Türk Hava Yollari Anonim Ortakligi : Board’s Activity Report 2Q'22

TÜRK HAVA YOLLARI A.O.

Page : 1

BOARD ACTIVITY REPORT

PURSUANT TO THE COMMUNIQUE SERIAL II. NO.14.1

1 JANUARY - 30 JUNE 2022

BOARD's ACTIVITY REPORT

TÜRK HAVA YOLLARI A.O.

Page : 2

BOARD ACTIVITY REPORT

PURSUANT TO THE COMMUNIQUE SERIAL II. NO.14.1

TABLE OF CONTENTS
1.	INDUSTRY DEVELOPMENTS ....................................................................................................	3
2.	FIELD OF ACTIVITY, CAPITAL STRUCTURE AND SUBSIDIARIES ...............................	4
3.	ORGANIZATIONAL STRUCTURE ............................................................................................	9
4.	BOARD OF DIRECTORS AND COMMITTEES .....................................................................	11
5.	SENIOR MANAGEMENT...........................................................................................................	12
6.	HUMAN RESOURCES ................................................................................................................	12
7.	DEVELOPMENTS WITHIN THE INCORPORATION..........................................................	13
8.	TRAFFIC RESULTS ....................................................................................................................	15
9.	FLEET ............................................................................................................................................	17
10.	FINANCIAL SITUATION ...........................................................................................................	18
11.	INVESTMENTS, INCENTIVES AND INVESTMENT POLICIES........................................	19
12.	PROJECTIONS ABOUT THE INCORPORATION ................................................................	21
13.	OTHER INFORMATION ............................................................................................................	21

TÜRK HAVA YOLLARI A.O.

Page : 3

BOARD ACTIVITY REPORT

PURSUANT TO THE COMMUNIQUE SERIAL II. NO.14.1

1. INDUSTRY DEVELOPMENTS

The global COVID-19 pandemic crisis we faced in the first quarter of 2020, has deeply affected the global aviation sector. Vaccine studies finally showed positive result in the later 2020 and the countries started to vaccinate their citizens afterward. The increase in the number of vaccinated people have a direct and positive impact on the world economy as well as the aviation sector. In consequence of successful vaccination roll out campaigns, many countries eased travel restrictions which resulted in rapidly increasing passenger demand.

While the impact of Covid-19 pandemic had not been fully recovered, rising geopolitical tensions effected the industry once again. Besides, airports across Europe started to experience operational disruptions due to staff shortages. Because of its operational resilience and highly qualified work force which was preserved during the pandemic, in the first half of the year, Turkish Airlines carried 31 million passengers, reaching 88% of 2019 level. In the same period, our Incorporation became the only network carrier around the globe that surpassed pre- pandemic capacity levels. According to The International Air Transport Association (IATA), while global international passenger capacity reached 65% of 2019 level, European international passenger capacity reached 81% of 2019 level in June 2022. Turkish Airlines has continued to differentiate itself from its peers and exceeded 2019 capacity levels by 22%. Additionally, in the first half of 2022, Turkish Airlines has ranked first among the European network carriers in terms of flights according to the European Organization for the Safety of Air Navigation (Eurocontrol)*.

Turkish Airlines has gained the market share with its cargo operations during the pandemic period. Our Incorporation has made significant contributions to the transportation of medical supplies in the combat against COVID-19 outbreak. Turkish Cargo carried 335 million doses of Covid-19 vaccine to 61 countries. Especially considering the low number of carriers flying to Africa, Turkish Cargo undertook an important mission to ensure that vaccines remained accessible for people who live in this continent. The Incorporation has achieved to maintain its strong growth trend in the cargo market over the last decade and consequently, cargo revenue increased by 16% during the first half of 2022 compared to same period of previous year. According to data revealed by World Air Cargo Data (WACD), the international air cargo information provider, Turkish Cargo ranked in fourth place among the global air cargo carriers in terms of sales tonnage in June. In February of 2022, Turkish Cargo moved cargo operations to its highly technological new hub, SMARTIST. Thanks to its new home equipped with smart technology, the Company aimed to improve its position among the top air cargo carriers in the world. Turkish Airlines takes firm steps forward to be one of the largest air cargo carriers in the world by increasing its market share in the global air cargo market.

*Average number of daily flights is considered.

Oil Price per Barrel (Monthly Average)

		2021 Avg: $ 65				Change 22/21: 64.9%					2022 Avg: $ 107
$55	$62	$65	$65	$69	$73	$75	$71	$74	$84	$81	$74	$87	$97	$117	$105	$113	$123
Jan.21	Feb.21	Mar.21	Apr.21	May.21	Jun.21	Jul.21	Aug.21	Sept.21	Oct.21	Nov.21	Dec.21	Jan.22	Feb.22	Mar.22	Apr.22	May.22	Jun.22
Source: U.S. Energy Information Administration

TÜRK HAVA YOLLARI A.O.

Page : 4

BOARD ACTIVITY REPORT

PURSUANT TO THE COMMUNIQUE SERIAL II. NO.14.1

The table below sets out the fuel price analysis of the Incorporation.

FUEL PRICE ANALYSIS	2018	2019	2020	2021	6M'21	6M'22
Fuel Expenses (Million $)	3,768	3,873	1,638	2,756	981	2,779
Fuel Consumption (000 Tons)	5,278	5,525	2,803	4,156	1,672	2,564
Average Unit Cost ($/Tons)	714	701	584	663	587	1,084
Average Change of Unit Cost (%)	21%	-2%	-17%	13%	-12%	85%
Fuel Expense Share in Operational Expenses (%)	32%	31%	23%	29%	25%	40%

2. FIELD OF ACTIVITY, CAPITAL STRUCTURE AND SUBSIDIARIES

Türk Hava Yolları Anonim Ortaklığı (the "Incorporation" or "THY") was founded in Türkiye in 1933. The Company's main fields of activity are all types of domestic and international passenger and cargo air transportation.

The Incorporation is registered in Istanbul, Türkiye (Reg. No: 75184) and its head office address is Türk Hava Yolları A.O. Genel Yönetim Binası, Yeşilköy Mah. Havaalanı Cad. No:3/1 34149 Bakırköy, İstanbul/Türkiye. Detailed information about the Incorporation can be reached via Investor Relations Website. (http://investor.turkishairlines.com/en)

The authorized capital of the Incorporation is 5,000,000,000 (five billion) Turkish Lira, while the issued share capital is 1,380,000,000 (one billion three hundred and eighty million) Turkish Lira divided into 138,000,000,000 (one hundered thirty eight billion) shares, each with the nominal value of 1 Kuruş (one kuruş) and is completely paid.

Shares are divided into two groups, the distribution of share groups of the issued capital is as follows:

				Amount of			Ownership			Amount of			Rate of
	Shareholder			Nominal					Shares			Voting Right
					(%)
				Shares (TL)					(#)			(%)
	Türkiye Wealth Fund (Group A)	677,884,849		49.12		67,788,484,857		49.12
	The Republic of Türkiye Ministry of Treasury and Finance			0.01						1
	Privatization Administration (Group C)
	Open for Public (Group A)	702,115,151		50.88		70,211,515,142		50.88
	TOTAL			1,380,000,000			100.00			138,000,000,000			100.00

Group C share belongs to the The Republic of Türkiye Ministry of Treasury and Finance Privatization Administration and privilages granted to Group C share are defined in the Articles of Association of the Incorporation.

TÜRK HAVA YOLLARI A.O.

Page : 5

BOARD ACTIVITY REPORT

PURSUANT TO THE COMMUNIQUE SERIAL II. NO.14.1

The Group has 7 subsidiaries as of 30 June 2022. The table below sets out the consolidated subsidiaries and participation rate of the Group in these:

		Direct	Country of
Name of the Company	Field of Activity	Participation	Registration
		Rate
Turkish Technic Inc.	Aircraft Maintenance Service	100%	Türkiye
Flight Training and	Flight Training and	100%	Türkiye
Airport Operations Inc.	Airport Operations
Turkish Airlines Airport Real	Investment & Airport	100%	Türkiye
Estate Investment and Management	Operations
Inc.
Turkish Airlines International	Transportation and	100%	Türkiye
Investment and Transport Inc.	Investment
Cornea Aviation Systems Industry	In-Flight Entertainment	80%	Türkiye
and Commerce Inc.	Systems and Internet Service
Turkish Airlines Technology Inc.	Information and Technology	100%	Türkiye
THY Air Cargo Transport Inc.	Cargo Transportation	100%	Türkiye

Turkish Technic Inc.

Turkish Technic was established in 2006 as a 100%-owned subsidiary of Turkish Airlines, and merged with Turkish Airlines HABOM Inc. in June 2015. As of 30 June 2022, with 8,832 employees and various affiliate companies, Turkish Technic is among the world's largest aircraft maintenance, repair and overhaul (MRO) centers in the air transport industry. After moving to Istanbul Airport in 2019, Turkish Technic opened the first maintenance hangars of the MRO complex in October 2020. The facility was designed to provide all maintenance, repair and overhaul services from a single point to many domestic and foreign airlines, especially Turkish Airlines, in June 2021. Turkish Technic's facility is the first and only MRO providing base maintenance service at Istanbul Airport. In order to increase the number of foreign airlines it serves and its market share, Turkish Technic continues its activities in its hangars located at 5 different airports in Ankara, Aydın and Istanbul (Atatürk, Istanbul and Sabiha Gökçen Airports).

Turkish Flight Training and Airport Operations Inc. The Company was established on 21 June 2012 as a wholly owned subsidiary of Turkish Airlines. Yet to commence operations, it was established to operate Aydın Çıldır Airport, provide aviation training, organize sports-trainingflights and conduct all activities related to the transportation of passengers with aircraft appropriate to prevailing runway length. The airport is used as a base for Turkish Airlines Flight Academy and since the first half of 2013 provides flight training for Turkish Airlines pilot nominees. As of 30 June 2022, the Company has 98 employees.

Turkish Airlines Airport Real Estate Investment and Management Inc.

The Company, which is wholly owned by our Incorporation, was established on 15 November 2017 in order to operate principally in the fields of airport operations and investments and also according to the fields of other activity that is specified in the Articles of Association of the Company.