PEGASUS HAVA TAŞIMACILIĞI ANONİM ŞİRKETİ
ACTIVITY REPORT OF THE BOARD OF DIRECTORS
FOR THE PERIOD BETWEEN JANUARY 1 - DECEMBER 31, 2023
MARCH 4, 2024
Genel (Public)
Güney Bağımsız Denetim ve SMMM A.Ş. | Tel: +90 212 315 3000 |
Maslak Mah. Eski Büyükdere Cad. | Fax: +90 212 230 8291 |
Orjin Maslak İş Merkezi No: 27 | ey.com |
Daire: 57 34485 Sarıyer | Ticaret Sicil No : 479920 |
İstanbul - Türkiye | Mersis No: 0-4350-3032-6000017 |
(Convenience translation of a report originally issued in Turkish)
INDEPENDENT AUDITOR'S REPORT ON THE ANNUAL REPORT OFTHE BOARD OF DIRECTORS
To the Shareholders of Pegasus Hava Taşımacılığı Anonim Şirketi
- Opinion
We have audited the annual report of Pegasus Hava Taşımacılığı Anonim Şirketi ("the Company") and its subsidiaries ("the Group") for the period of 1 January - 31 December 2023.
In our opinion, the consolidated financial information provided in the annual report of the Board of Directors and the discussions made by the Board of Directors on the situation of the Group are presented fairly and consistent, in all material respects, with the audited full set consolidated financial statements and the information we obtained during the audit.
- Basis for Opinion
We conducted our audit in accordance with standards on auditing as issued by the Capital Markets Board of Turkey and Independent Auditing Standards (InAS) which are part of the Turkish Auditing Standards as issued by the Public Oversight Accounting and Auditing Standards Authority of Turkey (POA). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Annual Report section of our report. We are independent of the Group in accordance with the Code of Ethics for Independent Auditors (Code of Ethics) as issued by the POA, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
- Our Auditor's Opinion on the Full Set Consolidated Financial Statements
We have expressed an unqualified opinion in our auditor's report dated March 4, 2024 on the full set consolidated financial statements of the Group for the period of 1 January - 31 December 2023.
- The Responsibility of the Board of Directors on the Annual Report
In accordance with Articles 514 and 516 of the Turkish Commercial Code 6102 ("TCC") and the provisions of the Communiqué II-14.1 on the Principles of Financial Reporting In Capital Markets" ("the Communiqué") of the Capital Market Board ("CMB"), the management of the Group is responsible for the following items:
- Preparation of the annual report within the first three months following the balance sheet date and submission of the annual report to the general assembly.
- Preparation and fair presentation of the annual report; reflecting the operations of the Group for the year, along with its financial position in a correct, complete, straightforward, true and honest manner. In this report, the financial position is assessed according to the consolidated financial statements. The development of the Group and the potential risks to be encountered are also noted in the report. The evaluation of the board of directors is also included in this report.
- The annual report also includes the matters below:
- Subsequent events occurred after the end of the fiscal year which have significance,
- The research and development activities of the Group,
- Financial benefits such as salaries and bonuses paid to the board members and to those charged governance, allowances, travel, accommodation and representation expenses, financial aids and aids in kind, insurances and similar deposits.
When preparing the annual report, the board of directors takes into account the secondary legislative arrangements published by the Ministry of Customs and Trade and related institutions.
A member firm of Ernst & Young Global Limited
(Convenience translation of a report originally issued in Turkish)
- Auditor's Responsibilities for the Audit of the Annual Report
Our aim is to express an opinion, based on the independent audit we have performed on the annual report in accordance with provisions of the Turkish Commercial Code and the Communiqué, on whether the consolidated financial information provided in this annual report and the discussions of the Board of Directors are presented fairly and consistent with the Group's audited consolidated financial statements and to prepare a report including our opinion.
The independent audit we have performed is conducted in accordance with InAS and the standards on auditing as issued by the Capital Markets Board of Turkey. These standards require compliance with ethical provisions and the independent audit to be planned and performed to obtain reasonable assurance on whether the consolidated financial information provided in the annual report and the discussions of the Board of Directors are free from material misstatement and consistent with the consolidated financial statements.
The name of the engagement partner who supervised and concluded this audit is Sinem Arı Öz.
Güney Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi A member firm of Ernst & Young Global Limited
Sinem Arı Öz, SMMM
Partner
March 4, 2024 İstanbul, Turkey
(2)
A member firm of Ernst & Young Global Limited
PEGASUS HAVA TAŞIMACILIĞI ANONİM ŞİRKETİ
ANNUAL ACTIVITY REPORT OF THE BOARD OF DIRECTORS
FOR THE PERIOD JANUARY 1 − DECEMBER 31, 2023
This Report is prepared in accordance with the Regulation on the Determination of the Minimum Content of Company Annual Reports published by the Turkish Ministry of Commerce, the Corporate Governance Communiqué No. II-17.1 and the Corporate Governance Principles published by the Turkish Capital Markets Board and other applicable provisions of Turkish law.
As used in this Report, the following terms shall have the meanings indicated below:
- "Board" or "Board of Directors" refers to the Pegasus Airlines Board of Directors.
- "Company" or "Pegasus Airlines" refers to Pegasus Hava Taşımacılığı A.Ş., more fully described in Section 1/A of this Report.
- "Esas Holding" or "Esas" refers to Esas Holding A.Ş.
- "Hitit CS" refers to Hitit Bilgisayar Hizmetleri A.Ş.
- "PIN Lab" refers to Pegasus Innovation Lab, Inc.
- "PFTC in Liquidation" refers to Tasfiye Halinde Pegasus Uçuş Eğitim Merkezi A.Ş.
- "PAT" refers to Pegasus Havacılık Teknolojileri ve Ticaret A.Ş.
- "Principles" refers to the Corporate Governance Principles published by the Turkish Capital
Markets Board. - "Report" refers to this Annual Report of the Pegasus Airlines Board of Directors.
1- GENERAL INFORMATION
A- GENERAL INFORMATION ON PEGASUS AIRLINES
Reporting Period | : January 1, 2023 - December 31, 2023 |
Commercial Title | : Pegasus Hava Taşımacılığı A.Ş. |
Trade Registration | : Istanbul Trade Registry / 261186 |
Central Registry No. | : 0-7230-0470-8500017 |
Headquarters | : Aeropark, Yenişehir Mahallesi, Osmanlı Bulvarı, No: 11/A |
Kurtköy 34912 Pendik / Istanbul | |
Contact Information | : Telephone. +90 216 560 7000 |
Corporate Website. www.flypgs.com | |
Investor Relations Website. | |
http://www.pegasusinvestorrelations.com |
B- VISION, MISSION, AND STRATEGIC TARGETS OF PEGASUS AIRLINES
We operate in line with the strategic targets determined by our Board of Directors in accordance with our aim of being: "To be a leading low-costcarrier across the industry, providing safe and easy travel with low fares" and our motto: "Everybody has the right to fly."
Our strategic targets are underpinned by our key corporate values: Innovation, People Orientation, Competitiveness, Result Orientation, and Effectiveness & Efficiency.
1
Genel (Public)
Our annual budget is approved by our Board of Directors before each fiscal year. Our operational and financial results are monitored by the Board of Directors on a regular basis, against budgeted targets. The Board of Directors reviews our strategic targets and the Company's progress in terms of strategic key performance indicators on a regular basis.
C- CAPITAL, SHAREHOLDING AND ORGANIZATION STRUCTURE OF PEGASUS AIRLINES
Our issued capital is ₺102,299,707 and our authorized capital ceiling is ₺500,000,000. Information on our capital and shareholding structure as of January 1, 2023, and December 31, 2023, respectively, is shown in the table below.
January 1, 2023 | December 31, 2023 | |||
Number of | Shareholding | Number of | Shareholding | |
Shareholder | Shares | Ratio | Shares | Ratio |
Esas Holding | 57,959,838 | 56.66% | 57,959,838 | 56.66% |
Publicly Traded | 42,482,689 | 41.53% | 42,482,689 | 41.53% |
Emine KAMIŞLI | 619,060 | 0.61% | 619,060 | 0.61% |
Ali İsmail SABANCI | 619,060 | 0.61% | 619,060 | 0.61% |
Kazım KÖSEOĞLU | 309,530 | 0.30% | 309,530 | 0.30% |
Can KÖSEOĞLU | 309,530 | 0.30% | 309,530 | 0.30% |
Total | 102,299,707 | 100.00% | 102,299,707 | 100.00% |
As of December 31, 2023, Esas Holding is the controlling shareholder of Pegasus Airlines. Established in 2000, Esas Holding is the largest family-owned investment firm in Türkiye and is backed by the first- and second-generation family members of Şevket SABANCI, one of the five founding members of H. Ö. Sabancı Holding A.Ş., a leading Turkish conglomerate. With offices in Istanbul and London, Esas invests in various asset classes globally including private equity, real estate, venture capital and public markets.
Our Company's management organization chart as of December 31, 2023, is provided in Section 1/F of this Report.
D- INFORMATION ON BUSINESS ACTIVITIES
We are the leading low-cost airline in Türkiye. We operated charter flights since 1990. Following our acquisition by Esas at the beginning of 2005, we changed our business model, introducing a low-cost network carrier model for the first time and focused on providing affordable and on-time air travel service with a young fleet.
As a result of the successful implementation of this low-cost strategy, we experienced rapid expansion of our operations both in domestic and international routes. Between 2009 and 2019, our cumulative average annual passenger growth reached 18%, significantly outpacing the 9% annual average growth recorded by the Turkish market. We operate a growing young and modern fleet of 110 aircraft with 4.62 average aircraft age as of December 31, 2023.
We provide high-frequency services on short- and medium-haul,point-to-point, and transit routes on its domestic and international network primarily from our main hub in Istanbul Sabiha Gökçen International Airport. As of December 31, 2023, we offered scheduled passenger services on 36 domestic routes in Türkiye and 98 international routes to European (including North Cyprus), CIS, Middle Eastern and African destinations, serving a flight network covering 134 destinations in 50 different countries.
Our business model is based on a strong focus on efficient operations and cost control, and revenue generation through various services ancillary to the core air passenger services. In 2023, our CASK, non-fuel was recorded as €c2.26, while revenue recorded from ancillary
2
Genel (Public)
services constituted 30% of total revenue for the period. In 2023, we continued to derive revenue from other services, primarily consisting of cargo services and a relatively low volume of charter and split charter flights for tour operators, which represented 2% of total revenue for the period.
E- INFORMATION ON PRIVILEGED SHARES
We do not have any privileged shares. Therefore, there are no voting privileges attached to Pegasus Airlines shares or any preference in respect of the nomination of Board members or the allocation of any distribution or payment to be made from Company profits.
F- INFORMATION ON THE MANAGEMENT BODY, SENIOR MANAGEMENT AND PEGASUS AIRLINES EMPLOYEES
a)- Management Body: Our management body is the Board of Directors. Within the framework of Article 10 of our Articles of Association, the Board of Directors must be composed of at least five members. Also, pursuant to the Principles, one third of the members of the Board must fulfill the independence criteria determined by the Turkish Capital Markets Board.
Five independent members served in our Board of Directors between October 2022 and March 2023. Three independent board members appointed in the General Assembly Meeting in Marh 31, 2023. All independent Board members were nominated by the Corporate Governance Committee, and each nominee obtained the Capital Markets Board non-objection before taking office as an independent Board member.
Apart from independent Board members, two other members served in the capacity of non- executive Board member at the end of 2023.
The identity, duty and term of office of each Board member are indicated below.
Serves | |||
Name / SURNAME | Duty | Since (1) | Committee Duties |
Mehmet Tevfik NANE | Chairperson of the Board | 2022 | Member, Technology Comm. |
Ali İsmail SABANCI | Non-Executive Board Member | 2005 | - |
Mehmet Cem KOZLU | Non-Executive Board Member | 2013 | Member, Corp. Gov. Comm. |
Hatice Zeynep Bodur OKYAY | Non-Executive Board Member | 2016 | Member, Risk Comm. |
Agah UĞUR | Independent Board Member | 2019 | Chair, Audit Comm. |
Member, Risk Comm. | |||
David Florenz Alexander | Independent Board Member | 2022 | Chair, Risk Comm. |
VISMANS | Member, Technology Comm. | ||
Ayşegül İLDENİZ | Independent Board Member | 2022 | Chair, Corp. Gov. Comm. |
Member, Audit Comm., | |||
Technology Comm. | |||
Hüseyin Çağatay ÖZDOĞRU(2) | Board Member | 2023 | - |
- Board appointments are made annually at the discretion of our shareholders and our current Board members were appointed for a term of one year at the Annual General Assembly Meeting dated March 30, 2023.
- Appointed to succeed Stephen Mark GRIFFITHS upon his resignation dated August 28, 2023 to serve for the remainder of his term of office subject to the approval of the shareholders at the next General Assembly Meeting.
Information on the duties assumed elsewhere by our Board members in 2023 is provided in Annex-2 to this Report. Independency statements by our independent Board members are provided in Annex-3 to this Report.
b)- Senior Management: Our senior management comprises the General Manager (CEO) and department heads directly reporting to the CEO. Information on Pegasus senior management and their duties as of December 31, 2023, is provided in the following chart.
3
Genel (Public)
Serves Since | Serves in Position | ||
Name / SURNAME | Duty | (1) | Since (2) |
Güliz ÖZTÜRK | Chief Executive Officer | 2005 | 2022 |
M. Barbaros KUBATOĞLU | Chief Financial Officer | 2007 | 2018 |
Onur DEDEKÖYLÜ | Chief Commercial Officer | 2010 | 2022 |
Ergün DEMİRCİ | Chief Operations Officer | 2013 | 2022 |
Gençer KARATEPE | Chief Flight Operations Officer | 2018 | 2020 |
Dilara OĞUR | Chief Human Resources Officer | 2015 | 2015 |
Barış FINDIK | Chief Information Technologies Officer | 2017 | 2017 |
Murat TÜNAY | Chief Safety Management & Emergency | 2011 | 2020 |
Response Management Officer | |||
Yavuz Selim ÖZMEN | Chief Flight Academy Officer | 2016 | 2020 |
Ali UZUN | General Counsel and Sustainability Director | 2013 | 2022 |
Sinan Onur ÖZTUNA | Compliance Monitoring Group Manager | 2016 | 2020 |
Tayfun BORA(3) | Aviation Security Group Manager | 2003 | 2020 |
Özgür DİNÇER(4) | Group Head of - Internal Audit & Integrated | 2017 | 2017 |
Management Systems and Business | |||
Excellence |
- Indicates service in Pegasus Airlines Group Companies.
- Indicates service in the stated duty.
- Resigned from his duty on January 30, 2024, and the duties for Aviation Security were assumed by Murat TÜNAY effective as of the same date, pending approval of appointment by the Turkish General Directorate of Civil Aviation.
- Resigned from his duty on October 26, 2023, and was succeeded by Ayşe Naz ÇAĞIL effective as of February 6, 2024.
Our management organization chart is shown below:
General Counsel and Sustainability Director
Board of Directors
Chief Executive Officer
(CEO)
Group Head of -
Internal Audit &
Integrated
Management Systems
& Business Excellence
Chief
Operations
Officer
Chief
Commercial
Officer
Chief Financial | Chief Human | ||
Resources | |||
Officer | |||
Officer | |||
Reporting Line
Chief
Information
Technologies
Officer
Chief Safety & | |||||||
Chief Flight | Chief Flight | Emergency | |||||
Operations | Academy | Response | |||||
Officer | Officer | Management | |||||
Officer | |||||||
Additional Reporting Line
Compliance
Monitoring
Group
Manager
c)- Number of Employees: The total number of our full-time employees, including the employees of our consolidated subsidiary defined in Section 4/D of this Report, as of December 31, 2023, was 7,670. This number includes the members of our senior management listed above. There are no employees under a collective bargaining agreement.
G- INFORMATION ON TRANSACTIONS BETWEEN PEGASUS AIRLINES AND BOARD MEMBERS, COMPETING BUSINESS ACTIVITIES OF BOARD MEMBERS AND CONFLICT OF INTEREST REGARDING INVESTMENT ADVICE, RATING AND SIMILAR SERVICES PROCURED BY PEGASUS AIRLINES
At the Annual General Assembly Meeting held on March 30, 2023, our shareholders authorized our Board members, in accordance with Articles 395 and 396 of the Turkish Commercial Code No. 6102, to enter transactions with Pegasus Airlines on their own behalf
4
Genel (Public)
and on behalf of others and to engage in commercial business falling within the area of activity of Pegasus Airlines.
At the same meeting, our shareholders were informed, under a separate agenda item, as per the provisions of Principle 1.3.6, that in the previous year:
- no material transactions realized between Pegasus Airlines or its subsidiaries on one hand and our controlling shareholders, Board members, members of our senior management with administrative responsibility or their spouses or relatives up to and including the second degree on the other hand, which would create a conflict of interest, or
- any other instance where any of the foregoing persons engaged in competing business on their own account or on the account of others or through any enterprise where they act as a shareholder with unlimited liability.
Information on the related party transactions entered into by us in 2023 was provided in Note 5 to the Consolidated Financial Statements for the Accounting Period between January 1 - December 31, 2023, "Related Party Transactions".
In 2023, several Board members held executive and non-executive duties in entities that operate in the field of aviation. None of these entities competed with or entered into a significant transaction with us in a manner that would fall within the scope of Principle 1.3.6.
- Our Chairperson of the Board of Directors Mehmet T. NANE served as a non-executive board member of Flybondi Limited (United Kingdom), investing in the first low-cost airline based in Argentina.
- Stephen M. GRIFFITHS served as managing director at East Midlands Airport and Group Operational Transformation Director, as part of the Manchester Airports Group (United Kingdom) in 2023.
- Our non-executive Board member M. Cem KOZLU served as a member of the supervisory board and the audit committee of DO & CO AG (Austria).
The above transactions and engagements do not create any conflict of interest for us or our subsidiaries.
We act diligently to prevent any conflict of interests with the entities providing us services such as investment advice, corporate governance advice and rating services. In 2023, there are no transactions to report that gave rise to a conflict of interest in this respect.
H- WORKING PRINCIPLES OF THE BOARD OF DIRECTORS AND BOARD COMMITTEES
TheWorking Procedures and Principles of our Board of Directorsare determined in writing and are published on our Investor Relations Website. Subject to the provisions of the mandatory provisions of Turkish law and the Articles of Association regarding the authority, responsibilities, duties of the members of the Board of Directors and the delegation thereof, the Board of Directors:
- provides entrepreneurial leadership of the Company by taking decisions and guiding and overseeing the Company management, maintaining its risk, growth and income balance at the most appropriate level and by giving priority to the long-term interests of Pegasus Airlines with a diligent risk-management approach;
5
Genel (Public)
- guides corporate strategy, determines the human and financial resources required by Pegasus Airlines and approves the Company's annual budget, and while preventing conflicts of interest and balancing competing demands on Pegasus Airlines, supervises the performance of Pegasus Airlines and its management; and
- supervises the compliance of Pegasus Airlines' operations with the applicable legislation, the Articles of Association, the internal regulations, and corporate policies.
Our Articles of Association authorize our Board of Directors to resolve on donations on behalf of the Company, within the ceiling to be determined by the General Assembly and subject to the restrictions that may be brought by the Capital Markets Board pursuant to Article 19 of the Capital Markets Law and to resolve on all matters that do not fall within the explicit authority of the General Assembly under the applicable law and the Articles of Association.
In line with the relevant provisions in our Articles of Association, our Board of Directors convenes for meetings and adopts resolutions whenever the Company business requires. However, the Board of Directors meets at least four times a year. Board members are expected to attend all meetings, devote sufficient preparation time ahead of each meeting and present their opinions at each meeting. The Chairperson of the Board is expected to facilitate the efficient participation of all Board members at the meeting.
Records relating to the work of the Board of Directors are kept in writing and available to all Board members. Board members dissenting on any matter discussed during the meeting records his/her reasonable and detailed dissenting opinion in the records.
Save for special quorum requirements of the law, the Board meets at the presence of simple majority of its members and adopts decisions by simple majority of those that are present at the meeting. Each Board member has one vote. Unless one of the Board members requests a meeting, the Board can adopt decisions by the written approval of simple majority of its members to a written proposal submitted by a Board member or by the Company management. Each resolution passed at the Board of Directors is signed by a sufficient number of Board members and are kept in the Resolution Ledger of the Board of Directors.
Based on the resolution of our Board of Directors dated March 30, 2023, Committees and duties were identified as follows.
Audit Committee | |||
Chairperson | Agah UĞUR | Independent Board Member | |
Member | Ayşegül İLDENİZ | Independent Board Member | |
Corporate Governance Committee | |||
Chairperson | Ayşegül İLDENİZ | Independent Board Member | |
Member | Stephen Mark GRIFFITHS(1) | Non-Executive Board Member | |
Member | Mehmet Cem KOZLU | Non-Executive Board Member | |
Member | Ömer L. ÖMERBAŞ | Group Head of - Investment Relations | |
Committee on Early Detection of Risks | |||
Chairperson | David F. A. VISMANS | Independent Board Member | |
Member | Agah UĞUR | Independent Board Member | |
Member | H. Zeynep Bodur OKYAY | Non-Executive Board Member | |
Member | Mustafa TERCAN | Non-Board Member Expert | |
Technology Committee | |||
Member | Ayşegül İLDENİZ | Independent Board Member | |
Member | David F. A. VISMANS | Independent Board Member |
6
Genel (Public)
Member | Mehmet Tevfik NANE | Chairperson of the Board |
- Resigned from his duty on August 28, 2023.
In determining the composition of the structure of the Board Committees, the Board of Directors aims to form a balanced distribution of work in consideration of the number of non- executive and independent Board Members and the legal requirements for the composition of each Board Committee.
In accordance with the requirements of the Principles, all the members of the Audit Committee and the chairpersons of the Corporate Governance and Risk Committees are appointed from among independent Board members. Executive Board members assume no active duty in these Committees. Our Board did not establish separate Compensation and Nomination Committees, and, in accordance with the Principles, the duties pertaining to such functions are assumed by the Corporate Governance Committee.
The Committees record and maintain all their work in writing and submit regular reports on their work and results of Committee meetings to the Board.
Summary of the work undertaken by the Board Committees is provided below.
Audit Committee
The Audit Committee held four meetings on March 3, May 9, August 11, and November 8, 2023, in attendance of all members. The Committee engaged in works within the framework of its Charter and in this respect reviewed our Company's financial reports for the periods ending on December 31, 2022, and on March 31, June 30, and September 30, 2023, and shared its favorable opinion with the Board. The Committee prepared the proposal for the appointment of the independent audit firm for 2023 audit requirements, oversaw the activities of the Company's Internal Audit Department, its work plan and budget. In 2023, the Committee continued to oversee ethics governance work. The Committee informed the Board of its activities at each Board meeting held in 2023.
Corporate Governance Committee
The Corporate Governance Committee held four meetings on March 21, May 31, September 13, and December 13, 2023, in attendance of all members. The Committee engaged in works within the framework of its Charter and in this respect, oversaw corporate governance compliance, the nomination of independent directors and the determination of nomination and compensation principles for Board members in 2023, succession planning for executive management and key positions, scrutinized the operations of the Investor Relations Department. In 2022, the Committee reviewed the Company's Sustainability/ESG actions on a regular basis. The Committee reviewed and followed-up the action items of Board Self- Evaluation Study. In 2023, Pegasus Airlines retained one of the highest Corporate Governance Compliance Ratings across BIST, with a compliance rating of 97.5%. Pegasus Airlines remained the top-rated aviation stock on BIST and the second-highest ranked Company in terms of Board practices in 2023. The Committee informed the Board of its activities at each Board meeting held in 2023.
Committee on Early Detection of Risks
The Committee on the Early Detection of Risks held four meetings on March 21, May 30, September 12, and December 12, 2023, in attendance of all members. The Committee engaged in works within the framework of its Charter and in this respect established the main
7
Genel (Public)
Attachments
- Original Link
- Original Document
- Permalink
Disclaimer
Pegasus Hava Tasimaciligi AS published this content on 04 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 05 March 2024 00:32:00 UTC.