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.

Aircraft-based financing the lowest cost financing instrument in the capital and money market, constitutes a major part of Turkish Airlines’ debt composition thanks to its high credibility, long-term borrowing option and cross border tax lease opportunities. In addition, as of 31 December 2021, 19% of Turkish Airlines’ fleet is financially unencumbered which positively supports the balance sheet with 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), insurance panel guaranteed loans (the cooperation of an insurance consortium consisting of several highly-rated insurance companies (e.g. AFIC, Balthazar), private guaranteed financings (e.g. Aircraft Financing Solutions by Aviation Capital Group) 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 very well diversified, including Japan, China, Europe and USA based banks, financial institutions and lessors. In the future, Turkish Airlines plans to continue to diversify its financing mix by adding other innovative structures and partners to the current portfolio. We believe Turkish Airlines’ ESG sensitivity will also contribute to this goal with the rise of ESG financing products that value sustainability.

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 selecting currency denomination are the interest rates of the relevant currency which affects overall financial competitiveness and revenue generation in that currency to limit currency exposure and maintain natural hedge position. 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.