Creditor Relations

Finance Strategy

The aim of Turkish Airlines finance strategy is to enable the company to sustainably achieve its corporate vision of continued growth trend over the industry average and hence increase its competitive power.  In order to achieve this goal; financial stability, financial flexibility and adequate liquidity have been set as main priorities. 

Turkish Airlines finance team aims to:

  • Meet operational cash needs,
  • Ensure short and long term adequate liquidity,
  • Minimize cost of capital and other financial costs such as commissions and FX conversion charges,
  • Hedge external financial risks,
  • Maximize return from liquid cash portfolio given above constraints.

The performance is overseen by the interdepartmental Treasury and Risk Commission which is authorized by the Board of Directors.

Capital Structure

Turkish Airlines manages its balance sheet on a dynamic basis in line with its growth plans while following closely the airline and aircraft debt market. Being a growing company, optimum capital structure is determined by the borrowing capacity based on the level of cash generation and profitability. Therefore, Turkish Airlines aims to keep its adjusted net leverage less than 4.0x on a long-term basis and plans to operate between 3.5x – 4.0x over the medium-term.

Adjusted Net Debt before 2019= Total Debt (incl. Finance Leases) + 7x Aircraft related Rental Expense – (Cash & Cash Eq. + Time Deposits + Current PDP Receivables + Restricted Cash)

Adjusted Net Debt after 2019= Total Debt (incl. Finance Leases) + Lease Liabilities – (Cash & Cash Eq. + Time Deposits + Current PDP Receivables + Restricted Cash)

EBITDAR = EBITDA + Aircraft related Rental Expense

Aircraft related Rental Expense = Operating Leases incl. Heavy Maintenance + Wet Lease adj. for A/C rent portion (approx. 55%)

Adequate cash generation and profitability is prioritized and continuously monitored in order to secure debt service.

Debt Service = Finance Lease Principal and Interest Payments + Operating Lease incl. Heavy Maintenance Payments

Liquidity

Turkish Airlines Treasury manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecasted and actual cash flows while matching the maturity profiles of financial assets and liabilities.

Total Liquidity = Cash & Cash Eq. + Time Deposits + Current PDP Receivables + Restricted Cash

Turkish Airlines benefits from ample undrawn credit lines in addition to its cash balances. Turkish Airlines has access to around 2 billion USD of revolving credit facilities from its local banking partners all being provided on an unsecured basis.