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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to Turkish Airlines' Third Quarter 2020 Results Conference Call and Webcast. Today's speakers will be Murat Seker, CFO; Kadir Çoskun, Investor Relations Manager.
Dear speakers, the floor is yours.
Thank you very much. Good afternoon, everybody, and thank you for joining our third quarter financial results presentation. It's a pleasure to be on the line with you today.
In the summer months, aviation sector started to heal the wounds of COVID-19 pandemic and show gradual recovery. In this quarter, Turkish Airlines recorded $75 million operating profit. We exceeded $1.5 billion revenue, which accounts almost 40% of last year's level. To remember, in the second quarter, total revenue was 30% of 2019 level.
Currently, there is a visible setback in the recovery process due to new preventive measures introduced by many countries resulting from rising number of new cases. We will continue to increase the capacity through Q4, however, we will maintain our caution on this increase.
According to IATA, air travel is one of the safest means of travel even during the pandemic yet in order to see a meaningful recovery in passenger demand, we need to see significant improvements in the spread of virus, which force many countries to apply quarantines and international aerospace restrictions. In the meantime, we are focusing on the tasks that we can control, such as protecting our liquidity level, managing costs, investing in digitalization and trying to take care of our employees and customers.
We completed the quarter with around $1.3 billion cash and equivalents. As mentioned in the previous call, we expected around $300 million to $350 million cash burn per month as the bulk payments for major vendors and ticket refunds took place in the third quarter.
During October, we supported the cash position with new commercial loans and increased our cash level to around $1.5 billion. Going forward, we expect to have monthly cash burn of around $250 million during winter months till the end of this year. Available credit lines exceeding $2 billion ensure that we have sufficient liquidity throughout early 2021.
As in the second quarter, we continue to observe strong cargo performance in the third quarter with a year-over-year increase of about 60% in revenue. We continue to fully utilize our freighters and couple of wide-body passenger aircraft were assigned for cargo-only operation. We expect this strong cargo performance to continue in Q4 as well.
In June, we started with domestic flights first, and then opened some of our [ deep ] short-haul destinations, especially in Europe, to serve ethnic and leisure travelers to Turkey. In August, domestic Europe and North America flights took the major share in total capacity. By September, we kept adding destinations in Far East, Middle East and North Africa. We are planning to fly around 200 destinations out of 324 total by November.
Since the beginning of the crisis, we have been working hard to cut expenses and reserve our cash level. We took important steps towards these goals recently. After long discussions and negotiations, in early September, we came to an agreement with the union -- labor union. According to this agreement, we agreed on a salary deduction of 30% for ground employees from workman compensation, 35% for cabin employees from flight compensation, 50% for cockpit employees from flight compensation and a deduction of 30% for seniority payments of all our employees.
All these meant around 40% year-over-year decline in blended employee costs.
On the CapEx side, we reached an agreement with Airbus on postponing aircraft deliveries in order to minimize the idle capacity between '22 -- 2020 and 2022. We agreed on a new delivery schedule that extends the delivery time line up to 2028 and reduces the number of aircraft delivery per year to reasonable levels. We also agreed on action to cancel some of the future deliveries, if need arises. The agreement will reduce the PDP payments as well as the amount of financing needed for '21 and '22. We are about to finalize the agreement with Boeing as well.
Now let me briefly comment on the key financials and operational figures for the quarter. We generated around $1.5 billion revenue in the third quarter, which is almost 40% of the revenue for the same quarter of last year. In the first 9 months, we reached almost $5 billion revenue, which accounts around 50% of prior year's level.
With the help of the measures taken in cost side and a solid cargo performance, we achieved $75 million profit from main operations for this quarter. We recorded more than $600 million EBITDAR and around 40% EBITDAR margin. The EBITDAR value is doubled in this quarter compared to the second quarter. We introduced 30% of the capacity introduced in Q3 of last year. Passenger load factor was around 68%.
I'll stop here and let Kadir to continue with the presentation.
Thank you, Murat. Hi, everyone. Let me continue with the detail for operational and financial results. Let me start with the operational overview for the first 9 months of 2020. According to IATA, the total market operated with around 44% capacity compared to 2019. According to EUROCONTROL, traffic in the first 9 months was also around 46% of 2019 levels.
Compared to the sector, we observed a slightly slower recovery with total passenger numbers at almost 40% of 2019 levels. Compared to the other European network carriers, however, our recovery seems to be slightly better. Due to flight restrictions, international operations recover in a slower pace than domestic operations, which leads international to domestic ratio to be around almost 1.
Our total load factor for 9 months ended decreased by around 8.1 percentage points, which is still almost 6.6 percentage points higher than the highest average of 66.7%. This shows our faster recovery compared to the industry.
On the next slide, we see the significant effect of the pandemic on our international passenger figures, which decreased by almost 70%. This is an expected result after flights resumed because it will take time for long-haul destinations to recover compared to short-haul destinations. Almost 50% of our long-haul destinations, especially South America and Far East, are still closed. Unfortunately, the slow progress on the development of a vaccine and the concerns of the second wave and, therefore, lockdown, made it impossible for us to add any notable routes, especially in Far East.
We see the share of European travelers is increasing from 56% to 59%. Along with that, according to EUROCONTROL, Turkish Airlines was the second operator with the most flights in Europe in the second week of October. As expected, the portion of domestic passenger numbers increased largely due to the aforementioned lack of transit passengers. On a positive note, the share of international direct passengers, which we consider as the highest yielding passengers, increased by 1%.
Next slide. Now let me talk briefly about the recent traffic results. In September '20, we reached around 35% of total capacity compared to 2019, while domestic operations reached around 65%. July and August gave us hope for a fast recovery. However, the increase in the number of new cases and the recently introduced quarantines lowered the expectation. September traffic results were lower than August due to signals of the second wave. When we compare the year-over-year development, though, we can say that the rate of recovery was only stagnated. A further increase of capacity will be possible if we can add some routes to our current flight plan. As we already mentioned in the previous slide, some flight restrictions are highly dependent on vaccine. We believe that as soon as we can see progress concerning this matter, more routes will be added.
At the early stage of the recovery in July, [ other ] half of the international capacity was located in Europe. In September, we managed to have a much more diversified capacity allocation. Around 30% of our international capacity was located in Europe, 200% in North America and around 17% in the Far East. We were able to slowly improve our load factors. Also, the August base is higher. Our cargo tonnage increased month-over-month in September by around 2.4%.
In the next slide, cargo operations slide. Turkish Airlines was the first airline to utilize some of its wide-body passenger aircraft as freighters during the outbreak, which turned out to be highly profitable. Not only because of the transportation of medical equipment to fight the pandemic, but also to meet the demand in the absence of [ tele ] cargo. As you know, cargo yields duplicated during second quarter. With cargo tonnages approaching to 2019 levels, cargo unit revenue declined compared to the second quarter, but still they're almost 70% higher compared to last year.
Therefore, cargo revenues increased by 55% by the end of September, reaching almost USD 1.9 billion level, which corresponds to about 38% of our total revenues. While the industry freight through ton kilometers declined by around 25% in the first 9 months, Turkish cargo still increased the market share by adding 0.2% FTK for the same period. By the half of 2020, we reached an almost flat cargo tonnage. The third quarter, however, recorded a 7% decline in FTK, which is still stronger than the highest averages for the quarter.
On the next slide about key financial data. With the return of passenger flights, we reached around 30% ASK levels of 2019, we already mentioned. While we still have a slightly negative net operating loss of almost USD 60 million level, we achieved to stay on positive side by recording USD 75 million profit from main operations in this quarter. At the early stage of the recovery, passenger revenues are highly pressured by low load factors. Some countries have special regulations concerning load factors like China imposing 75% maximum load factor for the flights landing to China.
The main contributor were the positive results from main operations -- our very strong cargo operations with a revenue increase of almost 60%. We recorded USD 132 million of net loss in this quarter mainly because of the foreign exchange losses on financial activities. As a reminder, euro appreciated against U.S. dollar by 4%. Thanks to cargo contribution, EBITDA margin is higher than expected, and we will continue to maintain positive EBITDA margin levels.
On the next slide, EBITDA margin. In the first 9 months, we generated almost half of prior year level's revenue with around USD 5 billion. With the help of strict control over our costs, we are able to record slightly increasing EBITDAR margin for the first 3 quarters. We are closely monitoring EBITDAR as a performance metric and try to keep it about 20% level going forward.
About revenue breakdown. When we look at the revenue by business type breakdown, we see a quite high portion of cargo revenues. The portion of cargo revenues jumped from 12% in the same period of 2019 to almost 38% in the first 9 months. The continuing shift from cargo to passenger will be an important indicator to watch throughout recovery. Remember, the contribution coming from cargo side was higher in second quarter.
We also observed some slight changes in our geographic revenue generation. The unusual summer season and flight restrictions caused major changes in our transit and direct international operations. While flight restrictions in Europe caused the European revenue contribution to decrease, Far East, in which the process of recovery, is at an advanced state has an increasing contribution, especially with the help of cargo operations.
While lower capacity cuts in Americas increased the contribution of this region, Middle East, suffered a heavy destruction due to the highest capacity cuts. Even though almost half of the passengers in 2020 are domestic passengers, domestic contribution decreased due to the depreciation of Turkish lira against other hard currencies.
On the next slide, the unit revenue development was highly affected by low load factors in the third quarter of '20 as there is lack of business travel and premium leisure demand in the sector, the pricing was weak as expected in this quarter. If we compare RASK and passenger RASK, we can distinguish between strong cargo revenue developments and weak passenger RASK developments. As a side note, the sector-wide business class ticket prices declined during the pandemic. The prices are just twice as expensive as economic class tickets, while it was around 5x expensive in pre-COVID period.
Due to lower costs and better social distancing, the rate of recovery of business class segment is at a similar pace as the recovery of economic class. We minimized the inevitable downfall of revenue yields to under 4% in terms of ex-currency revenue yield in the third quarter. The decrease for 9 months ended is even stronger, with only 1.7%. Yields are low due to slow demand recovery, of course.
In the next slide, regional yield development for third quarter. When we look at the regional yield development in this quarter, high capacity cuts definitely stands out first. The highest capacity cuts were realized in the Middle East due to pandemic-related flight restrictions. Markets like Saudi Arabia and United Arab Emirates are still closed. However, the strong demand to travel in this region led to high increases in unit revenues. The developments in Far East and Africa are somewhat similar, with capacity cuts around 80% levels and solid improvements in unit revenues.
In Far East, there are still flight restrictions to India, Vietnam, Thailand, Sri Lanka, Mongolia, Tajikistan and Turkmenistan. Also, there are still frequency and capacity restrictions to Afghanistan, Uzbekistan and the Philippines. Hong Kong, Indonesia, Japan, South Korea, Singapore, Malaysia and Taiwan have no restrictions in terms of capacity and frequency, but they only accept their own citizens or people with residential permits.
The fall in passenger RASK is mainly due to heavy restrictions concerning passengers, whereas high cargo unit revenues drove total RASK up to over a 7% increase. Further similarities can be observed between Europe and Americas, where the recovery was faster, comparatively low capacity cuts of around 64% and moderate declines in unit revenues are recognized. Again, cargo revenue increases contributed to total RASK decrease being contained around 10%. North America transit potential is highly pressured by flight restrictions in India, Iran and Israel, and led to lower load factors, therefore, lower unit revenues.
The same reasons also put pressure on our transit operations in Canada. Passenger flights to Central and South America are not resumed yet.
We relaunched almost all routes in North Europe as of July. Turkey was in the safe country's list of the United Kingdom for the most part of the quarter. Most of our passengers to the United Kingdom were direct passengers.
Turkey was one of the first countries to resume flights to Moscow, St. Petersburg and Rostov in Russia. This was an advantage for us in terms of transit network and overall unit revenues and load factor due to the fact that there were only few alternatives to Turkish Airline. In Central Europe, our most important market, Germany, was partially opened with around 35% capacity compared to 2019. We try to be as dynamic as possible in Europe operations. Recently, we started to use wide-body aircraft to destinations like Amsterdam, Brussels, Frankfurt, Hamburg and Prague to capture cargo potential.
Domestic operations made up around 25% of our total capacity and almost 60% of our total passengers in the third quarter of '20. While capacity is back at 66% of 2019 level, load factors declined by around 14 percentage points, which heavily affected our unit revenues to decline. Overall, flight restrictions led domestic peers to relocate their available capacity to domestic destinations, which further pressured load factors and pricing. Due to the depreciation of the Turkish lira against U.S. dollar, expense revenue declined -- stayed in the high single-digit level.
Next slide, regional yield development in 9 months. When we look at the regional yield developments in the first 3 quarters, we see that in nearly normal first quarter's positive effect almost distinguishes, even though the third quarter showed strong signs of recovery. The capacity drops in all regions are near to Q3 levels, as we just discussed in the previous slide, with the only exception of domestic region. Here, the third quarter had a positive effect in the capacity development for 9 months due to the resume of 66% of domestic capacity. The capacity cuts in Middle East are still the highest. Very strong capacity increases to Far East in January restrained the capacity fall in Far East to 64% levels despite early flight restrictions towards the end of February.
While flight restrictions to Europe began in early March, flights to Americas were still operating and used as profitable capacity reallocation opportunities. For this reason, capacity cuts in Americas are lower than those in Europe.
In the next slide, the revenue development in the third quarter is basically shaped by a negative volume and a negative load factor effect. The negative volume effect caused our total revenue to decrease by around USD 2.4 billion, which corresponds to around 60% of our total revenues in the third quarter of 2019. High cargo revenues on the other side helped us to limit the total revenue deterioration at 62%, which compared to the other network carriers is a strong result.
On the next slide, looking at the CASK breakdown. We see increasing variable costs and decreasing fixed costs due to the reestablishment of passenger operations. In the third quarter, total CASK increased by 53% despite savings in personnel unit costs and passenger service and catering unit costs, higher aircraft ownership unit costs and maintenance unit costs increases due to low capacity, of course, put pressure on total CASK.
However, since we do not include cargo capacity in ASK definition, but the costs related to cargo in the total cost, there is a discrepancy between total capacity and total cost calculations. Cargo operations increased significantly when we include available ton kilometers to the calculation, CASK increased by only 12% and ex-fuel CASK by around 30% in the third quarter.
On the personal CASK side, our application for corporate-wide part-time employment starting from April 1 of '20 continued until the end of August. As of September, we introduced around 40% wage cut after reaching an agreement with the labor union. While job cuts in the sector were made in a large scale, one of our most important targets during the pandemic is to protect the employment of our personnel.
Aircraft ownership unit costs are still not only the biggest cost item in the CASK breakdown, but also recorded the highest increase, mostly due to the increase of the depreciation expenses by almost 7% in the third quarter. The portion of the depreciation expenses fell from 35% in the second quarter to 26% in the third quarter. Aircraft rent expenses, which are included in aircraft ownership costs, reduced by almost 46% in the third quarter. Two Airbus 321neo and 3 Boeing Dreamliner aircraft were delivered in the third quarter of '20. Also, 2 Boeing 747 freighters -- wet-lease freighters were delivered in this quarter.
Airports and air navigation unit costs and ground handling unit costs increased due to low ASK generation in the third quarter. Despite the fact that airports and air navigation expenses decreased by 55% and ground handling expenses decreased by 47%. Also, passenger services and catering, sales and marketing expenses were the item with the highest decrease with almost 67%. Maintenance expenses decreased by around 25% in the third quarter, but still from over 8% of our total expenses.
In the next slide, fuel expense breakdown. Fuel expenses in the third quarter decreased by 70%, 10 percentage points less than in the second quarter. Obviously, the flight restriction was the main contributor, followed by lower crude oil prices. On the other hand, the negative hedging effect was much lower than in the second quarter, but still a major factor making up for 16% of the total fuel expenses. Therefore, overall half of the -- over half of the negative hedging effect for 9 months was realized in the second quarter. We expect losses due to overhedged position in the following quarters to decline.
Next slide, profit from main operations bridge. In this quarter, cost-cutting was achieved by USD 340 million lower personnel costs and USD 60 million from other items, which amounts to a total of around USD 400 million. Besides the negative utilization impact and negative load factor effect also had a significant role. However, load factors in the third quarter and throughout the year are higher compared to many peer airlines.
While our load factor in the third quarter was at almost 68% level, [ RASK ] average is around 60% level. Nevertheless, thanks to lower fuel prices and positive currency, RASK and other effects, we achieved a profit from main operations of USD 75 million in this quarter.
In the next slide, in the profit from main operations for the first 9 months, the pressure of low demand is visible on year-over-year profit comparison. While currency, ex-currency unit revenue and the fuel prices helped, weak load factors, fixed costs and lower utilization of aircraft lowered the profit to minus USD 367 million.
On the next slide. As shown in the graph, we continue to be long in euro and short in Turkish lira. Compared to the first half results, there is a small shift from Japanese yen and euro -- and euro correlates to Turkish lira due to a higher portion of domestic operations in the third quarter. Consequently, Turkish lira’s portion increased by 0.6 percentage points to 10.4%. We used a monthly based decreasing [ laid ] hedging policy with a maximum 24-month contract period. In this policy, we modify hedging parameters regarding current circumstances and developments. Hedging level for euro-USD and euro-Turkish lira is very limited with 2% each.
Next slide. The share of fuel expenses within our total cost base is normally around 30%, but declined to 20% in the third quarter of '20. 60% of the fuel consumption in 2020 and 14% of the fuel consumption in '21 is hedged as of the end of September. As expected, we do not have an overhedged losses in the third quarter. About aircraft financing and debt management, our financial lease liabilities are around 4-point -- USD 9.4 billion by the end of September.
As we continue to pay the principal payments of the finance lease aircraft, and there were 5 financial lease entries in this quarter, our financial lease liabilities are unchanged since the second quarter. Attractive aircraft financing deals done in 2019 and '20 further decreased the weighted average interest rate to around 2% level. On the operational lease side, our total obligations are USD 1.8 billion by the end of September, around USD 100 million less since this quarter due to no operational lease entries in the third quarter.
In the next slide, regarding sustainability, we feel the increasing importance of sustainability and continue to work with dedication on this topic. The pandemic, although adjusted by itself, had a positive impact in decreasing global environmental problems. However, the decrease in the scale only provides a short-term benefit in terms of carbon emissions. We need to continue to discuss long-term solutions rather than focusing on short-term benefits. We want to use the current situation as a turning point, a time where we can adapt to a more sustained operational environment.
The best way to do so in our industry is to use new generation aircraft, invest in the research of biofuels, minimize the generation of hazardous waste and monitor closely the sustainability of our supply chain. We consider it as an important objective to reach ISO environmental industry targets for reducing carbon emissions and to fight against climate change to which we already aligned ourselves. In the process we will continue to monitor, calculate and verify greenhouse gas emissions according to ISO 14046 specifications. You may find more detailed information about our achievements in 2019 sustainability report.
I'll stop here, and we will pass to Q&A session.
[Operator Instructions]
Okay. I will be addressing the questions as a sort of -- we are grouping the questions because we are receiving sort of similar questions, and Murat will be answering these questions.
Murat, the first question is, of course, about the fleet and the current Airbus deal that we announced. There are a couple of questions, we combined them. Could you please update us on the negotiations with Boeing and Airbus?
Questions are from Najet from Bank of America; Esra Sirinel, IS Invest; [ SGBG Partners ]; [ Salim from Acuvest; Adam Tyler ]; and Hanzade from JPMorgan.
Sure. Well, we -- as you know, we recently announced the deal with Airbus, which included roughly $2.1 billion worth of saving caused by the postponement of the aircraft deliveries to -- from '25 -- 2025 to 2028. And this translate into about $2.25 billion worth of financing need from 2020 and 2021 and around $3 billion worth of financing need from 2022 and '23 to after 2024 period. So overall, we postponed, roughly speaking, $5 billion worth of financing of aircraft, including both narrow-bodies and wide-bodies to after 2024 years.
And in the meantime, this postponement also provided us some room for the PDPs. With this postponement, $450 million worth of PDP payment that was supposed to be made this year is postponed after 2022 and $400 million worth of PDP payment that was supposed to be made next year is also postponed after 2022 year. The average delivery time for 71 narrow bodies, neos and 25 A350s increased from roughly 2.4 years to almost 6 years.
And we have to, of course, thank Airbus for being very cooperative in this -- throughout the negotiation period. It was a mutually beneficial transaction. And we are hoping to conclude the deal with Boeing very soon. We have not finalized it yet, but we have already gone a long way throughout this negotiation. We are hoping to complete and announce it in the coming weeks.
Next set of questions about guidance. The first one is what level of capacity do you expect in the last quarter in light of fresh lockdowns?
Given the current situation, we foresee about 40% to 45% of the ASK level could be introduced as of -- compared to 2019, last quarter level.
And again, about guidance, what level of capacity should we expect in '21? In the previous call, we mentioned we might see 15% to 20% decline from 2019 levels. What is the current picture?
Well, in that second quarter results, we were a little bit more optimistic about the last quarter of this year. But as we all are aware, July and August, even though those 2 months were successful in terms of recovery, we started to see the number of new cases increasing towards the end of September. And in October, we saw that going up and a lot of countries are now talking about, and even implementing, a new quarantine scheme.
So that made us to be a little bit more cautious in our outlooks to ‘21. Our current base case scenario will be around 30% to 35% of the ASK could be introduced in 2021. So we're being a little more conservative than what we have announced earlier from 10%, 15%, we have pulled the available capacity to 30% to 35% level.
Next questions are about cash and liquidity. Do you have further room to cut your monthly cash cost? Can we still consider around $300 million monthly costs are reasonable going forward? What is your monthly net cash burn? Yes. What are the actions taken against the second wave of the pandemic? What would be the level of fixed costs, monthly cash burn in an environment of no passenger traffic?
When we were, again, discussing the cash burn level in the second quarter results, $300 million was a reasonable amount. But the third quarter, especially July and August months were a little bit more productive than our expectations and we happen to generate more cash than we anticipated. As a result of which, for the remaining part of the year, I mean, throughout the fourth quarter, we are expecting to spend around $250 million cash per month through the end of the year.
Well, the follow-up question was about the second wave. First of all, our expectation is even the second wave, which actually is -- seems to be, we are seeing it now, it's going to be less impactful than the first one as all the countries are more prepared, and we expect that to be less distortive than the first wave.
If things go further down, and we need to -- we see more lockdowns and more quarantines and more travel restrictions, we will be following the same steps that we did in the first wave, like implementing short working scheme and grounding more of the aircraft that we operate. So we'll be more ready if the second wave comes more seriously. However, given the current situation in Turkey, at least, we don't have that sentiment. And Turkey, throughout the summer months has been one of the most actually welcoming country in air travel.
We haven't imposed any significant air travel restrictions to incoming countries as well other than very limited episodes. There was a few weeks to -- there was restrictions to Iran and Afghanistan, but they were quite temporary.
Next question from Hanzade from JPMorgan. What is the total cash reserve, including undrawn credit lines versus monthly cash burn, post start of the period -- post start of operations?
So we are actually, at the moment, are more or less the same level that we were in the end of the third quarter. So I could say it's roughly around $1.4 billion levels. Even though we kept spending, burning new cash, we happen to receive new credits from the banks since the end of the third quarter. So we are more or less on the same level. Undrawn credit lines, it's still comfortably around $2 billion level with the bank.
Again, a question about cash. What was the main reason behind the cash rundown of around $500 million during third quarter, despite the increase in bank borrowings and cash inflow from previously booked margin goals? How much was this decline was related to flight liability payments? I guess this is about ticket refunds.
Okay. So the main items of expenditures were the aircraft finances, roughly $400 million. And about $70 million, there were commercial loan payments. We’ve got about 400 million new credits, and there were airport infrastructure investments, some engine and maintenance needs of about overall 270 million. The ticket refunds were about $460 million in the third quarter.
Okay. What avenues do you consider to boost the liquidity to cover the cash burn during the coming winter and spring?
Well, we are under continuous discussions and negotiations with our service providers and including our subsidiaries on the main cost items like catering, like handling, like fuel consumption. And we are negotiating with them to lower the fees, if weaker demand environment arises.
And as I have mentioned in the earlier question, the postponement of the aircraft deliveries, especially for 2020, 2021, and relatedly, the PDP payment deferrals are important venues for keeping the liquidity high. And also to be facilitating higher cargo revenues, we have implemented, as Kadir mentioned in the presentation, some of our passenger aircrafts for cargo operations and we are -- we will be ready to do more of that if such demand arises.
Regarding cost questions, Murat, you had $1 billion of cost saving target for 2020. How much of this has been realized? And is this a saving that could stay over the next 2 years?
In the -- especially second and third quarters, overall, we had about 700 -- roughly $700 million worth of saving merely just introduced by the personal expenses. We introduced partial work scheme for about 3 months of 10% level and then increased that to 50% for 2 months in the third quarter. So there was a significant amount of saving. And then in September, we had the agreement with union, which came along with about 40% deduction. So on the personnel expenses, we had a significant saving.
And on the other items, like marketing expenses, sales expenses, fees and commissions and other operating related contractual improvements, we had roughly $150 million. So overall, we had, so far, $850 million worth of saving on the cost side. And for the last quarter, we believe, we can comfortably make the remaining $150 million to $200 million more saving for the last quarter of this year.
And do you think that could stay over the next 2 years?
A significant part of it, especially the personnel expenses on the variable cost side, which depends on the amendments we made with the union, and that amendment is until the end of 2022. So that part is -- sorry, it's ended -- until the end of '21, so next year, we'll definitely we'll be able to cover it.
And there was an agreement -- I mean it's not a written agreement, but if the business does not improve in 2022 and the union has been cooperative, even though there is not a commitment yet, but they have shown their cooperation for the continuation of this scheme, if the impact of the crisis and the severity of the crisis continues.
And the remaining items are more or less on the same evaluation, if the depth and then the severity of the crisis continues, we believe we can continue the same reductions most probably with our subsidiaries and with our other service providers as well.
What will be the impact of wages cut under agreement with union on personnel expenses in Q4? Will it be comparable with the impact of short-term allowance program in second and third quarter? Or should we expect higher personnel costs?
It will be around -- the union agreement translates into, roughly speaking, $120 million to $130 million per quarter. So it's less than what we had introduced in the second and third quarter because I want to underline that we had a very, very stringent cut throughout those months.
We paid the partial work scheme, we introduced, covered only 10% of the wages. So it's less than that the agreement we had with the union, but it's still is a reasonable amount of, as I said, around $120 million to $130 million savings for Q4.
About CapEx and debt questions. What's your projected net debt level for 2020 and 2021 under your base scenario?
The current situation, and we are almost at the end of the year, we believe the net debt for 2020 will be around $14.5 billion level. It was -- at the end of last quarter, it was around $13.8 billion. We had some new deliveries in the meantime, and that's the main reason for this increase in our -- some of our infrastructure projects were ongoing, even though they -- we slowed down most of them.
We were trying to finish some of the buildings that were almost 90%, 95% completed in order to be able to transfer the operations in the new airport. And for the next year, we don't foresee a significant change on the net debt level. So we expect that to stay around $14.5 billion to $15 billion level.
How much CapEx should we expect in our models for '20 and '21? Another question, could you provide some figures on the expected CapEx, PDP as to through '21 -- about, I mean, the CapEx about -- for '20 and '21, what do you think?
So the CapEx I mentioned for '20 -- for '21, the -- no, sorry, the CapEx for 2020 should be around $3.7 billion.
$3.1 billion.
$3.1 billion, sorry, $3.1 billion. And for '21, as there will be very limited new deliveries -- aircraft deliveries, we expect to be around -- spend around $1.5 billion in '21 and roughly $800 million of this will be for aircraft and around $700 million will be for the remaining investments.
And for this year, as I said, it should be around $3.1 billion and, of this amount, roughly $2.2 billion should be for aircraft purchases and $800 million to $900 million will be for the other expenditures.
Next questions are about cargo. Do you consider to team up with any partner on cargo business to accelerate growth on that front?
We don't have such a project at the moment. I mean carving out our cargo operations has been in the agenda for some time. But given the current market environment, there is no active party that we are engaging in and running such a discussion. But our cargo, on itself, has been, as we expressed in the presentation, has been quite profitable and productive.
How much your cargo operations profitability would have increased if you had operated all operations under one roof? It means, I guess, in the new airport.
Definitely, it sure has benefits. As I just expressed in the -- one of your earlier questions, that's the area actually that we are keeping the infrastructures continuing so that we are trying to complete our cargo terminal, Smart East project, as we call it. It's about 90%, 95% of the project is completed. There is still some further investments that needs to be done.
Depending on the cash level, our projections is by the fall of next year of '21, when the big cargo volumes start to be transported, we expect the new terminal to be ready, but that's current -- are based on our current expectations. And -- but if it doesn't go along, we'll keep the operation with the 2 terminal, especially when the passenger network is slow, most of the cargo is being moved with the freighters anyway. So there is not too much inefficiency in this environment.
It was -- there was a little bit more inefficiencies when we had the full-blown belly cargo operation and had to complement it with the cargo operation, but that's not the case at the moment. And we don't expect a huge change on that in '21. So it won't be a big loss if we cannot move the cargo operation from Atatürk Airport to Istanbul Airport.
Murat, there is a follow-up question. Does $250 million cash burn figure includes reduction in PDP following the Airbus agreement?
Yes, yes, it does include. It's based on the new delivery plan. That's one of the factors that helped us bring down the $350 million cash burn to $250 million. That's one component. Another component is the deferral of the -- and postponement of the deliveries. And another component is better-than-projected operational performance in the summer months of 2020.
Okay. And there is another follow-up question about cargo. Are you seeing any normalization in unit cargo revenues?
Normalization, I understand that question is coming down as the unit yields have been going up very, very high in the third quarter. Even in third quarter, roughly, they were about 60% above the same levels as of last year. So we don't see much change there. They are still significantly above the yields, I mean, the cargo yields are still significantly above the same levels as we saw in October of last year -- September, October of last year.
Okay. Another question is about share buyback. You have announced the share buyback program in the early months of '20, but you haven't initiated yet. When are you planning to initiate, if there's any plan?
Well, I mean, it's -- we don't see it as a great time to do that as we have to be very careful in where we are spending our cash. We feel comfortable with our current cash position and it's -- the current level of the stock is extremely attractive. But I don't think we will be implementing that anytime soon. We should be a little bit more comfortable with the outlook -- with the operational outlook that we have going forward. And if we see a reasonable recovery and -- in the operation in '21, probably by the summer of '21, and if the cash generation capacity increases on the operational front, then we might reconsider that.
Next question is about the need for capital injection. It seems the company's current cash position is enough to cover some short-term period. At what point do we think you need capital injection?
Capital injection, I mean, by -- well, through a capital increase, it's definitely an option. But we don't -- we are not considering that option anytime soon at the moment. We believe the current cash capacity through the commercial loans and what we have at hand through the operational front could be sufficient for '21. But as I said, if picture gets to be more drastic, we definitely can look into that, but we are not in active inquiry of any capital injection from our shareholders.
There is a follow-up question regarding this one. Any word on negotiations with Turkey Wealth Fund, other parties to sell some stakes or to inject cash into the company?
That, I believe, relies on news that came out roughly a month ago on the media. We haven't been in any -- in conference or discussion with the wealth fund regarding to do any stake selling or injecting any capital. So there hasn't been any such discussions with the wealth fund. But the sovereign wealth fund as our biggest shareholder as well as the respective government bodies, we are in very close coordination and communication. The Ministry of Transportation, Ministry of Treasury and Finance, they are following the situation, development of the Turkish Airlines very closely. But despite of this fact, we have not engaged with them in any discussion for a capital injection or stake selling.
Okay. The next question is about, is there any change in business model? Actually, do you have any plans regarding to change hub-and-spoke model of your network? Any intentions to increase point-to-point traffic?
On a big picture, no. I mean we are a network carrier. And we still are one of the airlines that is flying to more destinations than any other airlines. As of today, we are flying to roughly 200 destinations and likely at around 20 more by the end of November. So this still provides us an advantage in utilizing the hub-and-spoke model. But we also see some countries putting extra restrictions, lockdowns, quarantines. So it's not being 100% effective all through the geographies. We are not considering to changing that.
However, our low-cost arm, AnadoluJet, which we have announced at the beginning of the year that it would start international flights, which they did, and after the lockdown times were over in the third quarter, AnadoluJet flew to a few European cities and had a profitable operation actually. So throughout these episodes where the hub-and-spoke system might not be too productive, we are planning to utilize more extensively AnadoluJet's point-to-point system and benefit from that.
Next question is about ticket refunds. Could you please update us on ticket refunds?
So, so far, we have spent around $950 million on refund since the beginning of the crisis. And in third quarter, roughly $500 million, out of this $950 million. And we believe, in Q4, there could be an additional $200 million -- $250 million more refunds that we could make.
In the meantime, we introduced several products like additional mileage, some vouchers to the customers. And then we saw some positive responses on those, and we'll keep increasing those alternative solutions in order to reduce the refund amount as well.
The next question is about -- is there a certain level where you would need to approach the market to raise new cash?
Well, it's -- at the moment, even if we have $1.3 billion, $1.4 billion, we are actively inquiring for new cash from the market. So for -- I believe, all throughout '21, we will be doing that. And we want -- we don't see a level that we are getting close and that could put a huge risk in running the operations. I think having saying that $250 million roughly spending per month, and 3 months is -- makes roughly $750 million. So 3 months’ worth of cash at hand is -- would be a reasonable amount that we could see cash depleting.
Murat, we are almost up for the time. The last question is about the news that foreign pilots are put on unpaid leave. Could you please elaborate on that?
So we -- when the operations started to decline and there was a lot of uncertainties, we introduced an optional unpaid leave scheme to our staff, not only to pilots, but pilots, the cabin and as well as the ground staff and some took it. After we resumed the operations, in June, we started with about 10% of the operation, and then it start -- it increased gradually. But in the third quarter, it was around 30% to 40% of the ASK that we could put as of 2019. So there is still a lot of surplus in cabin and cockpit. So as of -- due to this, we introduced, and regardless of nationality, we introduced an unpaid work -- unpaid leave to some of our staff. However, despite of doing this, we are still keeping all the certificate, licenses, work permits of these staff so that they are ready to operate if need arises.
Okay. Okay. Thank you. Marina, this is all from our side.
Thank you very much. This concludes today's webcast call. Thank you all for your participation. You may now disconnect.