Turk Hava Yollari AO
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Turk Hava Yollari AO
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Ladies and gentlemen, welcome to Turkish Airlines Full Year 2018 Results Conference Call and Webcast. Today's speakers will be Mr. Ilker Ayci, Chairman of the Board and the Executive Committee; Assoc. Prof. Murat Seker, Ph.D., Chief Financial Officer. I'll now hand you over to your host. Sir, please go ahead.
Thank you very much. Dear ladies and gentlemen, welcome to our year-end financial results presentation. It's a great pleasure to have this opportunity again. We completed solid year in many aspects, and I would like to comment on the main drivers behind the success before we start to evaluate the figures.
One of the main drivers of 2018 performance is for sure the demand environment, the number of tourists coming to Turkey reached to almost 40 million in 2018 with 22% increase year-over-year, not only incoming demand, but domestic and international transit demand was strong in 2018, too. So another key driver is the limited competition pressure observed mainly in Gulf carriers. They used to increase double-digit capacity in previous year, but in 2018, the growth was limited with around mid-single digit levels. This gave us a relief, especially in Asia to Europe routes, consolidation in Europe after the failure of some smaller carriers contributed to our profitability positively as well.
Expansion in cargo growth was another driver, which is worth to mention for 2018 performance. Both cargo tonnage carried and the cargo segment revenue increased by 25% in 2018. Since the daily cargo volume counts for almost half of the carried cargo, contribution of the expansion in cargo segments is visible in unit revenues and in EBIT levels.
Let me now comment on the macro indicators for Turkish Airlines. Total revenue increased by 17% for the full year and reached to USD 12.8 billion. After the strong first half performance in 2018, we revised our guidance to $12.5 billion. We are glad to be able to successfully meet our year-end guidance. Cargo revenues, as I just explained, increased by 25% and the net income reached to $753 million. Both the number of passengers and the unit revenue increased by high single-digit, thanks to the strong demand environment realized throughout the year.
I would like to talk briefly about the guidance for 2019. We will be carrying almost 80 million passengers this year, parallel to the limited ASK growth in the domestic routes. The number of domestic passengers will be flat year-over-year. There will be double-digit growth in the number of the international passengers from 42 million in 2018 to 47 million in 2019. Total revenue will be increasing almost 10% and exceeding USD 14 billion. In accordance with the increase in the average fleet of 8%, ASK growth will be around 7%. Load factor will be around 81%. Ex-fuel CASK will be increasing 3% to 5%, mainly due to the higher airport fee and the greater size of the operating area in the new airport. This will lead to a contraction in the EBITDAR margin to about 22% and between 24%. The last item is the average into-plane fuel cost. We expect this to be USD 715 per ton for 2019, which is similar to 2018 levels.
As I mentioned earlier, Turkish tourism rebounded in 2017 and 2018. The total number of tourists coming to Turkey increased by 22% and exceed 2015 levels by reaching to 40 million for Turkish Airlines. The number of international passengers surged by 12%, excluding transit passengers and reached to 19 million in 2018. When you look at the country breakdown, the increase in direct passengers from China and India was strong with 26% and 52%, respectively. The strong demand supported with solid direct passengers figures helped to mitigate the impact of the increase in jet fuel prices. The total number of tourists is expected to reach 45 million in 2019. This number will be 16 million for -- only for Antalya and more than 90% of Antalya passengers are international direct passengers. We are planning to capture more of this premium demand, and we will be assigning new direct flights from Antalya to some cities in Europe and Middle East.
As a quick evaluation on the forward bookings for the following months, I could say that the start of the year will be a bit negative, but it will be turning out to be very positive in the following months. We started 2019 with a slightly negative load factor in January compared with the same period of 2018. The main reason is the high base of the 2018 for which the winter was relatively much softer. For February, the figures are slightly negative as well as, again, due to the high base of the last year. Easter shifted to April this year, that is why there might be slight decline in March figures, but April and the rest of the second quarter are expected to be stronger than last year, which is very, very important.
I would like to also briefly share the latest updates about the move to the new airport. We're getting ready with all necessary preparations in order to mitigate the possible risk items in the new airport. We are working in cooperation with all related parties about the move. In the meantime, construction of our buildings will be completed by the end of March. Following the current plan announced by Directorate of State Airports Authority, we are planning to carry entire passengers operations on the 5th and the 6th of April and start of the flights on the 6th. With start of our operations, we expect to benefit from many new opportunities to expand our network and enhance the service quality.
With these remarks, I will now leave the floor to Dr. Murat Seker to continue with the presentation. Yes, Murat, the floor is yours.
Thank you very much, Mr. Chairman. I'll continue with Slide 7. Let me begin with the traffic figures. In 2018, our passenger number increased by 9.5%. As it has been in the previous year, increase in the yearly passenger numbers exceeded the capacity growth. This explains a 2.8 percent point (sic) [ percentage point ] increase in overall load factor reaching 82%, which is also the highest load factor rate we have ever recorded. Similarly, yearly domestic load factor of 85.3% and international load factor of 81.4% are -- were our highest ever attained rates, which was a good indicator of the strong tourism sector in Turkey in the last -- in last year.
In the next slide, we can see the passenger breakdown. While the international to international transfer passengers increased in numbers by 8%, its share in total international passengers was 56%, same as in 2017. Regarding the international breakdown by geography, we have a higher demand from Europe compared to last year, which has a positive effect in our unit revenues. The share of African passengers also rose during 2018.
Graph at the bottom shows the breakdown of passengers by transfer type. As you can see here, there is a shift from international transfer segment to international direct category, a good sign of increased Turkish demand. As we expand our fleet in our new home, we choose to invest in new generation and environmental-friendly aircraft. Our fleet will be expanded in this regard with more than 200 new generation aircrafts till 2023. We received 9 new generation narrow-body aircraft in 2018, and they are 15% more fuel-efficient compared to the conventional aircraft types in our fleet. As the share of new generation aircraft will be increasing, fuel and maintenance costs are expected to be declining accordingly. 50 new generation wide-body aircrafts will be utilized mostly as additional frequency to the existing primary long-range destinations. They will also replace performed flights A330 and 777 for the less profitable secondary long-range destinations.
Looking at the cargo operation, strong growth in terms of demand and capacity continued during 2018. Our total tonnage of cargo carried grew by 25% and reached 1.4 million tons. Likewise, our cargo revenues increased by 25% reaching $1.6 billion, which made cargo operation an important revenue contributor. Turkish Cargo freight ton kilometer grew by 25% in 2018, whereas the world freight ton kilometer average growth rate was 3.5%.
When we look at the financial data, in the last quarter of '18, passenger revenues increased by almost 8% and cargo revenues increased by almost 17%. On a year-over-year basis, passenger revenues and cargo revenues increased by almost 16% and 25%, respectively. Depreciation of Turkish lira against hard currencies improved foreign tourist arrivals to Turkey, especially from European destinations. On the other side, increase in cargo network and world trade helped us achieve astonishing growth in cargo business. Despite increase in fuel prices, in the last quarter, we were able to manage costs efficiently, and 7% increase in costs was offset by 8.4% increase in revenues. The reason for 36% decrease in profit from main operations for the last quarter is the sharp increase in fuel prices, which led a 24% increase in fuel cost for the last quarter. On a year-over-year basis, we achieved a new record in profit from main operations with an increase of nearly 17% compared to 2017.
We generated $576 million EBITDAR and 19.3% EBITDAR margin. This is slightly lower than last quarter of 2017. The depreciation on EBITDAR margin is mainly because of higher fuel prices offsetting revenue increase effect, which resulted in a decrease in profit from main operations. Overall, in 2018, we achieved $753 million net income and generated $3.3 billion EBITDAR, which is higher than the 2017 level of $3 billion.
When we look at the margins over the last 5 years, we can see that average EBITDAR is around 23%, and we are above the average in 2018. Stable and sustainable growth in revenues achieved for the last 2 years was a result of this. Despite 17% revenue growth in '18, due to increase in fuel prices, EBITDAR margin fell slightly below 2017 levels.
Now let's move to the revenue details. In the left chart, we see the breakdown by business type. Majority of the revenue comes from passenger side and second biggest component is cargo with almost 13% contribution to the top line. The positive environment in tourism and aviation sector and depreciation of Turkish lira were stimulating both passenger and cargo demand.
The chart on the right gives geographic breakdown. Well-diversified revenue generation capability continues to help the possible regional volatilities. 88% of revenues in '18 are generated from outside of Turkey with the biggest contribution coming from Europe, followed by the Far East regions. We managed to increase the share of Europe, Africa and Americas in this period. Europe with more than 113 destinations we fly to, continue to be an important region for us. We follow positive news from European tour operators regarding their reservations to Turkey in 2019 summer.
On the Asia market, we have recently made a codeshare agreement with Indigo, which is one of the major airlines in India. Evolution of the revenue yield and the RASK were strong in 2018. Even though RASK and revenue yield development seemed weaker in the fourth quarter due to the high base effect over the same period of last year, we achieved to increase RASK and yield by 2% and 3%, respectively, in the fourth quarter of the last year. When we look at the -- at constant currency RASK and yield, we see that the demand and pricing environment where quite good in the last quarter as well. We have been achieving RASK constant currency and revenue yield constant currency terms improvement of 8% to 9%.
When you look at the developments for the whole year, RASK and yield went up by 8% and 7%, respectively. Turkish Cargo continued to be a solid contributor in these figures. In units revenue increase -- its units revenue increased significantly and this affects the RASK growth positively. Considerable increase in passenger yields was mainly driven by the shift in the passenger mix towards high-yielding point-to-point traffic. International to international transfer passengers went up by 8%, while excluding international to international transfer passengers, number of international -- total international passengers were up by 12%.
Now let's highlight how we performed across all regions in terms of capacity and unit revenues. We have been increasing capacity in the markets, yet demand was strong, so we have been able to improve the units revenues at the same time. RASK growth is double-digit in Europe, Americas and Africa and others have strong growth in 2018. Domestic RASK was negatively affected by the currency depreciation and is the only exception among all regions. However, when we look at that constant currency terms, domestic RASK was also growing strongly. Together with RASK, yields were also significantly higher in all regions, what we have seen for domestic RASK is also seen here. Its impact to total yields is not substantial, thanks to the low share of domestic revenue in the total passenger revenue compared to other regions.
In the fourth quarter, we increased our revenues by 8%. Here on the graph, we can see the drivers of the revenue development and main driver was ex-currency passenger RASK increase of about 12%. Other than that, cargo revenue increased by 16% and, however, the negative currency effect is high as in the third quarter of 2018 with $195 million. When we look at the full year, we lost almost $400 million revenue due to 40% appreciation of U.S. dollars against Turkish lira compared to last year. However, thanks to the good results of ex-currency yield and the RASK growth over the year of '18, we achieved 17% total revenue increase in line with our guidances.
We were also good on load factors in '18 due to the limited capacity increase, an 82% load factor, 5% ASK growth increased total revenue by almost $900 million. When we look at the cost side, our costs continued to be amongst the lowest in the industry. Even though rising fuel prices in the last quarter affected cost base negatively, the cost management discipline allowed us to withstand the pressure and increase profitability. Ex-fuel costs decreased by 2.4% level in the last quarter, mainly as a result of lower personnel costs due to weakened Turkish lira and decrease in aircraft ownership and airport costs.
On a yearly basis, while total CASK increased 9.3%, ex-fuel costs increase was limited to 3.2%, in line with our guidances. Part of the increase in sales and marketing expenses were due to online sales increase in the online sales -- increase in online sales as a commission rate charged by payment service providers increased in 2018. Another main cost increase was in maintenance. This was mainly because of the cost base for maintenance expenses was lower in 2018 due to deviations in maintenance plans.
Now let's look at the profit evolution. We performed slightly worst in the fourth quarter when compared to the same period of last year, mainly because of our higher unit costs, especially in fuel. However, we could offset the negative currency effect on the revenue side. Looking at the full year of profit evolution, we achieved all-time high operating profit by an increase of 17% compared to 2017. As in the first -- fourth quarter, we could offset the negative currency impact. However, due to higher Brent prices, fuel costs in the industry rose too much in 2018 and here you can see our 21% into-plane jet fuel price increased costs almost $650 million.
Regarding to the hedging policy, on the upper left chart, we see the revenue breakdown by currency and other chart shows us the expenses by currency. Most of the portion of revenue and expenses are in U.S. dollars, this is 7% of revenues and 58% on the expense side. At the same time, 28% of revenues and 12% of expenses are in euro denomination. As seen in the graph, we are long in euros and short in Turkish lira. We also have hedging policy for this currency risks. In this policy, our strategy is monthly based decreasing layered hedging. Our contracts are for a maximum 24 months. In this policy, we modify hedging parameters regarding the current circumstances.
About the fuel. Fuel cost share within our total cost base is roughly about 30%. Even though we have layered hedging strategy, when forward fuel price curve is higher than what we estimate for the future, we decrease the number of hedging contracts which we enrolled. As you know, from January to November, fuel price were not increasing. After November, the prices in the market went down from $84 per barrel. As of the end of December, we have about 21 million barrels hedging position. 18 million barrels of these positions belong to 2018.
Lastly, on the aircraft financing, we come -- our financial lease liability decreased from $8.1 billion to $7.4 billion in '18 by paying more than $1 billion financial lease obligation. We received 12 new -- brand new aircrafts in this year and due to different type of lease structures like asset guarantees, French tax leases, our weighted average interest rate, cost of funding went down from 2.95% to 2.85%.
During '18, lease payments for 11 aircrafts were completed and ownership of this aircrafts transferred -- were transferred to us. Number of aircrafts we own will continue to increase in 2019 as well. In '18, we mandated financing about 44 aircrafts that are scheduled to be delivered in 2019. On the operational lease side, our total obligations decreased from $1.9 billion to $1.6 billion in 2018. And this concludes my presentation, now we are going to continue with the questions and answers.
[Operator Instructions]
Okay. As our usual practice, I will read the questions and our Chairman will try to answer them. The first question, there are lot of overlapping questions I'm seeing here. Could you please update us on the status of the move to the new airport, is the new date and likely tenant for this great move or should we expect a new date after summer season period? And Selim Kunter from Deniz Investment has a similar question. So our Chairman is going to answer them together.
Thank you very much, Murat. The construction of our building will be completed by the end of March. And following the current plan announced by Directorate of State Airports Authority, we're planning to carry entire passengers operations on the 5th and the 6th of April and to start the flights on the 6th. This date is likely candidate for Turkish Airlines as it falls right before the summer schedule.
The next question is, the economic activity in Turkey is expected to be shrinking in 2019. What would be the impact of this on domestic and Turkey outbound demand? What is the proximate effect of EBIT in 2019? And what are the measures taken for the decline in domestic demand? This is a question also by Cenk Orcan and Ezgi Yilmaz.
Yes. In terms of the number of domestic passengers, we do not expect a significant decline due to the price cap for domestic tickets. We expect to have a flat domestic demand environment in 2019. The drop you observe in the first few months are likely to be compensated in the second half of the year. We guided 3% ASK growth in domestic routes to prevent the possible load factor erosion. For Turkey outbound demand, the indicators are slightly negative due to the depreciating Turkish liras. So we expect that Turkey inbound demand in 2019 will continue to compensate this decline. So we are planning to add direct flights from Antalya to 8 European and 8 Middle Eastern destinations in the summer schedule of the 2019, which will yield an increase on the number of frequencies to the city from 17 to 53 for better utilizing the premium demand. So also, as an answer to this question, percentage of revenue in domestic and outbound flights is about 3% of total revenues in 2018.
The next question is, what are the main drivers for the cost increase that are related to the move? A question by Can Alagöz and Artem Yamschikov.
Yes. Unit prices for the airport charges, including lending and parking security charges and rent and et cetera, include around 20% to 30% in our euro and Turkish lira terms. On top of that, the area utilized is much bigger. The terminal area is 2.5x of Atatürk Airport's terminal area, and the lounge area is 5x bigger than the existing one. There are more than 100 bridges in Istanbul airport, whereas this number is less than 30 in Atatürk Airport. The distances are longer for passenger buses and the rental areas are getting bigger as well. The luggage system is more widespread. Also, new airport will be -- in the new airport, we will be working with our subsidiary TGS, Turkish Ground Services company for ground handling services and with a new fuel operator for fuel. We expect Havas Havaalanlari will continue their operations in Istanbul airport as well.
Okay. The next question is from -- is, is your $14.1 billion revenue target consolidated or unconsolidated figure? If it is consolidated, what is driver for 10% top line growth apart from 6% tax growth for 2019? It's a question by Esra Suner.
USD 14.1 billion is the consolidated revenue guidance for 2019. We should take the ASK growth into consideration, which is guided by -- to be 7% to 8% range. On the top of the ASK growth, the unit revenue expectation is slightly positive, 1%, 2% up for 2019 with time in total around 10% increase.
Okay. The next question is, can you give us some color on forward bookings? Question by Erdem Kayli and Selim Kunter.
Yes. No update. The January performance was within our expectations. February, the figures are flat compared to last year due to the high base of last year. And last year, the winter was extremely mild, which led to few cancellations. Also, this year, Easter shifted to April, that is why there might be slight decline in March figures, as I pointed out in my opening speech. So we expect strong tourism this year, as we mentioned during the presentation. Thus, second quarter is expected to yield strong performance. As an answer to Selim's question, based on the first 2 months readings, we don't see a potential downside or upside risk for the guidance.
The next question is, what is the CapEx projection for the year and net debt for the end of the year? This is a question also asked by Onur Müminoglu.
Yes. As you have already known, we will add 44 new aircraft to our fleet in 2019, and our investment for Istanbul airport will continue. So we are planning to have around USD 3 billion CapEx, including Istanbul airport. We expect a total debt of $12 billion to $12.2 billion and net debt of USD 9.5 billion to USD 9.7 billion at the end of the 2019.
The question is, Pegasus is one of your competitors in Turkey and they have changed their strategy. They cut capacity from domestic routes and replaced its capacity to their international routes. How did it affect Turkish Airlines? And do you see any yield pressure on international routes?
We observe Pegasus is shifting domestic capacity to Europe and their Middle Eastern destinations. We do not expect material impact in yields and load factors for these routes, since the market share of Pegasus is limited compared to Turkish Airlines, that is obvious. Pegasus is able to attract only direct passengers to and from Istanbul.
A question by Cenk Orcan. Any impact of delay in new airport move on 2019 guidance. In general, how do you lead to 2019 guidance in the face of first 2 months performance regarding the yields, unit costs, load factors and cargo?
Delay of new airport movement will decrease our first quarter cost compared to our 2019 guidance. In the first 2 months, cargo operations did well, and we carried more cargo tons compared to guidance. Since movement is late, unit cost would be lower than guidance. On the other hand, yields and load factors are as expected. These changes do not require a guidance revision though.
The question is by Esra Suner. The -- what are the major items leading to your 3% to 5% ex-fuel CASK increase expectation in 2019? What is your brand equivalent estimates for total $715 average fuel cost for 2019?
There are 2 major items that drive 3% or 5% ex-fuel CASK increase for 2019. The first one is the wage increases delivered to pilots in 2018. We delivered wage increase for all pilots in June and October. The total impact will be realized in 2019. The second item is the new operating cost in Istanbul airport and unit sizes for the airport charges increased around 30% in euro and Turkish lira's terms. On top of that, the area is getting bigger. The terminal area is the 2.5x of Atatürk Airport's terminal area and the lounge area is 5x bigger than the existing one. There are more than 100 bridges in Istanbul airport where this number is less than 30 in Atatürk. The distances are longer for passenger buses and the rental areas are getting bigger as well. In short, we will operate with a better service quality, but a bit costly. And the average brand assumption is $65 per barrel in our guidance.
The next question is by Gaye Aksongur and Ezgi Yilmaz. Question is about the expense from investment activities. The sale of marketable securities showed $634 million profit during the first 9 months of '18. However, due to a loss in the quarter '18 -- in 2018, 12 months figure shows a profit of only $12 million. Could you provide more information about the loss in the last quarter? And both Gaye and Ezgi had this similar question.
Let me take this very quickly. As you know, we have 100% own subsidiaries and some JVs in order to have the -- a better service to our customers and in different source to aviation. In the third quarter, due to the new investment and JV agreements we had, we received progress payments of about close to TRY 600 million. And this amount, when we recorded in the third quarter, they were recorded as income from investment activities. When we were having the year-end evaluation with auditor, auditor's evaluation was to carry this amount to the balance sheet. And due to this adjustment, we had to suppress the 600 -- roughly TRY 600 million to a longer terms. So the tail loss is seen in our year-end financial statements. This amount will be deducted during the next 10 to 15 years from our receivables under the balance sheet and will be seen under the P&L book.
After the strong growth for consecutive years, what is the reason for 3% to 4% increase in carried cargo stated in 2019 guidance figures?
We recorded on average 25% growth in cargo over 3 consecutive years. There are 3 factors behind this cautious cargo growth guidance for 2019. In 2019, we're going to have parallel operations in 2 airports for cargo. Daily cargo will be in Istanbul airport, while the freighter cargo operations will be handled in Atatürk. So furthermore, the fleet growth is limited in 2019. We are planning to add a 777 freighter by the end of this year and 2 more by 2020. The last thing is the expectations about the air cargo demand in 2019. We observe that the global air cargo demand is going to be relatively slower than 2018.
A question by [ Arnette ], [ Rafferty Capital ]. What is the outlook in competition side for 2019?
When we look at the capacity outlooks in 2019, network carriers in Gulf region are not too aggressive. Local carriers seem to increase their market share in Gulf region, which is not a track for Turkish Airlines as our origin and destination payers are not overlapping. For Europe, the consolidation is continuing with the failures of the smaller airlines. We're going to benefit from consolidation as the excess capacity will be eliminated. Network carriers are not adding aggressive capacities in Europe, too.
So a question by Can Alagöz. Should we expect any pressure on the yields on increasing competition once foreign airline companies start work in Istanbul airport? If yes, which geographic destinations do you expect to see increase in competition the most?
We do not expect heavy competition from European locals carriers. This is mainly because of the airport charges in Istanbul airport, which are higher compared to Atatürk and Sabiha Gokcen airport. However, some Far East and the Middle East based airlines may prefer to initiate flights to Istanbul airport. As you know, Turkish Airlines has lower unit cost compared to its peers, and we believe this will make us stronger at the competition. New passengers will explore Istanbul as a convenient transit point with the airlines. They used to fly at first, but we are sure that next time Turkish Airlines, with higher service quality, will catch that passenger for the following flights.
The next question is by Kerem Tezcan. How did you manage to reduce your cost of debt in your last quarter of 2018?
Turkish Airlines have achieved a very low cost of debt by using different types of tax leverage products such as French-Italian tax leases and JOLCO in combination with competitively priced debt varying from insurance-backed loans and such as AFIC and export-guaranteed loans, such as for jet. And we have received 12 new brand aircraft in 2018 with these types of leverage products and 7 of them entered in the last quarter, which reduces average cost of debt.
A question by Erdem Kayli. What is your growth plan to penetrate further into the Asia market after the move to the third airport? In line with the code sharing agreement with Indigo, do we also expect a partnership agreement with Chinese -- for Chinese market or acquiring an airport stake outside Turkey? What is your plan for cargo operations?
With Indigo and that partnerships, we set our goals already to further penetrate to India and China markets. Parallel to the capacity expansion in the new airport, we're planning to increase our cargo market share globally, but the share of Asia in this goal will be visible compared to other regions. There is no intention to buy a stake in an airport management company inside or outside of Turkey in the near term and -- since we are focusing on the financing of our aircrafts.
A question by [ Hamzad Kochappan ]. Do you expect higher maintenance costs in 2019 observed -- as observed in 2018? Should we be looking for a normalized increase per block our maintenance costs?
We expect about a 5% increase in maintenance expenses in this year. Yet, we can -- it's fair to say that the maintenance expenses per block are -- will be flattish in this year.
Another question by Gaye Aksongur is on taxes. We had seen TRY 383 million deferred tax expenses in the last quarter. Is it reasonable to assume a similar pattern in the coming quarters? Could you provide more color on the effective tax rates for the coming period?
Deferred taxes are a result of differences between IFRS and the Turkish Tax Procedure Law and we expect similar pattern in the coming years. Corporate tax rate has been increased 2 points, and it's 22% for the year 2018, '19 and '22 according to Turkish tax laws.
After the move to the new airport, is there a change in your growth strategy in Sabiha Gokcen. Do you plan to add capacity there given the large number of aircrafts you have on the pipeline? What are the strategic plans for AnadoluJet. A question by [ Kemal Huzen ].
We're planning to maintain our existing coverage of Sabiha Gokcen airport in terms of market share. The importance of Sabiha is increasing with the greater coverage area after construction of Osman Gazi Bridge. The subway to Sabiha Gokcen will be ready by the end of 2019, which will facilitate the access to this airport. 2 parallel onlays on the other hand are going to be ready by mid-2020. After the move to Istanbul airport, we are planning to focus more on the AnadoluJet reconstruct -- restructuring project. We aim to improve the seat configuration and the cost structure and the fleet in order to make AnadoluJet a more competitive low-cost carrier.
A question by Onur Müminoglu. What is your long-term sustainable net debt-to-EBITDA multiple goal?
We, at the moment, have it around 3% to 5%. But as we have a young fleet and a young airline, it is -- has a strong fleet development projection. We expect this ratio, this multiple to be around 3.5 up to 4x level for the short time, for the next few years. But then we expect that to come down to around 3x level for the midterm. This was a question by Onur Müminoglu.
Next question is, you are planning to add more frequencies from Antalya base in 2019. Could you please share some details?
As you all know, Antalya is the powerhouse of Turkish prison and it's very critical point, and it's important -- day-by-day becoming more important, and we're adding direct flights from Antalya, Bodrum, Dalaman and Izmir to some European and Middle Eastern cities, but 90% will be from Antalya. This year, we added direct flights from Antalya to 8 European, 8 Middle Eastern destinations. The number of frequencies will be increasing from 17 to about 50 flights per week from Antalya.
Next question is by Erdem Kayli. Considering your target markets and balance sheet structure, what is your optimum fleet breakdown in terms of owned/leased aircrafts? Do you expect higher sell and leaseback activities, while Turkish Airlines moves to more aircrafts?
Yes. Our main appetite and priority has always been finance lease, but does not -- that doesn't mean that we do not consider any sell and leaseback agreement. If you compare our current fleet breakdown with peers, you will see that our operating lease share is lower than the industry average, but high percentage of finance lease enables us to transfer their ownerships at the end of the lease period. As mentioned before, 11 aircrafts ownership transferred to us and that number will increase each year. At the end, we would like to keep operating leases share around 25% to 30% to maintain the optimal fleet composition.
Question by Can Alagöz. Do you expect any dramatic change in the average daily flight utilization rate once you have fully moved the Istanbul airport, increase, decrease in the medium term?
The average transit time will be slightly increasing in new airport at the beginning as the distance between the runways and terminals increase. However, once the Turk runway is completed, that longer transit time is going to be shortened again. On the other hand, the queues before landing and takeoff will be much shorter. And as a result of this at the beginning, both times we expect them to be similar with Atatürk. But as I said, after especially Turk runway is completed, there will be significant efficiency improvements.
A question by Kerem Tezcan. Do you think a negative impact of currency in the last quarter in EBIT will prevail in 2019? Does this have a risk on your guidance?
In 2019, we expect that the negative impact of currency in revenues will prevail, but as 2018, positive currency impact on cost will offset the new negative revenue impact on -- in 2019. We think that the overall currency impact in EBIT will again be positive.
A question by Can Alagöz. Once you transfer to Istanbul airport in the beginning of April, will you still have any operations in Atatürk Airport? Any potential double airport costing for Q2 and Q3?
Throughout the year, we will continue cargo flights in Atatürk. The meals will be carried from kitchens at Atatürk as well. So -- but there will be also for the catering satellite, new unit for us as well. So we'll backup from here for the main courses only. And the transfer of the cargo and the meals between the 2 airports cost us around $8 million, $9 million for the entire year. So it is included in the guidance already and is acceptable.
Can you quantify the benefit of the new airport?
Yes. Let me try to give you some figures for materializing these benefits. As the most visible one, we will be avoiding the fuel cost that is burnt during extra orbiting over Marmaris for landing, which is more than $100 million per year. The increasing slot availability is another benefit that enables Turkish Airlines to penetrate new markets and increase capacity. Larger parking and runway capacity of the airport will improve the flight time performance, will allow better connection experience. The increase in the service quality will be a visible benefit for our customers with a greater terminal, with more bridge availability for parking with greater launch areas and the new facilities for the transit passengers. On the cargo side, the new terminal will allow significant growth on the cargo capacity. It will be able to facilitate up to 4 million ton cargo capacity, whereas capacity in Atatürk Airport is only 1.5 million tons.
The next question is by Erdem Kayli asking about our Asian growth strategy.
You know Erdem, well, we have been iterative in mentioning that we want to grow in Far East Asia. Our Chairman just answered the question about the cargo. The agreement -- JV we have been establishing with ZTO. And recently in India, we established an exclusive code share agreement with Indigo. We expect this to increase our Indian traffic. Currently, we have 14 frequencies, whereas there is no Indian carriers flying to Turkey. This will increase our reach to Mumbai -- to cities beyond Mumbai and Delhi. And we expect to get more Indian tourists to Turkey -- to Istanbul and Turkey, especially after this agreement.
A question by Kerem Tezcan. How much fuel hedging ratio to increase by first half of 2019 from the 44% level?
According to the hedging policy, we expect 48% to 50% ratio of hedging as of -- in 2019. And also, we will keep our maximum 60% hedge ratio policy in current market conditions.
A question by Ezgi Yilmaz. What would be your ex-fuel CASK guidance if the airlines was fully operated Istanbul Atatürk Airport in 2019? Would -- what would be the potential ex-fuel CASK increase in '19 if the airport transition is not completed smoothly?
In Istanbul airport, we expect around 2% ex-fuel CASK increase due to new effective charges and expansion in service area. If there were flat rates applied in Istanbul airport, ex-fuel CASK guidance would be 1% to 3% increase. We don't expect major problems during transition. Our preparations and plans are all on schedule and our transition plan also includes contingency costs, such as delays, cancellations and reterminaling.
A question about Sabiha Gokcen. There are lots of rumors about acquiring a stake in the new airport in Sabiha Gokcen. Could you please share your plans about these types of investments? It's a question by Can Alagöz and Selim Kunter.
Well, beyond all these gossips or these talks, I can say that very clearly, we have avoided the idea to acquire a stake in Sabiha Gokcen at some discussions, but we didn't materialize it. And we're not actively searching an investment for acquiring a stake in either Sabiha Gokcen or Istanbul New Airport. We're very clear on that.
A question by Onur Müminoglu. Will you take any action regarding fight with inflation initiatives so as not to exceed target inflation rate in determining domestic ticket prices?
There is a cap for domestic ticket prices set by Civil Aviation Authority already. We are not planning to apply further pricing restrictions for domestic ticket prices.
Another question, you made a salary enhancement for a corporate personnel shortly after the sudden hike in USD/Turkish lira rate in September 2018. However, Turkish lira recovered afterwards. Will you consider a new salary increase if Turkish lira depreciates again as it happened in 2018?
That are both significant Turkish lira depreciation and increasing pilot demand, especially from Far East region in 2018. As a result of this, we made an adjustment on their salaries. We're observing that the current compensation package is on par with the European carriers. If and when required, Board of Directors will be ready to take any necessary action. And however, the likelihood of such a wage increase is low for 2019. And also, we're -- we were not the only airlines who made that adjustment in the last year.
Another question. Turkish Airlines has an expected fleet size of about 500 aircrafts by the end of 2023. Do you see any financing problem if you bear on mind that many airline companies expect declines at unit revenues in the following years?
Based on our projections, we do not expect to have any financing issues in the coming years. In 2018, we financed 44 aircrafts and 6 of them, which were widebodies; the total financing amount was close to $3 billion. We didn't run into any problem and we had a diverse set of financers. After 2 consecutive years of no growth in the fleet, this year we started to add new capacity. On the unit revenue side, we expect to have less yields in 2019. We expect the aircrafts -- we will add the fleet will be create -- able to create enough EBITDAR margin to keep the debt ratios at acceptable levels. So we are very solid on that.
Okay. I'll take the last question as we are running out of time. Last question is by Ömer Ömerbas, Ak Yatirim. When you prepared your budget for 2019, did you assume that your transfer to the Istanbul airport would take place on March? If so, would there be a significant impact on the postponement of the transfer to April on your 2019 budget?
Actually, when we were doing the budget, our thinking was we would move to the new airport and we were prepared to be able to move to the new airport from the beginning of the year. So we did our preparations and financial preparations accordingly. But the move did not take place at the beginning of the year. So there is some cost advantages in Atatürk. So we have -- we are expecting to see slight benefit of that in the first quarter results, mainly due to the lower unit cost and lower -- some other size of Atatürk Airport.
And that ends our Q&A session.
So thank you so much for your participation and for your also questions, and thank you very much for your patience, and thank you for the organization.
Thank you, Mehmet.
Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you all for participating. You may now disconnect.