Message From the Chairman - 2007

In 2007, our Company continued its steady march towards becoming a global player in the highly competitive aviation industry by further increasing efficiency and effectiveness. At the end of this successful year, we are pleased to have achieved all of the goals that we had set out for ourselves. This past year was not only a year of increasing passenger numbers and revenue streams; it was also a year in which we achieved each and every one of our quality targets.

Our growth numbers have always stood out from other measurable data and as such have broken record upon record. While member companies of the Association of European Airlines last year averaged a growth rate of 4.1%, THY grew 16% to reach 20 million passengers. We provided service to regions across the globe through 141 flight destinations, 102 aircraft, and approximately 11,000 personnel.

While THY’s passenger numbers doubled over the past four years, we are very happy to see that this growth was accompanied by commensurate achievements in safety, quality and other similar areas to which we assign great importance. Our Company ranked first in Europe for Operational Safety Level among the member companies of the Association of European Airlines. Thus, the safety of our aircraft, which are maintained by THY Teknik A.S., has once again been memorialized. As a company that treats flight safety as its fundamental priority, THY has established itself as a trustworthy name worldwide, and these results also speak to the success of our personnel. The most important force behind these successful achievements is the THY Reliability Control Program.

In the meantime, the independent rating agency Skytrax, which evaluates airlines and airports based on quality and service standards, increased Turkish Airlines’ rating to four-star. With these results, THY now occupies a place among the most prestigious names in world aviation. Our efforts were also recognized in the conclusions of the Turkish Customer Satisfaction Index (TMME). The TMME provides important information on timeliness in tracking trends in customer satisfaction, customer loyalty, and related profitability and competitiveness. This year was the first in which the aviation sector was measured, and THY was pronounced to be the first-place company by the Quality Association (KALDER).

Turkish Airlines has always viewed customer satisfaction as its highest priority. We are aware that understanding the customer is most basic factor in increasing customer satisfaction and loyalty. In this vein, we kicked off the “Secret Customer and Honorary Observer” program in January of 2007. Through this project, we are able to gain insight into the expectations of our customers and plan THY’s future in line with those expectations. The project allows us to monitor under pre-set scenarios the quality of all our services before, during and after flights in our call centers, sales offices, agencies, and check-in desks as well as our Internet site.

As the face that greets Turkish Airlines' customers, our website (www.thy.com) received the first-place award among 1,061 website entries in the "E-Commerce" category of the 5th Golden Spider Web Awards, and placed second in the "Corporate Communications" category. This award is testimony of the effective administration of our website, which has seen its number of users increase from 1 million to 2.5 million and for which numerous expression of gratitude for both its design and usability have been received from passengers. Through on-going renewal, we continuously increase the variety and quality of the services we are able to provide on our website, which is accessible in 17 different languages. We now provide our customers with online boarding services, which is offered by only a small handful of airlines worldwide. Hence passengers who check-in through our website are able to prepare online boarding cards and proceed directly to their flights for boarding.

Our website has been active since 1996, and has now engineered another revolution to add to such services as reservations, electronic ticketing (e-ticket), and online check-in. Always been an innovator in Turkey, Turkish Airlines now offers a Flexible Price Viewing System service through its website, www.thy.com. This system, available for international flights, makes inquiries into seat availability and pricing much faster and easier. Travel opportunities are enhanced by the ability to search for seat availability three days prior to or after desired dates, and to scan one day forward or backwards for better ticket prices and various other options.

Our strides in growth, development and transformation have placed their stamp on the past four years. By the end of 2008, the number of our aircraft will increase from 102 to 119, and we will offer our passengers more options and flexibility in the frequency of service on our routes. At the end of March we will finalize our membership in the Star Alliance, and as a result, our existing high standards of service and our values towards flight safety will become better known and recognized throughout the world through Star Alliance accreditation. By delivering brand new options, possibilities, and opportunities to our customers, we will fully cement our identity as a global airline.

Interior work has been completed on two of our double-aisle, wide-body aircraft serving long-haul routes in particular, and these aircraft have entered active service in our fleet, having been outfitted with the maximum standards of comfort and the latest entertainment systems. AVOD digital in-flight entertainment systems have been installed in our A-340 aircraft, in addition to our A-330 aircraft serving long-haul routes. This system allows our passengers to choose desired applications by remote control in business class and by either remote control or touch screen in economy class. As a result of this work, THY’s success was recognized through selection as the third best airline at the 19th Avion Awards, which judges on-board services. This award, which was organized in conjunction with the WAEA by Skytrax, one of the world's most respected auditing and consulting firms, was voted on via website by passengers from around the world, and is held up as a fruit of our efforts in on-board services.
The success of the past four years clearly cannot only be attributed to continuous and pure growth alone. The most important elements driving this growth have been the development of new products and quality services and maintaining a favored position over our competitors, while rigorously adhering to Turkish Airlines’ uncompromising culture of placing traffic safety as the basic principal in all matters. In this context, THY has established a new subsidiary, Turkish Do&Co A.Ş., which provides high-quality catering services and has been a source of great satisfaction to our customers.

In line with its policy of product diversification, THY offers through SunExpress - a company in which it has a 50% ownership share - affordable (low-cost business model) passenger carrier services direct between Izmir, Antalya, and Adana with no stops in Istanbul or Ankara and on certain other international routes. In this same vein, a preparations are nearly complete for a new operation that will be based out of Ankara and operated under the trust of THY. We will offer this new service under a different "brand", and it will feature flights with frequencies sufficient to tie together the four corners of Anatolia. Because costs will be relatively low, ticket prices will be held at affordable levels, and the project will serve as a feeder out of Ankara into THY flights to the important cities of the world. In this manner, the establishment of a regional flight service network will begin in Anatolia.

A new A320 flight simulator equipped with cutting-edge technology has been added to the three existing simulators in our Flight Training Center. With this fourth simulator, the Turkish Airlines Flight Training Center provides training services to over 30 national and international airline companies, not including Turkish Airlines itself. A total of 11,000 hours of simulator usage brought in EUR 4.5 million of revenue.

As a leading innovator in our country, THY has made a historic decision to establish the THY Flight Training Academy to train pilots to world standards. Thus, THY will train both its pilots as well as future pilots of the region’s airlines to the standards required for duty as pilots and licenses holders for commercial airlines.

In 2008, the International Air Transport Association will hold its annual meeting in Turkey for the first time, bringing Istanbul to the forefront of world aviation. This meeting will be significant not only in promoting THY, but also in bringing publicity to Istanbul and the rest of our country.

At the close of 2007, the Board of Directors developed further our previously laid-out strategy and resolved to commence a new push forward. We formed a new dream, extending to the 100th anniversary of the Turkish Republic. This dream sets a goal for Turkish Airlines to have a fleet of approximately 250 aircraft, to be a global player in every sense of the word, to provide service well beyond the potential offered by Turkey alone, and to conduct its work with great rigor, effectiveness, and efficiency. The upcoming celebration of our 75th anniversary on May 20, 2008 acts as sufficient encouragement for us to build on this dream. In order for it to become reality, we herald 2008 as a period in which we will work with both passion and enjoyment.

We commemorate with gratitude the founders of our Republic and of Turkish Airlines - first and foremost the source of our inspiration, Mustafa Kemal Ataturk - for laying the foundations upon which, one by one, we have built our dreams.

Our wholly-owned subsidiary, Turkish Technic Inc., has entered into a joint-venture agreement with Pratt&Whitney, one of the largest company’s in its sector, to establish a large-scale engine maintenance center. This will be Pratt&Whitney’s eighth global-scale maintenance center. The JV will transform our Technical division into the highest quality and most recognized and preferred customer-focused center for aircraft maintenance in the region.

In June of 2008, Turkish Airlines hosted in Istanbul the IATA’s 64th Annual General Assembly, one of world’s most important aviation summit meetings. The assembly brought together senior executives from 240 of the world’s airlines and drew international media attention. One of the assembly’s most important conclusions was that the era of paper-based tickets for IATA member-airlines has come to a full end. Istanbul thus played host as we witnessed a historic moment in aviation history.

The extraordinary rise in oil prices and increases to airport and environmental taxes had a major impact on the tenor of the summit meeting, which serves as a platform for assessment and discussion of the future of aviation. Participants at the summit were duly impressed with the success of Turkish Airlines during a period in which the aviation sector around the world is struggling with the effects of rising oil-related costs.

We take particular pleasure in seeing our ongoing work in the improvement of service quality bear fruit. This year, the 20th Avion Awards were presented on the basis of seven different categories of in-flight entertainment services, and Turkish Airlines was proud to receive the overall 3rd place award according to the ratings of two of the world’s most respected auditing and consulting companies in Skytrax and the World Airline Entertainment Association.

We continue to offer our passengers in-flight entertainment via personal screens on our fleet’s A330 and modified A340 aircraft. In addition, we have caused a stir with our in-flight meals by removing all manufactured foods and instead serving meals using only fresh raw materials and prepared by professional chefs to our passengers taste. Moreover, as of the end of December 2008 we have begun First Class service on two of our wide-body long haul B777-300 aircraft, initially on routes serving London, Hong Kong and Singapore.

We have every confidence in our ability to continue on these successes, and are determined to surpass the results achieved so far. In pushing Turkish Airlines to even greater heights, we strive to place it among the select companies of Europe and the world. Our short-term goal is to become one of Europe’s four largest airlines and to reach 40 million passengers and revenues of $10 billion by 2013, cementing Turkish Airlines’ place as a national symbol that instills pride in its country’s citizens. As we increase our passenger numbers and boost profitability, we never lose sight of our aim to separate ourselves from our competitors through the high quality of our service.

Only with the support of our valued passengers and the efforts of our dedicated employees will we be able to surpass these expectations. As we complete our 75th year, we owe a debt of gratitude to those that have stayed by our side and given us their trust and support on this journey.

Sincerely,

Dr. Candan KARLITEKIN
On behalf of the Board of Directors