Türk Hava Yollari Anonim Ortakligi (THYAO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to Turkish Airlines Full Year 2021 Earnings Call and Webcast. [Operator Instructions] With that, I'll now hand you over to Associate Professor, Murat Seker, Member of the Board and the Executive Committee, also the Chief Financial Officer; and Mr. Mehmet Fatih Korkmaz, Head of Investor Relations. Gentlemen, the floor is yours.

Welcome to the presentation of our financial results for the fourth quarter and the full year of 2021. When we started the fourth quarter, global recovery from the pandemic seemed to be on track. However, as we learned -- sorry -- however, as you learn from the last 2 years, the recovery would not follow a straight path. Entering our lives by the end of November, Omicron variant actually proved this to be true. Similar to the previous episodes, many governments across the globe responded to this new variant by limiting international travel. Through the experiences we have accumulated during the pandemic, we remained agile, used our geographical reach and captured demand wherever possible. Combining these advantages with our low-cost base allowed us to conduct substantially more profitable operation compared to our peers. This is why today we are happy to present to you a strong fourth quarter as well as full year results. Turkish Airlines proved itself once again increasing its global market share and became one of the few airlines that achieved profit in 2021. One of the main pillars of this success was the diversion of [ of our staff to Turkish Air brand ]. Since the beginning of the pandemic, our personnel have been making sacrifices and working hard to circumvent the effects of the pandemic on our operations. I would like to take a moment to recognize their dedication and thank them for such a remarkable result. In order to reward the efforts of our staff, while keeping the cost base in mind, we signed a new collective labor agreement with the Turkish Civil Aviation Union. This agreement took effect as of the beginning of 2022 and will last until the end of 2023. From the beginning of the year, we have seen that the effect of Omicron variant on global mobility gradually faded, given the high transmissibility and lower severity of the cases. As governments started to roll back Omicron-related international restrictions, path to a better outlook should accelerate. The trajectory of our revenue recovery continues to be positive. We remain optimistic for the upcoming spring and summer travel seasons. Additionally, we are seeing early signs of significant pent-up demand for international travel, especially in Europe and in Americas. Currently, we are ready to respond to increased travel demand as well as flying to 260 destinations, which compromise around 82% of pre-pandemic network. During the fourth quarter, we carried about 18 million passengers, adding up to almost $45 million for the full year, which is 77% of 2019 levels. Our full year capacity realized at 68% of 2019 level, which resulted in Turkish Airlines to become the busiest network carrier in European aerospace. We were able to strengthen our position on the back of Turkey's tourism recovery. Thanks to the successful vaccination campaign and government policies in Turkey, Turkish tourism recovered towards 2019 levels, well ahead of its global peers. Considerable increase in both passenger and cargo traffic led to a substantial improvement in our financial performance. Total revenue reached $3.3 billion in this quarter, surpassing the 2019 level. Continuing cost discipline, combined with the increase in revenues, we recorded $554 million operating profit, $1.2 billion EBITDA, which is around 38% EBITDA margin. And net income with $225 million was another highlight of this quarter. Our liquidity level remains strong with $2.7 billion cash and equivalents and over $3 billion available credit lines. With its financial results, Turkish Airlines stands out among its peers. Cargo continued to outperform well in the fourth quarter with total revenue reaching almost $1.3 billion with a year-over-year increase of 48%. Our cargo operations now account for 38% of our total revenues compared to 13% in 2019. Cargo unit revenue continued to be strong in this quarter with more than 140% increase compared to the fourth quarter of 2019. We observed that global air cargo demand has continued to perform relatively strong due to ongoing disruptions in supply chain, congestion at ports, lack of belly capacity and insufficient sea freight capacity. We expect these trends to continue at least until the end of the first half of 2022. Turkish Cargo led a sustainable growth and maintained its status as the fastest-growing air cargo brand and became fifth biggest air cargo carrier in 2021. Last month, we successfully transferred our remaining cargo operations from Ataturk Airport to our new cargo facility, Smart East in Istanbul Airport. This move will certainly improve efficiency of our operations and support our target to be among the top 3 air cargo carriers globally. Finally, I would like to thank our shareholders, customers and business partners for the trust they have placed in Turkish Airlines. We are well prepared for international traffic recovery in 2022 and have a strong confidence based on what we have achieved so far. Now I will let Fatih to continue with the presentation and elaborate on some of the key results.

Thank you, Murat. Hello, everyone. I will be talking about the financial and operations results for the fourth quarter. I would like to start with last quarter's capacity development to give you further detail about the recovery progress. Following the third quarter strong performance, we continue to restore our capacity in the fourth quarter. After Omicron variant entered our lives at the end of November, many of global airlines cut back capacity for December. We placed ourselves on the other side of the spectrum by increasing our flights and reached the highest level of capacity since the beginning of the pandemic. In line with our expectations, we didn't experience any decrease in bookings, thanks to high Christmas demand. Load factors steadily increased throughout the last quarter, almost reaching the third quarter levels as the recovery was driven by strong international demand. Despite the weaker nature of the winter season, the number of transit passengers in the fourth quarter increased slightly compared to the third quarter of 2021. Cargo capacity continued to overperform 2019 levels despite 5% lower belly capacity. Thanks to strong cargo demand combined with lack of belly space and ongoing problems in sea freight, cargo unit revenues in the fourth quarter realized 28% higher than the last year. Also, cargo carried per ton increased by 34% in the fourth quarter of 2021 compared to 2020. As the recovery in passenger operations continued, we reached 87% of 2019 international capacity levels in December. As you can see from the lower side of the slide, Turkish Airlines international capacity is considerably higher than the European average of 67% and the global average of 49%. The bubble chart on the upper part of the slide shows the regional performance in terms of load factors and compared to 2019. In the last quarter of 2021, North America outperformed all the other regions, excluding South America, with 33 higher ASK than 2019 and strong load factor. For the whole year, the region recorded 7% higher ASK compared to 2019. After lifting U.S. restrictions on Europe in early November, we didn't experience any adverse effect since most of the European carriers were not able to put their desired capacity into the market. South America had the highest capacity increase of 39% and realized the highest regional load factor. Domestic capacity dropped to 90% of 2019 level in the fourth quarter after exceeding 2019 level in the third quarter due to Turkish lira depreciation. Europe as the biggest capacity contributor generated 84% of 2019 capacity in the fourth quarter, while maintaining a comparable high load factor of 73%. Due to travel restrictions, thus lower operational level, Far East was still the worst performing region in the fourth quarter. Strong cargo operations more than compensated weak passenger unit revenues in the region, leading to higher overall revenues. As expected, there were no major changes in terms of restrictions in the region. Rollback of strict restrictions on air travel still remains to be seen. In the line chart below, we see a clear pent-up demand in the high season, which explains our strong performance in the third quarter. In the last quarter, we observed a similar [ month particular ] sales trend between 2021 and 2019, indicating a healthy recovery progress. Shipping cost rate, together with the ongoing disruptions in supply chain, continued to support air cargo profitability in the last quarter of 2021. As shippers prefer to avoid long delays, there was a continuing shift from sea to airfreight. Strong e-commerce development and Christmas holiday season caused a decline in inventories, which in return increased cargo demand further. These factors led to conductive environment for cargo performance. As a result, cargo unit revenues more than doubled in 2021 compared to 2019. [ Even strong ] cargo unit revenues achieved in 2020 were outperformed by 28% increase in this quarter. In parallel, cargo revenues increased by 48% compared to 2020 and reached $4 billion. In 2021, our cargo revenues accounted almost 38% of total revenues, up from 13% in 2019. During 2021, Turkish Cargo became the fifth largest cargo carrier in the world as our market share reached 5.2%, both in terms of revenue and FTT. Now let us head to financial highlights. As you can see, our cash position increased by around $900 million from 2020 year-end to almost $2.7 through 2021. Last year, we had $3.7 billion inflow from operating activities and outflow of almost $2.8 billion. Additionally, we have approximately $3 billion available credit lines, which increased our total liquidity to around $5.5 billion. As visualized in the left bottom chart, operational cash flow has reduced net debt by $2.5 billion to $11.6 billion in 2021. Leverage level was another metric that was deviated from its trend in 2020. Thanks to strong EBITDA generation and debt repayments in 2021, we were able to decrease the net debt-to-EBITDA ratio to 3.4 this year. With normalization of cargo revenues and EBITDA, our leverage ratio is expected to increase slightly above our long-term target of 3.5% in next year. Now let us get to the key financial and operational data. Increasing passenger and cargo yields, along with the high volume, net passenger revenues in the fourth quarter to reach over 70% of 2019 levels and cargo revenues to almost triple. With a strong revenue generation during this quarter, we managed to exceed 2019 revenues for the first time since the beginning of the pandemic. Profit from main operations and net income realized as $1.4 billion and almost $906 million respectively and continue to be above 2019 levels similar to the third quarter. As a result of strong operational performance, EBITDA margin reached 35% in 2021 with almost 12 percentage point increase over 2019 EBITDA margin. Now let me briefly talk about our expenses and some of the cost-cutting activities we made throughout the year. Looking at the CASK expense breakdown, we recorded a slight increase in CASK around 4% in the fourth quarter, which is mainly driven by lower capacity deployment. If we normalize CASK with the cargo capacity, CASK and ex-fuel costs would decrease by 1.7% and 4.2% respectively, compared to 2019. We believe taking cargo operations into account on our cost base would provide a more accurate picture of our operations. In the fourth quarter, fuel expenses per ASK increased by 10% as a result of increasing fuel prices. Even though recent geopolitical developments put pressure on fuel expense outlook, we already hedged 45% of our 2022 consumption and expect to record [ HK ]. Personnel expenses per ASK are still below 2019 levels due to the salary cuts and depreciation of Turkish lira against hard currencies. In 2022, we expect personnel cost per ASK to be still lower than 2019 even after the new collective labor agreement due to increasing capacity and Turkish lira depreciation. Additionally, we expect to achieve some savings through ongoing organizational simplification and downsizing of managerial positions. Together with the recovery in passenger operations, airports and navigation CASK moderately increased by around 5% in the fourth quarter. On a side note, 50% discount on the fees in the State Airport Authority controlled airports in Turkey and Sabiha Gokcen Airport will continue until end of 2022, relieving some pressure. Maintenance CASK decreased by 3% in the fourth quarter due to lower number of flights compared to the same period of 2019. Sales and marketing CASK decreased by around 10% in the fourth quarter as customer behavior shifted towards online reservation, resulting in lower reservation system and incentive expenditures. Going forward, we aim to enhance our digital sales and capabilities to save on distribution costs further. In 2021, we achieved total savings of around $700 million. As I mentioned earlier, in 2022, we are aiming to take steps to drive down our industry-leading unit costs further by implementing structural changes, cutting down our sales expenses and concentrating more on organizational simplification. Fuel expenses decreased by $7 million in the fourth quarter of 2021 compared to 2019. Increase in fuel prices compensated by declining volumes and $46 million hedge gain. The share of fuel cost in our total cost base in 2021 reverted back to pre-pandemic levels to 30% as the operational recovery gained momentum. We continued to add new hedge positions in the fourth quarter. As of December 2021, our hedge levels were 45% for 2022 and 5% for 2023. The breakeven price is at $71 as of February 2022. We transferred Turkish Airlines' entire domestic and international operations at Sabiha Gokcen Airport and AnadoluJet in 2020. Our aim is to construct a strategy to lower cost base furthered by implementing new corporate structure, upgauging with new fleet entries and high utilization through increased point to point exposure. As AnadoluJet capacity increased by 32% in 2021 compared to 2020, we are planning to deploy 30% more capacity in 2022, doubling 2019 capacity. [ Pioneer ] to our aim of building an international low-cost carrier, percentage of international capacity jumped to 52% in 2021 from 13% in 2019. Our international routes are concentrated mostly on price-sensitive, short-haul and medium-haul destinations in Europe and Middle East. Additionally, we are targeting to capture understored ethnical demand from Europe to Turkey, especially through direct international flights to holiday destinations such as Antalya, Dalaman and Bodrum. AnadoluJet's relatively low ex-fuel CASK in 2021 allows us to target price-sensitive customers. Profitability of AnadoluJet is more than enough for us to penetrate the market neutral as the contribution margin realizes 16% in 2021. With the expected new generation aircraft entries in 2022, we will be able to upgauge drive down unit costs further and increase the contribution margins. Now let us talk about our 2022 expectations and our midterm priorities. As we are coming close to the end of the first quarter, we are expecting first quarter of 2022 capacity to be around 2019 levels. It is still early to shed further light about full year capacity right now as there are still some uncertainties. We remain confident for the upcoming spring and summer seasons in terms of demand and ready to adjust capacity according to the market conditions. On the cost side, our ex-fuel cost target is to be on par with 2019 level as we will continue to add more capacity throughout peer. We expect CapEx to be around $3.5 billion in 2022, including aircraft engines, spare parts and other fixed investments. Going forward, we are intensely working on our midterm priorities. These priorities are sustaining our low unit costs, accelerating leveraging and strengthening our liquidity levels, targeting new growth opportunities through delegating cargo, build up on connectivity and passenger operation recovery, extract ancillary revenue potentials to enhance top line growth. We continue our sustainability efforts in line with the vision and the general strategy of our incorporation. We evaluate our impact on the supply chain and the environment according to United Nations' Sustainable Development Goals. We optimize our flight activities, invest in new technologies and prioritize fuel option aircraft while adding new generation 15% less fuel consuming aircraft to our fleet. We are aiming to reduce our carbon emission by 50% by 2050 and advancing gender balance by 2050. Turkish Airlines operated its first flight with sustainable aviation fuel on the flight from Istanbul to Paris in February. Besides, we aim to implement the voluntary carbon offset project to reduce impact of operations. With this project, the emissions caused by our employees duty flights will be neutralized. On our passengers on the other hand, we saw the opportunity to neutralize the emissions from their flights with various offset projects on our website. In 2021, our company participated in one of the world's most respected platform, carbon disclosure project, climate change program and received a B- rating. Also in 2021, we obtained the highest level certificate in IATA's [ IMER ] system and became the first airline to directly obtain the Stage 2 certificates. With sustainable operation in mind, our efforts allowed us to save almost 37,000 tonnes of fuel and prevent emission of almost 116,000 tonnes of carbon to the atmosphere in 2021. This will conclude our presentation, and we can now continue with the Q&A session.

[Operator Instructions] And with that, speakers, over to you for the written questions.

Murat, we have received a number of questions from our analysts. I'm going to start with our financial results in the fourth quarter. One of the questions is, which factors led better-than-expected financial results in 4Q?

Well, actually they were the same reasons that led us to have a better-than-expected results in the earlier quarters. One of the factors was us being in the market and providing capacity and to benefit from the pent-up demand. In particular, opening up the UK in the last quarter gave a boost to those potential passengers trying to benefit from the latest summer vacation parts -- and yields in this quarter were almost the same level of 2019 yield levels as a result of which the revenue increased by about almost 70%. They reached 70% of the 2019 levels. And the cargo demand continued to be strong with the capacity and also with the high unit revenues. We carried 13% more cargo and 144% higher cargo yields were attained in this quarter compared to the same period of 2019. And on the other -- on the expenses, our cost-cutting initiatives continued in this quarter. The normalization in the wages came at the beginning of this year. So that was another supportive factor. And as the flight restrictions ease throughout the world, we try to benefit from that with our high vaccination rates and being an attractive country for those potential tourists.

Murat, there are questions about current headlines about Ukraine. What percentage of revenues, passenger and cargo, are coming from Russia and Ukraine?

The best number I can give for this question is 2021 numbers. And in '21, both Russia and Ukraine together made about 3% of our revenues. And these were 2 countries where flight restrictions were not in place mostly. And then, there was a strong demand from these countries to Turkey. About overall, I believe we had about 5 million tourists overall from these 2 countries. So this year, in our initial budgeting, we were expecting this ratio not to increase. On the other hand, it could even go down a little bit because our projections were more of the countries that we could not fly in '21. We would be able to operate in this year. So the share of Russia and Ukraine together in our overall revenue would decline, but it wouldn't go below 2% level. So I could say, it should be this year, we were -- in our initial planning, it should be somewhere around 2% to 3% of our overall revenue. But the good thing with Turkish Airlines is, as we have such a big network, we are flying to, as we presented -- as we stated in the presentation, almost 300 points. The network provides a huge diversity to circumvent the negative effects of this turmoil that is happening in our neighboring geography. And on the cargo front, it's also a very limited exposure. We have also very limited exposure. We are applying to almost 90 points with our freighters and the revenue generated from Ukraine and Russia together makes less than 1% of this income.

Murat, the next question about aerospace. Are you observing any meaningful incremental demand or price strength lately in the face of geopolitical developments and the lockages of aerospace between Europe and Russia.

Between Europe and Russia, we don't see much of a conflict there because we have a direct route that does not interfere with any other country in our flights to most of the Russian air space. But with Ukraine, we will have some deter related expenses, increasing costs because to be able to transfer to a part of the Continental Europe, we used to pass through Ukraine. So that might bring some additional costs, which we think should be around roughly $2 million to $3 million monthly additional overflight costs. And about the demand from Russia, well, demand dropped, but for a very short and temporary period, there was some flying out, people trying to go to their home countries who were caught up in this turmoil in Russia. And those who want to travel abroad, we saw some increase in demand, but of course, that was a...

Would you foresee any risk of travel flights between Turkey and Russia if the situation further escalates?

That's still -- that is also very early to answer such a question as we are all trying to follow from the news there are some sanctions already introduced by some of the countries. U.S. announced some sanctions. In the European Union, we are reading and hearing that some sanctions will be imposed, but there is nothing very concrete on the European side yet. So it's still yet to be seen how drastic the effect of these sanctions are going to affect civil transfers, civil flights.

We have some questions on our outlook. What is your current capacity and yield expectation for 2022 as of '19 levels? And are you planning to focus on any specific region?

So we are well aware that since the 2020 -- first half of 2020, we are not being able to share anything concrete with you any reasonable guidance and Actually, we are not -- we are still in more or less the same situation. We definitely, based on our 2021 results, much more optimistic in 2022 outlook. The impact of the pent-up demand is going to be more in our expectations and projections, but the various variants coming out and then putting temporary -- even temporary restrictions on flights is making our life difficult to make too advanced planning or providing 2 long ahead guidance. For example, we were expecting the Far East region to open up at the beginning of this year, but still we are seeing some limitations there. So in Far East and Middle East, we probably won't be able to meet our 2019 capacity levels. But on the other hand, U.S., which has been very open throughout '21, we have actually surpassed our 2019 capacity levels in this region and we expect to put further capacity to benefit from the travel to and from Americas, not only United States but the whole North and South American continents. And Africa, we are planning to pass the 2019 capacity level. In Europe, we probably will be able to catch up with the 2019 capacity level. Domestic seems that we will be able to put a little bit more capacity compared to 2019 level. So overall, we might be on the same levels of capacity, but the regional composition is still not too well dispersed. Some regions are still continuing to be restricted.

Murat, could you give any color on guidance for this year?

So yes, well, just similar to the question I just answered, as we have seen a very nice profit results bottom line, and of course part of that was led by those stringent cost impact and they are not going to be at the same strength in this year. So we will see some normalization in our profitability, by which I mean from 30% -- 35% level of EBITDA margin, we probably will bring it down to more on the vicinity of 20% to 25% levels. So the cost increase, capacity increase, but margins are going to be shrinking, yet we will be maintaining our strong profit results in the coming years.

Murat, most of our analysts are curious about the main drivers of pricing. Were we able to reflect increases in fuel price to ticket prices via fuel surcharges?

Well, the short answer is, on the mid to long-term, we are able to do this, achieve this, partially reflect the fuel price increases on the ticket prices. But where we can do this differs a lot based on the level of competition, based on the strength of the demand in that particular region, so it's difficult to say this is valid all throughout the globe where we operate. But it is fair to say that wherever it is possible, we are being able to reflect the impact of the fuel prices on ticket prices and in some -- like some parts of the world, the high fuel prices puts pressure on the cost and makes a lot of the airlines uninterested to fly in those destinations where we, as a big network carrier, can still sustain profitable margins in providing such operations. So that's our kind of a gain from the high fuel CASK in certain regions.

Now we are hedging to demand and forward-looking questions. Have you seen a decrease in bookings after Omicron variant? Do you see any signs of normalization in demand as restrictions started to ease globally? How is the current customer booking behavior?

Well, we saw the impact of Omicron temporary only luckily. Firstly, as we know, this came into our live towards the end of the year, and we were actually seeing increases in the load factors towards the end of the year from, as we also saw in the presentation from 69% levels to almost 71% level by the end of December. And then, in early January, the Christmas travel demand was still strong, so the impact of Omicron was limited. But then we saw its effect towards the second half of the month in January, together with the snowstorm that we lived in Turkey had some negative impact. But then when we look at the February sales for forward bookings, we are still seeing a nice momentum, a nice and positive momentum. And so our outlook is positive, the impact of the Omicron seems to be limited as of today.

Next question is about Turkish lira depreciation and inbound traffic. Could you share your expectations regarding inbound traffic to Turkey for the following months considering depreciation? Do you expect an increase in inbound traffic and inbound traffic compensates losses in outbound traffic?

So if the past is any example, we lived such episodes in 2018. And then, in 2019, in both of which years outbound traffic was very limited, but the inbound traffic was multiple times higher than the outbound traffic. So overall, Turkish Airlines, we benefited from that -- or we did not get much distortions from such an environment. So given the current market environment, Turkish lira has depreciated as compared to last year. So it will have some impact on outbound traffic. Yet, we expect that to be more than compensated by the strong inbound traffic. The usual numbers is when outbound traffic gets distorted, we get at least twice more outbound traffic from outside to Turkey for leisure travelers. So overall, it might not have distorted effect in our bottom line.

Now we are heading to cargo questions. Could you please comment on the cargo unit revenue and capacity in the last quarter?

This was something we [Audio Gap] fall season, cargo demand and unit revenues would decline towards the end of the year, but we did not see that in fourth quarter, cargo capacity was up 16% and the unit revenues were up 28% as compared to the last quarter of 2020. So the capacity and then the market outlook for cargo continues to be strong in the last quarter.

What about outlook for cargo unit revenues for this year? When do you expect normalizations?

This is hard to tell. It has, to a certain degree, has to do with the impact of the pandemic and how the sea transportation is going to recover, how the supply chain distortions -- disruptions are going to be eased out, but the level of e-commerce that we see today is definitely in favor of air cargo being very precious in the coming year. So we don't think the yields are going to come down very quickly. They will continue as we are seeing today in a sort of a plateau for at least until the first half of the year than in the second half, together with the belly cargo capacity increasing and more airlines operating, especially with the widebodies, we might be seeing declines in the yields going forward in the second half.

Murat, most of our analysts are curious about increasing brand prices and their impact on our operations. How do you expect fuel CASK for this year?

So yes, this definitely is a very -- very tricky question. We completed 2021 with about 45% hedge ratio and which was slightly lower than our long-term ratio due to faster-than-expected traffic growth that we observed in '21. For '22 consumption, we are already hedged at 45% levels. And with the current prices based on our current projections, we expect to have more than $100 million hedge gains from our hedged position, higher Brent prices definitely limit our appetite to have further -- to add further new hedge positions because of this, what we believe to be hopefully temporary and then it should sit in a plateau and we will see how to continue from then on. And in this year, we are expecting about 8% fuel CASK increase, including hedge, and this is -- well, we made a projection about the brand a few weeks ago, but just like today, even it went up quite high. So we definitely need to revisit our calculations on that front.

What ex-fuel CASK level should we expect for the full year and 2022?

Ex-fuel CASK, I think they're going to be on par on the vicinity of 2019 levels. They definitely will come down in dollar terms in ex-fuel CASK compared to 2021. We expect them to come down because the amount of capacity we put is going to be significant compared to 2021 level. So a good benchmark for us will be 2019 level. We are expecting to be around that CASK, which was around 4.67 in 2019.

After signing the new collective bargaining agreement, what is the estimated personnel CASK in 2022 compared to 2019?

The personnel CASK is expected to decrease by 6% to 7% compared to 2019 and about like 11% compared to 2021 level. We don't expect to hire many new staff. We are expecting to hold on to our 2019 personnel level. And together with the Turkish lira depreciation, that's why we are expecting the CASK to come down.

On a more macro view, do you agree that cost inflation will be the main topic in 2022? What are your plans to manage any impact on that front?

The cost inflation is going to be with us for some time, not just in Turkey, which we have been living with for quite some time, but in the U.S. and in Europe and in a lot of the emerging markets, we are seeing inflation. And this is putting some pressure on our cost side. But -- and we are closely following these factors, especially on the handling, catering and fuel prices. And these items, we are trying to reduce the effects of inflation through hedges or optimization of the projects with tighter budgetary monitoring and being as vibrant and active as possible to monitor these cost items?

Now we are heading to fleet and CapEx questions. What is the planned number of aircraft entries and exits in 2022?

As you might remember, in the 2020 and year-end investor call, we announced that we had a risk schedule of our fleet development plan with Airbus and Boeing. So this year, we are going to -- last year, we had about like a 13% net growth, and we are expecting this year to have roughly similar, about 17% net growth. Both on the widebody and narrowbody, we are going to be adding new aircraft, but there will be about like 11 retiring aircrafts. So it will be a relatively small growth on the fleet in 2022.

Can you update -- can you give an update about our fleet expansion plan?

On the fleet, in particular, this -- just also following up on the earlier -- just previous question, the big portion of this growth is going to come from AnadoluJet, our low-cost arm, which, as you have followed with us, we have increased their international capacity, and they're adding new destinations not to their main hubs, which are Sabiha and Istanbul and Ankara, but also to our touristic destinations like Antalya, Izmir and Dalaman. So with this in mind, with both producers in the next 2 years, up to 24, we are expecting to have about 20 and 17 of these will be narrowbodies and 5 wide bodies. And from 24 to 28, we are expecting to have about 40 to 50 more and roughly 10 of which will be widebodies.

Murat, what is the CapEx for 2022.

We are going to continue some of those past investment projects, infrastructure projects and this is above 17 new aircraft deliveries. They will correspond to about $2.1 billion CapEx to aircraft deliveries and roughly $1.5 billion will go to engines, heavy maintenance and our other CapEx needs.

We got a lot of questions about our net debt level. They are curious about our year-end debt level.

This year, as with this strong profit of $1.4 billion, which helped us significantly to reduce our net debt level, we decreased it by $2.5 billion last year compared to 2020. And our year-end -- '21 year-end net debt level was roughly around $12 billion. And this year, in 2022, we expect our net debt level to be around $13 billion. And our net debt to EBITDA target for this year-end is to be around 3.5 to 3.8x levels.

Murat, another question. What are your plans on deleveraging? Are you planning to decrease your current commercial credit levels? How do you expect your capital structure to evolve?

Deleveraging, as I just answered, we are actually deleveraging. At the end of 2020, our net debt-to-EBITDA ratio was about 9.5x, and we have come a long way to decrease that ratio to about roughly around 4x level. So this year, we will continue to decrease it. We will also continue to roll part of our financial debt rolling them over with the long-term debt. And our aim is to reach roughly 3x net debt-to-EBITDA ratio in the coming years.

About cash and liquidity, what was the monthly cash burn in 4Q and the full year?

Well, when we exclude the loans and actually there was no cash burn, but monthly cash accumulation throughout last quarter was almost $200 million. And overall, our cash flow for last year, we started the year with about $1.8 billion. The cash generated from our operations was around $3.5 billion, and then the financial cash outflow, together with the investment outflow, was around like a $2.6 billion and as a result of which we could finish the year with about $2.6 billion cash and equivalents at hand.

What about the 2022's cash burn or generation?

This year, we don't expect to burn cash from the operation. But of course, our financial needs are still there. As I said earlier, we still are going to get new aircraft, so our CapEx need is there. But from merely the perspective of the operations, we don't expect much cash burn and we expect to finish the year with about $1.5 billion to $2 billion cash at hand.

We have a question about our PDP inflows for 2022.

As there is not too many new orders and incoming deliveries and some of which are the financial leases, we are expecting roughly around like $50 million to $60 million PDP inflow.

Now we are heading to AnadoluJet questions. Could you provide details on AnadoluJet operations? What should we expect different this year compared to last year?

We are planning to increase AnadoluJet capacity by about 30% in this year compared to last year. This is the one I just answered in the fleet question. A significant part of the new narrowbody aircraft we are in the market for AnadoluJet. And this new capacity will be put in the international -- for the international demand -- to meet the international demand, especially to have the point-to-point operations to connect our summer resource regions or for the ethnic travelers to connect them to Middle East and European capital cities.

Murat, analysts would like to know more about AnadoluJet fleet and any changes.

Currently they have about 53 aircraft, and we expect that to increase on a net basis to 61. There will be about like 14 entries. And then, year-end, there will be some exits. So overall, net change will be 7 to 8 additional narrow-body aircraft for dose for this year.

Now we are heading to cargo questions. Was there any revenue growth due to transparent cargo operations to the new airport? Could you elaborate on efficiencies by this [ note ]?

As we have done a much bigger transfer from Ataturk Airport to Istanbul Airport on the passenger side at early 2019, we were very experienced and transfer of cargo took place around February very recently, which was a relatively low season for cargo operations. And part of the operation was already continuing from Istanbul airport. So we have already had to facilitate satellite terminal and then the main terminal fully operational in Istanbul Airport as a result of which this transit was quite smooth and without any significant operational or commercial losses.

Any update on the plans to carve out cargo?

That project is still in progress. Yes, it's progressing a little slowly. As we get more and more into the business of carving out and, first, we realize that at our scale with a freighter fleet of almost 20 aircraft, there is no similar carving out of any cargo business. So this has brought our attention, the complexity of such a transfer. That's what we are trying to evaluate and reevaluate and reevaluate what is the cost and benefit of this operation. And we are trying to determine the best timing for having such operation. Currently, cargo is very profitable. We have been benefiting from it significantly. The share in revenue came from almost 10% levels to almost 40% this year -- last year, sorry. And the year before, in 2020, it was about 50% of the total revenues. So we don't want to lose this profitable margin with the transfer, but that project is still continuing. We just don't feel the big rush in doing it as along the way we are realizing some operational issues that might risk our profitable margin, not for the project itself, but for the operation of doing it. So we are just taking our time to provide a more comprehensive analysis of pros and cons of doing that operation and when to do it.

Murat, what about AnadoluJet restructuring? What are your plans to lower cost base further?

So that's also a little bit more behind than the cargo project, but that's a project that we have worked on intensively, internally with all the related departments. As we know, there is limitations in finding new aircraft, and there is constraints in the production both on the Airbus and Boeing side. So the timing of this project partially depends on it, and it partially depends on when both of the term runways will be operational in Sabiha Gokcen Airport. And there is a project we are still working on, try to establish in the best means possible.

We have 2 more questions. Can you comment on the financial effect of snowstorm last -- in January?

The snowstorm had -- it impacted the operation for about 3 days. It mainly affected the Istanbul Airport, which was more on the north side and the impact was more severe there. As I said, it last around like 3 days and the financial impact was about $60 million to $80 million, including the cargo, revenue loss.

Another question, how do you evaluate your business class performance?

The path of recovery on the business class is kind of similar on the economic class. Our daily business class revenue is 32% below 2019 level and economy class revenue is more or less same, about 27%, 28% below 2019 level. The corporate segment's recovery is lagging, but the [ active ] travelers and the leisure travelers, we are seeing more and more of them using the business segment. So they are balancing out the negative impact of corporate business travelers. I see some of these questions. Let me just quickly see if there is anyone that we did not answer. Brand forecast on our guidance, I think I answered this already. We had a forecast, but I think today, we have to revisit the forecast. We were thinking -- at the beginning of the year, we were thinking around like $85, $88, then we revised it to about like $93, $94, now I think we just have to revisit it after seeing it about few more how this increase is going to -- whether it's going to be sustainable or not. And conquer fuel price hike, is there any change in the plan to introduce new technology fuel option aircraft? That's what we are investing on. That's definitely what we are investing on. All the new aircraft that we include to the fleet are new generation fuel efficient NEOs or MAXs and even the widebodies are A350s or 787s. So actually all the aircraft we have had to the fleet since 2018, I think, are new generation. So this is definitely something our hands are on. The Turkish Airlines operate a number of local Russian flights. I don't think we operate any local Russian flights. We have operations to Russia, but -- and there is some -- because of the limitation we have actually decreased it. So this, maybe I didn't understand the question too well. 2022 guidance include potential negative impact from Russia, Ukraine, I think we answered this. Yes, I think we answered all the questions.

Murat, we got questions from HSBC, Goldman Sachs, Bank of America, JPMorgan, Societe Generale, [ Issue Invest ] Oyak, if you must, [ Issue Invest ] again, [ BGC heavy list ]. We would like to thank all of you for your participation and for your questions. If you have any more questions, you can get in touch with us any time. And thank you.

Thank you, ladies and gentlemen, and thank you for your answers speakers and presentation. Ladies and gentlemen, this concludes today's webcast call. We thank you for your participation. You may now disconnect.