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Ladies and gentlemen, welcome to Turkish Airlines Second Quarter 2021 Earnings Call. There will be a Q&A session after the presentation. [Operator Instructions] I will now hand you over to your host, Dr. Murat Seker, the Chief Financial Officer; and Kadir Çoskun, Head of Investor Relations. Sir, the floor is yours.
Thank you very much, and good afternoon to all. Thank you for joining our second quarter financial results presentation.
We are quite pleased to be on the line with you today. All Turkish Airlines family is deeply saddened by the wildfires and the floods that have been damaging hectares of forest land and the residential areas and have been claiming life in Turkey as well as in many other parts of the world. We offer our condolences to those who lost their loved ones during these disasters and wish strength to those fighting against these disasters. As the national flag carrier, we feel obliged to protect and watch over our values. As Turkish Airlines family, we are committed to support families who are affected and regrow our forests for a greener Turkey. We hope to overcome these challenges soon.
Now coming back to our financial results. In the second quarter, Turkish Airlines family continued to show strong resilience against the hardship of pandemic. The devotion of our staff to Turkish Airlines brand was a crucial contributor for -- to the financial success we achieved. Turkish Airlines recovery process since the summer months of 2020 has been ahead of our peers. In the second quarter -- sorry, the second quarter was another successful period despite the aggravating effects of full lockdown and the month of Ramadan in this quarter. Especially in June, capacity development and ticket sales showed considerable progress. In this month, we exceeded 2019 capacity level in some regions and sold almost the same number of tickets compared to 2019 level in some others. As an outcome of this operational improvement and positive outlook, we decided to increase salaries by about 10% on top of the inflation adjustment starting from July.
Progress in vaccination rates in Turkey and the countries we operate to facilitated more air travel than we anticipated. Strong ticket sales in June is already being reflected as strong flight performance in the third quarter. We exceeded 75% of 2019 ASK level in July, and we expect this trend to continue for the remainder of the third quarter. As a result, we are mobilizing our network faster than many of our peers. As of August, we are flying to 46 domestic and 203 international destinations, which [ compromises ] around 75% of our total network. From the first quarter to the second, ASK increased by almost 30% and reached around 56% of the ASK in the same period of 2019. We carried 8.2 million passengers, adding up to approximately 15 million passengers since the beginning of the year. We reached $2.2 billion revenue in this quarter, which accounts for almost 69% of 2019 and 2.5x of 2020 second quarter revenue level.
With the help of continued cost discipline and strong cargo performance, we recorded $114 million operational profit, a better performance than 2019's second quarter. We recorded USD 637 million EBITDAR in -- with around 29% EBITDAR margin. Net loss of $62 million was recorded in this quarter mostly due to foreign exchange losses from financial activities of around $200 million. Overall, net loss in the first half was nearly $1 million.
We maintained strong cargo performance in the second quarter with a total revenue reaching over $940 million with a year-over-year increase of 26%. This amount corresponded to about 43% of total revenues. Cargo unit revenue continued to be strong in this quarter with almost 75% increase compared to the unit prices in the second quarter of '19. We continue to utilize more than 10 wide-body passenger aircraft for cargo operations besides 26 freighters, and we reached a market share of 5.4% in terms of freight tonne kilometers at the end of June.
We completed the quarter with around $2.2 billion cash and cash equivalents, which is roughly $500 million higher than the previous quarter's cash level. This is the first quarter we did not have any cash burn since the beginning of the pandemic. This performance was due to the resilience in operating profit, improved ticket sales in June and net predelivery payments inflow during the quarter. The cash flow in this quarter, excluding new commercial loans and payments, was around $500 million. Due to escalated commercial loan payments and investment expenditures for the remainder of the year, we expect to burn cash. We think we can finish the year with a monthly cash burn of around $30 million to $60 million for the full year, which is a significant improvement than $60 million to $90 million range previously announced. Available credit lines exceeding $2 billion ensure that we will have sufficient liquidity throughout '21.
On fleet development, the delivery schedules were revised for Boeing and Airbus. We expect to receive 6 wide-body and 19 narrow-body aircraft this year, which will bring the year-end fleet to 371.
Once again, I would like to thank to -- our esteemed shareholders, customers and business partners for the trust they placed in Turkish Airlines during this highly challenging period.
Now I will leave the floor to Kadir Bey to continue with the presentation and elaborate on some of the key results.
Thank you, Murat Bey. I will be talking about financial and operational details for second quarter.
Let me start with some historical data and the recent months' development in terms of capacity management. When we look at the first graph, we can see that capacity steadily increased with some ups and downs caused by several outbreaks of virus variants and therefore, the implementation and lifting of flight restrictions. Capacity increased from 23% of 2019 levels in July 2020 to 62% of 2019 levels in June '21. We observed the strongest recovery in the second quarter of '21, even though concerns related to the Delta variant caused some downside pressure in May '21. While load factors at the beginning of the second quarter had a negative trend compared to previous months, we observed increasing load factors in June, almost approaching 70% despite increasing ASK levels.
Since July 2020, we observed lower year-over-year international capacity cuts compared to the IATA average as well as European airlines. While the IATA average international capacity increased from 23% of 2019 levels in March '21 to 29% of 2019 levels in June '21, we managed to increase our international capacity to 60% ASK levels of 2019 by this June '21. However, a setback in May on the side of Turkish Airlines was mainly caused by 18 days' lockdown. We continue to be the busiest operator in terms of average daily flights in April and May, according to EUROCONTROL data. By the last week of June, we reached 947 average daily flights, which is 65% of 2019 levels. Also, our main hub, Istanbul Airport, continued to be the busiest airport in Europe, with an average of 734 flights per day in the last week of June.
Cargo capacity generated by cargo aircraft increased by 8% in the second quarter compared to the same period of 2020 and 71% compared to the same period of 2019. By adding passenger aircraft and utilizing our cargo fleet in much tighter schedule, we managed to increase our freight tonne kilometer by 42% in June '21 compared to June 2019.
On the next slide, regional traffic recovery after domestic lockdown. The following graphs are important to show you our current state. The graph on the left shows you the performance of each region in terms of ASK and load factor in June '21 compared to June 2019. Americas outperformed other regions with an outstanding performance. We achieved high load factors in Americas while we produced 9% more ASK compared to June '19. North America is the main contributor with an ASK contribution of 24%, slightly higher than Europe. Combined with Central and South America, the ASK contribution amounts to 28%. Domestic capacity reached almost 80% of 2019 ASK levels with a modest load factor. Far East is still the region with the strictest flight restrictions, which is reflected by the lowest ASK and load factors. Other regions are still struggling to accelerate the speed of recovery but yet indicates slight recovery in terms of ASK and load factors, while Europe has big importance due to its high ASK contribution.
Monthly ticket sales can vary from season to season especially due to consumer behavior. As you know, after the pandemic, people started to prefer to buy tickets close to the flight date rather than buying them months ago. In the right-side graph, we show the number of tickets sold compared to 2019. Our monthly ticket sales change jumped from minus 42% in May to minus 1% in June compared to 2019. This was mainly due to the end of lockdowns in Turkey and the spread of vaccination in Turkey and all around the world. While a majority of passengers in 2019 bought their ticket for June at least 1 month before, we observed high ticket sales in June for following months.
In the next slide, about cost cutting. We successfully achieved a total cost saving of USD 175 million in the second quarter of '21 and around USD 375 million in the first half of '21, mostly by decreasing personnel costs. During the second quarter, cost saving of around USD 125 million in personnel expenses driven by the salary reduction agreement with the labor union, which has been signed last year, is very impactful. However, the savings in personnel expenses will continue to decrease in the upcoming quarters due to the wage increase at the rate of inflation difference and an additional wage increase of 10% that's effective from July '21. Approximately USD 50 million savings were also achieved by overhead reductions and other expenses in this quarter.
In the next slide. Strong liquidity management in such times is more crucial, although our cash generation performance in '21 gets stronger with improving cost of the sector's recovery. The monthly cash burn came down from around USD 300 million in the third quarter of 2020 to around USD 100 million in the last quarter of 2020. These high cash burn levels, which were mainly due to the refunded tickets and mark-to-market outflows, decreased significantly in the first quarter of '21. Together with a strong revenue generation and strict cost management, we accomplished to limit cash burn, excluding commercial credits, in the first quarter to USD 50 million in total for 3 months. High yields despite comparably low load factors, high unflown ticket revenues as already showed in the ticket sales graph, continuing solid performance, and high predelivery payment influence during this quarter provided a strong operational cash generation.
Cash flow from operations in the first half exceeded USD 1.5 billion, which is higher than 2019 levels. This brings down our monthly average cash burn expectation for the year 2021 to a range between USD 30 million to USD 60 million. Although we generated cash in the second quarter and don't expect cash burn in the third quarter, we still expect to burn some cash in the last quarter mainly due to limited cash generation from operating activities in such a weak quarter. We expect to maintain a liquidity position of at least USD 4 billion with currently over USD 2 billion undrawn credit line.
In the next slide, let's take a look at the net debt to revenue ratio projection for the next 5 years. As you see, our ratio was around 80% before the outbreak of the pandemic. After reaching its peak of around 220% in 2020, we expect the net debt to revenue ratio to slowly decrease until reaching normal levels in '24 again. Net debt is not likely to increase in the following years. We started the year with USD 14.9 billion net debt. As of 30 June '21, net debt amounts to USD 14 billion, decreased by USD 900 million during the first half of '21. This was on account of strong cash inflows from operating activities, as we described in previous slides. As cargo revenues are as strong as ever before and passenger revenues are slowly climbing up, we continue to [ prove higher activity ] even during the pandemic. With strong revenue generation and strict cost management, combined with decreasing net debt, we plan to reach our long-term net debt to EBITDA target of 3.5x by 2025.
In the next slide about AnadoluJet. Our decision to separate point-to-point operations from our transit network by using our AnadoluJet brand while meeting low-cost demand started to show successful results. The total capacity produced by AnadoluJet in the first half of '21 increased by 129% compared to the same period of '20. The capacities in our 2 main hubs, Sabiha Gökçen Airport and Ankara Esenboga Airport, increased by 203% and 39%, respectively. The substantially higher airfare increase in Sabiha Gökçen Airport was mainly due to the expansion in network and loosening restrictions. Although Ankara Esenboga also had a strong shift towards international operations, this shift is reflected by the passenger numbers, which are almost unchanged, while capacity increased by almost 40%.
Targeting especially price-sensitive, short-haul destinations in Europe and Middle East with AnadoluJet improved profitability due to lower airport fees in Sabiha Gökçen Airport, modified narrow-body aircraft with 189 seaters and adaptations on passenger services in luggage rates in order to increase ancillary revenues. We are looking forward to record a similar success story in upcoming months, especially with the help of vaccination progress, which might release broader pent-up tourism demand.
In the vaccination slides, only very few smaller countries have decided to fully vaccinate over 70% of their population. Vaccinating over 70% of the gross population is crucial for eliminating the serious effect of the COVID-19 virus on health care. Together with the easing of the current situation, more and more general and flight-related restrictions will be lifted. Also, increases in vaccinations will drive consumer confidence higher. With this improvement, we are ready to meet the possible pent-up demand in the upcoming quarters.
As a part of the aviation sector, we look forward to reach 2019 ASK levels in summer '22. This expectation is highly dependent on the successful vaccination rollout. As of August 9, the portion of Turkey's population which has been fully vaccinated reached almost 35%, while over 76 million doses have been given. In terms of doses given, Turkey ranks at ninth place for the time being. On a side note, the percentage of the population fully vaccinated with an average of -- with an age over 18 is over 46%. Lockdowns in Turkey ended towards the end of May, which helped to limit daily cases to an easily manageable amount. However, the outbreak of the Delta variant caused daily cases to increase swiftly. Looking at the most recent data, however, we see that the growth speed of daily new cases is slowing down. Lower daily cases are key for increasing tourism demand and consumer confidence in the upcoming quarters.
In the next slide, the recovery process in the second half of 2020 and the first half of '21 shows some back-and-forth, month-over-month development caused by flight restrictions and complex consumer behavior in air travel. However, after a minor setback in February, month-over-month development were mainly positive with the exception of May. The outbreak of the Delta variant put some pressure on consumer behavior.
Especially, the domestic market was highly impacted since a full lockdown was initiated. Strict restrictions in some countries further constricted operations. Notwithstanding, total ASK remained almost flat and even slightly positive in international operations in May. On the other hand, June and July was exceptionally successful in every aspect. Despite the total ASK increase of almost 40% in July, load factor also increased by almost 4 percentage points remarkably. Domestic passenger numbers more than doubled in June and continued to increase in July by 45%.
International passenger numbers increased in an even higher rate of almost 59% in July after increasing by 44% in June. The surge in international passenger numbers in July was mostly caused by an 82% month-over-month increase in direct international passenger figures, while transit passenger numbers increased by 36%. As the biggest ASK contributor in July, North America was the most outstanding region. July ASK in North America increased by 14% compared to June, while passenger numbers increased by 21%, resulting in load factors to increase by 4.3 percentage points. Another significant ASK increase of 40% in July was observed in the Middle East. This development gives hope that the recovery of this very long-haul-dependent region will soon accelerate even further.
Carried cargo was flat in July compared to June due to the already high base since the early stages of the pandemic. With the visible recovery of long-haul operations and continuing improvements in medium-haul operations, we are glad to have reached over 55% international ASK levels of 2019 in the second quarter of 2021.
In the next slide, cargo operations slide. As I already mentioned before, we expected cargo unit revenues to normalize in the second quarter of '21. Nevertheless, the normalization was not realized yet, and it's not going to be any time soon. Cargo unit revenues are still around 75% higher than 2019 unit revenues. Although compared to 2020 levels, they are slightly lower. Also, carried cargo volume continued to increase slightly due to the increasing amount of belly cargo kicking in as passenger operations slowly recover. Overall, cargo revenues increased by 46% in the first half of '21 compared to 2020 and even more than doubled compared to 2019. While the industry FTK increased by 25% in June '21 compared to June 2020, according to IATA, Turkish cargo increased its market share by adding 35% FTK during the same period. With increasing FTK and unit revenues, we achieved a market share increase of 0.5 percentage point in terms of revenue compared to last year.
In the next slide, key financial data. Passenger revenues in the first half of '21 are at 41% of 2019 revenue level, while total revenues reached USD 4 billion level in the first half of '21. Higher cargo revenues, steadily increasing capacities, high passenger yields and especially the recovery of direct long-haul and transit operations contributed to this rise. Cargo revenues, which contributed to almost half of total revenues in the first half of '21 remained stronger than expected with almost USD 1.8 billion. This is more than twice as much as in 2019. As we mentioned in previous quarters, we were estimating that cargo unit revenues will normalize. The normalization hasn't taken place yet, which helped driving down the total revenue contraction in the first half of 2021 to 33% compared to the same period of 2019.
Owing to our cost-cutting activities throughout the pandemic, we reached a profit from main operations of USD 114 million, leading to a profit from main operations of USD 73 million for the first half of '21. A much lower cost base due to structural cost savings, some discounts and a lower scale of operations together with extraordinary cargo revenues are holding the EBITDAR margin at a high level. The EBITDAR margin in the second quarter of '21 of around 29.3% is 12 percentage points higher than the same quarter of 2019.
Next slide. We compared unit revenues in the second quarter of '21 with the unit revenues of 2019 due to the fact that passenger operations were only operated for evacuations last year. RASK increase was low at 0.5% compared to the second quarter of 2019. This increase was mainly due to strong cargo unit revenues. We can distinguish the positive effect of cargo revenues on total RASK by looking at passenger RASK, which decreased by almost 24% compared to 2019. Passenger RASK continues to be under pressure by low load factors as we introduced additional international routes and capacity. However, as we discussed in previous slides, load factors began to ramp up in June '21. By the looks of the current state of recovery, the divergence between high cargo unit revenues and low passenger unit revenues will remain significant during the third quarter. Revenues slightly declined in the second quarter, but we see a slight increase in ex currency yields.
Next slide. Looking at the regional yield development of the second quarter, we can still see major capacity cuts and different unit revenue development in each regions. Again, we show the development compared to 2019 data as it gives a much better understanding of the current state. Although measures implemented by the regions' governments due to the pandemic are much less than in previous quarters, the same tendencies are still visible in the second quarter of '21. Anyhow, those measures will still have an impact on load factors and consequently on unit revenues.
Middle East continued to be the region with the highest capacity cut in the second quarter, which is not that big of a deal since the region's total capacity contribution is normally the second lowest. As we see in every region, total RASK performs much better than passenger RASK due to strong unit revenues. Because of the increase in capacity in the second quarter compared to the first quarter, unit revenue development are weaker.
Operations in Middle East were not only under pressure due to pandemic-related flight restrictions but also due to intra-regional issues between countries. Operations in Israel seem to reach our expectations until tensions between Israel and Palestine occurred. Iran operations were at a moderate level but had some headwinds because of the lifting of visa requirements for group tourists between Russia and Iran. This caused some decline of demand from Iran to Turkey. The lockdown in May, which took place in Turkey, further pressured demand. The pilgrimage travel restriction from countries other than member states of the Gulf Cooperation Council continued in the second quarter.
The Arabian Peninsula is still shaped by strict restrictions. For example, Saudi Arabia only permits departing flights, while Kuwait increased the amount of maximum passenger numbers slightly from 35 passengers per flight in the first quarter. On the flip side, weekly frequencies to Dubai rose to 21 and our aim to meet demand, which is expected to occur with the start of the time of expos and vacations. Further frequency additions were made to Bahrain, Iraq and Oman and are expected to continuously increase over time.
Far East was once again the region with the second most capacity cuts, while restrictions in the region put heavy pressure on passenger unit revenues, exceptionally good cargo unit revenues drove the total RASK increase to the highest level among all regions. Nevertheless, total revenues for the region were greatly below our initial expectations. The expected easing of flight restrictions with the vaccination process wasn't as sufficient as we were hoping. As a result, restrictions in China, India, Thailand, Vietnam, Japan, South Korea, Taiwan, Pakistan and Kazakhstan remained almost unchanged and are not expected to change, particularly in the near future. Operations to India, Mongolia and Turkmenistan haven't been resumed yet due to the travel restrictions. Although there is a strong ethnic travel demand from countries as Pakistan, Afghanistan and Nepal and Bangladesh to Europe and North America, ongoing travel restrictions in each of these regions limit the capacity we can offer and put pressure on load factors.
Operations in Middle Asia are carried out with the maximum number of frequencies permitted by the state authorities, while load factors remain high. For example, in Kyrgyzstan, frequencies are at pre-pandemic levels and restrictions that were imposed by Uzbekistan were lifted totally in July. All being said, we look forward to reach all our targets in Middle Asia in terms of [ tax ] and revenue.
Africa is the region where passenger unit revenues had the lowest decline in the second quarter, whereas strong cargo revenues helped total RASK to increase at a high level, having the second-best development after Far East. This was mainly due to the loose restrictions in some major markets of the region. While capacity in Africa reached 62% of 2019 levels in the second quarter, capacities in North Africa reached 58% of 2019 levels, making Sub-Saharan operations in the main -- making Sub-Saharan operations the main contributor with 68% of 2019 ASK levels.
We observed higher capacities than 2019 levels in destinations such as Sharm El Sheikh and Hurghada of Egypt and Khartoum of Sudan, mainly due to high demand from Russia and partly from Europe. Frequencies were even increased by the end of March, with some down pressure by the flight restrictions imposed by Russia between April 15 and June 1 and came back afterwards. By the end of March, we reached 2019 ASK levels in Cairo and expect to maintain same capacities in upcoming periods while we were still unable to operate flights to Oran and Constantine of Algeria due to restrictions. And restrictions to Morocco were lifted and flights were operated while under 2019 levels. Hotel quarantine and restrictions of 1 weekly flight with a maximum of 250 seats imposed by Tunisia continued in June and July and was lifted in 1st of August.
As mentioned, Sub-Sahara was a stronger region of Africa. Capacities in Sub-Sahara even increased by 30% compared to the first quarter of '21. In some Sub-Sahara destinations, imposed flight restrictions from other countries continue to be in favor in the second quarter and are expected to continue in the third quarter. In some destinations, passenger numbers were maintained at 2019 levels or even increased despite the same capacity level. Additionally, the lifting of some restrictions in Europe and North America enabled us to relaunch new routes and ASK capacity. Besides, we continued to use wide-body aircraft in several Sub-Sahara destinations such as Accra and Nairobi to meet the lucrative cargo demand.
Touristic flights to Seychelles and Zanzibar relaunched in the second quarter, whereas operations to Mauritius started in July. The time for the relaunch of operations to Kilimanjaro and Mombasa isn't clear yet, while flights to Port Harcourt, Malabo, Pointe-Noire and Antananarivo, Lusaka, Maputo and Durban are not likely to resume in this year.
Capacity in Europe in the second quarter was among the strongest regions with over 46% of 2019 ASK levels reached. Similar to the other regions, cargo unit revenues outperformed passenger unit revenues, which is reflected by the 16% fall of passenger RASK. Flight restrictions in Europe remained at a high level during the second quarter, mostly caused by the Delta variant. As a result, we saw declining load factors compared to the first quarter of around 4 points.
In East Europe and in the Balkans, capacity reached 61% of 2019 ASK levels, while capacity increased by 29% compared to the first quarter of 2021. The region was especially under pressure by the negative effect of Ramadan holiday, together with the lockdown taking place in Turkey during May. Although competition rose during the second quarter in Azerbaijan, Georgia and Moldavia, we maintained our superiority in the region and kept high unit revenues.
Obligatory PCR tests and quarantines for arriving passengers in South Europe, especially towards Turkish passengers, continued to pressure operations. The region was dominated by flights to Turkey and ethnic transit flights along with compassionate flights. While flight restrictions in France and Greece eased slightly in the second quarter, restrictions in Italy and Spain remained similar as in the first quarter. All in all, passenger traffic in the region increased by 37% compared to the first quarter of '21.
Development in North Europe are mixed. Although touristic flight restrictions in Great Britain were lifted in mid-May, the increase of daily cases in Turkey led Great Britain and Ireland to add Turkey to their red list. This had a significant effect on our frequencies to Pakistan and Bangladesh due to the region's high demand of ethnic travel. Ongoing restrictions in Norway and Finland caused us to cancel some flights and change aircraft type in order to reduce capacity. We expanded our operations in Russia after restrictions were lifted in June 22. Increasing competition took some pressure, but a positive trend is still there. With the relaunch of Tallinn and Riga in the second quarter, all destinations in North Europe are operating again.
Capacity in Central Europe was under expectations. Although Central Europe is a region with -- exceeding the high ethnic travel, rising daily cases along with the Ramadan holiday had a major downside effect. The third quarter, however, started positive. Rising vaccination numbers and attractive holiday opportunities in Turkey drive positive expectations for the third quarter.
America was the region with the least capacity cuts with over 92% of the normal capacity back on track in the second quarter. We already mentioned that we even increased our capacity to North America by almost 11% in June compared to 2019. On a side note, capacity to Central and South America also almost reached 2019 levels. This capacity increase came at the cost of falling unit revenues at the side of passenger RASK and revenue yield, yet strong cargo unit revenues were sufficient for increasing total RASK in the second quarter as well as for the first half.
Looking at the forward bookings, local travel, ethnic travel to Pakistan, Ukraine, Lebanon and Egypt from North America will continue to enhance our transit operations' profitability in the region. Additional frequencies were added to Los Angeles, Miami, San Francisco and Chicago during June. Restrictions imposed by Canada since February caused load factors to fall under our expectations but turned to a positive trend with the lifting of some restrictions. Frequencies to Montreal and Toronto will increase in the third quarter, whereas flights to Vancouver started in May. Load factors in South America were lower than initially planned due to flight restrictions imposed by Argentinian Civil Aviation Authority and flight restrictions imposed by the Turkish Ministry of Health towards Brazil.
Domestic capacity in the second quarter reached 62% of 2019 levels. Since lockdowns were lifted towards the end of May, June capacity reached 75% of 2019 ASK levels. Unit revenues fell sharply mainly due to the depreciation of Turkish lira against other hard currencies. Ex currency revenues though grew strongly. The full lockdown, which started on April 29 and continued until May 17 caused us to cancel roughly over half of our domestic operations during the lockdown time due to our revised demand expectations. Also, recovering international operations caused domestic traffic flights to climb up. With the reintroduction of operations to and from Zonguldak, the number of domestic destinations increased to 43 in second quarter.
In the next slide. When we look at the expense breakdown, we see that total expenses decreased by 34% in the second quarter compared to the same period of 2019. Variable costs increased compared to the previous quarter due to the increasing activity in passenger operations. We only included changes for 2019 due to the small complete shutdown of passenger operations in second quarter of '20. Improving passenger operations limited the increase of CASK to 16% in the second quarter of '21 compared to 2019. If you combine our passenger operations with already strong cargo operations in the CASK calculation, CASK even decreased by 3% and ex-fuel CASK increased by only 2.4% in this quarter. Ex-fuel CASK excluding cargo capacity, however, remains at a high increase of 23% compared to total CASK due to the lower fuel CASK.
Personnel expenses decreased by 44% in the second quarter of '21, showing even a higher decline compared to the first quarter. The decrease of personnel expenses by 3.3% quarter-over-quarter was caused by the depreciation of the Turkish lira against other hard currencies. Aircraft ownership costs increased by almost 3% in the second quarter of '21, although aircraft ownership CASK increased significantly. Depreciation expenses increased by 14%, mainly due to the addition of 5 Airbus 321neos and 1 Airbus 350 and 4 MAX aircraft in the second quarter.
Airports and air navigation expenses decreased by almost 30% in the second quarter not only because of the low level of operations but also partly due to the 50% discount we get in airports ran by State Airports Authority and Sabiha Gökçen Airport for '21 and '22. Sales and marketing expenses decreased by almost 50% in the second quarter. This decrease is higher than the decrease we had in the first quarter due to the higher base in the first quarter of '20. The highest decline was achieved in passenger services and catering due to in-flight catering changes we initiated during the pandemic. While some of these changes might be permanent, some pre-pandemic services might relaunch in the near future.
In the next slide. Fuel expenses in the second quarter decreased by 42% compared to 2019, almost a similar decrease as the capacity drop. Lower jet fuel prices in the second quarter of '21 caused fuel expenses to decrease by USD 91 million, while lower operations reduced total fuel expenses by another USD 327 million. No hedging gains or losses occurred in the second quarter compared to 2019. In the second quarter of '21, the share of fuel expenses within the total cost base was at 27%, around 4 percentage points lower than in the same period of 2019. Fully recovered operations will drive the share up to around 30% again. 41% of the fuel consumption in '21 and 14% of the fuel consumption in '22 is hedged as of end of June. We didn't have any over-hedge in this quarter. In the second quarter, we added new hedge positions especially for the second half of the year. We are planning to reach 50% hedge level for '21.
In the last slide, sustainability slide. We continue our sustainability efforts in line with the vision and general strategy of our incorporation, considering the expectations of our stakeholders and related parties. We consider our impact on the supply chain and the environment in line with the United Nations Sustainable Development Goals. We optimize our flight activities, invest in technologies and prioritize fuel-efficient aircraft while adding new aircraft to our fleet.
As a result of all efforts in the second quarter of '21, we saved 8,500 tons of fuel and prevented the emission of almost 27,000 tons of carbon to the atmosphere. The average fleet age at the end of this quarter was 8.5. Our 9 buildings at Istanbul Airport have been registered as LEED-certified by the American Green Building Council. The LEED Green Building Certificate is a certificate of appreciation given to the buildings that comply with the basic criteria of sustainability in order to support natural life without disturbing the ecosystem. Also, our incorporation was again entitled to enter the BIST Sustainability Index in '21. You can find more details about our sustainability approach and the most material issues in our Sustainability Report of 2020.
This will conclude our presentation. We can now continue with the Q&A session.
[Operator Instructions]
Apparently, we received a couple of questions about the FX loss and net income level for this quarter. What was the driver of large FX losses in the quarter, which came as a large surprise? Are these hedging policy changes? Were there any hedging level that contributed to these losses?
Well, first of all, there was no change on the hedging policy. If you would recall a few years back, we introduced a natural hedge policy to bring closer the operational profit and loss level with the net income level. What happened in the first -- in 2 quarters of this first year is mainly the extreme volatility we saw on euro-dollar ratio and the yen-to-dollar ratio together with the Turkish lira depreciation against dollar led us to have FX losses in significant amounts. As you would recall, in our balance sheet, we have about $10 billion financial loss -- sorry, the financial lease of aircraft financing. And we have currently closed $4 billion worth of commercial loans, in which a significant portion of this is in euro denomination.
So when we compare -- when we look at from the beginning of the year, which euro-dollar was around $1.22 to $1.23, it came down to around $1.17 in the end of first quarter. So euro depreciation led to -- sorry, yes, euro depreciation of around 4.4% and together with Japanese yen depreciated from JPY 104 to JPY 110 levels roughly of 5% led to having FX gains. But in the second quarter, the Turkish lira loss depreciation against dollar together with euro appreciation of 1.3% and -- led to further financial losses. So this was the main cause of volatility and big diversion between the financial FX losses of the first quarter and second quarter, which -- and led us to have the about $62 million FX losses. From $114 million operational profit coming down to $62 million net loss, of this difference, the -- about close to $200 million worth of it was purely net FX losses that we received.
Okay. Next question is about demand and forward booking. What is the level of bookings now compared with 2019 levels? Have you seen an impact on demand from the Delta variant? Have you seen a pickup in bookings after the end of lockdown in mid-May? What are the bookings -- how do the bookings for different regions compare? And which are the strongest?
First, as Kadir Bey mentioned in the presentation, because of the lockdowns and flight restrictions not only in Turkey but all through Europe and many of the Asian countries in the months of May and -- April and May, there was a very, very strong pent-up demand that was released in June. So that led us a very significant number of bookings that we observed in the month of June. Tickets sold in this month reached 2019 levels, and the similar daily sales were maintained in most of July. The strongest region in terms of tickets sold were U.S., Americas, North America in general, and Turkey. And in this region -- to this region, tickets sold reached about 50 -- they were 50% higher than the 2019 level. On the other hand, Far East region continued to be the weakest region as a lot of the countries in the region kept flight restrictions continued after the wave we saw in March and -- since March. ASK reached about 80% of 2019 level in July, and Europe reached about 80% or so of 2019 ASK level in July. Americas and the domestic market, we exceeded 2019 ASK levels in July.
Next question is about wildfires. Do you see any risk coming from the Delta variant and wildfires in summer holiday destinations, which can impact [ tax ] and bookings? Are you seeing increase on ticket refunds in recent weeks due to wildfires?
About the fires, we saw some cancellations when we compare the few weeks before the first fire was seen in those touristic regions. It was nearly about 10%, but mostly -- actually almost all of it was on the domestic market cancellation. We did not see any international flight cancellations because of the wildfires. About Delta variant -- sorry, about the refunds, the ratio of refund tickets is steadily coming down. In May, it was around like 15%. In June, it came down to about 10% levels. In July, it's around the same level. So it is steadily approaching to our long-term pre-pandemic levels, I can say. Did I miss anything? About the Delta variant, so far, we have not seen any impact of the Delta variant other than the countries bringing additional restrictions, but those are the countries that already had the restrictions to or from Turkey. So it -- so far, through the summer months, it did not have any major negative impact.
Okay. I will continue with capacity questions. What's your planned capacity ramp-up for 3Q, 4Q and 2022 as of percentage of 2019 levels? When do you expect to return to 2019 capacity levels?
So as also mentioned in the presentation, first half came around to -- close to 55% to 57% of the ASK level of 2019. And in summer months, we definitely are putting more capacity. And roughly, third quarter will come around 80% of the 2019 ASK level. And the fourth quarter is going to be close but little less than that of roughly around 75% of the 2019 ASK level. And together with this, it is going to bring us to almost the same level, maybe slightly less than our originally stated at the beginning of the year ASK level of 60% to 70% ASK of 2019 level by the end of this year. By next summer, in 2020 summer, suppose -- I mean assuming the air restrictions will be relieved, we can reach 2019 summer capacity level by 2022 summer. For the full year of 2019 ASK level, our expectation is to reach it by 2023. And next year's capacity could be around 75% to 85% of the 2019 ASK level.
Next question, again, about capacity. Can you compare the number of daily flights, countries and destinations flown currently with the same period of 2019? Which geographies are the weakest in network recovery?
Kadir Bey also -- that slide that he explained was quite thorough, but just I'll try to summarize some of those numbers. Number of daily flights in July reached almost 85% of 2019 levels. And as of to date, we are flying to 214 -- sorry, 249 destinations, which is down from 314 destinations from before the pandemic levels. However, instead of comparing the destinations, the ASK level is going to be more helpful understanding how we are doing. Capacity in the Americas, as I mentioned earlier, exceeded 2019 level with 21% in North America and 31% in Central and South America in July. Europe, usually our biggest ASK contributor, reached to also above 2019, 80% of 2019 ASK level in July. While the Far East is showing a much slower recovery due to the travel restrictions, travel -- the Middle East and Africa are -- we see better signs of recovery in the summer months compared to -- comparing June to July.
And the last capacity question. Can you make a comparison of your daily flight mix in terms of aircraft types, narrow-body, wide-body, with the frequencies in 2019? If you compare 2019 wide-body aircraft, do you see further room for recovery for long-haul flights?
Well in the first half, the narrow-body aircraft reached around 50% of 2019 daily frequencies. On the other hand, wide-body reached around 60% to 2019 frequencies. And the main driver of higher utilization of wide-body aircraft was first -- again, we have iteratively mentioned, the strong demand in the North America region and higher cargo demand we saw all around the world, in particular Far East region.
Next question is about yield. Yields have been improving. What's your expectation for the remainder of the year and potentially into 2022? Any potential risks of downward pressure?
For -- yes, 2022 is a little harder. But for the remainder of this year, we expect to maintain the yields with the same levels of the 2019 levels in the second half. The kind of the key reason for that is even though we are not being able to put as much capacity as in '19. There is still a demand, and we still have a rich network and provides a significant amount of connectivity, and this is helping us to sustain the yield levels of 2019. About 2022, it's -- yes, it's still early. We still have to see the fall. But our expectation would be, together with the capacity growth, to maintain the yield levels of '21.
Another yield question. How is pricing on current bookings for international routes and domestic routes? What is the competitive environment?
Well, actually, we see a recovery on the demand side in both international and domestic operations. We expect to reach 2019 unit revenues in this quarter. International yields in the third quarter of 2019 was around 7.48 levels. So we are hopeful that we will be able to be having yields in the vicinity of that level. On the domestic market in Turkish lira terms, we expect the yields to increase. But together with the Turkish lira depreciation, we could see at the end of -- I mean including the impact of the currency depreciation, we might see some erosion in dollar terms in domestic yields. But overall, as I said in the earlier question, we would expect to have a stable yield development when we compare the third quarter of 2019 and '21.
And regarding to the recovery, where we are, when we compare -- in the month of July, when we compare TK's operation in terms of landing and in terms of ASK, comparing Turkey with the European and Middle Eastern airlines in our region with our peers, where our -- in our landing compared to 2019 is about 30% below in '21 compared to '19, this peer average is around 45%. And in terms of ASK, Turkish Airlines is almost 30% below 2019 ASK in the month of July, and our peers is around close to 50% low.
Yes. The next question is about fuel costs. Are you comfortable with current hedging levels for fuel costs? How do you expect fuel CASK for '21 and '22?
As you would remember, we had some hedging losses due to the very steep Brent decline last year, and we started to hedge our fuel consumption after we resumed operations towards the end of last year or early beginning of this year. And currently, we have -- 41% of our '21 consumption is hedged, and our breakeven Brent level is $60. We don't have any over-hedged position, and there is around roughly $20 million to $25 million hedge gain from contracts in the first half of this year. Fuel CASK, when we adjust that with the cargo operations, is going to be increasing in the second half parallel to the increase in jet fuel prices. As you would know, there is 12% to 15% increase in the jet fuel in the second half of the year in our expectation compared to the first half. And there will be a small impact coming from fuel hedge gains in the second half.
Next question is about unit costs. What ex-fuel CASK and total CASK level should we expect in second half of the year?
The ex-fuel CASK is about 30% higher than 2019 in the first half. And in the second half, we expect that to be slightly higher when compared to the 2019 level, like roughly 3%, but we will see normalization to continue parallel to the capacity growth that we will see. And as a result of this, actually, the total CASK is also slightly increasing comparing to the second half of 2019 level.
What's your outlook for actual unit costs when we reach the 2019 ASK level?
Well, probably with our current expectation for '22 and '23, we expect to reach 2019 ex-fuel CASK levels by 2022 or '23, more likely somewhere in between -- it's quite difficult given the high volatility also in the fuel -- jet fuel in the Brent market.
Among unit costs, handling is up significantly per landing or per ASK compared to 2019. Can you please clarify this? Is there a fixed cost portion?
Well, that's mainly to do with significantly above our prior projections capacity put by the -- by cargo operation. It was -- in the first half was roughly about 20% more capacity that we initially anticipated. And as a result of that -- and also given that cargo operation was mostly left with the wide-body aircraft and a cargo operation, by its nature, is a more handling-intensive operation. So the handing costs went up. Just to give you some example, compared to passenger handling, cargo handling per landing in the second quarter was about 5x higher. So this -- and also, the cargo handling per landing was more than the earlier quarters. So these brought the handling expenses up significantly.
The question is about cash burn, Murat Bey. What was the cash burn in the second quarter? And can you give us the detail about the drill down?
In the second quarter, cash amount increased by above $550 million. And when we exclude the new commercial bank loans we received and the loan payments we made, the net cash inflow was about -- around $500 million, which was from the operations. And net entry on the bank loan was about $60 million, $70 million. So for the positive cash flow on the operational front, that $500 million, first and most strong factor was increased sales in June, which increased the working capital by around $350 million. And there was about close to $200 million worth of PDP inflows. In this quarter, we received about 11 aircraft. And there were also, led by our fuel hedge positions, mark-to-market inflows of around $50 million.
This question is about predelivery payments. What will be the PDP payment balance, which is currently USD 900 million in balance sheet? What's the expectation, I guess, for the year-end?
So for the remaining part of the year, we don't expect much change on this significantly. I believe there will be something around of $50 million worth of inflow in the second half.
Next question is again cash burn. I see that you earned a decent amount of cash in 2Q '21. Please guide us whether you are going to be cash positive in 3Q even accounting for a seasonal cash outflow due to decrease in future bookings.
Even though we generated cash in the second quarter, we -- and we expect to be flattish on the third quarter, overall, we expect -- we still expect to burn some cash in the last quarter, particularly on the -- there will be PDP outflows, and there will be lease payments and commercial loan payments that were initially scheduled to take place in the last quarter. So this cash outflow is going to bring our yearly average net cash burn to around $30 million to $60 million, which is about $30 million to $40 million better than we initially guided for. Was there anything else here?
No, I guess.
Yes. So overall, we expect to be burn -- be flat on cash burn on third quarter and roughly have $30 million to $60 million cash burn per month throughout the year.
What's your net debt projection for the year-end?
That also is a result of better-than-anticipated cash generation in the second quarter and the third one. We are going to be bringing down our net debt level to $14.5 billion to $14.8 billion, which was -- again in our earlier quarter results, was around $15.1 billion to $15.3 billion. So there was about a $400 million to $500 million improvement on that.
Next question is about CapEx. What do you expect CapEx breakdown for '21 and '22, including CapEx for new aircraft, heavy maintenance, airport infrastructure needs, et cetera, '21 and '22?
So this year, we expect to spare about $1.3 billion for new aircraft, about $600 million for maintenance, spare engines and equipment and $240 million, $250 million for the other investments. And there is a significant amount here on the still ongoing infrastructure projects in the new Istanbul Airport. So this overall is making around $2 billion to $2.1 billion worth of CapEx for '21. And for the next year, it's similar. There will be again about $1.3 billion worth of investment for aircraft financing, about $800 million for heavy maintenance. And Istanbul Airport is going to need much less because we have finished -- we will be finished by most of our first phase projects by then. It will require something around $50 million worth of CapEx.
Next question is about the ratio. Is your net debt to EBITDA target still around 3x? When and how do you expect to reach this target?
We expect to have around 5.7x net debt to EBITDA by the end of this year. And our midterm target is around 3.5x to 4x level.
How do you plan to pay your short-term bank borrowings of around USD 2.6 billion?
For this short term, I take it as a loan under 1-year tenor.
Yes.
And of this $2.6 billion, $1.4 billion amount is the Exim loan that we get from Turkish Eximbank. And it's a rotating loan. We have had that in the balance sheet over the last like 4 years. So there is no -- we don't see any risk in revolving this amount. And the remaining roughly $1 billion is all from the Turkish commercial banks, with which we have quite a deep relationship. And there won't -- we don't expect any difficulty rolling those debts going forward.
I'm jumping to cargo questions, Murat Bey. Cargo operations are still strong. What's your expectation around yields and volumes in the remainder of the year and into 2022? Would it be fair to expect some normalization?
Yes. Cargo yields are definitely going much, much higher than the pre-pandemic levels, and there is a few reasons for that. And most common one is the lack of belly capacity provided by the passenger aircraft. And there are issues due to the marine transportation. The -- it's quite expensive to have also marine transportation. So this is the fact. But when the normalization is going to come is going to be determined by the evolution of the pandemic, how the airlines are going to put passenger capacity and how the marine transportation expenses is going to be changing in the coming period.
So definitely, some normalization is going to take place, but the timing is difficult to foresee. But in the meantime, we are trying to benefit most of the current market environment. And well, if any guidance, IATA's expectation is that those yields are not going to come down before 2024, but they went up quite quickly in the beginning of the pandemic. So they could come down quickly as well. Our advantage compared to most of our peers is, just like our passenger network, our cargo network is quite widespread and we see quite the benefit of this in providing us yields. And about the volumes for the full year, we expect to have about 20% increase in cargo volumes compared to 2020 level.
Recent development about moving cargo operations to Istanbul, can you give us some details about it?
Yes. That's a project we have been working heavily. And actually, the building is completed. And now the required transporting systems and handling systems are being established in the building. We had a little bit of a glitch on establishing the IT system there. So based on this, we expect to move still within 2021, but it could be either in the last quarter or towards the end of the year. However, given the current strong cargo performance, we don't see the urgent need to have the full operation move there. But we are going to be starting to use the new facility with our passenger wide-body aircraft so that in the meantime, while running the full cargo freighter operation from Atatürk Airport, we will continue to facilitate more and more the new cargo facility in Istanbul Airport.
Any update on the plans to carve out cargo as a separate entity?
That's also continuing. There is -- it's quite an involved operation actually. There is quite a bit of a procedural and operational issues that we are trying to handle, the tax legislation, application process to Capital Markets Board, receiving flight permissions and establishing the AOC all around the world. We need to get these permissions that TK has but our new subsidiary currently does not have, and IT, human resource transfers to the new company. So there is quite a bit involved process here. There are tasks -- many tasks first that are simultaneously working. We also plan to finish this process by the end of the year.
Are you planning any new partnership or strategic move in the environment after COVID-19, both for passenger and/or cargo businesses?
On the passenger side, we don't have any such ambition at the moment. But on the cargo side, there is quite a bit interested parties that show their interest. And they are -- we leave those evaluations to a time after we fully spin off our cargo operation as a separate entity.
An online question from [ Turk Investment ]. Will you consider to receive fresh equity for strengthening market position in the post-pandemic era?
Well -- so we are definitely continuously in coordination and in contact with financiers. Fresh equity, we don't think we need that, but the question here mentioned in terms of convertible bonds. We have been approached by [ quite a bit bank ] that introduced this product to us. And with an open mind, we are looking into that. We are also looking into Eurobond market. And Turkish corporates and banks have shown strong presence in that market. So that's another area that we could utilize to strengthen our liquidity position. But currently, as we expressed throughout the presentation, we don't feel the urgency of a high amount of increasing our debt level. But these products are definitely available to us, and we can tap the market when we see necessary.
Okay. Another online question. What is the latest plan for Boeing MAX operation and delivery?
So this year, we got -- we will be receiving about 13 MAXs, and we already started the operation with them. But still, currently, there is a surplus of capacity but -- and we don't see any technical problem with them, and there is already -- they are being utilized in a quite a bit -- quite different parts of the world. So we are receiving them, and we will be utilizing them. We already see the benefits of them actually compared to the old-generation Boeing narrow-body aircraft. So we'll be able to benefit from their presence in the fleet in the near time.
We completed all the questions from [ OYAK Yatirim ], Goldman Sachs, JPMorgan, HSBC, TEB Yatirim, BGC Partners, VTB Capital, [ Una Yatirim ], Bank of America, [ Halk Yatirim ], and Wood and Capital. Thanks for them for sending over their questions to contribute our investor call today. We can end the call.
Ladies and gentlemen, this concludes today's webcast call. Thank you for your participation. You may now disconnect.