Financing

Turkish Airlines’ financing policies concentrate on long term financing aiming to achieve a low overall financing cost as well as to diversify its financing options in terms of structure and geography. To meet aircraft related financing requirements, the finance team considers the options provided by all credit markets enabling the company with flexibility in choice of financing.

Thanks to its high credibility and properties of the financing structure such as long-term borrowing option, cross border tax lease opportunities, Aircraft-based financing which is the lowest cost financing instrument in the capital and money market constitutes the major item in Turkish Airlines’ debt composition. In addition, 15% of Turkish Airlines’ current fleet is financially unencumbered which supports positively to the balance sheet as a strong tangible assets and may contribute to the liquidity position of the company in case of necessity.

The current aircraft financing debt portfolio of the company consists of export credit guaranteed loans (e.g. EECA, US Ex-Im, SACE), private insurance guaranteed loans (the cooperation of an insurance consortium consisting of several highly-rated insurance companies e.g. AFIC, Balthazar), French and Italian Tax Leases combined with either guaranteed or commercial loans, Japanese operating leases with call option (JOLCO), secured capital market products (e.g. USD and JPY Denominated EETCs), sale-and-leaseback transactions, short term operational leases and commercial loan financial leases, all of which offers very competitive financing solutions to Turkish Airlines in the international markets. Investor base is also well diversified and including Japan, China, Europe and USA based banks, financial institutions and lessors. In the future, Turkish Airlines plans to continue to diversify financing sources by adding more innovative structures.

Current breakdown of financial lease liabilities of Turkish Airlines is shown in the below chart. The Turkish Airlines selects the currency denomination of its long-term financing based on several parameters. The primary parameters taken into account in currency decision are the interest rates of the relevant currency which affects overall financial competitiveness and revenue generated in that currency which is crucial not to create extensive currency exposure and to maintain natural hedge position to the extent possible in a given currency. In line with its natural currency hedging policy, Turkish Airlines makes use of different currencies in aircraft financing transactions such as EUR, USD, JPY and CHF as seen in the pie chart below.