Message From the Chairman - 2006

The year 2006 represents a special period of time within the history of Turkish Airlines, Inc. We have taken important steps in adapting to the changing conditions, as well as realizing the growth process. While doing all these, we left our public institution identity behind and turned into an incorporated company, 49% shares of which belong to public, via the Secondary Public Offering (SPO).

This transformation means a fundamental change of environment for our Company. I can summarize our attitude against the challenge ahead as adapting to the new environment we are in, achieving the maximum benefit from the flexibilities provides in favor of the Company, and adopting a new inspection method which will not fail to fill the lack of inspection, occurring from the removal of the Turkish Grand National Assembly Inspection upon us.

Turkish Airlines also took important steps in 2006, with regard to adaptation to the changing conditions parallel to the financial developments throughout the world, self-renewal, and making use of opportunities.

At the date of April 1, 2003, when we were appointed, Turkish Airlines was flying 64 aircraft, 11 of which were Avro Regional Jet; today, Turkish Airlines removed the Avros totally from its fleet, and have actually included half of the 63 new aircraft that are decided to be bought, and exceeded 100 planes.

In parallel with expanding fleet size, Turkish Airlines increased the number of pilots from 600 to 1,200, and the number of cabin crew from 1,700 to 2,600; and therefore, performed a rapid increase in terms of human resources, especially in the 2005- 2006 period.

As advancing from a company with 300 departures daily to a company with 500 departures, the ramp services of the Handling Services, which are comprised of apron and background works, are transferred to institutions with Group-A Handling Certificate along with management responsibility.

In a period when unprecedented increases in business volume were experienced in Turkish Civil Aviation, our Company has achieved a 83% in terms of on-time departures, and ranked up to the 2nd place among European companies with similar schedules.

By adding economically and efficiency aspects into the aircraft maintenance, repair, and modification skill that our Company transformed into an important asset as a result of long years' experience, our Company moved towards a new restructuring as Turkish Airlines Technics, Inc. in June 2006. This new restructuring has opened the way for distinguishing and evaluation of Technical Assistantship performance under our Directorate General, which is attached to the main field of activity of aircraft management, and formed an important phase in the efficient use of resources.

Our Company, providing the return maintenances of the Avro planes with high management and maintenance costs, has removed all such planes from its fleet, eliminated customer dissatisfaction, and by replacing the A319 planes with Avros, achieved a deduction in management and maintenance costs.

Instead of purchasing external Call Center services, our Company moved on to the concept of Customer Contact Center by resolving the issue internally, and by including 96 disabled people in addition to the newly-employed 250, it formed the ground for new developments in this area. Whereas 25% of the calls were not replied in 2004, this ratio decreased to 2% in 2006. Reply times up to 30 minutes are pulled down to 20 seconds. This performance has been achieved in a period when the maximum daily call number increased from 18,000 to 28,000.

In addition to the one in Ataturk Airport, Turkish Airlines started operating from Sabiha Gökçen Airport in Istanbul, and carried the operation in here up to the scope of Ankara Esenboğa within 2006. In 2006, the number of passengers carried from Sabiha Gökçen exceeded 1,200,000.

By directing SunExpress company, whose 50% shares are owned, towards domestic and international scheduled flights, Turkish Airlines provided a new expansion, and for now, it has been carrying 1,500,000 passengers with fair prices (by Low- Cost Business Model), without moving to Istanbul and Ankara.

By passing to the "Flight Training Organization" through the purchase of three training planes in 2006, our Company has started to train its own pilots who will serve for years, within its system of own sources, based on the youth who successfully receive their graduate levels in various engineering fields and have perfect level of foreign language.

By purchasing A320 simulator, our Company has strengthened its present influence within the existing Pilot Training infrastructure, and achieved savings on resources by meeting the needs of Turkish Airlines and other private Turkish companies.

Completing IOSA inspections successfully, Turkish Airlines once more proves its compliance to all existing standards in terms of aviation security and accreditation.

Carmen Systems is agreed on and implemented as Crew- Planning software. Thus, human resources in Cockpit and Cabin will be used more effectively and efficiently.

By forming CIP lounges in both domestic and international flights, Turkish Airlines saved time for its loyal customers and distinguished them, Business Class being the foremost.

Within the framework of the aim to establish access to all points which can be gone reached from Turkey and show potential in the short-term, flight network is expanded over 100 points abroad by the establishment of 24 new flight destinations in 2006. This implementation has been successful and exceeded our expectations.

By moving towards managing the catering services produced by Turkey with an affiliated partnership that is found by us and called Do&Co. Inc., a new concept and approach to catering are adopted by the Company. This enterprise will provide an important advantage to Turkish Airlines in attracting customer attention among its peers with the same or less expenditure. Additionally, with flexibility and considerable saving in parallel with the dynamism and variability in customer demands, foundations of a world brand in aviation catering sector has been laid.

Our Management, foreseeing that competition in air transport industry with international schedule would be observed between blocks, decided to join Star Alliance which has an intense and positive cooperation character, and signed the protocol which regulates the accession on December 9, 2006. The process with regard to alliance membership shall be provided within 2007, and before the summer season 2008, certain membership shall be established.

Turkish Airlines, having signed contract in order to convert 3 of its A310 planes to cargo in 2007 and 2008 with EADS Group which is authorized to convert passenger aircraft to cargo, has formed the core of the steps it will take in cargo transportation.

Within the context of placing the Company's relationships with agencies on new conditions, "Zero Commission + Service Costs + Incentive” system is implemented instead of “Commission + Incentive” system as of summer season 2007.

Our Management and all our personnel, who are constantly devoted to Turkish Airlines, carry the pride of representing our nation throughout the world. Elimination of deficiencies occurring from time to time in this representation is our constant aim.

Our concepts with regard to the future of Turkish Airlines have surrounded our minds and hearts as the project of realizing Mustafa Kemal Ataturk's direction of "The future is in the skies". We deeply wish to be able to realize the second five-year portion of the 15-years of perspective we formed when we were appointed.

Dr. Candan KARLITEKIN
On behalf of the Board of Directors