/(loss) on sales of fixed assets 31 (3.333.754) (55.645)Increase/(decrease) in provision for impairment 18 178.783.996 (835.272.705)Loss/(profit) on equity investments accounted for usingthe equity method 16 (12.813.703) (3.572.374)Interest expense 33 116.763.052 105.396.609Movement in manufacturers' credit 26 (13.146.194) (3.378.570)Unrealized foreign exchange loss/(gain) on finance leases 32-33 (2.890.159) 586.719.977Increase/(decrease) in provision for doubtful receivables 10 4.749.104 15.637.769Impairment on investment property 17 78.086 5.000.000Movement in fair value of derivative instruments 32-33 (9.016.534) 6.071.262Dividend income 32 (42.016) (35.033)Operating profit before working capital changes 1.209.728.334 1.368.477.117Increase in trade receivables 10 ( 100.986.852) (119.242.883)(Increase)/decrease in other short and long term receivables 11 7.946.875 (6.855.126)(Increase)/decrease in inventories 13 (50.636.641) 15.381.280(Increase)/decrease in other current assets 26 19.889.671 (54.435.261)(Increase)/decrease in other non-current assets 26 21.922.557 (35.419.804)Increase in trade payables 10 125.692.267 70.585.220Increase in other payables 11 41.742.703 33.386.915Increase/(decrease) in provision for short term liabilities 22 (173.042) 2.681.175Increase in other short and long term liabilities 26 35.344.129 37.238.679Increase in employee benefits 24 6.916.055 8.154.065Increase in passenger flight liabilities 26 99.131.282 107.717.411Cash flow from operating activities 1.416.517.338 1.427.668.788Payment of retirement pay liability 24 (16.939.915) (12.854.510)Interest paid (117.019.197) (102.736.065)Tax payments 26-35 (106.289.632) (82.420.270)Net cash flow from operating activities 1.176.268.594 1.229.657.943CASH FLOW FROM INVESTING ACTIVITIESProceeds from sale of tangible and intangible fixed assets 18-19 129.348.500 26.482.893Interest received 181.134.732 82.172.581Dividends received 542.016 7.034.983Purchase of tangible and intangible fixed assets(net of increase in finance lease liabilities) (*) 18-19 (228.635.897) (230.333.395)Prepayments for the purchase of aircrafts (1.331.217.539) 249.984.372(Increase)/decrease in short term financial investments 7 1.203.244.254 (1.109.665.350)Cash outflow for the purchase of investments accountedat equity method 16 (39.418.996) (4.280.515)Net cash used in investing activities ( 85.002.930) ( 978.604.431)CASH FLOW FROM FINANCING ACTIVITIESRepayment of principal in finance lease liabilities ( 397.692.584) ( 261.788.079)Decrease in financial borrowings ( 6.803.885) ( 3.917.374)Increase in other financial liabilities 9 3.650.707 39.361.447Dividends paid ( 99.213.754) -Net cash used in financing activities ( 500.059.516) ( 226.344.006)NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 591.206.148 24.709.506CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 504.905.721 480.196.215CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 1.096.111.869 504.905.721(*)TL 178.514.434 portion of tangible and intangible assets purchases in total of TL 407.150.331 as of 31 December 2009 was financed through financeleases. (31 December 2008: TL 1.019.175.119 portion of tangible and intangible assets purchases in total of TL 1.299.191.959 was financed throughfinance leases.)92The accompanying notes form an integral part of these consolidated financial statements.ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)1. THE COMPANY'S ORGANIZATION AND OPERATIONSTürk Hava Yolları A.O. (“the Company” or “THY”) was incorporated in Turkey in 1933. The principal activity of the Company isdomestic and international air transportation of passengers and cargo. As of 31 December 2009 and 31 December 2008, theshareholders and their respective shareholdings in the Company are as follows:31 December 2009 31 December 2008Republic of Turkey Prime MinistryPrivatization Administration 49,12% 49,12%Other (publicly held) 50,88% 50,88%Total 100,00% 100,00%The total number of employees working for Türk Hava Yolları A.O. and its subsidiary (“the Group”) as of 31 December 2009 is15.269. (31 December 2008:14.072). The average number of employees working for the Group as of 31 December 2009 and 2008is 14.696 and 13.724, respectively.The Company is registered in İstanbul, Turkey and its head office address is as follows:Türk Hava Yolları A.O. Genel Yönetim Binası Atatürk Havalimanı, 34149 Yeşilköy İSTANBUL.Approval of Financial StatementsBoard of Directors has approved the financial statements as of 31 December 2009 and delegated authority for publishing it on5 April 2010. General shareholders' meeting has the authority to modify the financial statements.2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS2.1 Basis of PresentationBasis of Preparation for Financial Statements and Significant Accounting PoliciesThe company and its subsidiaries registered in Turkey maintain their books of account and prepare their statutory financialstatements in accordance with accounting principles in the Turkish Commercial Code and Tax Legislation. Subsidiaries that areregistered in foreign countries maintain their books of account and prepare their statutory statements in accordance with theprevailing accounting principles in their registered countriesThe Capital Markets Board (“CMB”) has established principles, procedures and basis on the preparation of financial reports byenterprises and the representation of the reports with Communiqué Series XI, No: 29 “Communiqué on Capital Market FinancialReporting Standards”. This Communiqué is applicable for the first interim financial statements to be prepared after 1 January2008 and with this Communiqué, the Communiqué Series XI, No: 29 “Communiqué on Capital Market Accounting Standards” hasbeen repealed. In accordance with this Communiqué, the companies are supposed to prepare their financial statements inaccordance with the International Financial Reporting Standards (“IAS/IFRS”) accepted by the European Union.93ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.1 Basis of Presentation (cont'd)Basis of Preparation for Financial Statements and Significant Accounting Policies (cont'd)Nevertheless, until the discrepancies between the IAS/IFRS accepted by the European Union, and the IAS/IFRS declared by IASBare announced by the Turkish Accounting Standards Board (“TASB”), IAS/IFRS will be in use. Under these circumstances, TurkishAccounting Standards/Turkish Financial Reporting Standards (“TAS/TFRS”), which are the standards published by TASB, notcontradicting with IAS/IFRS will be predicated on.The accompanying consolidated financial statements have been prepared in accordance with IFRS and comply with CMB's decreeannounce on 17 April 2009 and 9 January 2009 regarding the format of the financial statements and footnotes since at the dateof the issuance of these financial statements the differences of IAS/ IFRS accepted by the European Union are not declared bythe TASB. Accordingly, some reclassifications are made in the prior year financial statements.All financial statements have been prepared on cost basis principal. Historical cost is generally based on the fair value of theconsideration given in exchange for assets.Currency Used In Financial StatementsThe individual financial statements of each Group entity are presented in the currency of the primary economic environment inwhich the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results andfinancial position of each entity are expressed in Turkish Lira (“TRY”), which is the functional currency of the Company, and thereporting currency for the consolidated financial statements.Adjustment of Financial Statements in Hyperinflationary PeriodsAs per the 17 March 2005 dated, 11/367 numbered decree of CMB, companies engaged in Turkey and those of which preparetheir financial statements in accordance with the CMB Accounting Standards (including IAS/IFRS exercisers), use of inflationaryaccounting standards have been discontinued effective 1 January 2005. Pursuant effectuation, “Financial Reporting Standardsin Hyperinflationary Economies” issued by the International Accounting Standards Committee (IASC), (“IAS 29”) was no longerapplied henceforward.Comparative Information and Restatement of Prior Period Financial StatementsConsolidated financial statements of the Group have been prepared comparatively with the prior period in order to give informationabout financial position and performance. On order to maintain consistency, with current year consolidated financial statements,comparative information is reclassified and significant changes are disclosed if necessary.Basis of the Consolidationa) The consolidated financial statements include the accounts of the parent company, Türk Hava Yolları A.O., its Subsidiary and its Affiliateson the basis set out in sections (b) and (c) below. Financial statements of subsidiary and affiliates are adjusted where applicable in orderto apply the same accounting policies. All transactions, balances, profit and loss within the Group are eliminated during consolidation94b) Subsidiary is the entity in which the Company has power to control the financial and operating policies for the benefit of the Companythrough the power to exercise more than 50% of the voting rights relating to shares in the companies owned directly and indirectlyby itself, otherwise having the power to exercise control over the financial and operating policies for the benefit of the Company.ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.1 Basis of Presentation (cont'd)Basis of the Consolidation (cont’d)The table below sets out the consolidated Subsidiary and participation rate of the Group in this subsidiary at 31 December 2009:Participation RateName of the Company Principal Activity 31 December 2009 31 December 2008 Country of RegistrationTHY Teknik A.Ş. Aircraft Maintenance Services 100% 100% TurkeyThe balance sheet and statement of income of the subsidiary were consolidated on the basis of full consolidation. The carryingvalue of the investment held by the Group and its Subsidiary were eliminated against the related shareholders' equity. Intercompanytransactions and balances between the Group and its Subsidiary were eliminated during consolidation process.c) The Group has six joint ventures. These joint ventures are economical activities that decisions about strategic finance andoperating policy are jointly controlled by the consensus of the Group and other participants. The affiliates to which the participationrates of the Group are 50% and 49% are controlled by the Group jointly, and are valued by equity method.The table below sets out consolidated affiliates and indicates the proportion of ownership interest of the Company in theseaffiliates at 31 December 2009:Participation shareCompany name Principle activity 31 December 2009 31 December 2008 Country of registrationGüneş Ekspres Havacılık A.Ş. Air Transportation 50% 50% TurkeyTHY DO&CO İkram Hizmetleri A.Ş. Catering Services 50% 50% TurkeyP&W T.T. Uçak Bakım Merkezi Ltd. Şti. Maintenance 49% 49% TurkeyBosnia Herzegovina Airlines Air Transportation 49% - Bosnia HerzegovinaTGS Yer Hizmetleri A.Ş. Ground Services 50% 100% TurkeyTHY Opet Havacılık Yakıtları A.Ş. Fuel sales 50% 50% TurkeyAccording to the equity method, subsidiaries are stated as the cost value adjusted as deducting the impairment in subsidiaryfrom the change occurred in the subsidiary's assets after the acquisition date that is calculated by the Group's share in theconsolidated balance sheet. Subsidiary's losses that exceed the Group's share are not considered (actually, that contains a longterm investment which composes the net investment in the subsidiary)95ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.2 Changes in Accounting PoliciesChanges in accounting policies are applied retroactively and the financial statements of the previous period are adjusted.2.3 OffsettingFinancial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceableright to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liabilitysimultaneously.2.4 New and Revised International Financial Reporting StandardsUpdated following new standards and interpretations applied in the current period financial statements and the reported amountsand disclosures effect has been made. Applied in these financial statements but does not have an impact on the reported amountsof other standards and interpretations in detail later in this chapter also explains in part.Standards affecting presentation and disclosure in 2009 financial statements• IAS 1 (Revised), “Presentation of financial statements”IAS 1(2007) has introduced terminology changes (including revised titles for the financial statements) and changes in the formatand content of the financial statements. The Group presents in the consolidated statement changes in equity all owner changesin equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income.• IFRS 7 (Change), “Financial instruments: Disclosures”The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk The Groupin the current period, towards the implementation of these standards in the transition process, as mentioned in relation to theextended description has chosen not offer any comparative information (Note: 38).• IFRS 8, “Operating segments”IFRS 8 is an explanation standard that requires of the revised the Group's reportable segment that (Note: 5). The Group presentedthe segment information for the first time in a manner that is consistent with its internal reporting. According to internal reporting,aviation and technical operations were identified as operating segments.96ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.4 New and Revised International Financial Reporting Standards (cont’d)Standards affecting presentation and disclosure in 2009 financial statements (cont'd)IFRIC 13, “Customer loyalty programs”According to IFRIC 13, customer loyalty programs should be accounted as a separate component of the sales process. Grouphas adopted the early application of IFRIC 13 "Customer Loyalty Program", and on 1 January 2008 as retroactively applied asis. The Implementation of IFRIC 13, with the Group's customer loyalty programs changes has caused changes in the recordingpolicy of revenues. While free travel has calculated by incremental cost method and recorded estimated cost as liability at previousapplication, according to the IFRIC 13, customer loyalty programs have started to account a separate component of salesoperations. A fraction of fair value of collected the sales amount is distributed as unearned income with the name of “liabilityof passenger of frequent flight program”. Besides, as these interests are used by the Entity, they are recorded as revenue.Standards and interpretations those are effective in 2009 with no impact on the 2009 consolidated financial statementsWith the following new and revised standards and comments were applied in these financial statements. There is no significanteffect of implementation these standards and comments on the amounts that reported in the financial statements. However,this may affect the accounting of future transactions or contracts.Amendments to IFRS 1 “First-time Adoption of International Financial Reporting Standards” and IAS 27 “Consolidated and SeparateFinancial Statements - Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate”The Group presents in the consolidated statement changes in equity all owner changes in equity, whereas all non-owner changesin equity are presented in the consolidated statement of comprehensive income.Amendments to IFRS 2 “Share-based Payment - Vesting Conditions and Cancellations”The amendments clarify the definition of vesting conditions for the purposes of IFRS 2, introduce the concept of 'non-vesting'conditions, and clarify the accounting treatment for cancellations.'IAS 23, “Borrowing costs” (2007)The principal change to the Standard was to eliminate the option to expense all borrowing costs when incurred.97ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.4 New and Revised International Financial Reporting Standards (cont'd)Standards and Interpretations that are effective in 2009 with no impact on the 2009 consolidated financial statements (cont'd)Amendments to IAS 32 “Financial Instruments: Presentation” and IAS 1 “Presentation of Financial Statements -Puttable FinancialInstruments and Obligations Arising on Liquidation”.The revisions to IAS 32 amend the criteria for debt/equity classification by permitting certain puttable financial instruments andinstruments (or components of instruments) that impose on an entity an obligation to deliver to another party a pro-rata shareof the net assets of the entity only on liquidation, to be classified as equity, subject to specified criteria being metIAS 39, “Financial Instruments: Recognition and Measurement” Amendments relating to hedging itemsThe amendments provide clarification on two aspects of hedge accounting: identifying inflation as a hedged risk or portion, andhedging with options.“Embedded Derivatives” (Amendments to IFRIC 9 and IAS 39)The amendments clarify the accounting for embedded derivatives in the case of a reclassification of a financial asset out of the'fair value through profit or loss' category as permitted by the October 2008 amendments to IAS 39.IFRIC 15, “Agreements for the Construction of Real Estate”The Interpretation addresses how entities should determine whether an agreement for the construction of real estate is withinthe scope of IAS 11 Construction Contracts or IAS 18 Revenue and when revenue from the construction of real estate should berecognized. The requirements have not affected the accounting for the Group's construction activities.IFRIC 16, “Hedges of a Net Investment in a Foreign Operation”The Interpretation provides guidance on the detailed requirements for net investment hedging for certain hedge accountingdesignations.IFRIC 18, “Transfers of Assets from Customers”The Interpretation addresses the accounting by recipients for transfers of property, plant and equipment from 'customers' andconcludes that when the item of property, plant and equipment transferred meets the definition of an asset from the perspectiveof the recipient, the recipient should recognize the asset at its fair value on the date of the transfer, with the credit recognizedas revenue in accordance with IAS 18 Revenue98ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.4 New and Revised International Financial Reporting Standards (cont'd)Standards and Interpretations those are effective in 2009 with no impact on the 2009 consolidated financial statements (cont'd)IAS 38, 'Intangible Assets' Standards ChangesIn addition to improvements in IFRS (2008), IAS 38 standard has been amended as purposes of: A business has only access topurchased products or advertising or promotional expenses could be accounted to the point of services taken.Amendments to IAS 40, “Investment Property”As part of Improvements to IFRSs (2008), IAS 40 has been amended to include within its scope investment property in the courseof construction.Amendments to IAS 39 “Financial Instruments: Recognition, Measurement”, and IFRS 7, “Financial Instruments: Disclosures regardingreclassifications of financial assets”The amendments to IAS 39 permit an entity to reclassify non-derivative financial assets out of the 'fair value through profit orloss' (FVTPL) and 'available-for-sale' (AFS) categories in very limited circumstances. Such reclassifications are permitted from1 July 2008. Reclassifications of financial assets made in periods beginning on or after 1 November 2008 take effect only fromthe date when the reclassification is made.Amendments to IAS 20 “Accounting for Government Grants and Disclosure of Government Assistance”:As part of Improvements to IFRSs (2008), IAS 20 has been amended to require that the benefit of a government loan at a belowmarketrate of interest be treated as a government grant. This accounting treatment was not permitted prior to these amendments.Standards and Interpretations that are issued but not yet effective in 2009 and have not been early adoptedIFRS 3, “Business Combinations (2008)”IFRS 3(2008) is effective for business combinations where the acquisition date is on or after the beginning of the first annualperiod beginning on or after 1 July 2009. The main impact of the adoption will be as follows:a) to allow a choice on a transaction-by-transaction basis for the measurement of non-controlling interests (previously referredto as 'minority' interests) either at fair value or at the non-controlling interests' share of the fair value of the identifiable netassets of the acquire,99ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.4 New and Revised International Financial Reporting Standards (cont'd)Standards and interpretations that are issued but not yet effective in 2009 and have not been early-adopted (cont'd)IFRS 3, “Business Combinations (2008)” (cont'd)b) to change the recognition and subsequent accounting requirements for contingent consideration,c) to require that acquisition-related costs be accounted for separately from the business combination, generally leading to thosecosts being recognized as an expense in profit or loss as incurred.The group will apply IFRS 3 (revised) prospectively to all business combinations from 1 January 2010.IFRS 9, “Financial Instruments: Classification and Measurement”In November 2009, the first part of IFRS 9 relating to the classification and measurement of financial assets was issued. IFRS9 will ultimately replace IAS 39 Financial Instruments: Recognition and Measurement. The standard requires an entity to classifyits financial assets on the basis of the entity's business model for managing the financial assets and the contractual cash flowcharacteristics of the financial asset, and subsequently measure the financial assets as either at amortized cost or at fair value.The new standard is mandatory for annual periods beginning on or after 1 January 2013.IAS 24, ”(Revised 2009) Related Party Disclosures”In November 2009, IAS 24 “Related Party Disclosures” was revised. The revision to the standard provides government-relatedentities with a partial exemption from the disclosure requirements of IAS 24. The revised standard is mandatory for annualperiods beginning on or after 1 January 2011.IAS 27, “(as revised in 2008) Consolidated and Separate Financial Statements"IAS 27 (revised) is effective for annual periods beginning on or after 1 July 2009. The revised standard requires that ownershipdecreases or increases that do not result in change in control to be recorded in equity.The Group will apply IAS 27 (revised) prospectively to transactions with non-controlling interests from 1 January 2010.IFRIC 17, “Distributions of non-cash assets to owners”IFRIC 17 is effective for annual periods beginning on or after 1 July 2009. The interpretation provides guidance on the appropriateaccounting treatment when an entity distributes assets other than cash as dividends to its shareholders.100ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.4 New and Revised International Financial Reporting Standards (cont'd)Standards and Interpretations that are issued but not yet effective in 2009 and have not been early-adopted (cont'd)IFRIC 19, “Extinguishing Financial Liabilities with Equity Instruments”IFRIC 19 is effective for annual periods beginning on or after 1 July 2010. IFRIC 19 addresses only the accounting by the entitythat issues equity instruments in order to settle, in full or part, a financial liability.Amendments related to Annual Improvements to IFRS (2009)As part of the Annual Improvement project, in addition to the amendments mentioned above, other amendments were made tovarious standards and interpretations. These amendments are effective for annual periods beginning on or after 1 January 2010.2.5 Summary of Significant Accounting PoliciesSignificant accounting policies applied in the preparation of accompanying financial statements are as follows:2.5.1 RevenueRendering of services:Revenue is measured based on the future value of collected or to be collected receivable amounts. Passenger fares and cargorevenues are recorded as operating revenue when the transportation service is provided. Tickets sold but not yet used (not flied)are recorded as passenger flight liabilities.The Group develops estimations using historical statistics and data for unredeemed tickets. Total estimated unredeemed ticketsare recognized as operating revenue. Agency commissions to relating to the passenger revenue are recognized as expense whenthe transportation service is provided.Aircraft maintenance and infrastructure support services are accrued with regard to invoices prepared subsequent to the services.Dividend and interest income:Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to thatasset's net carrying amount.Dividend income generated from equity investments is registered as shareholders gain the dividend rights.101ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont’d)2.5.2 InventoriesInventories are stated at the lower of cost and net realizable value. Cost of inventories is the sum of all costs of purchase, costsof conversion and other costs incurred in bringing the inventories to their present location and condition.Average cost method is applied in the calculation of cost of inventories. Net realizable value represents the estimated sellingprice less all estimated costs of completion and costs necessary to make a sale.2.5.3 Tangible AssetsTangible assets are measured at net book value calculated by deduction of accumulated depreciation from cost values, costvalues being restated until 31 December 2004 in accordance with inflation accounting. Depreciation is calculated over the usefullives for tangible assets on a straight-line basis. The useful lives and residual values used for tangible assets are as follows:Useful Life (Years)Residual Value- Buildings 25-50 -- Aircrafts 15-20 10-30%- Cargo Aircraft 30 10%- Engines 15-20 10-30%- Components 7 -- Repairable Spare Parts 3-7 -- Simulators 10-20 0-10%- Machinery and Equipments 3-15 -- Furniture and Fixtures 3-15 -- Motor Vehicles 4-7 -- Other Equipments 4-15 -The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the differencebetween the sales proceeds and the carrying amount of the asset and is recognized in profit or loss2.5.4 Leasing TransactionsLeasing - the Group as the lesseeLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards ofownership to the lessee. All other leases are classified as operating leases.Assets held under finance leases are recognized as assets of the Group at their fair value at the inception of the lease or, if lower,at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheetas a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligationso as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit orloss, unless they are directly102ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.4 Leasing Transactions (cont'd)Leasing - the Group as the lessee (cont'd)attributable to qualifying assets, in which case they are capitalized in accordance with the Group's general policy on borrowingcosts.Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group's net investment in theleases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Group'snet investment outstanding in respect of the leases.Rental income from operating leases is recognized on a straight-line basis over the term of the relevant lease. Initial direct costsincurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognizedon a straight-line basis over the lease term.2.5.5 Intangible AssetsIntangible assets include leasehold improvements, rights, information systems and software. Intangible assets are carried atthe beginning cost including the restatement to the equivalent purchasing power for those accounted on or before 31 December2004 less accumulated depreciation. Leasehold improvements are depreciated over their lease periods and other intangibleassets are depreciated over their useful life of 5 years, on a straight-line basis.2.5.6 Impairment on AssetsThe carrying amounts of the Group's assets are reviewed at each reporting date to determine whether there is any indicationof impairment. If any such indication exists then the assets' recoverable amounts are estimated.An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount.The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell.Value in use is the present value of estimated future cash flows resulting from continuing use of an asset and from disposal atthe end of its useful life. Impairment losses are accounted at the consolidated income statement.An impairment loss recognized in prior periods for an asset is reversed if the subsequent increase in the asset's recoverableamount is caused by a specific event since the last impairment loss was recognized. Such a reversal amount is recognized asincome in the consolidated financial statements and cannot exceed the previously recognized impairment loss and shall notexceed the carrying amount that would have been determined, net of amortization or depreciation, had no impairment loss beenrecognized for the asset in prior years.Group determined aircrafts, spare engines and simulators together (“Aircrafts”) as lower-line cash generating unit subject toimpairment and impairment calculation was performed for Aircrafts collectively.103ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.6 Impairment on Assets (cont'd)In the examination of whether net book values of aircrafts, spare engines and simulators exceed their recoverable amounts, the highervalue between value in use and sale expenses deducted net selling prices in US Dollars is used for determination of recoverableamounts. Net selling price for the aircrafts is determined according to second hand prices in international price guides. Net sellingprice for spare engines and simulators is net book values based on US Dollar acquisition costs. In the accompanying financial statements,the change in the differences between net book values of these assets and recoverable amounts are recognized as provision income/lossesunder income/losses from other operations account. Changes in value due to exchange rate changes are shown under group of financialincome/expenses.2.5.7 Borrowing CostsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarilytake a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time asthe assets are substantially ready for their intended use or sale.2.5.8 Financial InstrumentsFinancial assets and liabilities are recorded in the balance sheet when the Group is a legal party to these financial instruments.a) Financial assetsFinancial investments are recognized and derecognized on a trade date where the purchase or sale of an investment is under a contractwhose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measuredat fair value, net of transaction costs except for those financial assets classified as at fair value through profit or loss, which are initiallymeasured at fair value.Financial assets are classified into the following specified categories: financial assets as “at fair value through profit or loss” (FVTPL),“held-to-maturity investments”, “available-for-sale” (AFS) financial assets and “loans and receivables”. The classification dependson the nature and purpose of the financial assets and is determined at the time of initial recognitionFinancial assets at fair value through profit or lossFinancial assets are classified as financial assets at fair value through profit or loss where the Group acquires the financial assetprincipally for the purpose of selling in the near term, the financial asset is a part of an identified portfolio of financial instrumentsthat the Group manages together and has a recent actual pattern of short term profit taking as well as derivatives that are not designatedand effective hedging instruments.Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognized in profit or lossincorporates any dividend or interest earned on the financial asset.104ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.8 Financial Instruments (cont'd)a) Financial assets (cont'd)Effective interest methodThe effective interest method is a method of calculating the amortized cost of a financial asset and of allocating interest incomeover the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through theexpected life of the financial asset, or where appropriates a shorter period.Income is recognized on an effective interest basis for held-to-maturity investments, available-for-sale financial assets and loansand receivables.Loans and receivablesTrade and other receivables are initially recorded at fair value. At subsequent periods, loans and receivables are measured atamortized cost using the effective interest method.Impairment of financial assetsFinancial assets, other than those at fair value through profit or loss are assessed for indicator of impairment at each balancesheet date.Financial assets are impaired where there is objective evidence that as a result of one or more events that occurred after theinitial recognition of the financial asset the estimated future cash flows of the investment have been impacted. For loans andreceivables the amount of the impairment is the difference between the assets carrying amount and the present value of estimatedfuture cash flows, discounted at the original effective interest rate.The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exceptiontrade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable isuncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously recognize written offare credited against the allowance account are recognized in profit or loss.With the exception of available for sale equity instruments, if, in a subsequent period the amount of the impairment loss decreasesand the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognizedimpairment loss is reversed through profit or loss to the extent the carrying amount of the investment at the date the impairmentis reversed does not exceed what the amortized cost would have been had the impairment not been recognized. In respect ofavailable for sale equity securities, any increase in fair value subsequent to an impairment loss is recognized directly in equity.105ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.8 Financial Instruments (cont'd)a) Financial assets (cont'd)Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments whichtheir maturities are three months or less from date of acquisition and that are readily convertible to a known amount of cashand are subject to an insignificant risk of changes in value. The carrying amount of these assets approximates their fair value.b) Financial liabilitiesThe Group's financial liabilities and equity instruments are classified in accordance with the contractual arrangements andrecognition principles of a financial liability and equity instrument. An equity instrument is any contract that evidences a residualinterest in the assets of an entity after deducting all of its liabilities. The significant accounting policies for financial liabilitiesand equity instruments are described below. Financial liabilities are classified as either financial liabilities at fair value throughprofit and loss or other financial liabilities.Financial liabilities at fair value through profit or lossFinancial liabilities at fair value through profit or loss are initially measured at fair value, and at each reporting period revaluedat fair value as of balance sheet date. Changes in fair value are recognized in profit and loss. The net gain or loss recognized inprofit or loss incorporates any interest paid on the financial liability.Other financial liabilitiesOther financial liabilities, including bank borrowings, are initially measured at fair value, net of transaction costs. Other financialliabilities are subsequently measured at amortized cost using the effective interest method, with interest expense recognizedon an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability andof allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimatedfuture cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.106ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.8 Financial Instruments (cont'd)b) Financial liabilities (cont'd)Derivative financial instruments and hedge accountingThe Group's activities expose it primarily to the financial risks of changes in foreign exchange rates and interest rates. The majorsource of interest rate risk is finance lease liabilities. The Group's policy is to convert some financial liabilities with fixed interestrates into financial liabilities with variable interest rates, and some financial liabilities denominated in EUR into financial liabilitiesdenominated in USD. The derivative financial instruments obtained for this purpose are not subject to hedge accounting andprofit/loss arising from the changes in the fair values of those instruments are directly accounted in the income statement. In2009, Group converted some of the floating-rate loans into fixed-rate loans through derivative financial instruments. Also, Groupbegan to obtain derivative financial instruments to hedge against jet fuel price risks beginning from 2009. Group accounts forthose transactions as hedging against cash flow risks arising from jet fuel prices. Use of derivative financial instruments ismanaged according to Group policy which is written principles approved by Board of Directors and compliant with risk managementstrategy.The Group does not use derivative financial instruments for speculative purposes.Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifiesfor hedge accounting. At that time, for forecast transactions, any cumulative gain or loss on the hedging instrument recognizedin equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, thenet cumulative gain or loss recognized in equity is transferred to profit or loss for the period.Derivatives embedded in other financial instruments or other non-financial host contracts are treated as separate derivativeswhen their risks and characteristics are not closely related to those of the host contract and the host contract is not carried atfair value with unrealized gains or losses reported in profit or loss.2.5.9 Foreign Currency TransactionsTransactions in foreign currencies are translated into Turkish Lira at the rates of exchange ruling at the transaction dates.Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate ruling at the balance sheetdate.Gains and losses arising on settlement and translation of foreign currency items are included in the statements of income.107ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.9 Foreign Currency Transactions (cont'd)The closing and average TL - US Dollar exchange rates for the periods are as follows:Closing RateAverage RateYear ended 31 December 2009 1,5057 1,5457Year ended 31 December 2008 1,5123 1,2976Year ended 31 December 2007 1,1647 1,3003The closing and average TL - Euro exchange rates for the periods are as follows:Closing RateAverage RateYear ended 31 December 2009 2,1603 2,1508Year ended 31 December 2008 2,1408 1,8969Year ended 31 December 2007 1,7102 1,77732.5.10 Earnings per ShareEarnings per share is calculated by dividing net profit by weighted average number of shares outstanding in the relevant period.In Turkey, companies are allowed to increase their capital by distributing free shares to share holders from accumulated profits.In calculation of earnings per share, such free shares are considered as issued shares. Therefore, weighted average numberof shares in the calculation of earnings per share is found by applying distribution of free shares retrospectively.2.5.11 Events Subsequent to the Balance Sheet DateAn explanation for any event between the balance sheet date and the publication date of the balance sheet, which has positiveor negative effects on the Group (should any evidence come about events that were prior to the balance sheet date or shouldnew events come about) they will be explained in the relevant footnoteIf such an event were to arise, the Group restates its financial statements accordingly.2.5.12 Provisions, Contingent Liabilities, Contingent AssetsProvisions are recognized when the Group has a present obligation as a result of a past event, and it is probable that the Groupwill be required to settle that obligation, and a reliable estimate can be made of the amount of the obligation.The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at thebalance sheet date, taking into account the risks and uncertainties surrounding the obligation.Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the presentvalue of those cash flows.108ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.12 Provisions, Contingent Liabilities, Contingent Assets (cont'd)When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, thereceivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivablecan be measured reliably.Onerous ContractsPresent liabilities arising from onerous contracts are calculated and accounted for as provision.It is assumed that an onerous contract exists if Group has a contract which unavoidable costs to be incurred to settle obligationsof the contract exceed the expected economic benefits of the contract.2.5.13 Segmental InformationThere are two operating segments of the Group, air transportation and aircraft technical maintenance operations; these includeinformation for determination of performance evaluation and allocation of resources by the management. The Company managementuses the operating profit calculated according to financial reporting standards issued by the Capital Markets Board while evaluatingthe performances of the segments.2.5.14 Investment PropertyInvestment properties, which are properties, held to earn rentals and/or for capital appreciation are measured initially at cost,including transaction costs. Subsequent to initial recognition, investment properties are stated at fair value, which reflects marketconditions at the balance sheet date.Gains or losses arising from changes in the fair values of investment properties are included in the profit or loss in the year inwhich they arise.Investment properties are derecognized when either they have been disposed of or when the investment property is permanentlywithdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement ordisposal of an investment property are recognized in profit or loss in the year of retirement or disposal2.5.15 Taxation and Deferred TaxTurkish tax legislation does not permit a parent company and its subsidiary to file a consolidated tax return. Therefore, provisionsfor taxes, as reflected in the accompanying consolidated financial statements, have been calculated on a separate-entity basis.Income tax expense represents the sum of the tax currently payable and deferred tax.109ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.15 Taxation and Deferred Tax (cont'd)Current taxThe tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the incomestatement because it excludes items of income or expense that are taxable or deductible in other years and it further excludesitems that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enactedor substantively enacted by the balance sheet date.Deferred TaxDeferred tax is recognized on differences between the carrying amounts of assets and liabilities in the financial statements andthe corresponding tax bases which is used in the computation of taxable profit, and is accounted for using the balance sheetliability method.Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognizedfor all deductible temporary differences to the extent that it is probable that taxable profits will be available against which thosedeductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arisesfrom goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transactionthat affects neither the taxable profit nor the accounting profit.Deferred tax liabilities are recognized for taxable temporary differences associated with investments in subsidiaries and affiliates,and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probablethat the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporarydifferences associated with such investments and interests are only recognized to the extent that it is probable that there willbe sufficient taxable profits against which to utilize the benefits of the temporary differences and they are expected to reversein the foreseeable future. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to berecovered.Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability issettled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balancesheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from themanner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.110ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.15 Taxation and Deferred Tax (cont'd)Deferred Tax (cont'd)Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against currenttax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its currenttax assets and liabilities on a net basisCurrent and deferred tax for the periodCurrent and deferred tax are recognized as an expense or income in profit or loss, except when they relate to items credited ordebited directly to equity, in which case the tax is also recognized directly in equity, or where they arise from the initial accountingfor a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill ordetermining the excess of the acquirer's interest in the net fair value of the acquirer's identifiable assets, liabilities and contingentliabilities over cost.2.5.16 Employee benefits / Retirement pay provisionUnder Turkish law and union agreements, lump sum payments are made to employees retiring or involuntarily leaving the Group.Such payments are considered as being part of defined retirement benefit plan as per International Accounting Standard 19(revised) “Employee Benefits” (“IAS 19”). The retirement benefit obligation recognized in the balance sheet represents the presentvalue of the defined benefit obligation as adjusted for unrecognized actuarial gains and losses.2.5.17 Statement of cash flowsIn statement of cash flow, cash flows are classified according to operating, investment and finance activities.Cash flows from operating activities reflect cash flows generated from sales of the Group.Cash flows from investment activities express cash used in investment activities (direct investments and financial investments)and cash flows generated from investment activities of the Group.Cash flows relating to finance activities express sources of financial activities and payment schedules of the Group.Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments whichtheir maturities are three months or less from date of acquisition and that are readily convertible to a known amount of cashand are subject to an insignificant risk of changes in value.111ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.5 Summary of Significant Accounting Policies (cont'd)2.5.18 Share Capital and DividendsCommon shares are classified as equity. Dividends on common shares are recognized in equity in the period in which they areapproved and declared.2.5.19 Manufacturers' CreditsManufacturers' credits are received against acquisition or lease of aircraft and engines. The Group records these credits as areduction to the cost of the owned and amortizes them over the related asset's remaining economic life. Manufacturers' creditsrelated to operating leases are recorded as deferred revenue and amortized over the lease term.2.5.20 Maintenance and Repair CostsRegular maintenance and repair costs for owned and leased assets are charged to operating expense as incurred. Overhaulmaintenance checks for owned and finance leased aircraft are expensed as incurred and delivery maintenance checks of operatingleased aircraft are accrued on a periodical basis.2.5.21 Frequent Flyer ProgramThe Group provides a frequent flyer program named “Miles and Smiles” in the form of free travel award to its members onaccumulated mileage. Miles earned by flights are recognized as a separately identifiable component of the sales transaction(s).A portion of the fair value of the consideration received in respect of the initial sale shall be allocated to the award credits andthe consideration allocated to award credits should be recognized as revenue when awards credits are redeemed.The Group also sells mileage credits to participating partners in “Shop and Miles” program. A portion of such revenue is deferredand amortized as transportation is provided.2.6 Important Accounting Estimates and AssumptionsPreparation of the financial statements requires the amounts of assets and liabilities being reported, explanations of contingentliabilities and assets and the uses of accounting estimates and assumptions which would affect revenue and expense accountsreported during the accounting period. Group makes estimates and assumptions about the future periods. Actual results coulddiffer from those estimations. Accounting estimates and assumptions which might cause material adjustments on the book valuesof assets and liabilities in future financial reporting period were given below:The Determination of Impairment on Long Term Assets:Basic assumptions and calculation methods of the Group relating to impairment on assets are explained in Disclosure 2.5.6.112ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)2. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS (cont'd)2.6 Important Accounting Estimates and Assumptions (cont'd)Calculation of the Liability for “Frequent Flyer Program”:As explained in Note 2.5.21, Group has programs called “Miles and Smiles” and “Shop & Miles” which are applied for its members.In the calculations of the liability related with concerned programs, the rate of use and mile values which are determined byusing statistical methods over the historical data were usedUseful Lives and Salvage Values of Tangible Assets:Group has allocated depreciation over tangible assets by taking into consideration the useful lives and salvage values which wereexplained in Note 2.5.3.3. BUSINESS COMBINATIONSNone.4. JOINT VENTURESSee note 16.5. SEGMENTAL REPORTINGThe management of the Group investigates the results and operations based on air transportation and aircraft technicalmaintenance services in order to determine in which resources to be allocated to segments and to evaluate the performancesof segments. The detailed information on the sales data of the Group is given in Note 28.5.1 Total Assets and LiabilitiesTotal Assets 31 December 2009 31 December 2008Aviation 8.542.807.991 7.871.289.987Technic 534.901.509 444.802.648Total 9.077.709.500 8.316.092.635Less: Eliminations due to consolidation (505.620.073) (404.857.920)Total assets in consolidated financial statements 8.572.089.427 7.911.234.715Total Liabilitites 31 December 2009 31 December 2008Aviation 5.529.700.126 4.884.702.891Technic 100.305.913 93.546.882Total 5.630.006.039 4.978.249.773Less: Eliminations due to consolidation (502.796.838) (53.602.154)Total liabilities in consolidated financial statements 5.127.209.201 4.924.647.619113ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)5. SEGMENTAL REPORTING (cont'd)5.2 Net Operating Profit / (Loss)Segment Results:Inter-segment1 January-31 December 2009 Aviation Technic elimination TotalSales to external customers 6.845.308.852 190.574.051 - 7.035.882.903Inter-segment sales 17.973.830 526.831.414 (544.805.244) -Segment revenue 6.863.282.682 717.405.465 (544.805.244) 7.035.882.903Cost of sales (5.087.547.647) (579.093.922) 530.692.425 (5.135.949.144)Gross profit / (loss) 1.775.735.035 138.311.543 (14.112.819) 1.899.933.759Marketing, sales and distribution expenses (801.665.991) (5.171.892) 334.470 (806.503.413)Administrative expenses (221.582.438) (44.046.329) 4.092.241 (261.536.526)Other operating incomes 82.872.341 17.160.521 (8.896.758) 91.136.104Other operating expenses (202.042.652) (15.679.696) 18.582.866 (199.139.482)Operating profit / (loss) 633.316.295 90.574.147 - 723.890.442Inter-segment1 January-31 December 2008 Aviation Technic elimination TotalSales to external customers 5.974.927.490 148.246.719 - 6.123.174.209Inter-segment sales 30.938.398 434.468.304 (465.406.702) -Segment revenue 6.005.865.888 582.715.023 (465.406.702) 6.123.174.209Cost of sales (4.500.178.013) (501.131.764) 458.639.193 (4.542.670.584)Gross profit / (loss) 1.505.687.875 81.583.259 (6.767.509) 1.580.503.625Marketing, sales and distribution expenses (632.369.295) (3.714.723) 208.010 (635.876.008)Administrative expenses (172.203.555) (34.289.692) 2.680.066 (203.813.181)Other operating incomes 58.451.257 17.899.690 (19.660.419) 56.690.528Other operating expenses (196.578.878) (37.081.437) 23.539.852 (210.120.463)Operating profit / (loss) 562.987.404 24.397.097 - 587.384.501Income statement items related to impairment of tangible fixed assets.Inter-segment1 January-31 December 2009 Aviation Technic elimination TotalReal increase on tangible fixed assetimpairment provision (Loss from otheroperations) (154.263.062) - - (154.263.062)Increase on tangible fixed assetimpairment provision due to exchangerate changes (Financial expense) (24.520.934) - - (24.520.934)114ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)5. SEGMENTAL REPORTING (cont'd)5.2 Net Operating Profit / (Loss) (cont’d)Inter-segment1 January-31 December 2008 Aviation Technic elimination TotalReal increase on tangible fixed assetimpairment provision (Loss fromother operations) (176.836.702) - - (176.836.702)Increase on tangible fixed assetimpairment provision due to exchangerate changes (Financial expense) 1.012.109.405 - - 1.012.109.405Income statement items related to investments accounted for equity methodInter-segment1 January-31 December 2009 Aviation Technic elimination TotalShare of investment profit/ (loss)accounted for using the equity method 15.512.901 (2.699.198) - 12.813.703Inter-segment1 January-31 December 2008 Aviation Technic elimination TotalShare of investment profit/ (loss)accounted for using the equity method 4.042.859 (470.485) - 3.572.3745.3 Investment OperationsInter-segment1 January-31 December 2009 Aviation Technic elimination TotalPurchase of of tangible and intangiblefixed assets 286.807.723 120.342.608 - 407.150.331Current period amortization and depreciation 293.456.913 53.594.667 - 347.051.580Investments accounted for using the equity method 129.630.762 22.421.794 - 152.052.556Inter-segment1 January-31 December 2008 Aviation Technic elimination TotalPurchase of of tangible and intangiblefixed assets 1.180.306.571 118.885.388 - 1.299.191.959Current period amortization and depreciation 203.281.709 82.983.692 - 286.265.401Investments accounted for using the equity method 39.872.359 3.765.565 - 43.637.924115ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)6. CASH AND CASH EQUIVALENTS31 December 2009 31 December 2008Cash 540.180 356.049Cheques received 769 244.458Banks - Time deposits 974.329.053 365.786.513Banks - Demand deposits 100.193.848 122.908.559Other liquid assets 21.048.019 15.610.1421.096.111.869 504.905.721Time Deposits:Amount Currency Opening Date Interest Rate Maturity 31 December 200921.05.2009 04.01.2010%5,85 - %13,7238.174.400 TL 31.12.2009 22.02.2010 238.174.40020.07.2009 18.01.2010%1,75 - %4,5087.427.313 EUR 31.12.2009 20.01.2010 188.869.22423.01.2009 04.01.2010%0,20 - %6,00363.475.745 USD 31.12.2009 25.02.2010 547.285.429974.329.053Amount Currency Opening Date Interest Rate Maturity 31 December 200817.11.2008 02.01.200990.700.000 TL 31.12.2008 %13,50 - %23,50 22.01.2009 90.700.0023.050.000 EUR 07.11.2008 %7,76 05.02.2009 49.345.44024.10.2008 02.01.2009149.270.034 USD 31.12.2008 %2,00 - %7,50 22.01.2009 225.741.073365.786.5137. FINANCIAL ASSETSShort-term financial assets are as follows:31 December 2009 31 December 2008Time deposits with maturity more than 3 months 175.000.000 1.403.033.703Derivative instruments at fair values (Note 39) 47.298.370 39.599.159222.298.370 1.442.632.862Time deposits with maturity of more than 3 months:Amount Currency Opening Date Interest Rate Maturity 31 December 200920.07.2009 11,55% 20.07.2010175.000.000 TL 20.07.2009 12,50% 20.07.2010 175.000.000175.000.000116ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)7. FINANCIAL ASSETS (cont’d)Amount Currency Opening Date Interest Rate Maturity 31 December 200921.05.2008 05.01.2009544.600.000 TL 22.12.2008 %19,15 - %23,00 03.09.2009 544.600.00007.07.2008 19.01.2009107.460.000 Euro 22.12.2008 %6,50 - %8,50 04.05.2009 230.050.36823.01.2008 05.01.2009415.515.000 USD 15.12.2008 %5,65 - %8,55 24.07.2009 628.383.3351.403.033.703Long-term financial assets are as follows:31 December 2009 31 December 2008Sita Inc. 1.679.619 1.679.619Emek İnşaat ve İşletme A.Ş. 26.859 26.859Star Alliance GMBH 44.465 44.4651.750.943 1.750.943Sita Inc., Emek İnşaat ve İşletme A.Ş. and Star Alliance GMBH are disclosed at cost since they are not traded in an active market.Details of the long-term financial assets of the Group at 31 December 2009 are as follows:Country ofregistration OwnershipCompany name and operation Share Voting power Principle ActivityEmek İnşaat ve İşletme A.Ş. Turkey 0,3% 0,3% ConstructionSita Inc. Netherlands Less than 0,1% Less than 0,1% Information&Telecommunication ServicesStar Alliance GMBH Germany 5,55% 5,55% Coordination Between StarAlliance Member Airlines8. FINANCIAL BORROWINGSShort-term financial borrowings are as follows:31 December 2009 31 December 2008Bank loans 14.439.256 34.900.371Finace lease obligations 397.827.585 384.388.858412.266.841 419.289.229117ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)8. FINANCIAL BORROWINGS (cont'd)Long-term financial borrowings are as follows:31 December 2009 31 December 2008Bank loans 14.187.801 -Finace lease obligations 2.561.711.482 2.798.005.2352.575.899.283 2.798.005.235The details of short-term part of long-term bank loans as of 31 December 2009 are as follows:Maturity Interest Rate Currency Original Amount Interest Accrual TL17.10.2011 Libor+3,50% USD 9.422.728 167.002 14.439.256The details of long-term bank loans as of 31 December 2009 are as follows:Maturity Interest Rate Currency Original Amount Interest Accrual TL17.10.2011 Libor + 3,50% USD 9.422.728 - 14.187.801The details of short-term bank loans as of 31 December 2009 are as follows:Maturity Interest Rate Currency Original Amount Interest Accrual TL15.08.2009 Libor+1,25% USD 22.937.732 139.945 34.900.371Financial lease obligations are as follows:31 December 2009 31 December 2008Less than 1 year 469.617.973 480.276.603Between 1 – 5 years 1.438.363.567 1.566.966.270Over 5 years 1.548.610.096 1.778.034.6123.456.591.636 3.825.277.485Less: Future interest expenses (497.052.569) (642.883.392)Principal value of future rentalsstated in financial statements 2.959.539.067 3.182.394.093Interest Range:Floating rate obligations 1.133.986.718 1.221.791.915Fixed rate obligations 1.825.552.349 1.960.602.1782.959.539.067 3.182.394.093As of 31 December 2009, the US Dollars and Euro denominated lease obligations' weighted average interest rates for the fixedrate obligations are 4,91% (31 December 2008: 4,90 %) and for the floating rate obligations are 0,78% (31 December 2008: 1,93%).118ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)9. OTHER FINANCIAL LIABILITIESShort-term other financial liabilities of the Group are as follows:31 December 2009 31 December 2008Fair value of derivative instruments (Note 39) 45.232.172 44.360.335Borrowings from banks 846.771 639.91646.078.943 45.000.251Debt to banks account consists of overnight interest-free borrowings obtained for settlement of monthly tax and social securitypremium payments.10. ACCOUNTS RECEIVABLE AND PAYABLEShort-term trade receivables are as follows:31 December 2009 31 December 2008Trade receivables 455.045.487 381.445.533Due from related parties (Note 37) 32.128.286 4.741.388Allowance for doubtful receivables (41.791.892) (37.042.788)445.381.881 349.144.133The Group provided provision for the receivables carried to legal proceedings and for the others by making historical statisticalcalculations. Movement of the doubtful receivables for the period ended 31 December 2009 and 2008 are as follows:1January - 1 January -31 December 2009 31 December 2008Opening Balance 37.042.788 21.405.019Current period expense 22.513.003 20.707.670Bad debts collected (15.357.120) (4.895.781)Receivables written-off (2.406.779) (174.120)Closing Balance 41.791.892 37.042.788Explanations about the credit risk of Group's receivables are provided in Note 38 Credit Risk.Short-term trade payables are as follows:31 December 2009 31 December 2008Trade receivables 536.177.325 425.068.449Due from related parties (Note 37) 22.663.149 9.433.149Other 1.961.004 607.613560.801.478 435.109.211119ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)11. OTHER RECEIVABLES AND PAYABLESOther short-term receivables are as follows:31 December 2009 31 December 2008Prepayments made for aircrafts,to be received back in cash (net) 724.055.005 30.220.978Non-trade receivables from related parties (Note37) 12.581.316 67.386Receivables from tax office 1.933.804 4.917.861Receivables from employees 1.165.585 1.263.682Deposits and guarantees given 1.153.878 949.250Receivables from foreign acquisition transactions 938.235 5.551.351Receivables from foreign technical suppliers 265.974 1.465.399Deductible VAT - 4.295.567Bosnia Herzegovina Airlines Share Advancement - 10.704.000Other receivables 1.299.578 2.238.484743.393.375 61.673.958Long-term other receivables are as follows:31 December 2009 31 December 2008Prepayments made for aircrafts,to be received back in cash (net) 637.383.512 -Interest swap agreement deposits 7.663.566 -Advance payments for operating leases 7.211.446 6.924.230Receivables from employees 6.045.185 6.410.064Deposits and guarantees given 4.863.237 3.472.266Receivables from Sita deposit certificates 1.193.182 1.205.400Receivables from foreign acquisition transactions - 4.796.921664.360.128 22.808.881Short-term other payables are as follows:31 December 2009 31 December 2008MCO advances 69.550.656 57.613.133Taxes and funds payable 31.244.933 26.061.291Social security premiums payable 25.835.403 21.564.459Payables to insurance companies 14.832.195 -Deposits and guarantees received 9.665.768 7.603.582Other advances received 1.150.351 1.072.264E-Pos ticket advances 936.185 162.591Charter advances 895.143 751.062Other liabilities 2.522.747 1.138.625156.633.381 115.967.007120ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)11. OTHER RECEIVABLES AND PAYABLES (cont’d)Long-term other payables are as follows:31 December 2009 31 December 2008Deposits and guarantees received 8.941.613 7.865.28412. RECEIVABLES AND PAYABLES FROM FINANCIAL SECTOR OPERATIONSNone (31 December 2009: None).13. INVENTORIES31 December 2009 31 December 2008Spare parts 133.739.727 87.165.280Other inventories 29.624.852 25.918.729163.364.579 113.084.009Provision for impairment (-) (14.368.647) (14.724.718)148.995.932 98.359.291Movement in change of diminution in value of inventories as of 31 December 2009 and 2008 are as follows:1 January - 1 January -31 December 2009 31 December 2008Provision at the beginning of the period 14.724.718 10.845.508Current period expense 1.290.280 13.078.367Cancellation of provisions recognized (1.646.351) (9.199.157)Provision at the end of the period 14.368.647 14.724.71814. BIOLOGICAL ASSETSNone (31 December 2008: None).15. ASSETS FROM CONSTRUCTION CONTRACTS IN PROGRESSNone (31 December 2008: None).121ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)16. INVESTMENTS ACCOUNTED FOR EQUITY METHODThe associates accounted per the equity method are as follows:31 December 2009 31 December 2008Güneş Ekspres Havacılık A.Ş. (Sun Express) 26.698.068 13.811.371THY DO&CO İkram Hizmetleri A.Ş. (Turkish DO&CO) 34.054.590 26.060.988Bosnia-Herzegovina Airlines 2.936.441 -P&W T.T. Uçak Bakım Merkezi Ltd. Şti. 22.421.794 3.765.565TGS Yer Hizmetleri A.Ş. (TGS) 63.482.168 -THY OPET Havacılık Yakıtları A.Ş. 2.459.495 -152.052.556 43.637.924Financial information for Sun Express as of 31 December 2009 and 31 December 2008 are as follows:31 December 2009 31 December 2008Total assets 232.316.502 113.774.956Total liabilities 178.920.367 86.152.214Shareholders' equity 53.396.135 27.622.742Group's share in associate's shareholders' equity 26.698.068 13.811.3711 January - 1 January -31 December 2009 31 December 2008Revenue 899.836.648 765.171.890Profit/ (loss) for the period 25.409.528 (3.899.580)Group's share in profit/ (loss) for the period 12.704.764 (1.949.790)Financial information for THY DO&CO Catering Services as of 31 December 2009 and 31 December 2008 are as follows:31 December 2009 31 December 2008Total assets 122.594.934 93.245.421Total liabilities 52.485.754 41.123.446Shareholders' equity 68.109.180 52.121.975Group's share in associate's shareholders' equity 34.054.590 26.060.9881 January - 1 January -31 December 2009 31 December 2008Revenue 267.960.365 190.142.882Profit/ (loss) for the period 16.987.205 11.985.300Group's share in profit/ (loss) for the period 8.493.603 5.992.650122ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)16. INVESTMENTS ACCOUNTED FOR EQUITY METHOD (cont’d)Financial information for P&W T.T Uçak Bakım Merkezi Ltd. Şti as of 31 December 2009 and 31 December 2008 are as follows:31 December 2009 31 December 2008Total assets 104.846.886 8.344.051Total liabilities 59.088.122 659.225Shareholders' equity 45.758.764 7.684.826Group's share in associate's shareholders' equity 22.421.794 3.765.5651 January - 1 January -31 December 2009 31 December 2008Revenue 119.754 -Profit/ (loss) for the period (5.508.567) (960.174)Group's share in profit/ (loss) for the period (2.699.198) (470.485)Financial information for Bosnia and Herzegovina Airlines as of 31 December 2009 and 31 December 2008 are as follows:31 December 2009 31 December 2008Total assets 49.653.830 -Total liabilities 43.661.093 -Shareholders' equity 5.992.737 -Group's share in associate's shareholders' equity 2.936.441 -1 January - 1 January -31 December 2009 31 December 2008Revenue 20.721.502 -Profit/ (loss) for the period (13.524.756) -Group's share in profit/ (loss) for the period (6.627.130) -Financial information for TGS as of 31 December 2009 and 31 December 2008 are as follows:31 December 2009 31 December 2008Total assets 142.871.824 -Total liabilities 15.907.488 -Shareholders' equity 126.964.336 -Group's share in associate's shareholders' equity 63.482.168 -123ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)16. INVESTMENTS ACCOUNTED FOR EQUITY METHOD (cont’d)1 January - 1 January -31 December 2009 31 December 2008Revenue - -Profit/ (loss) for the period 1.964.336 -Group's share in profit/ (loss) for the period 982.168 -By the protocol and capital increase dated on 17 September 2009, 50 % of TGS’ capital, which has a nominal value of 6.000.000TL, was acquired by HAVAŞ for 119.000.000 TL and a share premium at an amount of 113.000.000 TL has arised in the TGS’scapital. Because the share premium is related to the 5-year service contract between the Company and TGS, the Company’sportion (50 %) of the share premium under the shareholders’ equity of TGS was recognized as ‘Deferred Income’ to be amortizedduring the contract period.Financial information for THY Opet Havacılık Yakıtları A.Ş. as of 31 December 2009 and 31 December 2008 are as follows31 December 2009 31 December 2008Total assets 5.745.326 -Total liabilities 826.333 -Shareholders' equity 4.918.993 -Group's share in associate's shareholders' equity 2.459.495 -1 January - 1 January -31 December 2009 31 December 2008Revenue - -Profit/ (loss) for the period (81.009) -Group's share in profit/ (loss) for the period (40.504) -Portions of financial assets accounted for equity method in profit / (loss) are as follows:1 January - 1 January -31 December 2009 31 December 2008Sun Ekspress 12.704.764 (1.949.791)Turkish DO&CO 8.493.603 5.992.650P&W T.T. Uçak Bakım Merkezi Ltd. Şti. (2.699.198) (470.485)Bosna Hersek Havayolları (6.627.130) -TGS 982.168 -THY OPET Havacılık Yakıtları A.Ş. (40.504) -Toplam 12.813.703 3.572.374124ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)16. INVESTMENTS ACCOUNTED FOR EQUITY METHOD (cont’d)Details of investments accounted for equity method as of 31 December 2009 are as follows:Country ofregistration OwnershipCompany name and operation Share Voting power Principle ActivityGüneş Ekspres Havacılık A.Ş.(Sun Express) Turkey 50% 50% Air transportationTHY DO&CO İkramHizmetleri A.Ş. Turkey 50% 50% Catering servicesP&W T.T. Uçak BakımMerkezi Ltd. Şti Turkey 49% 49% Maintanance servicesBosnia HerzegovinaBosnia Herzegovina Airlines Federation 49% 49% Air transportationTGS Yer Hizmetleri A.Ş. Turkey 50% 50% Ground servicesTHY OPET HavacılıkYakıtları A.Ş. Turkey 50% 50% Aviation fuel17. INVESTMENT PROPERTY1 January - 1 January -31 December 2009 31 December 2008Opening balance, January 1 48.130.000 53.700.000Purchases 758.086 -Loss due to the change in fair value (78.086) (5.000.000)Disposal - (570.000)Closing balance, December 31 48.810.000 48.130.000Fair values of Group’s investment property were obtained from the valuation performed by an independent valuation firm, whichis not a related party to Group. Valuation was performed by the independent valuation firm, which is authorized by Capital MarketsBoard with reference to market prices.125ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)18. TANGIBLE ASSETSCostTechnical ComponentsLand, land equipments Other Aircraft and Aircraftsimprovements simulators and equipments, and spare repairable Special Construction acquired byand buildings vehicles fixtures engines spare parts costs in Progress leasing TotalOpening balance at 1 January 2009 164.645.538 311.294.139 166.561.736 2.755.313.950 366.092.558 29.093.614 62.709.927 4.855.582.307 8.711.293.769Additions - 19.336.919 20.689.613 37.302.488 93.157.533 2.311.972 27.889.945 203.152.915 403.841.385Disposals - (9.709.447) (14.615.913) (283.401.122) (139.420.597) (2.850) - (84.407.359) (531.557.288)Transfers - - - 31.770.055 - 16.019.226 (72.886.720) 25.097.439 -Closing balance at 31 December 2009 164.645.538 320.921.611 172.635.436 2.540.985.371 319.829.494 47.421.962 17.713.152 4.999.425.302 8.583.577.866Accumulated depreciationOpening balance at 1 January 2009 55.667.061 248.016.427 139.815.066 2.023.627.036 185.009.980 22.559.087 - 980.614.975 3.655.309.632Depreciation charge for the year 2.731.505 14.943.907 10.371.000 53.590.864 45.729.773 3.624.704 - 212.257.891 343.249.644Disposals - (9.340.289) (14.512.382) (256.514.451) (83.694.306) (475) - (40.722.553) (404.784.456)Impairment, real increase/(decrease) - (551.167) - 77.905.359 - - - 76.908.870 154.263.062Impairment, increase/(decrease) dueto exchange rate changes - 37.062 - 18.192.961 - - - 6.290.911 24.520.934Closing balance 31 December 2009 58.398.566 253.105.940 135.673.684 1.916.801.769 147.045.447 26.183.316 - 1.235.350.094 3.772.558.816Net book value 31 December 2009 106.246.972 67.815.671 36.961.752 624.183.602 172.784.047 21.238.646 17.713.152 3.764.075.208 4.811.019.050Net book value 31 December 2008 108.978.477 63.277.712 26.746.670 731.686.914 181.082.578 6.534.527 62.709.927 3.874.967.332 5.055.984.137126ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)18. TANGIBLE ASSETS (cont’d)CostTechnical ComponentsLand, land equipments Other Aircraft and Aircraftsimprovements simulators and equipments, and spare repairable Special Construction acquired byand buildings vehicles fixtures engines spare parts costs in Progress leasing TotalOpening balance at 1 January 2008 164.584.014 303.009.428 171.151.244 2.639.937.173 327.244.646 23.890.480 59.697.500 3.830.021.095 7.519.535.580Additions 10.644 20.494.791 8.968.480 85.287.700 102.489.872 12.093.986 42.532.535 1.019.175.119 1.291.053.127Disposals (253.838) (12.210.080) (13.557.988) (2.114.432) (63.641.960) (7.516.640) - - (99.294.938)Transfers 304.718 - - 32.203.509 - 625.788 (39.520.108) 6.386.093 -Closing balance at 31 December 2008 164.645.538 311.294.139 166.561.736 2.755.313.950 366.092.558 29.093.614 62.709.927 4.855.582.307 8.711.293.769Accumulated depreciationOpening balance at 1 January 2008 53.372.621 252.091.508 144.571.580 2.077.621.580 153.043.938 20.246.335 - 1.580.584.464 4.281.532.026Depreciation charge for the year 2.409.090 12.680.870 8.589.280 42.672.639 77.231.045 4.124.389 - 134.780.686 282.487.999Disposals (114.650) (11.877.505) (13.345.794) (1.023.101) (45.265.003) (1.811.637) - - (73.437.690)Impairment, real increase - 2.080.031 - 65.194.491 - - - 109.562.180 176.836.702Impairment, decrease due to exchangerate changes - (6.958.477) - (160.838.573) - - - (844.312.355) (1.012.109.405)Closing balance 31 December 2008 55.667.061 248.016.427 139.815.066 2.023.627.036 185.009.980 22.559.087 - 980.614.975 3.655.309.632Net book value 31 December 2008 108.978.477 63.277.712 26.746.670 731.686.914 181.082.578 6.534.527 62.709.927 3.874.967.332 5.055.984.137Net book value 31 December 2007 111.211.393 50.917.920 26.579.664 562.315.593 174.200.708 3.644.145 59.697.500 2.249.436.631 3.238.003.554127ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)18. TANGIBLE ASSETS (cont’d)As explained in Note 2.5.6., since it is higher than ‘value in use’, the Group uses net US Dollar sales prices after cost of sales asthe recoverable value in calculation of impairment in its property, plant and equipment (i.e. aircrafts, spare engines and simulators- “Aircrafts”). The Group has TL 24.520.934 of increase in impairment loss arising from exchange rate changes due to the decreaseof net TL sales prices of aircrafts as a result of the depreciation of US Dollar against the TRY and has 154.263.062 TL of increasein impairment loss as a result of decline in the US Dollar prices of aircrafts in the year ended 31 December 2009 (Note 2.5.9).Total increase in impairment loss amounts to TL 178.783.996.19. INTANGIBLE ASSETSRightsCostOpening balance at 1 January 2009 76.958.343Additions 3.308.946Disposals (2.333)Closing balance at 31 December 2009 80.264.956AmortizationOpening balance at 1 January 2009 65.795.741Additions 3.801.936Amortization for the year (2.333)Closing balance at 31 December 2009 69.595.344Net book value 31 December 2009 10.669.612Net book value 31 December 2008 11.162.602RightsCostOpening balance at 1 January 2008 68.832.212Additions 8.138.832Disposals (12.701)Closing balance at 31 December,2008 76.958.343AmortizationOpening balance at 1 January, 2008 62.031.040Additions 3.777.402Amortization for the year (12.701)Closing balance at 31 December 2008 65.795.741Net book value 31 December 2008 11.162.602Net book value 31 December 2007 6.801.172128ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)20. GOODWILLNone (31 December 2008: None)21. GOVERNMENT GRANTS AND INCENTIVESNone (31 December 2008: None)22. PROVISIONS, CONTINGENT ASSETS AND LIABILITIESProvisions for short-term liabilites are as follows:31 December 2009 31 December 2008Provisions for legal claims 7.287.354 7.460.396Movements in the provisions for legal claims at 31 December 2009 and 2008 periods set out below:1 January- 1 January-31 December 2009 31 December 2008Provision at the beginning of the period 7.460.396 4.695.954Charge for the period 1.346.190 3.031.707Provisions released (1.519.232) (267.265)Provision at the end of the period 7.287.354 7.460.396The Group recognizes provisions for lawsuits against it due to its operations. The lawsuits against the Group are usuallyreemployment lawsuits by former employees or damaged luggage or cargo.a) Guarantees/Pledge/Mortgage (“GPM”) given by the group: Amount of letter of guarantees given is TL 92.014.638 as of 31December 2009 (31 December 2008: TL 81.610.647).31 December 2009 31 December 2008A. Total amounts of GPM given onthe behalf of its own legal entity 92.014.638 81.610.647B. Total amounts of GPM given on the behalf ofsubsidiaries that are included in full consolidation - -C. Total amounts of GPM given in order to guarantee thirdpartie debts for routine trade operations - -D. Total amounts of other GPM given - -92.014.638 81.610.647129ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)22. PROVISIONS, CONTINGENT ASSETS AND LIABILITIES (cont’d)b) At the beginning of 2006, US Ministry of Justice Antitrust Unit and Europe Antitrust Authorities synchronously initiated aninvestigation in Europe and the United States about the fix of the air cargo prices that covers the leading airline companies. Withinthe context of this investigation, information and documents that the Company holds are requested to be presented by USAColumbia (Washington) Regional Court through official notification in April 6, 2006. Similar notifications are sent to the otherconcerning airline companies. Within the context of this investigation, the Company’s inviolation of the agreement is declared toAnti-trust department of US Ministry of Justice, negotiations are continued by the American lawyers on behalf of the Company.As of the report date, the Company management thinks that the results of this investigation initiated by the US Ministry of Justicecannot be reliably measured. For this reason, no provision is provided for this issue in the accompanying financial statements.But, there is a possibility of financial liability to the Group as the result of this issue.c) Dispute Related to Collective BargainingSince it is understood that an agreement will not be reached in the 22nd Term talks on collective bargaining between the Companyand labor union Türkiye Sivil Havacılık Sendikası (“Hava-İş”), a “Record of Dispute” is signed and mediation process started. TheCompany made a wage increase of 6% on its own initiative, however, “Hava-İş” demands a retroactive increase in wages. Sincecollective bargaining is not concluded as of balance sheet date, there is not any provision in financial statements for the matterdue to the fact that the result is uncertain for 2009 whether it will cause additional charge for the Company or not.d) The Group’s discounted retirement pay provision is TL 151.875.562. The Group’s liability for retirement pay would be approximatelyTL 299.090.230 as of 31 December 2009, if all employees were dismissed on that date.23. COMMITMENTSThe Group’s not accrued operational leasing debts details are as follows:31 December 2009 31 December 2008Less than 1 year 312.850.973 201.619.938Between 1 – 5 years 853.516.736 684.056.091More than 5 years 422.992.569 422.009.0941.589.360.278 1.307.685.123To be delivered between the years 2010-2012, the Group signed a contract for 24 aircrafts with a total value of 5.9 billion USDollars, according to the price lists before the discounts made by the aircraft manufacturing firms. The Group has made anadvance payment of 913 Million US Dollars relevant to these purchases as of 31 December 2009.130ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)24. EMPLOYEE BENEFITSShort-term employee benefits are as follows:31 December 2009 31 December 2008Salary accruals 38.827.130 33.409.789Due to personnel 1.437.729 1.674.174Provisions for unused vacation 14.469.621 12.734.46254.734.480 47.818.425Provision for long-term retirement pay liability comprised the following:31 December 2009 31 December 2008Provisions for retirement pay liability 151.875.562 142.459.082Provision for retirement pay liability is recorded according to following explanations:Under labor laws effective in Turkey, it is a liability to make legal retirement pay to employees whose employment is terminatedin such way to receive retirement pay. In addition, according to Article 60 of Social Security Law numbered 506 which was changedby the laws numbered 2422, dated 6 March 1981 and numbered 4447, dated 25 August 1999, it is also a liability to make legalretirement pay to those who entitled to leave their work by receiving retirement pay. Some transfer provisions related to serviceconditions prior to retirement are removed from the Law by the changed made on 23 May 2002.Retirement pay liability is subject to an upper limit of monthly TL 2.427 as of 1 January 2010 (1 January 2009: TL 2.260).Retirement pay liability is not subject to any kind of funding legally. Provision for retirement pay liability is calculated by estimatingthe present value of probable liability amount arising due to retirement of employees. IAS 19 (“Employee Benefits”) stipulatesthe development of company’s liabilities by using actuarial valuation methods under defined benefit plans. In this direction,actuarial assumptions used in calculation of total liabilities are described as follows:Main assumption is that maximum liability amount increases in accordance with the inflation rate for every service year. So,provisions in the accompanying financial statements as of 31 December 2009 are calculated by estimating present value ofcontingent liabilities due to retirement of employees. Provisions in the relevant balance sheet dates are calculated with theassumptions of 4,80% annual inflation rate (31 December 2008: 5,40%) and 11% discount rate. (31 December 2008: 12%). Estimatedamount of retirement pay not paid due to voluntary leaves and retained in the Company is also taken into consideration as 2.17%(2008: 2.99%). Ceiling for retirement pay is revised semi-annually. Ceiling amount of TL 2.427 which is in effect since 1 January2010 is used in the calculation of Group’s provision for retirement pay liability.131ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)24. EMPLOYEE BENEFITS (cont’d)Movement in the provision for retirement pay liability is as follows:1 January- 1 January-31 December 2009 31 December 2008Provisions at the beginning of the period 142.459.082 131.959.011Charge for the period 15.405.411 17.941.602Interest charges 8.870.209 8.260.634Actuarial loss /(gain) 2.080.775 (2.847.655)Payments (16.939.915) (12.854.510)Provisions at the end of the period 151.875.562 142.459.08225. RETIREMENT BENEFITSNone (31 December 2008: None).26. OTHER ASSETS AND LIABILITIESDetails of other current assets are as follows:31 December 2009 31 December 2008Credit note accruals for received aircrafts 34.479.378 40.861.407Prepaid taxes and funds 33.751.118 58.951.175Prepaid operating lease expenses 19.410.997 11.010.997Technical maintenance income accruals 18.049.297 5.438.006VAT to be refunded 9.825.050 5.469.834Prepaid sales commissions 9.418.953 8.832.684Prepaid insurance expenses 5.197.278 5.676.306Advance given for orders 3.788.745 4.649.039Other prepaid expenses 3.543.305 4.668.513Interline passenger income accruals 3.409.593 8.073.217Advances for business purposes 903.082 1.005.304Prepaid wet lease rent expenses - 5.345.647Other currents assets 1.896.961 3.581.299143.673.757 163.563.428132ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)26. OTHER ASSETS AND LIABILITIES (cont’d)Other non-current assets are as follows:31 December 2009 31 December 2008Prepayment for tangible assets 45.347.530 74.096.755Maintenance reserves for engines 26.581.865 18.171.033Prepaid aircraft financing expenses 7.543.182 7.197.530Prepaid operating lease expenses 2.776.711 3.175.779Prepaid Eximbank guarantee and exposure fee 1.183.491 2.618.689Prepaid expenses 139.175 234.72583.571.954 105.494.511Other short-term liabilies are as follows:31 December 2009 31 December 2008Accruals for maintenance costs 98.389.811 69.099.738Unearned revenue from share transfer of TGS (Note:16) 11.300.000 -Other unerarned revenue 5.534.473 430.965Incentive premium accruals 5.049.461 4.603.716Accruals for other expenses 2.142.564 369.934Other liabilities 79.703 7.251.639Manufacturer’s credit related to aircrafts to be received - 9.926.677122.496.012 91.682.669Other long-term liabilities are as follows:31 December 2009 31 December 2008Unearned revenue from share transfer of TGS (Note:16) 45.200.000 -Other unerarned revenue 5.904.110 -Gross manufacturer’s credits 39.419.630 39.289.960Accumulated depreciations of manufacturer’s credit (11.517.414) (8.168.227)79.006.326 31.121.733Passenger flight liabilities are as follows:31 December 2009 31 December 2008Frequent flyer program liability 124.222.967 98.946.996Flight liability generating from ticket sales 282.983.563 253.091.354Flight liability generating from mileage sales 179.318.749 135.355.647586.525.279 487.393.997133ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)27. SHAREHOLDERS’ EQUITYThe ownership structure of the Group’s share capital is as follows:31 December 31 DecemberType % 2009 % 2008Republic of Turkey PrimeMinestry Privitization Adm(*) A, C 49,12 429.818.308 49,12 85.963.662Other (Publicly held) A 50,88 445.181.692 50,88 89.036.338Paid-in capital 875.000.000 175.000.000Restatement effect 1.123.808.032 1.672.901.479Restated capital 1.998.808.032 1.847.901.479(*) 1.644 shares belonging to various private shareholders were not taken into consideration when the Group was included tothe privatization program in 1984. Subsequently, these shares were registered on behalf of Privatization Administration accordingto Articles of Association of the Group, approved by the decision of the Turkish Republic High Planning Board on 30 October 1990.As of 31 December 2009, the Group’s issued and paid-in share capital consists of 87.499.999.999 Class A shares and 1 Class Cshare, all with a par value of Kr 1 each. These shares are issued to the name. The Class C share belongs to the Republic of TurkeyPrime Ministry Privatization Administration and has the following privileges:Articles of Association 7: Positive vote of the board member representing class C share and approval of the Board of Directorsare necessary for transfer of shares issued to the name.Articles of Association 10: The Board of Directors consists of seven members of which one member has to be nominated by theclass C shareholder.Articles of Association 14: The following decisions of the Board of Directors are subject to the positive vote of the class CShareholder:a) As defined in Article 3.1 of the Articles of Association, taking decisions that will negatively affect the Company’s mission,b) Suggesting change in the Articles of Association at General Assembly,c) Increasing share capital,d) Approval of transfer of the shares issued to the name and their registration to the “Share Registry”,e) Making decisions or taking actions which will put the Company under commitment over 5% of its total assets consideringthe latest annual financial statements prepared for Capital Market Board per agreement (this statement will expire when theCompany’s shares held by Turkish State is below 20%),f) Making decisions relating to merges and liquidation,g) Making decisions to cancel flight routes or significantly decrease number of flights except for the ones that cannot recovereven its operational expenses subject to the market conditions.134ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)27. SHAREHOLDERS’ EQUITY (cont’d)Restricted Reserves Assorted from ProfitThe legal reserves consist of first and second reserves, appropriated in accordance with the Turkish Commercial Code (TCC).The TCC stipulates that the first legal reserve is appropriated out of statutory profits at the rate of 5% per annum, until the totalreserve reaches 20% of the company’s paid-in share capital. The second legal reserve is appropriated at the rate of 10% perannum of all cash distributions in excess of 5% of the paid-in share capital. Under the TCC, the legal reserves can only be usedto offset losses and are not available for any other usage unless they exceed 50% of paid-in share capital.Foreign Currency Translation DifferencesForeign currency translation differences are the changes due to foreign exchange rate changes in the shareholders’ equity SunExpress which is a subsidiary accounted for equity method.Distribution of DividendsCompanies whose shares are traded at Istanbul Stock Exchange (ISE) are subject to the following dividend rules determined byCapital Markets Board:According to the Serial:XI No:29 communiqué of Capital Markets Board, depending on the decision made in shareholders' meeting,the profit distribution can be made either by giving bonus shares to shareholders which are issued either in cash or by addingdividend to capital or giving some amount of cash and some amount of bonus shares to shareholders. If the primary dividendamount determined is less than 5% of the paid-in capital, the decision gives the option of not to distribute the related amountas to keep within the equity. However, for companies that have not made any dividend distributions in the prior period and thereforehas classified their shares as “old shares” and “new shares” and those that will distribute dividends from the profit for the yearobtained from their activities, primary dividend amount shall be distributed in cash.According to the CMB’s decision on 9 January 2009, in calculation of distributable profit, the companies are required to prepareconsolidated financial statements, those companies enabled to calculate distributable profit by taking into consideration the profitin the financial statements prepared and announced to the public in accordance with Serial:XI No:29. Regarding the same decision,retained earnings of the companies in legitimate records, profit for the period and total amount of the assets generating profitare to be stated in the accompanying notes of financial statements in accordance with Serial:XI No:29 communiqué.In accordance with the Capital Markets Board’s (the “Board”) Decree issued as of 27 January 2010, in relation to the profitdistribution of earnings derived from the operations in 2009, minimum profit distribution is not required for listed companies(December 31, 2008: 20%), and accordingly, profit distribution should be made based on the requirements set out in the Board’sCommuniqué Serial:IV,No: 27 “Principles of Dividend Advance Distribution of Companies That Are Subject To The Capital MarketsBoard Regulations”, terms of articles of corporations and profit distribution policies publicly disclosed by the companies;135ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)27. SHAREHOLDERS’ EQUITY (cont’d)Distribution of Dividends (cont’d)Furthermore, based on the afore-mentioned decree, companies that are required to prepare consolidated financial statementsshould calculate their net distributable profits, to the extent that they can be recovered from equity in their statutory records,by considering the net profit for the period in the consolidated financial statements which are prepared and disclosed in accordancewith the Communiqué Serial: XI, No: 29;Within the frame of Communiqué Series: XI, No: 29, amount disclosed in notes to financial statements based on the Board decisiondated 9 January 2009; following the deduction of companies’ retained earnings, total of remaining profit for the period and othertotal resources that may apply to profit distribution;Within the frame of 6 th bulletin of Communiqué Series: IV No: 27, application of related period about profit distribution time;a) If all dividends are distributed in cash, dividends made to continue the adoption of distributing until the end of following fifthmonth of the fiscal period.b) If dividends are distributed as share, the Entity should apply for Capital Markets Board until the end of following fifth monthof the fiscal period and finish profit distribution until the end of following sixth month of the fiscal period as the purpose of exportedshares are recorded by Capital Markets Board.c) In the case of combination of the options "a" and "b", it was decided that operations described earlier should be performedseparately but within the time that referred to in subparagraphThe items of shareholders’ equity of the Company in the statutory records as of 31 December 2009 are as followsPaid-in capital 875.000.000Share premium 181.185Legal reserves 39.052.952Extraordinary reserves (*) 7.806.889Other profit reserves 9Special funds 53.064.572Retained earnings (*) 303.035.058Net profit for the period (*) 332.792.278Total shareholders’ equity 1.610.932.943* According to legitimate regulations, total amount, subject to dividend distribution is TL 643.634.225136ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)27. SHAREHOLDERS’ EQUITY (cont’d)Hedge Fund against the Cash Flow RiskHedge fund against cash flow risk arises from the accounting under shareholders’ equity for the changes in the fair values ofeffective derivative financial instruments designated against financial risks of future cash flows. Total of deferred gain/loss arisingfrom hedging against financial risk are accounted when the effect of the hedged item goes into the income statement.28. SALES AND COST OF SALESDetails of gross profit are as follows:1 January- 1 January-31 December 2009 31 December 2008Scheduled flightsPassenger 6.242.396.046 5.415.875.828Cargo and mail 442.452.326 381.265.205Total scheduled flights 6.684.848.372 5.797.141.033Non scheduled flights 60.234.596 79.011.633Other revenue 290.836.108 247.035.147Gross sales 7.035.919.076 6.123.187.813Less: discounts and sales returns (36.173) (13.604)Net sales 7.035.882.903 6.123.174.209Cost of sales (-) (5.135.949.144) (4.542.670.584)Gross profit 1.899.933.759 1.580.503.625Geographical details of revenue from the scheduled flights are as follows:1 January- 1 January-31 December 2009 31 December 2008- Europe 2.621.154.415 2.349.389.459- Far East 1.113.861.041 961.855.198- Middle East 858.064.501 703.042.695- Africa 380.388.615 254.735.557- America 317.489.740 221.418.430International flights 5.290.958.312 4.490.441.339Domestic flights 1.393.890.060 1.306.699.694Total revenue from scheduled flights 6.684.848.372 5.797.141.033137ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)28. SALES AND COST OF SALES (cont’d)The details of the cost of sales are as follows:1 January- 1 January-31 December 2009 31 December 2008Fuel expenses 1.527.808.008 1.850.738.704Personnel expenses 1.044.182.478 856.558.103Landing and navigation expenses 552.646.148 399.283.075Depreciation expenses 317.706.200 263.848.336Handling expenses 378.811.863 276.261.303Maintenance expenses 381.802.941 233.448.486Passenger service and catering expenses 325.039.231 259.376.473Operating lease expenses 275.052.324 154.353.787Codeshare expenses 160.695.562 141.212.392Insurance expense 35.344.992 21.169.619Short term leasing expenses 62.753.715 6.898.765Other leasing expenses 12.393.476 24.958.770Communnication expenses 6.914.020 7.019.829Other tax 5.763.728 6.154.225Utility expenses 6.075.303 4.285.948Cost of other sales 42.959.155 37.102.7695.135.949.144 4.542.670.58429. RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SALES AND DISTRIBUTION EXPENSES, GENERAL ADMINISTRATIVEEXPENSES1 January- 1 January-31 December 2009 31 December 2008Marketing, sales and distribution expenses 806.503.413 635.876.008Administrative expenses 261.536.526 203.813.1811.068.039.939 839.689.189138ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)29. RESEARCH AND DEVELOPMENT EXPENSES, MARKETING, SALES AND DISTRIBUTION EXPENSES, GENERAL ADMINISTRATIVEEXPENSES (cont’d)Marketing, sales and distribution expenses are as follows:1 January- 1 January-31 December 2009 31 December 2008Personnel expenses 221.533.668 199.988.876Commission and incentives expenses 206.925.465 189.842.053Reservation system expenses 154.300.075 104.458.574Advertising expenses 84.163.376 34.517.643Service expenses 24.116.304 11.688.333Other rent expenses 23.857.845 17.635.490Special passenger program milage expenses 17.731.434 14.100.772Passenger service and catering expenses 14.014.565 9.388.785Communication expenses 11.727.334 11.335.043Other tax 7.990.340 6.672.221Transportation expenses 7.444.732 5.187.679Membership expenses 5.118.475 12.929.861Utility expenses 3.291.672 2.686.730Maintenance expenses 1.539.270 1.410.155Depreciation expenses 868.435 708.667Fuel expenses 866.661 789.684Insurance expenses 751.543 527.870Other marketing and sales expenses 20.262.219 12.007.572806.503.413 635.876.008General administrative expenses are as follows:1 January- 1 January-31 December 2009 31 December 2008Personnel expenses 144.413.318 122.824.047Depreciation expenses 28.476.945 21.708.398Insurance expenses 16.633.619 2.610.354Service expenses 12.020.015 8.398.360Other tax 11.669.858 7.734.389Other rent expenses 11.395.026 6.828.249Maintenance expenses 8.630.075 11.817.364Communication expenses 7.632.253 3.730.409Other administrative expenses 20.665.417 18.161.611261.536.526 203.813.18130. EXPENSES ACCORDING TO CATEGORIESExpenses according to categories are explained in Notes 28 and 29.139ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)31. OTHER OPERATING INCOME / (EXPENSES)Other operating income consists of the following:1 January- 1 January-31 December 2009 31 December 2008Reimbursement of maintenance fee from leasing companies 16.559.675 -Provision released 16.876.352 4.903.880Banks protocol revenue 4.730.845 3.510.000Discounts received from maintenace spare parts suppliers 9.060.636 8.174.830Insurance, indemnity, penalty incomes 24.005.243 6.268.389Purchase discount 5.857.946 6.423.388Rent incomes 1.753.645 979.550Fixed assets sale income 3.333.754 179.102Income from free of charge materials 911.946 6.302.617Other operating incomes 8.046.062 19.948.77291.136.104 56.690.5281 January- 1 January-31 December 2009 31 December 2008Real increase in provisions for impairment of fixed assets (Note 18) 154.263.062 176.836.702Provision expenses 24.037.694 23.492.206Expenses due to aircraft crash 5.503.191 -Expense due to passengers without visa 4.796.605 1.973.061Other operating expenses 10.538.930 7.818.494199.139.482 210.120.46332. FINANCIAL INCOMEFinance income consists of the following1 January- 1 January-31 December 2009 31 December 2008Decrease in the provisions for impairment of fixed assets due tochanges in exchange rate (Note 18) - 1.012.109.405Interest income 159.789.136 123.120.093Gain due to changes in the fair value of derivative instruments 9.016.534 -Rediscount interest income 4.134.460 4.692.212Foreign exhange rate income - 287.925.459Dividend income 42.014 35.034172.982.144 1.427.882.203140ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)33. FINANCIAL EXPENSESFinance expenses are as follows1 January- 1 January-31 December 2009 31 December 2008Decrease in the provisions for impairmentdue to changes in exchange rate (Note 18) 24.520.934 -Foreign exchange loss 1.845.975 -Financial liabilities foreign exchange loss 2.890.159 586.719.978Finance lease interest expense 116.382.383 103.921.630Gain due to changes in the fair value of derivative instruments - 6.071.262Retirement pay interest expense 8.870.209 8.260.634Rediscount expense 17.530.474 6.801.332Other financial debts interest expense 380.669 1.474.979Other financial expenses 287.869 123.325172.708.672 713.373.14034. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONSNone (31 December 2008: None).35. TAX ASSETS AND LIABILITIESTax liability for the current profit is as follows:31 December 2009 31 December 2008Provisions for corporate tax 70.893.068 7.673.685Prepaid taxes and funds (68.473.524) (3.487.876)2.419.544 4.185.809Tax liability consists of the following items:1 January- 1 January-31 December 2009 31 December 2008Current period tax expense 70.893.068 7.673.685Deferred tax expense / (income) 73.377.970 163.566.042Change in deferred tax for the year 2008 (foreign earnings exemption) 33.121.716 -Change in corporate tax for the year 2008 (other) 508.583 -Tax expense / (income) 177.901.337 171.239.727141ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)35. TAX ASSETS AND TAX LIABILITIES (cont’d)The Group is subject to taxation in accordance with the tax procedures and the legislation effective in Turkey. Provision is madein the accompanying financial statements for the estimated charge based on the Group’s results for the years and periods.Corporate Tax Law of 5520 entered into force by 21 June 2006 and published in the Official Gazette No. 26205. With this Law, LawNo. 5422 was repealed from application.The corporate tax rate is 20% since 2006 (2006, 2007 and 2008 years: 30% for investment deduction).Corporate tax is applied on taxable corporate income, which is calculated from the statutory accounting profit by adding backnon-deductible expenses, and by deducting dividends received from resident companies, other exempt income and investmentincentives utilizedInvestment incentive certificates are revoked commencing from January 1, 2006. The investment incentive amount that cannotbe deducted from 2008 taxable income will not be carried forward to following years. In accordance with Income Tax Law TemporaryArticle 69, investment allowances available as of 31 December 2005 and due to insufficiency of profit are transferable to nextyear’s; can be deducted from the profits of 2006, 2007 and 2008 depending on taxpayers’ choice. Investment allowances can beforwarded to next year’s by restatement with Producer Price Index (PPI).In case of benefiting from investment allowances, the Corporate Tax rate is 30 % instead of 20%. Taxpayers have the option tobenefit from investment allowances in all or any of the years 2006, 2007 and 2008.Group preferred to deduct the investment allowances of 2005 from the earnings in 2006 and 2007. Therefore, the applicablecurrent corporate tax rate is 30% for 2006 and 2007. The applicable current corporate tax rate is 20% for 2008. The deferred taxrate used for the calculation of deferred tax assets and liabilities is also 20%Corporations are required to pay advance corporation tax quarterly, at the current rate on their corporate income. Advance tax is tobe filed in the following second month’s 14th day and paid on 17th day. Advance tax paid by corporations is credited against the annualcorporation tax liability. The balance of the advance tax paid may be refunded or used to set off against other liabilities to the government.Despite of the offset, if there are temporary tax amounts, it may be returned by cash or may be offset any other financial liabilities.Under the Turkish taxation system, tax losses can be carried forward to offset against future taxable income for up to 5 years.Tax losses cannot be carried back to offset profits from previous periods.In Turkey, there is no procedure for a final and definitive agreement on tax assessments. Companies file their tax returns withinthe 25th of the fourth month following the close of the related financial year. Tax authorities have the right to audit tax declarationsand accounting records for 5 years, and may issue re-assessment based on their findings.Except for the dividends paid to non-resident corporations, which have a representative office in Turkey, or resident corporations,dividends that are paid to non-resident corporations or corporations exempt from taxation in accordance with Income Tax Lawarticle 75 paragraph 2 lines (1), (2) and (3) are subject to withholding tax at the rate of 15%. An increase in capital via issuingbonus shares is not considered as a profit distribution and thus does not incur withholding tax.142ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)35. TAX ASSETS AND TAX LIABILITIES (cont’d)In accordance with “Bringing Some Assets Into National Economy” Law No: 5811, which has become effective as of 22 November2008, earnings of real persons and entities which are full fledged taxpayers obtained through their foreign offices/branches andtheir permanent agencies, including of those that are obtained by the end of 30 April 2009, are exempt from income and corporatetaxation to the extent that such earnings are transferred to Turkey from the date of the issuance of the related law until 31 May2009.Article 7.4 of the General Communiqué issued on 6 December 2008 in regards to “Bringing Some Assets Into National Economy”Law Serial 1, No: 5811 requires the inclusion of such earnings to the exemption to the extent that they are transferred to Turkeyas of 31 May 2009, even if earnings attributable to 2008 are subject to temporary tax filings for the 2008’s temporary tax periods,since branch earnings obtained through their foreign offices/branches and permanent agencies are determined at the last dayof the financial year.In this respect, the Company’s TL 436.428.799 of foreign branch earnings exemption obtained in 2008 issubject to as a deduction against the 2008’s Corporate Tax base. Unused and carry forward exemption amount of 2008 is alsosubject to deferred tax calculation.During the calculation of prepaid tax for the 2009 March period, the issues about the calculation of foreign branch earnings wereevaluated again by the Company management due to the factors of uncertainty in regulations, arising of different figures for thematter about which initiative can be used depending on the opinion taken from Tax authority, arising of different exception figureswhen the methods other than in the Tax authority’s opinion was applied. Foreign branch earnings, which were calculated previouslyon the location basis, are calculated again in the line basis, the previous earnings figure TL 436.428.799 has decreased to TL114.788.079. Because of the changes made in accounting estimates, an additional tax burden of TL 64.328.144 is stated in thefinancial statements as of 31 December 2009.Furthermore, the period of these exceptions are extended with Law No: 5917 article 46 which has become effective as of 10 July2009 and the provisional article 3 added to the Law No: 5811. Accordingly commercial earnings obtained by corporations throughpermanent representatives and branches abroad, between the dates of 1 May 2009 and 31 December 2009 are exceptional fromincome and corporate tax if, those earnings were transferred to Turkey until the date 28 February 2010. The Company hascalculated TL 156.045.544 foreign branch earnings for the year 2009 and has incorporated this amount to the calculation ofcorporation of tax relevant year.In August 2009, the company has reflected TL 508.580 additional tax burden, which is related to the corporate tax for the period2008 into the financial statements as of 31 December 2009 via adjustment declaration.143ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)35. TAX ASSETS AND TAX LIABILITIES (cont’d)1 January- 1 January-31 December 2009 31 December 2008Reconciliation of provision for taxes:Profit from operations before tax 736.977.617 1.305.465.938Domestic income tax rate of 20% 147.395.523 261.093.188Taxation effects on:- revenue that is exempt from taxation (2.846.785) (5.848.893)- foreign branch earning exemption 33.119.035 (87.285.760)- non-deductible expenses 233.564 3.281.192Provisions for tax expense in income statement 177.901.337 171.239.727Tax effect regarding other comprehensive income is as follows:1 January - 31 December 2009Amount Tax (expense) Amountbefore tax /income after taxForeign currency translation differences 181.933 - 181.933Change in cash flow hedge fund (2.189.161) 437.832 (1.751.329)Other comprehensive income for the period (2.007.228) 437.832 (1.569.396)Change in translation differences of foreign currency that is included in other comprehensive income, is TL 4.459.406. In addition,the effect on taxation does not exist for the period 1 January - 31 December 2008.The Group recognizes deferred tax assets and liabilities based upon temporary differences arising between its financial statementsprepared in accordance with IFRS and its statutory financial statements. Deferred tax assets and liabilities calculated for temporarydifferences expected to be realized in future are calculated under the liability method.144ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)35. TAX ASSETS AND TAX LIABILITIES (cont’d)The deferred tax assets and (liabilities) as of 31 December 2009 and 31 December 2008 are as follows:31 December 2009 31 December 2008Fixed assets (437.228.761) (433.734.782)Provision for ticket sales advances (48.624.219) (32.179.753)Accrued expense 41.874.247 36.194.357Provision for retirement pay 30.375.112 28.491.817Long-term lease obligations 21.625.506 49.277.131Short-term lease obligations 21.321.316 21.716.516Allowance for doubtful receivables 3.752.304 3.050.391Provision for impairment in inventories 2.873.729 2.944.944Provision for unused vacation 2.739.207 2.546.893Adjustment of inventories (1.165.198) -Income and expenses relating to future periods (756.009) 1.037.855Discount on receivables 279.604 472.633Discount on payables (164.343) (485.657)Accummulated loss - 31.206.428Other 854.400 158.260(362.243.105) (289.302.967)31 December 2009 31 December 2008Deferred tax assets - 1.986.324Deferred tax liabilities (362.243.105) (291.289.291)Deferred tax assets/ (liabilities), net (362.243.105) (289.302.967)The movements of deferred tax liability as of 31 December 2009 and 2008 are as follows:1 January- 1 January-31 December 2009 31 December 2008Opening balance at January 1 289.302.967 125.736.925Deferred tax expense 73.377.970 163.566.042Hedge fund tax income (437.832) -Closing balance at December 31 362.243.105 289.302.967145ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)36. EARNINGS PER SHAREEarnings per share disclosed in the consolidated statements of income are determined by dividing the net income by the weightednumber of shares that have been outstanding during the period concerned.In Turkey, companies can increase their share capital by making a pro-rata distribution of shares (“bonus shares”) to existingshareholders from retained earnings. For the purpose of earnings per share computations, such bonus shares are regarded asissued shares. Accordingly, the weighted average number of shares outstanding during the years has been adjusted in respectof bonus shares issued without a corresponding change in resources, by giving them retroactive effect for the period in whichthey were issued and for each earlier year.Earnings per share is calculated by dividing net profit by weighted average number of shares outstanding in the relevant period.Number of total shares and calculation of earnings per share at 31 December 2009 and 2008 are as follows:1 January- 1 January-31 December 2009 31 December 2008Number of shares outstanding at 1 January (in full) 17.500.000.000 17.500.000.000New shares issued (in full) 70.000.000.000 70.000.000.000Number of shares outstanding at 31 December (in full) 87.500.000.000 87.500.000.000Weighted average number of shares outstanding duringthe year (in full) 87.500.000.000 87.500.000.000Net profit for the period 559.076.280 1.134.226.211Earnings per share (kr) (*) 0,64 1,30(*) The earnings per share with par value of TL 1 is TL 0, 64 in December 2009; TL 1, 3 in December 2008.37. RELATED PARTY TRANSACTIONSShort-term trade receivables from related parties (Note 10) are as follows:31 December 2009 31 December 2008P & W T.T Uçak Bakım Merkezi 26.705.625 -Bosnia Herzegovina Airlines 3.729.488 -Sun Express 1.074.744 646.191THY DO&CO İkram Hizmetleri A.Ş. 616.912 4.095.197TGS 1.517 -32.128.286 4.741.388146ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)37. RELATED PARTY TRANSACTIONS (cont’d)Transactions with related parties in the nine month period ended as of 31 December are as follows:31 December 2009 31 December 2008TGS (*) 12.546.944 67.386Bosnia Herzegovina Airlines 34.372 -12.581.316 67.386(*) TL 12.279.145 (EURO 5.684.000), a portion of the Group’s non-trade reveivables from TGS, consist of the credit given to TGSwhich is due to 5 January 2010. (Interest rate: 2%)Short-term trade payables to related parties (Note 10) are as follows:31 December 2009 31 December 2008Sun Express 14.416.433 9.433.149THY DO&CO İkram Hizmetleri A.Ş. 8.246.716 -22.663.149 9.433.149Transactions with related parties in the nine-month period ended as of 31 December are as follows:1 January- 1 January-31 December 2009 31 December 2008Services rendered to Sun Express 46.068.132 8.038.397Services rendered to Bosnia Herzegovina Airlines 4.399.906 -Services rendered to THY DO&CO 1.001.534 792.687Service rendered to P&W T.T. 23.467.921 -Interest income from THY DO&CO - 401.50974.937.493 9.232.5931 January- 1 January-31 December 2009 31 December 2008Services received from THY DO&CO 224.579.638 147.850.051Services received from Sun Express 57.017.608 30.909.242Services received from Bosnia Herzegovina Airlines 2.435.000 -284.032.246 178.759.293147ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)37. RELATED PARTY TRANSACTIONS (cont’d)Transactions between the Group and Sun Express are codeshare operations; transactions between the Group and Turkish DO&COare catering services and loan financing. Receivables from related parties are not collateralized and maturity of trade receivablesis 30 days.The total amount of salaries and other short term benefits provided for the Chairman and the Member of Board of Directors,General Manager, General Coordinator and General Deputy Managers are TL 3.693.289 (2008: TL 3.003.116).38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS(a) Capital Risk ManagementThe Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizingthe return to stakeholders through the optimization of the debt and equity balance.The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 8, cash and cash equivalentsand equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.The Board of Directors of the Group periodically reviews the capital structure. During these analyses, the Board assesses therisks associated with each class of capital along with cost of capital. Based on the review of the Board of Directors, the Groupaims to balance its overall capital structure through the issue of new debt or the redemption of existing debt.The overall strategy of the Group remains the same since the year 2008.31 December 2009 31 December 2008Total debts 3.595.046.545 3.697.403.926Less: Cash and cash equivalents (1.096.111.869) (504.905.721)Net debt 2.498.934.676 3.192.498.205Total shareholders' equity 3.444.880.226 2.986.587.096Total capital stock 5.943.814.902 6.179.085.301Net debt/total capital stock ratio 0,42 0,52b. Financial Risk FactorsThe risks of the Group, resulted from operations, include market risk (including currency risk, fair value interest rate risk andprice risk), credit risk and liquidity risk. The Group’s risk management program generally seeks to minimize the potential negativeeffects of uncertainty in financial markets on financial performance of the Group. The Group uses a small portion of derivativefinancial instruments in order to safeguard itself from different financial risks.Risk management, in line with policies approved by the Board of Directors, is carried out. According to risk policy, financial riskis identified and assessed. By working together with Group’s operational units, relevant instruments are used to reduce the risk.148ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.1)Credit Risk ManagementCredit Risk of Financial Instruments ReceivablesTrade receivables Other receivables Deposits in Derivative31 December 2009 Related Party Third Party Related Party Third Party Banks InstrumentsMaximum credit risk as of balance sheet date (*) 32.128.286 413.253.595 12.581.316 1.395.172.187 1.249.522.901 47.298.370The part of maximum risk under guarantee with collateral etc. (**) - 3.437.802 - - - -A. Net book value of financial assets that are neither past due nor impaired 32.128.286 331.244.557 12.581.316 1.395.172.187 1.249.522.901 47.298.370B. Net book value of financial assets that are renegotiated, if not that will be acceptedas past due or impaired - - - - - -C. Net book value of financial assets that are past due but not impaired - 82.009.038 - - - --The part under guarantee with collateral etc. - 2.442.335 - - - -D. Net book value of impaired assets - - - --Past due (gross carrying amount) - 40.576.100 - - - --Impairment(-) - (40.576.100) - - - --The part of net value under guarantee with collateral etc. - - - - - --Not past due (gross carrying amount) - 1.215.792 - - - --Impairment (-) - (1.215.792) - - - --The part of net value under guarantee with collateral etc. - - - - - -E. Off-balance sheet items with credit risk - - - - - -(*)The factors that increase in credit reliability such as guarantees received are not considered in the balance.(**)Guarantees consist of the guarantees in cash & letters of guarantee obtained from the customers149ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.1)Credit Risk ManagementCredit Risk of Financial Instruments ReceivablesTrade receivables Other receivables Deposits in Derivative31 December 2008 Related Party Third Party Related Party Third Party Banks InstrumentsMaximum credit risk as of balance sheet date (*) 4.741.388 344.402.745 67.386 84.415.453 1.891.728.775 39.599.159The part of maximum risk under guarantee with collateral etc. (**) - 7.506.082 - - - -A. Net book value of financial assets that are neither past due nor impaired 4.741.388 314.650.601 67.386 84.415.453 1.891.728.775 39.599.159B. Net book value of financial assets that are renegotiated, if not that will beaccepted as past due or impaired - - - - - -C. Net book value of financial assets that are past due but not impaired - 29.752.144 - - - --The part under guarantee with collateral etc. - 2.318.741 - - - -D. Net book value of impaired assets - - - - - --Past due (gross carrying amount) - 37.042.788 - - - --Impairment(-) - (37.042.788) - - - --The part of net value under guarantee with collateral etc. - - - - - --Not past due (gross carrying amount) - - - - - --Impairment (-) - - - - - --The part of net value under guarantee with collateral etc. - - - - - -E.Off-balance sheet items with credit risk - - - - - -(*)The factors that increase in credit reliability such as guarantees received are not considered in the balance.s(**)Guarantees consist of the guarantees in cash & letters of guarantee obtained from the customers150ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont'd)(b) Financial Risk Factors (cont'd)b.1) Credit risk management (cont'd)The risk of a financial loss for the Group due to failing of one of the parties of the contract to meet its obligations is defined ascredit risk.The Group's credit risk is basically related to its receivables. The balance shown in the balance sheet is formed by the net amountafter deducting the doubtful receivables arisen from the Group management's forecasts based on its previous experience andcurrent economical conditions. Because there are so many customers, the Group's credit risk is dispersed and there is notimportant credit risk concentration.151ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.1) Credit Risk Management (cont’d)The Aging of past due receivables as of 31 December 2009 are as follows.ReceivablesTrade Other Deposits in Derivative31 December 2009 Receivables Receivables Banks Instruments Other TotalPast due 1-30 days 31.024.457 - - - - 31.024.457Past due 1-3 months 30.409.900 - - - - 30.409.900Past due 3-12 months 19.120.026 - - - - 19.120.026Past due 1-5 years 42.030.755 - - - - 42.030.755Past due more than 5 years - - - - - -Total past due receivables 122.585.138 - - - - 122.585.138The part under guarantee with collateral etc 2.442.335 2.442.335152ANNUAL REPORT 2009

Türk Hava Yolları Anonim Ortaklığı31 Aralık 2009 Tarihi İtibariyle Konsolide Finansal Tablolara İlişkin Dipnotlar(Tutarlar, aksi belirtilmedikçe, Türk Lirası (TL) olarak gösterilmiştir.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.1) Credit Risk Management (cont’d)The aging of the past due receivables as of 31 December 2008 are as follows.ReceivablesTrade Other Deposits in Derivative31 December 2009 Receivables Receivables Banks Instruments Other TotalPast due 1-30 days 9.751.742 - - - - 9.751.742Past due 1-3 months 13.013.807 - - - - 13.013.807Past due 3-12 months 16.766.592 - - - - 16.766.592Past due 1-5 years 27.150.622 - - - - 27.150.622Past due more than 5 years 112.169 - - - - 112.169Total past due receivables 66.794.932 - - - - 66.794.932The part under guarantee with collateral etc 2.318.741 - - - - 2.318.741153ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38 NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)(b.1) Credit risk management (cont’d)As of balance sheet date, total amount of cash collateral and letter of guarantee, which is received by Group for past due notimpaired receivable, is TL 3.414.006 (31 December 2008: TL 2.318.741).As of the balance sheet date, Group has no guarantee for past due receivables for which provisions were recognized.b.2) Liquidity Risk ManagementThe main responsibility of liquidity risk management rests upon Board of Directors. The Board built an appropriate risk managementfor short, medium and long term funding and liquidity necessities of the Group management. The Group manages liquidity riskby maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast andactual cash flows and matching the maturity profiles of financial assets and liabilities.The tables below demonstrate the maturity distribution of nonderivative financial liabilities and are prepared based on the earliestdate on which the Group can be required to pay. The interests that will be paid on the future liabilities are included in the relatedmaturities. The adjustment column shows the item which causes possible cash flow in the future periods. The item in questionis included in the maturity analysis and is not included balance sheet amount of financial liabilities in the balance sheet.Group manages liquidity risk by keeping under control estimated and actual cash flows and by maintaining adequate funds andborrowing reserves through matching the maturities of financial assets and liabilities.Liquidity risk table:31 December 2009Total cashoutflowaccording tothe contract Less than 3-12 months 1-5 years More than 5Due date on the contract Book value (I+II+III+IV) 3 months (I) (II) (III) years (IV)Non-derivativefinancial liabilitiesBank borrowings 28.627.057 29.847.936 7.680.629 7.536.703 14.630.604 -Financial lease obligations 2.959.539.067 3.456.591.636 103.436.047 366.181.926 1.438.363.567 1.548.610.096Trade payables 560.801.478 561.612.148 490.554.785 71.057.363 - -Other financial liabilities 846.771 846.771 846.771 - - -Total 3.549.814.373 4.048.898.491 602.518.232 444.775.992 1.452.994.171 1.548.610.096154ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.2) Liquidity risk management (cont’d)Liquidity risk table (cont’d):31 December 2008Total cashoutflowaccording tothe contract Less than 3-12 months 1-5 years More than 5Due date on the contract Book value (I+II+III+IV) 3 months (I) (II) (III) years (IV)Non-derivativefinancial liabilitiesBank borrowings 34.900.371 35.698.342 1.469.294 34.229.048 - -Financial lease obligations 3.182.394.093 3.825.277.485 107.114.326 373.162.277 1.566.966.270 1.778.034.612Trade payables 435.109.211 437.537.494 382.178.541 55.358.953 - -Other financial liabilities 639.916 639.916 639.916 - - -Total 3.653.043.591 4.299.153.237 491.402.077 462.750.278 1.566.966.270 1.778.034.612b.3) Market Risk ManagementThe Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.Market risk exposures of the Group are measured using sensitivity analysis. There has been no change to the Group’s exposureto market risks or the manner in which it manages and measures the risk.b.3.1) Foreign Currency Risk ManagementTransactions in foreign currencies expose the Group to foreign currency risk. The foreign currency denominated assets andliabilities of monetary and non-monetary items are as follows:155ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.3) Market risk management (cont’d)b.3.1) Foreign Currency Risk Management (cont’d)31 December 2009TL Equivalent US Dollar Euro GBP Other1.Trade receivables 318.804.899 91.640.001 108.281.865 8.393.269 110.489.7642a.Monetary financial assets 1.596.717.983 1.276.912.740 214.803.790 12.413.729 92.587.7242b.Non-monetary financial assets - - - - -3.Other 1.982.078 1.066.174 94.361 103.224 718.3194.Current assets (1+2+3) 1.917.504.960 1.369.618.915 323.180.016 20.910.222 203.795.8075.Trade receivables - - - - -6a.Monetary financial assets 637.383.512 637.383.512 - -6b.Non monetary financial assets - - - - -7.Other 65.373.959 48.743.839 12.586.766 2.119.701 1.923.6538.Noncurrent assets (5+6+7) 702.757.471 686.127.351 12.586.766 2.119.701 1.923.6539.Total assets (4+8) 2.620.262.431 2.055.746.266 335.766.782 23.029.923 205.719.46010.Trade payables 297.880.412 120.793.475 107.571.626 5.863.884 63.651.42711.Financial liabilities 457.499.014 252.991.955 204.507.059 - -12a.Other liabilities, monetary 14.337.275 7.789.570 3.479.885 336.138 2.731.68212b.Other liabilities, non monetary - - - -13.Current liabilities (10+11+12) 769.716.701 381.575.000 315.558.570 6.200.022 66.383.10914.Trade payables - - - - -15.Financial liabilities 2.575.899.284 975.801.038 1.600.098.246 - -16a.Other liabilities, monetary 8.941.614 2.354.919 5.734.714 2.605 849.37616b.Other liabilities, non monetary - - - - -17.Noncurrent liabilities (14+15+16) 2.584.840.898 978.155.957 1.605.832.960 2.605 849.37618.Total liabilities (13+17) 3.354.557.599 1.359.730.957 1.921.391.530 6.202.627 67.232.48519.Net asset / liability position of Off-balancesheet derivatives (19a-19b) 27.416.849 (257.400.455) 284.817.304 - -19a.Off-balance sheet foreign currencyderivative assets 284.817.304 - 284.817.304 - -19b.Off-balance sheet foreign currencyderivative liabilities 257.400.455 257.400.455 - - -20.Net foreign currency asset/(liability)position (9-18+19) (706.878.319) 438.614.854 (1.300.807.444) 16.827.296 138.486.97521.Net foreign currency asset/(liability)position of monetary items (IFRS 7.B23)(=1+2a+5+6a-10-11-12a-14-15-16a) (801.651.205) 646.205.296 (1.598.305.875) 14.604.371 135.845.00322.Fair value of foreign currency hedgedfinancial assets - - - - -23.Hedged foreign currency assets - - - - -24.Hedged foreign currency liabilities - - - - -25.Exports 5.356.374.684 756.866.783 2.821.421.134 152.119.413 1.625.967.35426.Imports 1.684.743.255 1.003.419.468 488.549.014 19.535.389 173.239.384156ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.3) Market Risk Management (cont’d)b.3.1) Foreign Currency Risk Management (cont’d)31 December 2008TL Equivalent US Dollar Euro GBP Other1.Trade receivables 201.671.977 36.369.880 72.663.669 6.607.281 86.031.1472a.Monetary financial assets 1.300.384.063 911.904.026 316.192.868 5.534.421 66.752.7482b.Non-monetary financial assets - - - - -3.Other 7.419.216 2.458.692 41.404 4.760.149 158.9714.Current assets (1+2+3) 1.509.475.256 950.732.598 388.897.941 16.901.851 152.942.8665.Trade receivables - - - - -6a.Monetary financial assets - - - - -6b.Non monetary financial assets - - - - -7.Other 72.794.855 72.789.485 4.400 - 9708.Noncurrent assets (5+6+7) 72.794.855 72.789.485 4.400 - 9709.Total assets (4+8) 1.582.270.111 1.023.522.083 388.902.341 16.901.851 152.943.83610.Trade payables 244.277.675 125.858.217 56.555.012 16.252.346 45.612.10011.Financial liabilities 463.649.564 251.539.094 212.110.470 - -12a.Other liabilities, monetary 9.761.078 4.472.433 2.789.862 81.221 2.417.56212b.Other liabilities, non monetary - - - - -13.Current liabilities (10+11+12) 717.688.317 381.869.744 271.455.344 16.333.567 48.029.66214.Trade payables - - - - -15.Financial liabilities 2.798.005.235 1.052.489.444 1.745.515.791 - -16a.Other liabilities, monetary 7.998.826 1.038.768 5.829.426 4.210 1.126.42216b.Other liabilities, non monetary - - - - -17.Noncurrent liabilities (14+15+16) 2.806.004.061 1.053.528.212 1.751.345.217 4.210 1.126.42218.Total liabilities (13+17) 3.523.692.378 1.435.397.956 2.022.800.561 16.337.777 49.156.08419.Net asset / liability position of Off-balancesheet derivatives (19a-19b) 12.349.552 (112.925.248) 125.274.800 - -19a.Off-balance sheet foreign currencyderivative assets 125.274.800 - 125.274.800 - -19b.Off-balance sheet foreign currencyderivative liabilities 112.925.248 112.925.248 - - -20.Net foreign currency asset/(liability)position (9-18+19) (1.929.072.715) (524.801.121) (1.508.623.420) 564.074 103.787.75221.Net foreign currency asset/(liability)position of monetary items (IFRS 7.B23)(=1+2a+5+6a-10-11-12a-14-15-16a) (2.021.636.338) (487.124.050) (1.633.944.024) (4.196.075) 103.627.81122.Fair value of foreign currency hedgedfinancial assets - - - - -23.Hedged foreign currency assets - - - - -24.Hedged foreign currency liabilities - - - - -25.Exports 4.540.026.181 536.061.102 2.404.349.759 141.055.054 1.458.560.26826.Imports 1.651.794.897 937.339.395 495.108.749 14.626.988 204.719.765157ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.3) Market Risk Management (cont’d)b.3.1) Foreign Currency Risk Management (cont’d)Foreign currency sensitivityThe Group is exposed to foreign exchange risk primarily from US dollar, Euro and GBP. The following table details the Group’ssensitivity to a 10% increase and decrease in US Dollars, Euro and GBP. 10% is the sensitivity rate used when reporting foreigncurrency risk internally to key management personnel and represents management’s assessment of the possible change inforeign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items andadjusts their translation at the period end for a 10% change in foreign currency rates. The sensitivity analysis includes externalloans as well as loans to foreign operations within the Company where the denomination of the loan is in a currency other thanthe currency of the lender or the borrower. A positive number indicates an increase in profit or loss.31 December 2009Profit / (Loss) Before TaxIf foreign currencyIf foreign currencyappreciated againstdevaluated againstTL by 10% TL by 10%1 - US Dollar net asset / liability 43.861.485 (43.861.485)2- Part of hedged from US Dollar risk (-) - -3- US Dollar net effect (1+2) 43.861.485 (43.861.485)4 - Euro net asset / liability (130.080.744) 130.080.7445 - Part of hedged from Euro risk (-) - -6- Euro net effect (4+5) (130.080.744) 130.080.7447 - GBP net asset / liability 1.682.730 (1.682.730)8- Part of hedged from GBP risk (-) - -9- GBP net effect (7+8) 1.682.730 (1.682.730)10 - Other foreign currency net asset / liability 13.848.698 (13.848.698)11- Part of hedged other foreign currency risk (-) - -12- Other foreign currency net effect (10+11) 13.848.698 (13.848.698)TOTAL (3 + 6 + 9 + 12) (70.687.831) 70.687.831158ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.3) Market Risk Management (cont’d)b.3.1) Foreign Currency Risk Management (cont’d)Foreign currency sensitivity (cont’d)31 December 2008Profit / (Loss) Before TaxIf foreign currencyIf foreign currencyappreciated againstdevaluated againstTL by 10% TL by 10%1 - US Dollar net asset / liability (42.548.468) 42.548.4682- Part of hedged from US Dollar risk (-) - -3- US Dollar net effect (1+2) (42.548.468) 42.548.4684 - Euro net asset / liability (161.468.260) 161.468.2605 - Part of hedged from Euro risk (-) - -6- Euro net effect (4+5) (161.468.260) 161.468.2607 - GBP net asset / liability 63.642 (63.642)8- Part of hedged from GBP risk (-) - -9- GBP net effect (7+8) 63.642 (63.642)10 - Other foreign currency net asset / liability 10.472.471 (10.472.471)11- Part of hedged other foreign currency risk (-) - -12- Other foreign currency net effect (10+11) 10.472.471 (10.472.471)TOTAL (3 + 6 + 9 + 12) (193.480.615) 193.480.615As explained in Note 2.5.6, the Group uses net US Dollars sales price as the recoverable amount in the impairment calculationof its property, plant and equipment (i.e. aircrafts, spare engines and simulations - “Aircrafts”). Accordingly, the impairmentprovided by the Group for the tangible assets decreases when the US Dollar is evaluated against TL, and increases when the USDollar is devaluated against TL. In this context, If US Dollar is appreciated by 10 % against TL, there would be an increase amountedTL 360.275.994 (1 January-31 December 2008: TL 360.198.667) in the net profit for the period except for the effects in the tableabove due to the decrease in the impairment of aircrafts, spare engines and simulators. If US Dollar is devaluated by 10 % againstTL, there would be a decrease amounted TL 401.499.641 effect in the profit or except for the effects in the table above.159ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.3) Market Risk Management (cont’d)b.3.2) Interest Rate Risk ManagementGroup has been borrowing over fixed and variable interest rates. Considering the interest types of the current borrowings,borrowings with variable interest rates have the majority but in financing of aircrafts performed in the last years, Group tries tocreate a partial balance between borrowings with fixed and variable interest rates by increasing the weight of the borrowingswith fixed interest rate in condition of the suitability of the cost. Due to the fact that the variable interest rates of the Group aredependent on Libor and Euribor, dependency to local risks is low.Interest Rate Position Table31 December 2009 31 December 2008Instruments with fixed interest rateFinancial Assets – Time Deposits 1.149.329.053 1.768.820.216Financial Liabilities 1.825.552.349 1.960.602.178Financial Instruments with Variable Interest RateFinancial Liabilities 1.162.613.775 1.256.692.286Interest Swap Agreements not subject to Hedge Accounting (net) (829.874) (5.087.603)Interest swap agreements subject to hedge acounting (Net) (7.130.730) -As indicated in Note 39, the Group as of 31 December 2009 fixed the interest rate for TL 877.507.548 of floating–interest-ratedfinancial liabilities via an interest rate swap contract.Interest rate sensitivityFollowing sensitivity analysis is determined according to the interest rate exposure in the reporting date and possible changeson this rate and it is fixed during all reporting period. Group management checks out possible effects that may arise when Liborand Euribor rates, which are the interest rates of the borrowings with variable interest rates, fluctuate 0, 5% and reports theseto the top management.In condition that 0, 5% increase in Libor and Euribor interest rate and all other variables being constant:Profit before taxes of the Group, which belongs to twelve-month-period, will decrease for TL 6.283.461 (as of 31 December 2008it will decrease by TL 6.283.461). In contrast, if Libor and Euribor interest rate decreases 0, 5%, Profit Before Taxes for sixmonth-periodwill increase with the same amountsMoreover, as a result of the interest rate swap contracts against cash flow risks, in case of a 0,5% increase in the Libor andEuribor interest rates, the shareholders’ equity of the Group will increase by TL 18.318.580 without the deferred tax effect. Incase of a 0,5% decrease in the Libor and Euribor interest rates, the shareholders’ equity of the Group will decrease by the sameamount without the deferred tax effect.160ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)38. NATURE AND LEVEL OF RISKS DERIVED FROM FINANCIAL INSTRUMENTS (cont’d)(b) Financial Risk Factors (cont’d)b.3) Market Risk Management (cont’d)b.3.3) Fuel prices sensitivityAs explained in Note 39, Group made forward fuel purchase contracts in order to hedge cash flow risks arising from fuel purchasesbeginning from 2009. Due to forward fuel purchase contracts subject to hedge accounting, as a result of a 10 % increase in fuelprices, the shareholders’ equity of the Group will increase by TL 11.038.146 excluding the deferred tax effect. In case of a 10%decrease in fuel prices, the shareholders’ equity of the Group will decrease by the same amount excluding the deferred tax effect39. FINANCIAL INSTRUMENTSFair Values of Financial InstrumentsFair values of financial assets and liabilities are determined as follows:• In standard maturities and conditions, fair values of financial assets and liabilities which are traded in an active market aredetermined as quoted market prices.• Fair values of derivative instruments are calculated by using quoted prices. In absence of prices, discounted cash flows analysisis used through applicable yield curve for maturities of derivative instruments.161ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)39. FINANCIAL INSTRUMENTS (cont’d)Categories and fair values of financial instruments (cont’d):Derivative Derivativeinstruments instruments Investmentwhich are reflected which are at cost FinancialLoans and fair value to share- reflected fair value available liabilities at Carrying31 December 2009 Balance Sheet Receivables holder’s equity value profit/(loss) for sale amortized cost Value NoteFinancial AssetsCash and cash equivalents 1.096.111.869 - - - 1.096.111.869 6Financial investments 175.000.000 4.102.120 43.196.250 1.750.943 - 224.049.313 7Trade receivables 445.381.881 - - - - 445.381.881 10Other receivables 1.407.753.503 - - - - 1.407.753.503 11Financial liabilities - -Bank borrowings - - - - 14.187.801 14.187.801 8Finance lease obligations - - - - 2.959.539.067 2.959.539.067 8Other financial liabilities - 7.866.905 37.365.267 - 846.771 46.078.943 9Trade payables - - - - 560.801.478 560.801.478 10Derivative Derivativeinstruments instruments Investmentwhich are reflected which are at cost FinancialLoans and fair value to share- reflected fair value available liabilities at Carrying31 December 2008 Balance Sheet Receivables holder’s equity value profit/(loss) for sale amortized cost Value NoteFinancial AssetsCash and cash equivalents 504.905.721 - - - - 504.905.721 6Financial investments 1.403.033.703 - 39.599.159 1.750.943 - 1.444.383.805 7Trade receivables 349.144.133 - - - - 349.144.133 10Other receivables 84.482.839 - - - - 84.482.839 11Financial liabilitiesBank borrowings - - - - 34.900.371 34.900.371 8Finance lease obligations - - - - 3.182.394.093 3.182.394.093 8Other financial liabilities - - 44.360.335 - 639.916 45.000.251 9Trade payables - - - - 435.109.211 435.109.211 10The Group considers the legitimate values of financial assets are of fair value162ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)39. FINANCIAL INSTRUMENTS (cont’d)Fair Values of Financial Instruments (cont’d)Fair values of financial assets and liabilities are determined as follows:• First level: Financial assets and liabilities are valued with the stock exchange prices in the active market for the assets andliabilities same with each other.• Second level: Financial assets and liabilities are valued with input obtained while finding the stock exchange price of therelevant asset or liability mentioned in the first level and the direct or indirect observation of price in the market.• Third level: Financial assets and liabilties are valued by the input that does not reflect an actual data observed in the marketwhile finding the fair value of an asset or liability.Financial assets and liabilities, which are presented in their fair values, level reclassifications are as follows:Fair value levelas of the reporting date31 December Level 1 Level 2 Level 3Financial assets 2009 TL TL TLFinancial assets at fair value throughprofit or lossDerivative instruments 43.196.250 - 43.196.250 -Financial assets subject tohedge accountingDerivative instruments 4.102.120 - 4.102.120 -Total 47.298.370 - 47.298.370 -Financial liabilitiesFinancial liabilities at fair valuethrough profit or lossDerivative instruments 37.365.267 - 37.365.267 -Financial liabilities subject tohedge accountingDerivative instruments 7.866.905 - 7.866.905 -45.232.172 - 45.232.172 -163ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)39. FINANCIAL INSTRUMENTS (cont’d)Derivative Instruments and Hedging Transactions (cont’d)In order to hedge important operations and cash flows in the future against financial risks, Group made interest rate swapcontracts to convert some of the fixed-rate finance lease liabilities into floating rate and cross-currency swap contracts to convertEuro-denominated finance lease liabilities into US Dollars.The changes in the fair values of those derivative instruments aredirectly accounted in the income statement for the period.The floating-rate financial liabilities of the Group are explained in b.3.2. Beginning from June 2009, in order to keep interest costsat an affordable level, considering long-term finance lease liabilities; Group made fixed-paid/floating-received interest rate swapcontracts to fix interest rates of finance lease liabilities whose maturities are after the second half of 2010 and account forapproximately 76 % of floating rate USD and Euro denominated liabilities. Effective part of the change in the fair values of thosederivative instruments which are subject to hedge accounting for cash flows risks of floating-rate finance lease liabilities areaccounted in cash flow hedge fund under the shareholders’ equity.Beginning from September 2009, in order to control risk arising from fluctuations in price of fuel which is approximately 30% ofcost of sales as of 31 December 2009 and to lessen the effects of fluctuations in oil prices on fuel expenses, the Group beganhedging transactions for approximately 10% of annual jet fuel consumption in 2009 . For this purpose, the Group made forwardfuel purchase contracts settled on cash basis. Effective part of the change in the fair values of those derivative instruments whichare subject to hedge accounting for cash flows risks of fuel purchases are accounted in cash flow hedge fund under the shareholders’equityGroup’s derivative instruments arisen from transactions stated above and their balances as of 31 December 2009 and 31 December2008 are as follows:164ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)39. FINANCIAL INSTRUMENTS (cont’d)Derivative Instruments and Hedging Transactions (cont’d)Pozitive fair Negative fair31 December 2009 value value TotalFixed-paid/floating received interest rate swap contractsfor hedging against cash flow risks of interest rate - (7.130.730) (7.130.730)Forward fuel purchase contracts for hedging against cashflow risk of fuel prices 4.102.120 (736.175) 3.365.945Fair values of derivative instruments for hedgingpurposes 4.102.120 (7.866.905) (3.764.785)Cross-currency swap contracts not subject to hedgeaccounting 15.596.383 (8.935.528) 6.660.855Interest rate swap contracts not subject to hedgeaccounting 27.599.867 (28.429.739) (829.872)Fair values of derivative instruments not for hedgingpurposes 43.196.250 (37.365.267) 5.830.983Total 47.298.370 (45.232.172) 2.066.198Pozitive fair Negative fair31 December 2008 value value TotalFixed-paid/floating received interest rate swap contractsfor hedging against cash flow risks of interest rate - - -Forward fuel purchase contracts for hedging against cashflow risk of fuel prices - - -Fair values of derivative instruments for hedgingpurposes - - -Cross-currency swap contracts not subject to hedgeaccounting 5.068.203 (4.741.776) 326.427Interest rate swap contracts not subject to hedgeaccounting 34.530.956 (39.618.559) (5.087.603)Fair values of derivative instruments not for hedgingpurposes 39.599.159 (44.360.335) (4.761.176)Total 39.599.159 (44.360.335) (4.761.176)165ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)39. FINANCIAL INSTRUMENTS (cont’d)Derivative Instruments and Hedging Transactions (cont’d)Hedging against Hedging againstfuel risk interest risk TotalIncrease/(decrease) in fair values of derivativeinstruments for hedging purposes 3.365.945 (7.130.730) (3.764.785)The amount of financial expenses inside hedge funds - 2.165.655 2.165.655Reclassified amount for inactive part in the risk eliminationof fair value of hedging gains of fuel hedging derivativeinstrument to financial revenues (590.031) - (590.031)Total 2.775.914 (4.965.075) (2.189.161)Deferred tax (555.183) 993.015 437.832Hedge fund as of 31 December 2009 2.220.731 (3.972.060) (1.751.329)40. EVENTS SUBSEQUENT TO THE BALANCE SHEET DATEThe Board of Directors decided to purchase 14 of A321-200 and 6 of A319-100 aircrafts to be delivered in 2011 and 2012; and to orderat option 10 of A319/A321 aircrafts to be delivered in 2013.The Board of Directors, having 49% of the shares of Bosnia Herzegovina Airlines, approved the decision a capital increase by 8.000.000–KM. In accordance with this decision, the “Corporation” will pay for its share in this capital increase in cash.The Board of Directors decided to lease 2 of B737-700 aircrafts which are to be delivered by March and April 2010.The Board of Directors decided to purchase 10 of B737-800 and 10 of B737-900ER aircrafts from Boeing Company to be deliveredbetween 2011 and 2014. The Board of Directors also decided to order at option 15 of B737-800/B737-900ER aircrafts to be deliveredbetween 2013 and 2015.The Board of Directors decided to lease 1 of B737-700 aircraft to be delivered by March 2010.The Board of Directors decided to increase authorized capital from TL 500 million to TL 2 billion and to include the following mattersinto Articles of Incorporation: to establish training institutions related to fields of activities of the Corporation and to make donationsand financial aid in compliance with regulatory provisions. The Board of Directors made an application to Capital Markets Board.166ANNUAL REPORT 2009

(Convenience Translation of Report And Financial Statements Originally Issued in Turkish)Türk Hava Yolları Anonim OrtaklığıNotes to The Consolidated Financial Statements for The Year Ended 31 December, 2009(All amounts are expressed in Turkish Lira (TL) unless otherwise stated.)41. OTHER ISSUES AFFECTING FINANCIAL STATEMENTS MATERIALLY OR NECESSARY TO MAKE FINANCIAL STATEMENTS SOUND,INTERPRETABLE AND UNDERSTANDABLEThe Board of Directors approved and authorized to issue the consolidated financial statements on 5 April 2010.In compliance with Capital Markets Board (“CMB”) Communiqué Serial: XI No: 29, the Group restated the previous periods’financial statements due to the changes in presentation and classification of financial statement items in order to maintaincomparability. The changes have no material impact on the shareholders’ equity and net profit / (loss) of the previous periods.The significant classifications are as follows:In the balance sheet as of 31 December 2008, TL 4.761.176 in “Other Financial Liabilities” is the offsetted amount for the “fairvalue of derivative instruments”, whereas it is presented separately in the balance sheet as of 31 December 2009 as TL 39.599.159in “Financial Assets” and TL 44.360.335 in “Other Financial Liabilities.‘Advances received for milage credit sales’ item, which was stated under ‘Other receivables and payables’ and amounting to TL45.587.172 in the balance sheet as of 31 December 2008, is now classified under ‘Other short term liabilities’.‘Special costs’ item, which was stated under ‘Intangible assets’ and amounting to net book value of TL6.534.527 in the balancesheet as of 31 December 2008, is now classified under ‘Tangible assets’.The Group reconsidered the depreciation accounting method of its aircrafts, spare engines and simulators, which are subject toimpairment while preparing the financial statements for the year ended at 31 December 2009. In previous years, the Group madedepreciation calculation over cost value impairment according to paragraph of 63 th in the International Accounting Standard36 "Impairment of Assets"; after the recognition of impairment loss, the depreciation charge for the asset is adjusted in futureperiods to allocate the asset’s revised charging amount, less its residual value, on a systematic basis over its remaining usefullife. The mentioned change does not lead to a change in balance sheet items, equity and net profit for the year, however, led toa reclassification between “Depreciation expense for the year” and “Provision for impairment loss for the year”. Thus, 2008financial statements were restated based on International Accounting Standard 8 “Changes and Inaccuracies in AccountingPolicies and Accounting Predictions” (“IAS 8). Because of this change, “Depreciation expense” under “Cost of sales” item decreasedby TL107.560.793 and “Real increase in provision for impairment in value of tangible assets” increased by the same amount167ANNUAL REPORT 2009