TÜRK HAVA YOLLARI ANONİM

ORTAKLIĞI AND ITS SUBSIDIARIES

Consolidated Financial Statements

for The Year Ended 31 December 2023

with Independent Auditor's Report

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors of Türk Hava Yolları Anonim Ortaklığı

Our opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Türk Hava Yolları Anonim Ortaklığı (the "Company") and its subsidiaries (together the "Group") as at 31 December 2023, and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards ("IFRS").

What we have audited

The Group's consolidated financial statements comprise:

  • the consolidated statement of financial position as at 31 December 2023;
  • the consolidated statement of comprehensive income for the year then ended;
  • the consolidated statement of changes in equity for the year then ended;
  • the consolidated statement of cash flows for the year then ended and
  • the notes to the consolidated financial statements, comprising material accounting policy information.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing ("ISA"). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (including International Independence Standards) ("IESBA Code"). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code.

PwC Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik A.Ş.

Kılıçali Paşa Mah. Meclis-i Mebusan Cad. No:8 İç Kapı No:301 Beyoğlu/İstanbul

T: +90 212 326 6060, F: +90 212 326 6050, www.pwc.com.tr

Mersis Numaramız: 0-1460-0224-0500015

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. Key audit matters were addressed in the context of our independent audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matters

How our audit addressed the key audit

matter

The recognition of the revenue, passenger

flight liabilities and the frequent flyer

program liabilities

Revenue and passenger flight liabilities

The following procedures were performed to audit

(Please refer to Note 2.3.1, 13 and 25)

of the revenue and passenger flight liabilities:

The major part of the Group's revenue consists of the

-

Through involvement of our IT experts, we

passenger revenue. The passenger revenue is

have tested the effectiveness of internal

recognized when the transportation service is

controls on IT systems that are designed to

completed. Total passenger revenue recognized in

account passenger revenue. Additionally, we

the consolidated financial statements of the Group

have tested accuracy and completeness of

amounted to USD17,727 million for the year ended 31

the reconciliations among IT systems which

December 2023. Unused tickets are recognized as

have been determined as key systems by us.

passenger flight liabilities, until the flights are

completed. Total passenger flight liability for ticked

-

We have understood the business processes

sales amounted to USD2,420 million as of 31

and controls over accounting of the

December 2023.

passenger revenue.

We focused on this area in our audit due to the

-

We have tested key controls over accounting

following reasons:

of the passenger revenue processes.

-

Significant estimates and judgments based on

-

We have tested unredeemed tickets through

historical data and trends are used in

sampling method.

calculation of revenue from unused tickets

which are accounted for passenger revenue in

-

We have tested consistency and

the consolidated financial statements,

mathematical accuracy of the methods used

in calculation of unused ticket revenue

-

Recognition of passenger revenue upon

which are estimated based on historical

completion of the services includes complex

data.

and different integrated information

technology ("IT") systems which processes

high volume of transactions and data,

  • The necessity for our IT experts to be involved in the audit process due to the complexity of the systems.

Key audit matters

How our audit addressed the key audit

matter

The recognition of the revenue, passenger

flight liabilities and the frequent flyer

program liabilities

Frequent flyer program liabilities

The following procedures were performed to audit

(Please refer to Note 2.3.1 and 13)

of the frequent flyer program liabilities:

The Group provides a frequent flyer program named

-

We have understood the business processes

"Miles and Smiles" in the form of free travel award to

and controls over accounting of the frequent

its members on accumulated mileage earned from

flyer program liabilities.

flights. Miles are recognized as a separately

identifiable component of each sales transactions.

-

Through involvement of our IT experts, we

Frequent flyer program liabilities amounted to

have tested the effectiveness of internal

USD236 million in the consolidated financial

controls on IT systems and internal controls

statements as of

that are designed to account frequent flyer

31 December 2023.

program liabilities.

The amount deferred as a liability is measured based

-

We have tested consistency and

on the fair value of the awarded miles. The fair value

mathematical accuracy of the methods used

is measured on the basis of the value of the awards

in calculation of frequent flyer liabilities

for which they could be redeemed. The amount

which are estimated based on historical

deferred is recognized as revenue when Miles and

data.

Smiles members fly using their miles or when the

Group does not expect that the miles to be redeemed

-

We have controlled consistency of frequent

by its customers ("breakage").

flyer program liabilities calculated at the end

of the reporting period with frequent flyer

We focused on this area in our audit due to the

program.

following reasons:

-

We have controlled breakage estimates

-

Breakage estimate ("the estimate of miles

through comparing the ratio with the

earned that will not be redeemed") are

historical usage data.

complex and highly judgmental due to the

significant assumptions used in the estimate,

  • Complex calculations are performed in determination of the value of the awards for which they could be redeemed,
  • The necessity for our IT experts to be involved in the audit process due to the complexity of the systems.

Key audit matters

How our audit addressed the key audit

matter

The Component accounting of aircrafts

(Please refer to Note 2.3.3, 2.3.4 and 15)

The carrying values of aircrafts' components

-

The following procedures were performed to

accounted for property, plant and equipment and

audit of the component accounting of

right of use assets amounted to USD19,260 million in

aircrafts:

the consolidated financial statements as of

31 December 2023.

-

We have inquired with the management to

understand the accounting policies applied

The Group accounts for the cost of aircrafts which

and how they meet the provisions of IAS 16,

are acquired directly or through leases separating

"Property, plant and equipment".

into the components (fuselage, engine, fuselage

overhaul and engine overhaul). Useful lives of these

-

The useful life and residual value estimates

components are determined separately and each

were controlled by comparing the fleet plan

components are amortized during their useful lives.

of the Group and the contracts of the aircraft

purchases and leasing transactions recently

We focused on this area in our audit due to the

made.

following reasons:

-

We have compared the consistency of the

-

The impacts to the consolidated financial

components and their useful lives with the

statements as of 31 December 2023 is

sectoral applications.

significant,

-

We have recalculated current year's

-

The assessment of determination of

depreciation expenses.

components involves significant level of

management's estimates,

  • The assessment of determination of useful lives of each components and residual values involves managements' significant estimates.

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Group's financial reporting process.

Auditor's responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

  • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
  • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control.
  • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
  • Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern.
  • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
  • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards actions taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

PwC Bağımsız Denetim ve

Serbest Muhasebeci Mali Müşavirlik A.Ş.

Baki Erdal, SMMM

Independent Auditor

Istanbul, 3 April 2024

TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIES

Consolidated Statement of Financial Position as at 31 December 2023

(All amounts are expressed in Million US Dollars (USD) unless otherwise stated.)

ASSETS

Notes

31 December 2023

31 December 2022

Non-Current Assets

Financial Investments

6

398

165

Other Receivables

-Third Parties

11

1,395

957

Investments Accounted for Using Equity Method

3

497

277

Investment Property

14

43

69

Property and Equipment

15

6,075

4,654

Right of Use Assets

15

16,928

16,577

Intangible Assets

- Other Intangible Assets

16

87

77

- Goodwill

27

27

Prepaid Expenses

13

1,294

914

Deferred Tax Asset

31

332

2

TOTAL NON-CURRENT ASSETS

27,076

23,719

Current Assets

Cash and Cash Equivalents

5

683

4,075

Financial Investments

6

5,344

626

Trade Receivables

-Related Parties

8

50

31

-Third Parties

9

806

964

Other Receivables

-Related Parties

8

9

13

-Third Parties

11

880

864

Derivative Financial Instruments

33

18

44

Inventories

12

418

331

Prepaid Expenses

13

237

176

Current Income Tax Assets

31

41

35

Other Current Assets

23

109

66

TOTAL CURRENT ASSETS

8,595

7,225

TOTAL ASSETS

35,671

30,944

The accompanying notes are an integral part of these consolidated financial statements.

1

TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIES

Consolidated Statement of Financial Position as at 31 December 2023

(All amounts are expressed in Million US Dollars (USD) unless otherwise stated.)

LIABILITIES AND EQUITY

Notes

31 December 2023

31 December 2022

Equity

Share Capital

24

1,597

1,597

Treasury Shares

24

(33)

-

Items That Will Not Be Reclassified to

Profit or Loss

-Actuarial Losses on Retirement Pay Obligation

24

(274)

(228)

Items That Are or May Be Reclassified to

Profit or Loss

-Foreign Currency Translation Differences

24

(221)

(294)

-Fair Value Gains on Hedging Instruments

24

Entered into for Cash Flow Hedges

281

515

-Losses on Remeasuring FVOCI

21

(14)

Restricted Profit Reserves

24

69

36

Previous Years Profit

8,097

5,405

Net Profit for the Year

6,021

2,725

Equity of the Parent

15,558

9,742

Non-Controlling Interests

5

-

TOTAL EQUITY

15,563

9,742

Non-Current Liabilities

Long-Term Borrowings

7

472

1,115

Long-Term Lease Liabilities

7 and 17

10,052

9,177

Other Payables

-Third Parties

11

25

24

Deferred Income

13

108

108

Long-Term Provisions

-Provisions for Employee Termination Benefits

21

229

273

-Other Provisions

19

85

61

Deferred Tax Liability

31

50

2,220

TOTAL NON-CURRENT LIABILITIES

11,021

12,978

Current Liabilities

Short-Term Borrowings

7

1,345

1,058

Short-Term Portion of Long-Term Borrowings

7

618

1,100

Short-Term Portion of Lease Liabilities

7 and 17

1,760

1,589

Trade Payables

-Related Parties

8

285

270

-Third Parties

9

1,006

930

Payables Related to Employee Benefits

10

418

183

Other Payables

-Related Parties

8

4

13

-Third Parties

11

238

112

Derivative Financial Instruments

33

101

211

Deferred Income

13

2,705

2,394

Current Tax Provision

31

39

3

Short-Term Provisions

-Provisions for Employee Benefits

19

50

39

-Other Provisions

19

6

6

Other Current Liabilities

23

512

316

TOTAL CURRENT LIABILITIES

9,087

8,224

TOTAL LIABILITIES AND EQUITY

35,671

30,944

The accompanying notes are an integral part of these consolidated financial statements.

2

TÜRK HAVA YOLLARI ANONİM ORTAKLIĞI AND ITS SUBSIDIARIES

Consolidated Statement of Profit or Loss and Other Comprehensive Income

For the Year Ended 31 December 2023

(All amounts are expressed in Million US Dollars (USD) unless otherwise stated.)

1 January -

1 January -

PROFIT OR LOSS

Notes

31 December 2023

31 December 2022

Revenue

25

20,942

18,426

Cost of Sales (-)

26

(16,060)

(14,036)

GROSS PROFIT

4,882

4,390

General Administrative Expenses (-)

27

(449)

(284)

Selling and Marketing Expenses (-)

27

(1,760)

(1,390)

Other Operating Income

28

509

230

Other Operating Expenses (-)

28

(323)

(167)

OPERATING PROFIT BEFORE

INVESTMENT ACTIVITIES

2,859

2,779

Income from Investment Activities

29

933

316

Expenses for Investment Activities

29

(65)

(23)

Share of Investments' Profit Accounted

for Using The Equity Method

3

232

121

OPERATING PROFIT

3,959

3,193

Financial Income

30

611

745

Financial Expenses (-)

30

(931)

(999)

Monetary Gain

2

-

PROFIT BEFORE TAX

3,641

2,939

Tax Expense

2,380

(214)

Current Tax (Expense) / Income

31

(66)

(35)

Deferred Tax Income / (Expense)

31

2,446

(179)

Deferred Tax Expense

(597)

(179)

Effect of Deferred Tax Income From Inflation Adjustment

3,043

-

NET PROFIT FOR THE YEAR

6,021

2,725

OTHER COMPREHENSIVE INCOME

Items That May Be Reclassified Subsequently To

Profit or Loss

(126)

338

Currency Translation Adjustment

73

(19)

Gains / (Losses) on Investments Remeasured FVOCI

35

(8)

Fair Value Gains on Hedging Instruments

Entered into for Cash Flow Hedges

(278)

462

Fair Value Gains Hedging Instruments of

Investment Accounted by Using the Equity Method

Entered into for Cash Flow Hedges

(9)

(7)

Related Tax of Other Comprehensive Income

53

(90)

Items That Will Not Be Reclassified Subsequently

To Profit or Loss

(46)

(157)

Actuarial Losses on Retirement Pay

Obligation

(56)

(196)

Related Tax of Other Comprehensive Income

10

39

OTHER COMPREHENSIVE INCOME

FOR THE YEAR

(172)

181

TOTAL COMPREHENSIVE INCOME

FOR THE YEAR

5,849

2,906

Basic Earnings Per Share (Full US Cents)

32

4.36

1.97

Diluted Earnings Per Share (Full US Cents)

32

4.36

1.97

The accompanying notes are an integral part of these consolidated financial statements

3

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