Turk Hava Yollari AO
IST:THYAO.E
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
222.2
330
|
| Price Target |
|
We'll email you a reminder when the closing price reaches TRY.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Turk Hava Yollari AO
You don't have any saved screeners yet
Welcome to Turkish Airlines First Quarter 2020 Results Conference Call and Webcast. Today's speakers will be Ilker Ayci, Chairman of the Board and the Executive Committee; Murat Seker, PhD, Chief Financial Officer. Dear speakers, the floor is yours.
Thank you very much, Marina. Good afternoon everybody. I would like to thank you for joining our first quarter financial results presentation. And it's our pleasure to be on the line with you. We completed a challenging quarter and with coronavirus outbreak which later on turned out to be the worst aviation crisis ever seen. Since the emergence of the virus outbreak, many countries closed down their borders, and many airlines grounded majority of their fleet. These developments affected the airlines in many aspects like planning, cost management and liquidity management. Soon after we learned about the outbreak in Wuhan, we stopped the entire China operation in early February. We managed to assign this capacity to other parts of the network, which enabled us to complete this month with no major change in capacity planning and partial load factor decline. Towards the end of February, when we saw the spread of the virus to closer countries to Turkey, such as Iran and Italy, we started to see stronger impact of the outbreak and suspended Iran and Italy operations immediately on the 29th of February. Especially in the second half of the March, we cut more than 7% capacity of ASK, which means almost 40% decline in ASK for the full month. Eventually, we suspended all international passenger flights on the 27th of March and all domestic passenger flights on the third of April.
We're planning to resume part of domestic and international flights in early to mid-June after obtaining the authority approval. We have some target countries to which we can start international flights. These countries have been successfully managing the outbreak like Turkey, and we believe that the respective aviation authorities will release flights to Turkey starting from June. In order to cope with the financial impact of the pandemic, Turkish Airlines is taking many actions to decrease operational expenses and secure the financial liquidity. These actions include reducing or postponing uncommitted capital expenditures, cutting nonurgent and nonoperational expenses, renegotiating payment terms with major vendors, postponement of the payments for ticket refunds, renegotiating operational lease contracts, freezing recruitment, deferring tax payments and fees and seeking new financing options.
Turkish government introduced a support package for the pandemic, which included decreasing value-added tax rate to 1% from 18% for air transportation. Deferring social security payments raising certain fees, facilitating part-time employment opportunities, among others. In addition, we introduced temporary voluntary unpaid leave option to our staff. Corporate-wide part-time employment schema is going to be implemented between April and June. In 2020 and in 2021, 1 of our primary goals is to keep the headcount in the company. In order to achieve this, including the top management and the Board, we are all going to do sacrifices. We are planning to negotiate with the union to have a longer term adjustments to all salaries. We are also planning to have a more compact international sales organization. We negotiated with many commercial banks to defer installment payments between April and June for 3 to 6 months. In addition, we aim to introduce at least $1 billion savings, including operational expenses, CapEx reduction, payment deferrals and tax benefits. These actions will help us to decrease cash outflow during the period where we do not operate. As of the 31st of March, we had around $1.8 billion cash and equivalents. New credit facility of about $400 million was drawn since the beginning of the year to support liquidity. Our projections show that existing cash position will be sufficient to cover 2020. We have sufficient undrawn credit lines available from domestic banks exceeding $2 billion. Turkish airlines did not have an issue with the use of these credit lines. And given our state ownership, we believe the lines will remain available throughout this episode of uncertainty. We are using all available means to secure our liquidity.
By the beginning of June, we expect to resume operations, we expect a slow global demand recovery towards the end of summer. In today's scenario, we expect around 55% ASK, 60% passenger drop from our initial guidance levels. However, our cargo operations are continuing at full capacity with freighters. And in addition, more than 30 wide-body passenger aircraft are being utilized for cargo operation. We have been investing and growing our cargo business since 2016. And this year, that investment has been [ paid off ].
Turkish Cargo is ranked as fifth among air cargo carriers in the world with 4.6% market share in the first quarter. During the outbreak, our Cargo revenues exceeded 2019 levels for April and May, with the help of almost double unit Cargo revenues despite the lower capacity availability. Low fuel costs also contributed significantly to the Cargo profits.
I would like -- I also would like to talk briefly about the fleet plans for the following year. When you look at the delivery plans as of 2019 year-end, more than 180 aircrafts were going to be delivered between 2020 and 2024. Parallel to the contraction in the air travel demand, we are discussing with manufacturers to postpone the deliveries so that we do not expect -- we do not have excess capacity in 2021 and in 2022. Another modulation here is also to postpone predelivery payments for these years.
Now I would like to comment briefly on key financial and operational figures for the first quarter. The total revenues declined by 8.5%, parallel to the 10% decline in ASK in this quarter. As opposed to the weakness in passenger operation, we recorded 15% increase in Cargo revenues as we realized the mild increase of 4% in the carried cargo volume, almost double-digit increase in unit revenue in March mainly drove this increase. Operating expenses decreased by almost 1% in this quarter, and lagged behind the 10% ASK decline. The fixed cost, mainly personnel costs became more visible on operating profit line with a lower capacity planning in March, hence, we reported $324 million operating loss and $327 million net loss in this quarter.
The 10% contraction in ASK in this quarter was led by the virus-related capacity cost in March. There was a 6% year-on-year increase in ASK by the end of February. Even the weaker revenue yield in March could not drag the strong revenue yields of January and February down to the negative territory. We saw revenue yields surging by 3% in the first quarter. A 20% decline in the number of passengers though it's partly caused by the pandemic. We started to shift domestic capacity with international capacity in January and February, and as a result of this, number of domestic passengers already declined by around 13% in the first 2 months.
Lastly, the load factor dropped by 4-point -- percent points due to the worsening demand and inefficiencies in planning among sudden changes in country's decision for closing down the borders.
I will pause here and leave the word to Mr. Murat Seker to continue with the presentation. Yes, Murat Bey.
Thank you very much, Mr. Chairman. I'll continue with Slide 6. Due to the outbreak the quarterly results are not too comparable, obviously. The number of passengers in the domestic market fell by over 13%, whereas international passenger numbers increased by almost 7% in the first 2 months of the year. However, after measures were taken against the outbreak throughout March, the passenger numbers fell by almost 20% overall in the first quarter. Load factor for the first 2 months was flattish but a falling load factor in the first quarter overall was inevitable considering the situation we were facing due to the pandemic.
International to international passenger numbers, which represent 59% of the total international passengers, increased by almost 7% at the end of February. Looking at the international breakdown by geography, there is no visible impact of the flight suspensions and re-allocations in March. The portion of Africa and Americas increased by 1% for each. Since both continents haven't been heavily infected by then. While the portion of Middle East decreased 2% due to the cancellations of Iran flights at the end of February.
The breakdown of passengers by transfer type shows further decline of domestic passenger numbers and the shift to international passenger categories. We also see that the international to international segment slightly outperformed the international direct passenger segment. The increase in the international passenger segment compensates the declining domestic demand. While the growth in terms of demand and capacity in cargo operations continued during January and February, the COVID-19 caused global economic slowdown, decreased the air cargo demand in March. However, despite the global slowdown in trade, air cargo became crucial for the transportation of medical equipment to fight the pandemic. Parallel to the strong cargo demand in March, we utilized some of our wide-body passenger aircraft as freighters.
Therefore, we managed to limit our cargo volume decline by a single-digit level in March. We observed an increase of almost 4% in total tonnage of cargo carried in the first quarter of 2020, thanks to strong unit revenues, our cargo revenue increased by almost 15%, reaching $466 million, which corresponds to about 18% of our total revenues.
When we look at the financial data, we see a COVID-19 cost decrease in total revenues, although our cargo revenue increased by a substantial amount, decreasing passenger revenues could not be compensated. We recorded $300 million net operating loss in the first quarter as expected in the consensus. The decrease in total revenues and the increase in net loss in the first quarter ended up to be limited due to the exceptional performance of January and February.
Also, several capacity reallocations throughout March further supported our revenue generation capabilities. In the EBITDAR margin graph, we will look at the past 5 year data. In the first quarter, EBITDAR amount declined by almost 30%, mainly cause of the pressure of the fixed costs on limited ASK generation. Compared with the first quarter of '19, EBITDAR margin declined by 3 percentage points. However, since the main effect on pandemic started in March, decrease in EBITDAR was limited.
Looking at the geographic breakdown, we see a diversified revenue generation capacity against possible regional volatilities. Before all international flights were suspended on 27th of March, we had the opportunity to reallocate, transfer capacity to various alternative destinations. Most of the reallocations were from Far East to other regions. When we look at the revenue by business type breakdown, it is important to mention the major increase of 3.7 percentage points in the cargo revenue portion, which is due to the strong cargo unit revenues and 5% higher utilization of cargo aircraft in the first quarter.
In the previous year, we observed a slight contraction in cargo unit revenues, which caused total RASK to have a weaker development than the passenger RASK. In the first quarter of 2020 though, we see an almost identical development between total RASK and passenger RASK. In terms of ex-currency RASK, we have a flat picture since dollar appreciated against Turkish lira by about 14% in the first quarter. A strong ex-currency revenue yield development of almost 6% was observed in the first quarter, mainly through a better pricing environment and the addition of more profitable long-haul flights in January and February. When we look at the regional yield developments, we see a major capacity cuts in all regions, except Americas and Africa. These capacity cuts were caused by flight suspensions.
After early suspensions to and from Mainland China, Iran, pilgrimage tours to Saudi Arabia, suspension to Europe and later to all international destinations took place. Up to that point, flights to America and Africa were still operating. Besides already high capacity increased to Americas in January and February, North American destinations provided profitable reallocation opportunities, while RASK was flattish, ex-currency revenue yields were on a high single-digit level. Africa was the region with the highest ASK increase in the first 2 months, which already caused RASK to decrease in Africa.
Unit revenues in sub-Saharan Africa were positive. By that, at the end of March, RASK was negative, while revenue yields were slightly positive. While the capacity cuts in Far East caused RASK to decrease, we observed a flat and even slightly positive RASK development in the other regions where capacity drastically decreased. Middle East was the only exception where the total RASK development was outperformed by passenger RASK due to the contraction of cargo revenues. Exceptional yield improvements were observed in European and domestic markets, whereas ex-currency yield increase of Europe even reached double digits. In the domestic market, ticket price cap Increased from TRY 352 to TRY 450 in the third quarter of '19. Also more stabilized Turkish lira against dollar cost ex-currency yield to increase by over 20%. In the first quarter of 2020, we observed an 8% decrease in revenues.
Looking at the revenue composition, we can see that the passenger revenue decreased by about 12%, while cargo revenues increased by about 15%. The main driver of the negative revenue development was, obviously, the volume effect of almost $230 million since ASK dropped by 10% in the first quarter. Negative load factor and currency effects were almost compensated both by positive passenger RASK and positive cargo developments.
Looking at the cost, we see an increase of 6%. This is mainly driven by the pandemic-related factors. Even though, we were able to minimize the cost increases by preemptive measures, a lot of measures we took had to be reactive against a sudden outcomes of the pandemic. The increase in personnel costs had 2 major factors. First, the pandemic cost decreased in ASK compared to the same period of last year. Second, salary increases according to labor agreement paired with an increase in personnel numbers of about 5%.
Measures taken against this cost items took effect after the first quarter. We have introduced temporary voluntary unpaid leave options to our staff and applied for corporative wide part-time employment, starting from the first of April. Aircraft ownership unit costs increased by over 22%, mainly due to the increase of depreciation expenses by about 14%. One 321neo aircraft; 5 787, Boeing 787; and 2 Boeing 777 Freighters were delivered in the first quarter.
Additional unit cost increase was caused by the decreasing ASK. Since operations in January and February were at full pace, and March was only partially affected by flight restrictions, airport and air navigation costs still increased due to higher unit costs in Istanbul airport. This will be -- this was the last quarter with a major low base effect linked to the move to the new airport in April 2019.
Similarly, ground handling cost increased due to the increased size of operating area and increased number of temporary employment and higher unit costs. Sales and marketing costs decreased mainly due to the COVID-19 cost flight restrictions, thus slowing down of the reservations. Commissions and incentives and reservation systems expenses decreased by almost 40%, and advertising expenses decreased by 21%.
In terms of passenger services and catering, we observed a slight decline. We have a cost-plus contract with DO & CO, which means that our catering expenses adapt to our scale of operations, which was lowered towards the end of March. Our maintenance costs increased above 25%. This was caused by the deferral of some of the planned maintenance activities from the last 2 quarters, which we communicated in earlier calls with you. Our ex-fuel CASK increased by over 7% in the quarter. In CASK calculation presented here, we do not include cargo capacity in ASK definition. However, we include the costs related to cargo in total costs. Since cargo operations increased significantly and will gain much more importance in the upcoming months, we also adjusted total ASK with cargo capacity. Ex-fuel CASK increased -- dropped from 7.3% to 2.9% and total CASK increased from 6% to 1.6% in Q1.
Looking at the fuel expense breakdown, we see an almost 8% decrease in total fuel expense, $29 million of the decrease was due to the lower price. Main reason for the decrease in profit from main operations in this quarter is the COVID-19 cost, load factor and utilization effects. As mentioned before, airline operators were forced to take reactive measures, which meant to operate with lowering load factors and utilization. A positive currency effect and increased unit revenues were significant contributors of the lower operating loss.
As shown in the graph, we continue to be long in euros and short in Turkish lira. The share of Turkish lira in revenues maintained about 10% levels. Despite a decrease in domestic capacity, the increase of the price cap was an important factor for maintaining this level. With almost base -- we used for a monthly based decreasing layered hedging policy with a maximum 24-month contract period. In this policy, we modify hedging parameters regarding current circumstances and developments. Share of fuel costs within our total cost base reached 28%, even though, we used a layered hedging strategy, the volume and type of the hedging contracts are aligned depending on the forward fuel price curve. When it exceeds a certain level, we decreased the hedge ratio and used alternative hedging tools. 48% of the fuel consumption in this year and 11% of the consumption in next year is hedged as of the end of March. Unfortunately, we won't be able to use the hedged fuel as plan, which means that we will be overhedged, especially in the second quarter. We have recorded $59 million from the overhedging of fuel consumption and charged it to financial expenses in the P&L statement.
Our financial lease liabilities are about $9.6 billion by the end of March. On the operating lease side, total obligations are $1.7 billion. Attractive aircraft financing deals done in '19 and early 2020 led to the weighting average interest rate come down to 2.3% levels. We aligned ourselves with IATA's environmental industry targets. These targets are the guidelines to achieve net zero CO2 emission by 2050.
COVID-19 will significantly influence the aviation sector in the upcoming years, but we will continue to monitor, calculate and verify greenhouse gas emissions according to ISO 1400 specification. CORSIA arrangements adopted in '16, 2016 by ICAO will enter into effect in '21. Within the scope of EU-ETS, carbon credit is purchased from international carbon markets, and we will provide detailed information about our achievements in '19 in our upcoming sustainability report.
This will conclude our presentation. And now, we will continue with the Q&A session.
[Operator Instructions]
I will read the questions, and our Chairman is going to answer them. There is a series of questions on the same topic. How much is your monthly total cash burn? What is your current cash position? And how long can your cash position last within your projections? These are questions asked by Kerem Akcanbas, Najet El Kassir, Erol Danis, Ivan Postevoy and Gaye Yalçin and Artem Yamschikov.
Okay. Our current cash position is around $1.8 billion. Our total -- our monthly total cash burn well around between 300 -- $200 million to $300 million until the end of the year.
Okay. The next question is how much is the undrawn credit line? Are they committed or uncommitted? And what portion of them is from state banks?
As of March 31, 2020, in additional to our $1.8 billion cash, Turkish Airlines have sufficient undrawn credit lines available from domestic banks, excluding Turkish Eximbank, which consists of cash and noncash limits. Our undrawn credit lines are about $2 billion, including of cash and noncash loans. Around 1/3 of this is from state banks. However, this amount may increase in case of a need in the future. Furthermore, Turkish Airlines didn't have any issue with the use of these credit line and given our state ownership, we believe the lines will remain available throughout this episode of uncertainty. Different funding programs from foreign banks are also on our agenda.
The next question is, are you evaluating other alternative financing options?
Yes. Of course, Turkish Airlines is considering alternative funding opportunities, such as a Eurobond issuance, if we believe the pricing is favorable. Turkish Airlines' coordination with respect to government authorities regarding our financial position. Besides Turkish Airlines has certain committed undrawn revolving credit facilities lines. Turkish Airlines owns 52 aircraft with the value of exceeding $1 billion, and all of them are unencumbered aircraft, we are currently working on selling and leasing back of different aircraft types, including 25 737-800 aircraft that we own. Furthermore, we are also working on a potential deal on owned spare engines and some of our wide-body aircraft as well.
Next question is, what is your new saving plans for fixed and variable costs? Do you have any negotiations with the airport authority or state on a fair distribution of costs such as reducing fees?
Sure, we do. We aim to achieve around $1 billion in savings and operational expenses and CapEx reduction with tax benefits. Turkish government approved part-time employment support, this alone will result in a reduction of around $330 million in personnel cost only for 3 months. Also, we have got some discounts for the airport fees as a result of our negotiations with IGA. On the CapEx side, we plan to postpone some of our new airport investments and decrease heavy maintenance expenses. We are reevaluating our original aircraft delivery plan for 2020 and 2021 and a delayed predelivery payments and together with the OEMs. Turkish Airlines already has a cost advantage compared to its most European peers, and we believe that this will make us advantageous when we resume operations. Additionally, we are also dealing with the also state authorities, state airport authorities also for the relevant reductions on the fees that we pay year-on-year.
There is a question on cargo. How is the cargo operations going in terms of ton and in terms of yields?
By the end of May, there is 50% year-to-date increase in units cargo revenues, increasing demand for Air Cargo with the absence of belly cargo capacity led unit price increase. We forecast that there will be normalization of unit revenues prior out to the normalization in belly cargo capacity. We expect to complete 2020 with 15% to 20% loss in Cargo volume, while the Unit Cargo revenues surge in a range of 30%, 40%. As of end of March, there is a contraction of 19% in sales volumes in air cargo industry, while this is only 4% decline for Turkish Cargo. We are ranked as fifth with almost 5% market share in Cargo volumes in March.
How should personnel expenses and CASK evolve in 2020, considering the extraordinary circumstances of this year and one-off savings booked in the fourth quarter of '19?
In the second quarter of 2020, there will be a major saving in personnel expenses, thanks to the corporate-wide part-time employment. At the moment, it is not clear whether we will request an extension and at what portion further salary aids will be. But when we took -- when we look at the current estimates, there will be a reduction of personnel expenses for 2020 of a range at least 25% or 30%. Our total expenses will have a major decrease in the second quarter, primarily due to the part-time employment aids and almost no operational activity. With the launch of some flights and uncertainty of a further extension of the part-time employment aid, expenses will increase slightly and stay at similar levels throughout the year. However, this reduction will not even nearly compensate the decrease in capacity yet due to lower capacity, a high double-digit increase of the personnel CASK seems certain.
Can you update us with your monthly debt payments due in the remainder of 2020? Have you deferred in a loan lease payments due to within this year?
We deferred approximately $250 million of corporate loans due within this year, and negotiations continue with some other banks, which are about to finalize positively. Our monthly debt payments, including bank borrowings and finance lease is about $150 million.
What could be the inflows in your cash position in the second quarter of '20? And any inflow from PDPs and what net cash flow per month do you generate from your Cargo operations in the second quarter?
Okay. 4 to 7 wide-body air and 8 narrow-body aircraft will be delivered between June to December 2020, in addition to our fifth largest capacity of our Cargo aircrafts. We're going to use additional these aircrafts too. Due to these deliveries, Turkish Airlines will receive $300 million to $400 million PDP refund from manufacturers until the year-end. We generated approximately $150 million cash per month from Cargo operations in April and May. However, we are not sure that we can reach that levels in the coming months. But obviously, our also Cargo region over the last few years. Right now, we are in a position of getting the really positive results after we made this investments, after we also put a vision to improve our Cargo operations. So this crisis became an absolutely a great opportunity for us to get more positive results.
How much hedge loss did you record in the first quarter?
The hedge loss in the first quarter under the cost of sales is $35 million from the realized hedge contracts because of the overhedging of fuel hedge contracts, we charge $59 million to the financial expenses, profit or loss statement. Thanks to our hedge strategy as this loss was limited compared to our peers. We expect the overhead impact will disappear in the following quarters. The production will start to grow and the food prices increasing.
COVID-19 pandemic will have drastic impact on the sector globally, eliminating insolvent players while bringing about new opportunities for solvent carriers such as THY. In that respect in what areas, regions do you see opportunities for THY?
The demand for air travel will not reach to the perquisite level for at least 1 or 2 years, clearly, the market will be smaller, but with few players to compete, we see opportunities. Cargo is one of the key contributing areas. We've reached almost 5% market share globally. In the Istanbul Airport, we will continue to expand our presence in post-COVID period for cargo. Another advantage is the access to ethnic and leisure demand, according to our forecast, ethnic and leisure passengers will start to fly earlier than the business-oriented passengers. In order to target them, you need to have a low-cost base and well distributed network, we have both of them. And we believe that the industry will be recovering gradually, but Turkish Airlines will be one of the earliest recovering airlines. With these advantages, I think the perfect location of Istanbul geographically. And also in terms of the management of the COVID-19 pandemic era in Turkey, became very successful and in terms of this Turkey, will be one of the most favorable destinations for the leisure and for the visitors, who would like to look for selves -- for themselves safe zones to make their holidays as well. So we're expecting that Turkey will be very competitive during the period of the new era.
Apart from the short-term allowance package, are there any measures government provided for Turkish Airlines?
Okay. We received support from the government authorities through the part-time employment support, deferral of some fees and tax payments, most importantly social security payments, which were implemented countrywide. The government decreased VAT to 1% from 18% for air transportation, extended the maturities or rediscount credits payables to the Export Credit Bank of Turkey, deferred the installment payments of corporate loans payable to public banks. We also received additional credit line from Export Credit Bank of Turkey.
What are your priority actions facing the current economic situation and the reduction of passenger demand? Also, have you requested a lifting of the ticketed -- ticket cap price for domestic flights?
Well, we are planning to have strict cost discipline and capacity management to tackle with the current demand environment as we are planning to start with mainly domestic operations. We are considering the domestic price cap as a possible risk and planning and to write the request to related government bodies for a lifting. But as we all know that in this period of time and the crisis management period, there will be always some solutions to exceed that cap and I think that everybody will understand why we can -- why the airlines cannot also follow or pursue the policies right now according to these type of caps. I think that the caps naturally will not be a barrier for any airlines during this period of time.
What will be the quarterly and year-end capacity reduction?
As we will be starting our passenger operations in the first half of June, we will be having the limited ASK in the second quarter. In the third and last quarter, we will be operating with 40% and 50% of the budget of the ASK, respectively. For the full year, we expect around 60% decline from our budgeted ASK and our base case scenario.
In order to minimize the risk of the infection, what kind of hygiene measures and safety precautions are you planning to apply when the flights resume? What will be the cost of these extra measures?
In this new era, we're talking about the healthy first along with the safe flight. Our teams are working on improving the hygiene standards in all parts of the flight experience to meet the new customer expectations on hygiene. We are changing our catering concept, adding new items such as face masks, amenity kit, not providing blankets to the flights less than 4 hours. Cost of the extra measures will be negligible, and also some of them will provide cost savings.
Which are the most critical direct international destinations for your profitability that you would want to put back into service as soon as possible?
Our most profitable routes are mainly long-haul routes, especially North America and Asia, Far East destinations. So we'd like to fly those destinations as soon as possible.
What is your outlook on the short-haul versus long-haul demand in the next couple of years? In what way will that affect your aircraft delivery plans?
Due to the control of pandemic in Turkey and international flight restrictions, we see that the recovery in domestic market will be faster. Under current circumstances in the next couple of years, we expect that the recovery in the short run to medium-haul markets -- short to medium-haul markets will be faster since direct passenger traffic in those routes is dominant than the transfer traffic. Long-haul to long-haul transfer market may require a longer time for recovery since they feed each other. We are discussing with manufacturers to delay some of the orders planned to be received in the next 1 or 2 years and to terminate the leases of some of the operating lease wide-body aircraft earlier than planned. Furthermore, our negotiations continue for deferred of some of the orders 2023.
Do you -- do we think that you may focus route profitability instead of transfer passenger operations until we see a solid international aviation demand recovery, what kind of opportunities and risks does such a business model update bring for THY?
Okay. As you know, the Turkish Airlines flight network includes more than 120 countries. And the good news is right now, we will start our domestic flights next week. And most probably, we'll start, hopefully, on Monday, with the also 5 major cities of Turkey. And then we'll expand this about a week into 30%, 40% of our capacity in the domestic market. So then the domestic flights next week, we're going to start. And also, hopefully, in the 10th of June, we're going to start international operation. So that with the lower frequencies to selected destinations, transfer passengers constitutes 44% of our total passengers in 2019, yet considering current demand conditions, we may focus on domestic and international direct passengers.
In respect of your plans to increase your business passenger number, do you expect meaningful recovery in corporate demand this year? Or do you think that's more of a 2021 thing?
Our understanding from the feedback of our corporate customers is that many of them, especially the ones related to production, are willing to turn back to the dynamic working structures, which imply quicker normalization in their flight plans. We do not expect intercompany meetings and conferences oriented travels will resume in 2020. Considering the uncertainties in 2020, we expect around 50% decline in corporate travel.
How much your CapEx needs for the remaining part of '20 and '21?
According to current plans for the whole year, our cash CapEx will be around $2.5 billion. And for 2021, it will be around $3 billion. But we are reevaluating our original fleet delivery plan for 2020, 2021 and 2022. And related pre-delivery payments with the OEMS. This will also reduce our CapEx for 2020 and 2021.
Are you planning to defer or cancel aircraft orders for next year?
We closely follow market conditions and analyze different scenarios in order to be able to adapt to the changing market conditions and not to create an excess capacity in the coming period. In this context, we discuss options with Boeing and Airbus about it.
Do you expect major change in your traffic mix after flights resume domestic, international, point-to-point, international transfer? And what are the implications on your profitability?
Considering current demand conditions, we may focus on domestic and international direct passengers rather than the transfer passengers for a while.
Direct passengers yields are higher than the transfer passenger yields. So it may limit the deterioration of the yields. And in addition to this, you may have to consider that Turkey during this period of time, of pandemic, showed that Turkey's healthcare system -- and -- performed very well and Turkish doctors and also healthcare staff worked very well. And in terms of this, Turkey has a great potential for the healthcare tourism. So I think that in the coming months, Turkey will be one of the most important destinations for the healthcare tourism.
You have mentioned that you consider selling some aircraft that you own, do you think the market-related prices are appropriate?
Well, we're planning to have sale and leaseback for some of the owned aircraft, especially pretty old ones. We intend to sell the aircraft that are convenient or convert into freighters. This is why we do not see a temporary discount in their market values as we are going back to -- as we are going to lease back those aircrafts for 6 to 8 year terms. There are enough interest in the market with reasonable prices.
Can you please make a brief breakdown of monthly cash output in terms of monthly lease payments, maintenance, personnel, et cetera?
I'll just quickly answer this, the monthly lease payments will be around $150 million, personnel expenses about $90 million to $100 million, and maintenance about $80 million.
How long do you think it will take for your traffic to catch up pre-COVID levels?
Is there anyone who can make a perfect guess today in the market? I don't think so. But parallel to the expectations of IATA and other aviation authorities, we think that it will take at least 1 or 2 years to catch the pre-COVID levels.
Will you revise your guidance? And will you be able to share your new guidance?
It is very difficult to share our guidance for the full year as the pandemic made the entire sector shutdown within weeks. We have no visibility at the moment how countries will resume air travel when they will resume with what conditions they will accept international travelers. We withdraw the guidance we shared at the beginning of the year. We will share our guidance as soon as we have more visibility on the outlook.
I'll read 2 quick questions...
But more than making a perfect guess for the future, it is very important to be flexible and adaptable. That is the area. That is not the area for big -- that is not the era to make big strategies, that is the era that make more adaptable and flexible and digital your company. That is the most important thing.
Any plans regarding publicly trading WTC bonds?
Well, this is something always on the back of our minds, and when we see an opportunity in the market, we definitely will tap that market. But we don't see that too accommodative in the very near future.
And a question is, are you going to stop or reduce catering during your flights?
Actually our Chairman had a few interviews and responded to this question, yes, there will be some reduction in the catering service overall. For just hygiene purposes, we will have the prepaid bags to be presented in the aircraft.
And another question is, are your cash in USD or in lira? Are they with Turkish banks or overseas?
Our cash position is in line with our revenues and expenses, where there is a natural hedge protecting us against the volatility in currencies. Turkish Airlines earned most of its revenues, we are non-Turkish lira, 85% denominated currencies that has been effective against the weakness of Turkish lira over the last years. And the cash position is managed and invested such that our future revenues and receivables as well as our liabilities in the future are effectively matched. Our cash is mostly invested in Turkish banks through time deposits. Eurobonds issued by Turkish Treasury or Turkish banks, some equities and derivative instruments. Some of our counter parties are also non-Turkish banks through derivative instruments.
What is the expected CapEx for 2020 and expected net debt position by the end of 2020?
We already responded to expected CapEx. I can just quickly say the net debt is about $12.5 billion. I think I'm quickly looking through, I think, we have responded to all questions.
I just see one question about AnadoluJet operations. Is there any update?
Yes. We -- you know that we gave a guidance earlier about the AnadoluJet. AnadoluJet very much Ankara centric right now and domestically fly. But AnadoluJet will start to fly instead of Turkish Airlines Redtail, they will fly from the Sabiha Gökçen and we will replace the Turkish Airlines aircrafts with the AnadoluJet in Sabiha. And additionally, AnadoluJet will start to fly abroad. They will make international flights, especially secondary destinations they will fly, so that there will be a good complementary portfolio with our also sub-brands as well.
Okay. So this completes our Q&A part. Thank you very much for your attendance to our investor call today.
Thank you very much for your participation and for your questions. And I hope that in a very unprecedented era, hopefully, this also meeting worked for both sides. And hopefully, we'll see each other soon again and inform you again about our also -- about our facts and figures as well. So thank you very much for being with us.
Thank you. This concludes our conference call. Thank you all for attending. You may now disconnect.