Research Update: Turkish Airline Turk Hava Yollari 'BB-' Rating Affirmed; Outlook Negative; Trust Certificates Rating Lowered To 'BBB-'

While Turk Hava Yollari A.O.'s (THY) financial profile suffered from geopolitical tensions and terrorist attacks in Turkey in 2016, we believe the airline's operational performance and credit metrics are showing signs of recovery and expect this will continue in 2017. While we have seen improvement in EBITDA margins in recent months from cost-management initiatives, we believe that 2015's record profitability levels will be unachievable in the medium term. We are affirming our 'BB-' rating on THY and lowering our rating on its enhanced equipment trust certificates by one notch to 'BBB-', due to our view of less legal certainty in Turkey and reduced collateral coverage. The negative outlook reflects that on the Republic of Turkey and THY's weak credit measures

...+ While Turk Hava Yollari A.O.'s (THY) financial profile suffered from geopolitical tensions and terrorist attacks in Turkey in 2016, we believe the airline's operational performance and credit metrics are showing signs of recovery and expect this will continue in 2017. + While we have seen improvement in EBITDA margins in recent months from cost-management initiatives, we believe that 2015's record profitability levels will be unachievable in the medium term. + We are affirming our '##-' rating on THY and lowering our rating on its enhanced equipment trust certificates by one notch to '###-', due to our view of less legal certainty in Turkey and reduced collateral coverage. + The negative outlook reflects that on the Republic of Turkey and THY's weak credit measures for the current rating....

Research Update