Turk Hava Yollari AO
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Ladies and gentlemen, welcome to the Turkish Airlines 2020 Year-End Financial Results Conference Call and Webcast. I want to thank you for standing by. [Operator Instructions]
I'll now hand you over to Mr. Mehmet Ilker Ayci, the Chairman of the Board of Directors and the Executive Committee of Turkish Airlines. Sir, the floor is yours.
Thank you very much, Mr. Rob. Thank you. And thank you for all the participants today. Good afternoon. Thank you for joining our year-end financial results presentation. It is a pleasure to be on the line with you today.
2020 was an extraordinary year, not just for aviation industry, but the whole world, which showed us that the normal can change drastically in a very short period of time and stay that way for a long time.
One of the things we learned after summer and winter months of 2020 was that the recovery wouldn't follow a straight path. It is possible to see -- actually, it is possible to see ups and downs in future demand environment due to new mutations, new waves and the progress in global vaccination. According to IATA, global airline industry will incur a total net loss of over $150 billion over 2021, much worse than the losses posted in 2001 and 2005 and 2008 and 2009 periods.
So according to IATA's estimations, in November, the expected loss for 2020 and 2021 covers almost all the profit generated between 2015 and 2019. Despite of uncertain outlook, Turkish Airlines distinguished itself with relatively better traffic and financial results. In 2020, we were ranked the most flying airline among network carriers in Europe.
In the last quarter of 2020, we recorded $112 million operating profit, higher than our third quarter operating profit of $75 million. We reached $1.8 billion revenue, which accounts almost 55% of last year's level. To recall, in the third quarter, total revenue was $1.5 billion, which is around 40% of 2019 level. Since the beginning of the pandemic, we have focused 3 key items: protecting the liquidity levels; managing costs; implementing structural changes in order to adapt to the new normal.
We completed the fourth quarter with more than $1.8 billion cash and equivalents, which is higher than the cash level at the end of first quarter. The average monthly cash burn in 2020, including lease payments, was around $200 million. Available going forward, we expect to have lower monthly cash burn through 2021. Available credit lines exceeding $2 billion ensure that we have sufficient liquidity throughout 2021, as in the second and the third quarter, we maintained strong cargo performance in the last quarter with a year-over-year increase of 79% in revenue.
Cargo revenue per ton increased by almost 80% in the fourth quarter. We were the first airline that started to utilize wide-body passenger aircraft for cargo operations. As a result, we recorded the fastest increase in the global market share for freight tonne-kilometer from 3.7% to 4.7% in 2020. We are planning to move the entire cargo operations to our new cargo facility in Istanbul Airport in early summer of 2021 and set a new target to be ranked among top 3 air cargo carriers globally. And we are planning to carve out our cargo operations this year to strengthen Turkish Cargo's competitive advantages.
Since the beginnings of this crisis, we have worked hard to cut expenses, especially on personnel, catering, advertising and overhead charges. We introduced cost savings by more than $1 billion in 2020. We will continue to implement these measures in 2021. And Murat Bey, our CFO, will be sharing more details about these measures through the presentation.
On the CapEx side, we shared the Airbus deal in our previous investor call. We are left with very minor details regarding the agreement with Boeing as well. This agreement will include a new delivery schedule that reduces the number of aircraft delivery per year to reasonable levels. It will include cancellation options and some of the -- also on some of the future deliveries as well. Well, the agreement will reduce the PDP liabilities as well as the amount of financing needs for 2021 and 2022.
Now, let me briefly comment on the key financial and operational figures this quarter as well. We generated around $1.8 billion revenue in the fourth quarter, and for the full year, we earned $6.7 billion revenue, which accounted around 50% of prior year's levels.
With the help of the cost-cutting measures and the solid cargo performance, we achieved $112 million profit from main operations for this quarter. We recorded $689 million EBITDAR, around 39% EBITDAR margin. The EBITDAR value further improved in the last quarter compared to the third quarter, exceeded $1.8 billion for the full year, 28% margin. In the fourth quarter, we utilized around 40% of the capacity of the same quarter of 2019.
I will stop here and let Mr. Murat Seker Bey, who will continue with the presentation. And thank you very much for your participation, once again on behalf of my Board and on behalf of my shareholders.
Thank you very much, Mr. Chairman.
I'll continue with Slide 6. We resumed our passenger operations in June with 49 international and 40 domestic destinations. By the end of 2020, we reached 165 international and 44 domestic destinations. In the recent months, with the pressure of the second wave and the lockdowns, wee compromised lower load factors with slightly increasing capacities.
In December, though, we managed to increase load factor with the help of Christmas demand despite a further capacity increase. Since July, we observed lower year-over-year international capacity cuts compared to the IATA average. Needless to say, international operations recovered in a much slower pace compared to domestic operations. Yet, we observed some signs of recovery on transit operations in the last quarter. We will further discuss this in the following slides.
According to Eurocontrol, there were quite a few days, especially in the Christmas week, when we had the highest number of flights in Europe region. As of 25th of February of this year, we fly to 169 international destinations.
Cargo operations became very crucial for revenue generation. Thus, we utilized our cargo fleet with a tighter schedule. This was necessary due to the lack of belly cargo throughout the second quarter. We were the first airline to utilize some of our wide-body passenger aircraft for cargo-only flights. By doing so, FTK increased by almost 1% in 2020, while, according to IATA, average FTK declined by almost 11%.
In 2020, total savings through our cost-cutting activities reached $1.1 billion. The most important item was personnel expenses, with around $800 million cost saving by application of short-term employment allowance starting from April 1, which continued until the end of August. Then in September, an agreement with the labor union was reached and introduced -- we introduced around 40% wage cut. We achieved these savings avoiding any layoffs.
Recently, State Airports Authority stated the necessary measures were taken in relation to the agreement made with airport operating companies in order to minimize the negative financial effects of the pandemic and canceled rental invoices issued in 2020 and announced to apply 50% discount for '21 and '22. Operator in Sabiha Gokcen Airport also followed a similar relief for the rent changes.
More savings were achieved by reducing marketing expenses, cutting back catering services and changing menus in international flights, further cost savings were made possible by supplier negotiations and tax deferrals.
During the pandemic, preserved cash management was crucial to survive. Most cash burn in the third quarter was around $300 million, which decreased to $100 million in the last quarter. One reason for the cash burn improvement in the fourth quarter was the significant decrease in the number of refunded tickets. Especially in March, we had $200 million ticket refunds and $250 million mark-to-market outflows. For the rest of the year, depletion in the cash level was much more limited. We observed increasing operational cash generation, not only with the strong cargo revenue, but also with recovering passenger revenue since summer.
Another factor for preserving our cash level was the appreciation of Turkish lira towards the end of quarter against other hard currencies. Cash position we hold in Turkish lira increased in USD terms by the end of the year. We expect cash outflows from financing activities to be much less in 2021.
The negotiations with Boeing and Airbus on fleet growth will decrease aircraft financing needs by around $4.5 billion in '21 and '22. We expect around $300 million net PDP inflow between '21 and '22 as a result of these agreements.
Monthly cash burn for '21 is expected to be between $60 million and $90 million. We expect to complete the winter season with about $2 billion cash position, with currently -- furthermore, with currently $2 billion undrawn credit lines.
On the top graph on this slide, we highlight decrease of the realized gross CapEx compared to the initial targeted amount. For 2020, we cut more than $1 billion from aircraft and non-aircraft financing. For '21, we expect much lower CapEx of around $1.5 billion, more than 90% of which belongs to aircraft-related CapEx. After negotiations with Boeing and Airbus, around 5 and 6 wide-body and around 17 and 19 narrow-body aircraft are expected to be delivered in this year.
About leverage, the pandemic drove the net debt-to-EBITDA ratio to high levels. While the crisis in '16 increased the ratio to almost 8x, the sector-wide impact of the pandemic led this ratio to a record high of 9.5x in 2020. We will reach our long-term target of -- midterm target of 3.5x with the help of cancellations and postponements in the aircraft delivery schedule.
We transferred the entire domestic and international operations in Sabiha Gokcen Airport to AnadoluJet. Modification of the seat constellation, which increased our narrow-body aircraft seats to 189 was key to enable lower cost per seat. Additional adaptations were made concerning passenger services and luggage rates to aim for ancillary revenues.
We are continuing to transform AnadoluJet into a full low-cost entity. We were able to increase our capacity in some price-sensitive short-haul destinations, especially in Europe. We serve 13 countries and 57 destinations with AnadoluJet in 2020. We plan to increase the share of AnadoluJet in international ASK with the addition of 11 new destinations in '21.
The successful vaccination all around the globe is key for the recovery of aviation sector. Although it is expected to take 5 years to vaccinate 75% of the world population with the current speed of 6 million vaccine per day, global vaccination will increase the passenger confidence for air travel. According to the most recent data, Turkey is ranked 7th in terms of total vaccination, by serving over 8 million citizens, almost 10% of the population. With the current rate of daily vaccinations, we expect half of the population to be vaccinated by early summer.
Now let me talk briefly about traffic results of last year. While minor setbacks in September and November slowed the pace of recovery, October and December were fairly productive months and increasing operational activity in December was achieved, even though a highly infectious mutation of the virus put additional pressure on air travel. In 2020, we operated with around 40% capacity of 2019 levels, which is similar to the IATA average.
Cargo tonnage steadily increased since September. When we look at the domestic and international breakdown, we observed a decrease in capacity in the domestic market. In international markets, however, we realized double-digit capacity increases in October and December. Overall, international capacity was down by around 62% in 2020 while the IATA average was around 68% decline.
A stronger recovery will take place with the reintroduction of long-haul destinations and additional frequencies. Long-haul operations are expected to recover in a slower pace than domestic and short- and medium-haul operations. While over the half of our capacity in the early stage of recovery in July was located in Europe, only 29% of the international capacity was located in Europe in the fourth quarter.
Far East and North America regions made up around 25% of our international capacity each, which underlined a relatively diversified capacity allocation. Also, load factors greatly improved in December.
2020 was a very successful year for cargo operations. We observed high unit cargo yields since the second quarter, with cargo tonnages slightly under 2019 levels due to the lack of belly cargo capacity for most of 2020. After a slight decline of unit cargo revenues, in the third quarter, we observed increase again in the fourth quarter. Overall, cargo revenues increased by around 61%, reaching over $2.7 billion, which corresponded to about 40% of the total revenues.
Turkish Airlines was the first airline to utilize some of its wide-body passenger aircraft, Boeing 777s, as freighters during the pandemic. We will continue to address the shortage of cargo capacity in this sector as this is key to ensure a smooth supply of the vaccines and medical equipment.
While the industry freight tonne-kilometers declined by almost 11% in 2020, according to the IATA, Turkish Cargo increased its market share by adding almost 1% FTK during the same period, especially December was a productive month with an 11% increase in FTK. With increasing both our FTKs and unit revenues, we achieved a market share increase of 1 percentage point in FTK.
The scale of cargo operations will surge with the completion of new cargo terminal in Istanbul Airport. While the total cargo capacity in Ataturk Airport is at 1.4 million ton per year, Istanbul Airport's yearly cargo capacity will be at 2.8 million tons after completion of the first phase.
Turkish Cargo's Smart East facility in the Istanbul Airport will have a closed area of 340,000 square meters and an annual capacity of 4 million tons of cargo with the completion of the second phase. We expect to start cargo operations in Istanbul Airport by the summer of this year. And the second phase is planned to be completed in 2024.
Smart East consists of 3 main crucial elements: first, automation and optimization, which includes robotic process automation and augmented reality technology; second, special cargo services which enable the shipment of temperature-sensitive cargo and animals; third, design, which contains direct connection to the freighters. By 2023, we expect Istanbul to be ranked fourth biggest cargo hub in the world and the biggest in Europe in terms of annual cargo handling capacity.
Now let's head to the key financial data. Although there was a decline in domestic capacity planning parallel to the restorations in Turkey in the fourth quarter, year-over-year international capacity increased by 10 percentage points compared to the third quarter. Overall, we had a visible capacity improvement. Winter season was weak in demand, yet we were still able to increase passenger revenue by around $60 million compared to third quarter.
Additionally, further increasing cargo revenues drove down the total revenue contraction to 46%. While we had a net operating loss in the previous quarter, we achieved a net operating profit of $61 million in the last quarter. Our profit from main operations further improved to $112 million. With this strong operating profit, net income was mildly negative at $50 million loss.
EBITDAR margin turned out to be almost 39%, supported by the high profitability of cargo operations and significant contribution margin from the passenger network. When we look at the unit revenue development, the most important point is the divergence between increasing cargo unit revenue and decreasing passenger unit revenues.
Although passenger RASK decreased by 15% in 2020, rising cargo revenues were more than enough to limit the decline in total RASK to 1.6%. Especially, in the last quarter, we observed a RASK increase of over 4%. Passenger RASK was mainly under pressure due to low load factors in the fourth quarter. While we introduced additional international routes and capacity, we noted load factor declines in October and November, which partially recovered again in December.
Regardless, revenue yields in 2020 decreased by around 2% while ex-currency yields, were flat. The last quarter ended up fairly successful with an increase of 5% in yields.
Looking at the regional year development of 2020 the year was shaped by major capacity cuts and minor unit revenue erosions. Highest capacity cuts were observed in the Middle East. [indiscernible] travel was still restricted from countries other than the member states of Gulf Cooperation Council.
There was a negligent decline in unit revenues. The recovery of Middle Eastern operations is expected to take place with the recovery of long-haul operations. Far East was the second region with the most capacity cuts. There were strict flight restrictions in this region. We could not operate to important markets such as India, Vietnam or Thailand at all. While countries like Japan, South Korea, Indonesia and Singapore only accepted their citizens.
China only allowed 1 flight per week with a maximum load factor of 75%. The considerable increase of total RASK by almost 11% with respect to 19% decrease of passenger RASK matched strong cargo unit revenues in this region. Africa region had the highest yield growth in 2020. While passenger operations in North Africa was relatively moderate, the cargo demand was strong. In some African countries imposed flight restrictions from other countries were in our favor. In some destinations, passenger numbers were maintained at 2019 levels. Yet in some others, there were improvements in the yields.
Overall, the passenger RASK decrease was low while cargo unit revenues drove the total RASK almost 4% upwards. Revenue yields in Europe increased in 2020. In East Europe and in the Balkans, capacity was at almost 50%, around 15 percentage points higher than in the previous quarter. While the capacity increased at a higher rate, load factors were at a similar level as 2019.
In North Europe, we operated with around 60% capacity and to 16 destinations in the last quarter. Turkey was among the first countries to resume flights to Russia, which helped with the transit network in the last quarter. Due to the second wave-related flight restrictions during October and December, capacity in Central Europe decreased by 20% in the fourth quarter compared to the third one. As a consequence of obligatory PCR tests in Turkey and Europe, we do not expect an increase in demand in the short term in this region.
Among international routes, Americas was the region with the least capacity cuts. Passenger RASK was down by around 18%. Recovery in North America was slow, not only due to rising COVID-19 cases but also due to the presidential elections held in the U.S. However, ethic travel to Pakistan, Ukraine, Lebanon, Egypt, supported our transit operations from this region. Flights to Central and South America were resumed in early October. The pace of recovery month-over-month seems reasonable while load factors are increasing from slightly 60% levels in October to 75% level in December. In some destinations, the pent-up demand led to high load factors during the first flights from the region.
Since June, 41 out of our domestic destinations are operational. We observed a strong recovery of domestic demand in the summer months, yet the traffic in the last quarter slowed down.
Short-range routes, like Istanbul and Ankara, Izmir or Antalya, observed a lower demand for air travel. Also, the second wave caused the reintroduction of weekend and evening restrictions, which further decreased the domestic demand. Units revenues in domestic operations were pressured by the annual depreciation of Turkish lira.
When we look at the cost breakdown, we see a further improvement of variable costs against fixed costs in the last quarter due to the slow recovery in passenger operations. Although we introduced several cost-cutting measures, the significant drop in ASK prevented these improvements to be reflected on the unit costs. Improving passenger operations limited the increase of CASK to around 38% in the fourth quarter. When we include high cargo production, available tonne kilometer in the CASK calculation, CASK increase drops to 5% level and ex-fuel CASK level, drops to 23% level in the fourth quarter.
For the whole year of 2020, CASK increased by 44% and again, including the effect of ATK, the increase is limited to 12%. When we look at the details of the CASK, personnel CASK increased by almost 33% despite of achieving 51% decline in personnel expenses. Aircraft ownership unit costs were the biggest cost item due to the nature of depreciation expenses, addition of 4 A321neos, 2 A350s and 1 Boeing 787 increased depreciation expense by almost 9%.
Airports and air navigation expenses decreased by 48% and ground handling expenses by 41%. Sales and marketing expenses decreased by almost 60%. As I mentioned -- as mentioned before, we introduced some changes in passenger services and catering, which decreased these expenses by 65% and the related unit cost by 13%. Maintenance expenses decreased by around 31% in 2020.
Fuel expenses in the fourth quarter decreased by 66%, about 6 percentage points more than the capacity drop. This shows the contribution of the lower jet fuel price, which is almost $200 million for the last quarter. The negative hedging effect was notably lower in the last 2 quarters, but its impact on 12 months made up almost 15% of the total fuel expenses.
The share of fuel expenses within total cost base is normally around 30%. It declined to 19% in the fourth quarter. The 60% of the fuel consumption in 2020 and 23% of the fuel consumption in '21 is hedged as of end of December. We did not have an overhedge in the last quarter. In December, we started to add new hedge positions, especially for the second half of the year. We are planning to reach 50% hedge levels for '21.
We continue our sustainability efforts in line with the vision and general strategy of our incorporation considering the expectations of our stakeholders and the related parties. We consider our impact on the supply chain and the environment in line with the United Nation's Sustainable Development Goals.
The relationship between the scope of our sustainability strategy and the UN's Sustainable Development Goals are summarized in Turkish Airlines' sustainable development goal map, which you can see on the slide. We optimize our flight activities, invest in new technologies, and prioritize fuel-efficient aircraft while adding new aircraft to the fleet. As a result of all these efforts, in 2020, we saved more than 20,000 tons of fuel and prevented emissions of more than 70,000 tons of carbon to the atmosphere.
THY was entitled to enter the Borsa Istanbul Sustainability Index in 2020, which includes companies, traders in Borsa Istanbul with higher corporate sustainability performances. In addition, in 2020, voluntary participation in performance evaluations of international indices and sustainability rating organizations such as Dow Jones Sustainability Index, FTSE4Good, MSCI, EcoVadis, Sustainalytics, Vigeo Eiris and TPI were provided.
This concludes our presentation, and now we'll continue with the Q&A session.
Thank you, speakers, for your presentations. All right, ladies and gentlemen, we'll now start our question-and-answer session. [Operator Instructions]
Thank you, Rob. This is Kadir from Investor Relations. We received a lot of questions from our dear analysts. Thanks for that. For the better use of time, we classified these questions, and I will be addressing these questions for Murat Bey to comment on them.
Murat Bey, first question is about guidance and demand questions, analysts from HSBC, BGC Partners, Wood, Gedik Yatirim are interested in our capacity plans about 2021.
Well, yes, this is probably the most challenging question of '21. And the least I can do at this stage is to shed some light on the capacity development that we are intending to introduce in '21, which is roughly around -- we would like to reach somewhere between 60% and 70% of the ASK level introduced in 2019.
And at this stage, I cannot divide it more through the quarter evolution. Like the first quarter, the first few months of the year, we initially thought there would be more capacity when we were doing the budget. We ended up seeing less ASK that could be introduced because of the restrictions, but we could compensate that with higher unit revenues.
So it's rather difficult, but our intention for this year is to come around 60% to 70% of the 2019 ASK level.
Next question is about our EBITDAR margin. From Goldman Sachs, "How do you expect EBITDAR margin to evolve in '21 after a very strong '20 EBITDAR margin? What do you think is the long-term sustainable EBITDAR margin?"
So, this is again a question related about the future guidance. And obviously, as we have expressed a little bit in the presentation, there is a lot of moving parts that makes us take critical turning points on making projections for the future.
The most crucial one is the vaccination rate, not just in a particular part of the world, but globally. How countries -- even the vaccination rates are high, how countries are going to be relieving their restrictions, air travel bans, limitations or additional requirements of the tests. So these are still the question marks ahead of us. But one thing we know for sure is, as we have tested this in 2020, when the countries look positively and start to open up their borders, Turkish Airline is going to be one of the first movers.
To make it a more concrete point, last year towards the end of summer, like in August, when in Europe, Germany decided to open up the borders to Turkey with their PCR test requirements, we very quickly adapted to this new requirement. Within a few weeks, we were able to provide the PCR tests on all outgoing passengers from Turkey to Germany.
So having said this, we are confident that whatever the market outlook is we will be placed in a very aggressively and very productive way to maintain our operations.
So now coming back to this EBITDAR margin question. For 2020, as we expressed, as we shared in the presentation, EBITDAR margin for 2020 was almost 28%, which is an extraordinary figure when we look at the historical data. We should expect a normalization in '21 on the margin level, but still, I expect -- we expect that would be higher compared to pre-COVID EBITDAR margin level if '21 operations would continue similar to our expectations.
In the third and fourth quarter of 2020, contribution margin for passenger operations were around 30%, which was similar to 2019. So we have ran a much similar operation, but we ran it equally profitably from, of course, not the bottom line, but just a contribution margin level to 2019 level.
Next set of questions are asking about the future demand environment and yield improvements, from IS Yatirim, BGC Partners and Wood. "What is the reason behind the yield improvement in 4Q '20? What's your yield expectations in '21 and going forward?" Business versus economic class dynamics in '21.
Especially in Far East, Africa and Middle East regions, we saw yield increases of around 30% because there was quite a bit of limitations to travel in and out of these regions. Although it is difficult, again, to put some exact numbers on the speed of recovery of each region and each customer segment, we expect recovery in economic class to be faster compared to business class for THY.
We expect a recovery in demand for leisure travelers to Turkey throughout summer from Europe and Middle East region. Even last year, we had tourists from U.K., Russia, Ukraine, Germany and several other European countries in large scales. This year, we expect the numbers to be -- to significantly increase, especially by the time we reach the summer.
Next question is from Ata Invest, asking about forward bookings. "Can we expect 65% to 70% of 2019 PAX numbers in summer of '21? And how do you see the forward bookings for summer?"
2020, one of the big challenges was the low visibility on forward bookings. One, as there was a quite diverse set of restriction applications by countries, the potential travelers had difficulties to book their -- to make their travel plans, those who even had the intention to travel.
So that's why -- and it's still continuing as still some countries, quite a few countries have restrictions. Visibility on forward bookings is low. But we see a recovery. When I look at the forward bookings from the beginning of February and compare that with the end of February, the months of March and April look improving but then we don't see much action for the -- throughout the summer months yet.
Our current expectation is to see a stronger summer season, though, this year, as we believe the number of vaccinated travelers is going to increase in Europe region, in Middle East region, Russia, and the pent-up holiday demand will be driving up the travel numbers. And Turkey is still an attractive place for tourists and we experienced touristic demand to Turkey last summer very successfully, we are expecting more will come this year, especially U.K., Ukraine, Russia and Germany.
Also, we expect most of the 65-plus age group will be vaccinated by the summer, especially in those countries who demand to travel to Turkey.
There is an online question, Murat Bey, for confirming what you said about monthly cash burn. "Can you please repeat monthly cash burn figures in Q4 versus Q3 and '21 expected?" Thank you.
In Q4, the monthly cash burn was around $100 million. In the third quarter, it was $300 million. And the expectation for '21, Q1, we expect that to be around $60 million to $90 million per month.
For the whole year?
Yes, for the whole year.
Yes. Next question from VTB Capital. "We see an acceleration in recovery of your transit passenger segment in 4Q '20. Could you please elaborate on the reasons behind this? And what do you expect for this segment in first quarter of '21?"
As we resumed the destinations from Africa, Middle East and Far East in Q4, we were able to reestablish our transit network. So we should expect further recovery in transit volumes in '21 as addition of new destinations. If you remember, as I mentioned in the presentation, we were flying to about -- around 164 international destinations. So we have -- we are trying to recover the full network, and that is giving us more opportunities to carry transit passengers.
Next question is from HSBC. "Have you reached any agreement with Boeing on fleet deliveries? What's your view on putting the MAX back on service?"
With Boeing, we are at a very, very end stage. Most of the critical items are already agreed upon. There are some very minor details, but they are not, by any means, substantial, critical. So we are planning to announce it on the public disclosure forum pretty soon. And the result of -- at the end, with both Airbus and Boeing, we reached a very similar deal in terms of the financing burden relief is providing us, in terms of the PDP relief it's providing us.
Overall, we expect for the next 3 years, from this year and next 2 years, '21 to '23, the financing needs will decrease by around $5 billion, and the PDP saving will be around $2 billion due to order deferrals, some cancellations, some options choosings. And overall total impact of this will be about $7 billion for the next 3 years. So it will provide a big relief on our financing burden. And also, on the net front, we will be -- this year as in -- sorry, as in 2020, we will be net receiver of PDP payments from the both manufacturers.
And about the MAX, as you remember, we have 12 MAXs in our fleet, which were grounded and we will be receiving some more MAXs this year. And as soon as the Turkish Civil Aviation Authority clears and certifies these aircraft, we are planning to use them in operation.
There's one online question from Avalon and question from Goldman Sachs and Halk Yatirim, from our analysts, about the fleet delivery schedule for '21. "Could you provide details as to fleet exit and entry schedule for 2021?"
In the presentation, I mentioned roughly, we were planning to get 5 to 6 wide-body this year, a mix of A350s and 787s. The exact number is going to be around this, but it's -- as we have not settled with Boeing fully yet. So I want to give it in a range, but not a big range. So 5 to 6 wide-bodies will be delivered and around 17 to 19 narrow-bodies, a mix of neos and MAXs are likely to be delivered this year. A significant part of these deliveries are planned for the second half of the year so that if there is a demand recovery, we could use some of these new-generation aircraft for the -- we can utilize them in summer demand.
And on the other hand, we are planning to have 10 aircraft exiting the fleet, 3 wide-bodies, 3 narrow-bodies and 3 cargo wet leases -- 4 cargos. Thank you.
Next questions are about costs. "Could you add a bit more color on expectation for staff expenses and fuel expenses for '21? How much of the savings made on staff cost in '20 is sustainable? And how much will not be? On fuel cost, do you expect rising fuel prices to add some pressure offsetting the benefit from rolling off of previous expensive hedges?"
The -- on the personnel expenses, the salary cuts is going to continue in '21 and we don't have a set date when that reduction is going to end. It's going to be a discussion with the labor union but when we were introducing the salary reduction, in September of last year, the mutual agreement was to see a reasonable recovery in the profit of Turkish Airlines and recovery of the sector.
So as our current expectation is the recovery is -- could come throughout the part of the 2022 or could be delayed to '23, we don't have an exact end date for this saving on the personnel expenses. However, we will be introducing inflation adjustment to the salaries, which in the first half of '21, is going to be around 8%. And for the second half, it's going to be, again, an additional 7% to 8% salary adjustment on the personnel expenses.
On the fuel CASK, we see a slight -- we expect a slight decline in fuel CASK in '21 compared to 2020. There is an increase in jet fuel prices but as we forecast, almost no fuel hedge losses for '21, the increase in jet fuel prices will be offset by the decline in the fuel hedge losses for this year.
Next question is from Ak Yatirim. "The airport authority recently introduced a relief package for airport operators. Would you expect support to extend into airlines as well? And if yes, in what form, would you expect these initiatives? Within this context, how much savings have you attained from Istanbul Airport, if any, or at other airports?
Let me answer them separate. There is a quite a few questions. So there was an around -- I think it was around 10% discount on parking and landing fees for Istanbul Airport in 2020. For the airports operated by State Airport Authority and Sabiha Gokcen operator, rents were canceled for 2020, most of 2020, and 50% discount was introduced for '21 and '22. So the impact for this reduction is around $7 million to $8 million because this did not include the airports that were operated by TAV or iGA, which are private companies. We have not received any announcement from them yet. So we will -- we are waiting to receive that.
And the question whether we are expecting anything on the airlines, there were discussions that Turkish Civil Aviation representatives, airlines, visited the ministers in the past months, Minister of Transportation, Minister of Tourism, so this actually came as a part of that -- as a part of those discussions. It's yet to be seen.
We are not -- I cannot really fully state that, yes, we are having something prepared for the airlines. But definitely both ministers were very closely and are still actually, closely monitoring the developments with the airline industry in Turkey.
Next question is from VTB Capital. "You have around $3 billion." He said $3 billion, but it's actually $2.7 billion, "short-term bank loans as of year-end '20. How do you plan to repay them in '21?"
Well, actually, this is -- a part of the short-term bank loan has been with us over the last 3 or -- 3 years almost. Because it is the Exim loan, a short-term rolling loan facility provided by Turkish Eximbank to the exporting corporates in Turkey. As we are the biggest exporter in Turkey, we get a reasonable amount of this loan. So roughly, EUR 1.4 billion is definitely going to be rolled over as it has been rolled over, over the last 3 years.
On top of that, last year, because of the obvious pandemic, we received a significant amount of commercial loans, but these commercial loans were -- almost 80% were from Turkish bank -- commercial banks. And since the beginning of the year, we have been discussing with them. We don't see any problem with rolling over this debt if need arises. At the moment, we feel like we won't be needing all of it, but if need arises to roll some part of this loan, we don't see any problem with that as we have a very good relationship with the commercial banks, with the major top 10 commercial banks in Turkey as well as the international banks who are present in Turkey.
Next question is about cargo. Of course, cargo front is very important this year, from IS Yatirim, HSBC and Ak Yatirim. "Cargo business seems to be a crucial income generator for Turkish Airlines. The increase in unit revenues, thanks to supply shortage in global cargo effect, was a key driver for this development. How do you see the transfer unit revenue so far? Should we expect some normalization when restrictions ease?"
So, at the beginning of this year, cargo yields continued to be significantly higher with respect to the same month of 2020. How the yields are going to evolve is actually a function of the global cargo capacity and Turkish Airline's belly cargo capacity, so that has to do with the passenger network. As the passenger traffic and passenger capacity increases, we expect the yields to come down. But on the other hand, we also expect the cargo available capacity to increase, so the impact on the bottom line is negligent. Still, we expect a positive growth in Cargo business.
And as long as the global cargo shortage continues, we expect to maintain the high yield. And as I said, as the capacity increase, we have such a rich network with cargo as well as the passenger, we still believe we will be benefiting from the market -- from keeping our market share intact despite the possible yield erosion.
Next questions are from VTB, HSBC, Seker Yatirim. They're asking what exactly are your plans on the development of Cargo segment, new cargo aircraft orders, et cetera? "What is the likely timing for the spin-off of Turkish Cargo? And can you give us more color on potential strategic partnership for cargo operations? Do you expect any concrete step forward for these cargo operations in '21?"
Well, we definitely have some of these intentions in mind, and we are planning to have the spin-off of our cargo, Turkish Cargo, as a separate entity within 2021. But there is not a potential stakeholder or partner that we are currently having any discussions. But that is within our long-term -- medium to long-term strategies. As I have also mentioned in the presentation, with the new terminal, cargo terminal, we call it as Smart East, there's going to be a huge potential for -- to grow the Cargo business for Turkish Airlines, for Turkey as well as for the region.
We want to strengthen our position among the most crucial cargo players in the sector. And we want to bring Turkish Cargo's unique competitive advantage to more make it visible with creating it as a separate entity.
HSBC and Tera Yatirim asks about AnadoluJet operations. "What are your plans for AnadoluJet within '21 and medium term? Do you expect any concrete step forward for AnadoluJet operations in '21?"
We actually had to have a significant growth in AnadoluJet international operations for 2020 budget, but due to the pandemic, we had to partially -- we could partially implement that strategy. As you would remember, Turkish Airlines left Sabiha Gokcen operations to AnadoluJet and AnadoluJet started its international operations from there starting from June with a reasonable profitable operating margin.
Although the travel restrictions, AnadoluJet flies to about 13 countries and 20 destinations in Europe and Middle East last year. We are going to be adding more capacity in '21 and this year, we would like to increase the number of countries from 13 to 24, and number of destinations from 20 to 38.
And we believe there will be a significant contribution in our -- AnadoluJet is going to be bringing a significant contribution to our international ASK growth in '21. The fleet of AnadoluJet by the end of 2020 was about 40 narrow bodies, 10 of which operated from Istanbul Airport in Ankara and 30 were based in Sabiha Gokcen. And if we happen to see a strong demand environment in summer, some of the grounded aircraft of TK can be transferred to AnadoluJet for summer operations, especially into point-to-point operations.
They're also asking the latest developments around the spinning-off AnadoluJet or restructuring.
That's something also within our considerations for this year. Since last year, we have been receiving consultation to -- about how to -- for constructing the AnadoluJet strategy to convert that into a Sabiha Gokcen-based value carrier. We are working on the fleet plan, the network, the target markets, the ancillary revenues, the technology, the organization structure. So there is a quite a bit preparations are being done for spinning off of AnadoluJet. We believe this conceptual planning is going to be completed in '21 and then the spin-off can take place in 2022.
Murat Bey, we have very limited time. I have 3 more questions. They are important, I believe. BGC Partners ask about our fuel hedges. "What is the current level and pricing of fuel hedges for '21 as of today?"
The current level is around -- for '21 is around 25% and we are planning to reach 50% level by the end of this summer.
Next questions are about CapEx and net debt. "Net debt was nearly about USD 15 billion at the year-end '20. What is your targeted level for the end of '21."
Last year, net debt was around $14.9 billion. We expect around -- to add, roughly speaking, additional $500 million to this and to have about $15.4 billion net debt in '21.
Yes. Last question, last but not least, from Ambrosia Capital and from IS Yatirim. "Vaccine passport is delayed for 3 months. In your -- what's your planned strategy if it is approved after 3 months?"
So that's a development actually we are monitoring very, very closely, like regulators like IATA and industry players, the IKO, the ASA and have all different studies, preparations relating to the vaccine passport.
Well, applying such a passport program seems challenging for several reasons. For number one, the global vaccination speed is not very homogeneous around the world. There is a quite bit countries who have not received sufficient amount of vaccinations. And even some countries who have received sufficient amount of vaccinations, the application speed is slow.
And on the top of this, there is a reasonable amount of the potential travelers who refuse to get the vaccination. So these are all putting challenges in different parts of the world to introduce such a passport that enables you to travel. And -- but one thing I can say for sure is, as we have done in the past throughout the peak months of the pandemic, we will be very quick to adapt to the necessary conditions. If such a requirement arises, we will be able to maintain that within our operations. We will be quick to reflect and adapt to such a requirement.
Okay. We already run out of time, Murat Bey. Thanks for your comments. Rob?
All right. Thank you, gentlemen. Thank you. Ladies and gentlemen, thank you for your questions. Speakers, if you have any more concluding remarks. Do you, indeed?
Well, thank you very much for all the attendees for listening our presentation. Our Investor Relations team is always ready and keen to answer any of your questions regarding to how we see the market and what is our outlook. Thank you very much for your attention.
All right. Thank you, speakers. And ladies and gentlemen, this concludes today's webcast call. I want to thank you for your participation. You may now disconnect.