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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 the Turkish Airlines Third Quarter 2021 Earnings Call. [Operator Instructions] I will now hand you over to Mehmet Ilker Ayci, Chairman of the Board of Directors and Executive Committee; and Associate Professor Murat Seker, member of the Board and Executive Committee and Chief Financial Officer. Dear speakers, the floor is yours.
Thank you very much. Thank you for the organization, and thank you very much, everyone, for your really reliable participation to our meeting. Distinguished guests, distinguished investors, thank you and good afternoon, everyone. Welcome to the presentation of our results for the third quarter of 2021. It is a pleasure to be on the line with you today. When we presented our third quarter results in 2020, almost a year ago, we were talking about the visible setback in the recovery process due to the new restrictions introduced by many countries resulting from rising number of infections. We were cautious on the capacity due to many uncertainties. One lesson we learned after experiencing summer and winter months of the 2020 largely affected by the pandemic was that the recovery would not follow the straight path. And we experienced several ups and downs throughout '21 as well. Fortunately, almost a year later, today, we had our strongest quarter since the pandemic began. The working of our staff to the Turkish Airlines brand was a crucial contributor to the financial and operational success. Since the beginning of the crisis, we have been working hard to cut expenses and reserve our cash. One of the biggest step taken towards this goal was the arrangement made with the union in September 2020, which resulted in around 40% year-over-year decline in employment costs. Then in July 2021, due to the positive development in appetite to travel and the higher availability of vaccination, we decided to increase the salaries by about 10% on top of the inflation adjustment. And lately, with the strong third quarter results, we made a second assessment and decided to increase salaries of cockpit personnel by 25% and the rest of the staff by about 20%, effective as of October 2021. We have seen that demand for air travel improved significantly throughout the summer months. People want to fly more. Progress in vaccination allowed governments to loosen international restrictions over the summer, which was reflected in our traffic results. Therefore, we expanded our operation in response to the increased travel demand. As of today, we are flying to 250 destinations. This compromises around 75% of our total network. As we all know, Turkey and particularly, Istanbul, are among the most visited destinations in the world. In the first half of 2021, Turkish Airlines was ranked first in Europe with around 700 average daily flights, significantly above the second airline with around 450 average daily flights. During this quarter, we carried about 16.5 million passengers, adding up to the 21 -- 31 million in the first half, which is 55% of 2019 level. Throughout the pandemic, we managed our wide network in a way that would keep our capacity aligned with demand. We gradually expanded capacity over the third quarter and passed 80% of the capacity in third quarter of 2019. We expect this trend to continue for the remainder of the year. The increase in demand led to a considerable increase in our financial performance. Total revenue in the third quarter increased by 56% compared to the second quarter. We reached USD 3.4 billion revenue in this quarter, accounting for almost 85% of 2019 level and 2.3x of the 2023 (sic) [ 2020 ] third quarter revenue level. With the help of continuing cost discipline and strong cargo performance, we recorded USD 722 million operating profit, USD 1.4 billion EBITDAR and around 41% EBITDAR margin. I mean a net income of $734 million was another highlight of this year. With these financial results, Turkish Airlines strengthened its position among the peers. Cargo continued to perform well in the third quarter, with total revenue reaching over $969 million, with a year-over-year increase of 45% and surpassing 2019 levels by 132%. We observed that the global air cargo demand has stabilized since May at levels well above the pre-pandemic period. Cargo unit's revenue continued to be strong in this quarter with more than 100% increase compared to the unit prices in the third quarter of 2019. We continue to utilize around 15 wide-body aircraft -- passenger aircraft for cargo operations besides 24 freighters. Turkish Cargo led the sustainable growth and maintained its status as the fastest-growing air cargo brand in the world. With our strong fleet and wide flight network, Turkish Cargo delivered 320 million COVID-19 vaccine doses to more than 55 countries around the world, meaning we save lives as Turkish Airlines family and Turkish Cargo family. As you know, we are planning to carve out our cargo operations to strengthen Turkish Cargo's position among the most crucial players in the cargo sector. We would like to make the most of Turkish Cargo's unique competitive advantage and create a separate platform for potential strategic partnership in the future. Finally, I would like to thank our shareholders, customers and business partners for the trust they placed on Turkish Airlines not only in the sunny days, but also throughout the turbulences. We are well prepared for recovery, and we are more than ready for the post-pandemic period as a whole family, and the team is in a good shape, the staff very much dedicated in a good shape. And the fleet is ready, and everybody is ready just to new takeoff in the post-pandemic period so that we can emerge stronger and more competitive. Now I will let our CFO, Mr. Murat Seker, to continue with the presentation and elaborate on some of the key results. Thank you very much for your patience and participation once again.
Thank you very much, Mr. Chairman. I would like to start with the recent month's capacity development, which might be the best indicator for tracking the recovery. The recovery process continued strongly in July and August, thanks to decreasing travel restrictions, increasing number of vaccinated people in Turkey and globally and the pent-up demand. Although in September recovery slowed down, operational figures are still encouraging. When we look at the first graph, capacity reached 80% of 2019 in the third quarter. Turkey was the second best performing country in tourism during the summer season. This demand was reflected in our international operational figures. Compared to the second quarter, number of direct international passengers surged by 160%, while total number of transit passengers increased by 58%. With the visible recovery of long-haul operations and continued improvements in medium-haul operations, we reached over 78% international capacity levels of 2019 in the third quarter of 2021. In the lower chart, we are comparing the recovery for IATA international capacity average with Turkish Airlines' international capacity. In September, IATA figures were able to reach around 40% of 2019 while Turkish Airlines showed a solid recovery of around 80% compared to '19. Demand for air cargo continued to be strong for the third quarter. We increased the freighter capacity by 49% compared to the third quarter of '19 by increasing the utilization and the load factor of freighters. Here, we compare regional traffic development with '19 levels. In the third quarter, Americas was the most outstanding region and exceeded '19 capacity levels by around 27% and, for the full 9 months, almost caught up with '19 capacity level. Remarkable performance for Americas was caused mainly by the Transatlantic restrictions that left Istanbul amongst the few transit points during the third quarter. Lack of travel restrictions in the U.S., allowing entry of full vaccinated people to Canada and the demand for South America destinations, were other contributors of the performance of the region. Beyond this, in summer months, we increased frequencies in U.S. destinations. Also, we started to fly a new route to Dallas at the end of September. Domestic capacity also exceeded 2019 level slightly in the third quarter. High vaccination rates in Turkey facilitated domestic travel without much restriction. Due to travel restrictions and lower scaled operations, Far East is still behind other regions in terms of recovery. But stronger cargo operations are compensating lower passenger operations in the region, and the region has double-digit RASK increase. Although we see some countries easing the restrictions in the region, we do not expect major change in winter months. In Europe, demand was higher than our expectations due to decreased travel restrictions and allowing entry of fully vaccinated people in summer months. Although we do not expect any major change in the region in following months, international traffic between Europe and Far East still continue to be at low levels. Monthly ticket sales performed similar to '19 levels in terms of the number of tickets sold starting from June throughout the third quarter. After the lockdown in May, we saw the impact of pent-up demand, which lasted throughout the summer. We increased our cash position by more than $1.1 billion from 2020 year-end. $2.4 billion cash inflow from operating activities and $1.3 billion cash outflow from financing and investing activities for the first 9 months took us to $3 billion cash level by the end of September. Having over USD 2 billion available credit lines, total liquidity is around $5 billion. We expect a positive cash flow for the whole year. Leverage level was another metric that was deeply deviated from its trend in 2020. Thanks to the strong EBITDA generation ability in '21, we are able to decrease net debt-to-EBITDA ratio below 5x levels this year. We will reach our long-term leverage target of 3 to 3.5x levels by 2025. Now let us head to the key financial and operational data. With improving passenger yields and load factor, passenger revenues in the third quarter reached 68% of 2019. Cargo revenue is still higher than expectations and again, has solid contribution to the total revenue. Although we still couldn't catch 2019 total revenue levels, the gap is closing. We reached 85% of 2019 total revenue in the third quarter and 75% of 2019 level in the first 9 months. In this quarter, we recorded more than $700 million net operating profit and $735 million net income. Both figures were higher than 2019 levels. Higher passenger and cargo revenues and lower cost base contributed to this strong result. As a result of the strong operational performance, EBITDA margin reached to almost 41%. Thanks to the strong demand in the summer season, passenger yields performed better than expected. And with the help of strong cargo operations, total RASK continued to perform well as well. Total expenses decreased by 20% in this quarter compared to the same period of 2019. Because of the lower capacity levels, fuel expenses are less than 2019. Personnel expenses are still below 2019 levels due to the salary cuts and depreciation of Turkish lira against the hard currencies. Aircraft ownership expenses increased by 2% in the third quarter because of the new aircraft entries and increase of depreciation and amortization expenses by 13%. Maintenance expenses decreased by 17% in the third quarter due to lower capacity realization compared to same period of '19. Other significant changes are 45% lower marketing and sales expenses and 42% lower passenger services and catering expenses in the third quarter. Those expenses decreased due to the lower capacity and passenger levels and depreciation of Turkish lira as well. Due to higher level of operations, percentage of variable costs and total costs reached its '19 level in the third quarter. We can say that they are back to normal levels now. In the third quarter, there is a decline of around 1% in ex-fuel CASK compared to the third quarter of '19. Ex-fuel CASK declined more with around 9% in the third quarter, including the impact of cargo capacity. We achieved a total cost saving of $575 million in the first 9 months, mostly by decreasing personnel costs. Recently, we made a salary adjustment to our staff by around 20% to 25% starting from October. On the other hand, another cost reduction item, discount of 50% in State Airport Authority controlled airports and Sabiha Gokcen airport will continue until the end of 2022. The ongoing transportation and shipping constraints-led cargo yields remain higher than we expected, and we do not expect a decrease to its pre-pandemic levels anytime soon. Cargo unit revenues almost doubled 2019 unit revenues level and were slightly higher than 2020 levels. As more passenger aircraft return to operation, contribution of belly cargo increased gradually. Cargo revenues increased by almost 2.5x in the third quarter of 2021 compared to '19. Cargo revenues in the first 9 months exceeded 2020 cargo revenues. Turkish Airlines is keeping its global market share of around 5.2% to 5.3% levels in terms of revenue and freight tonne-kilometer. Fuel expenses decreased by 18% in the third quarter compared to '19 as parallel to the capacity level. Although Brent prices are increasing, higher prices did not reflect in jet fuel prices at the same magnitude. There is around $30 million hedge gain in the third quarter, therefore, hedging also decreased fuel expenses in this quarter compared to '19. In this quarter, share of fuel expense in total expenses returned to 2019 third quarter level due to increase in operations. We continue to add new hedge positions in this quarter. As of 30th of September, current hedge levels are: 44% for '21; 24% for '22; and 2% for 2023. The breakeven price level is 65%. We continue our sustainability efforts in line with the vision and general strategy of our incorporation. We consider our impact on the supply chain and the environment in line with the United Nations' Sustainable Development Goals. We optimize our flight activities, invest in new technologies and prioritize fuel-efficient aircraft while adding new generation, 15% less fuel-consuming aircraft to the fleet. In line with our long-term ESG targets, we will start biofuel flights at one of our Nordic destinations. We are aiming to reduce carbon emission by 50% by 2050 and advancing gender balance by 2050. As a result of all our efforts, in the third quarter of '21, we saved 15,000 tons of fuel and prevented the emission of almost 50,000 tons of carbon to the atmosphere. The average fleet age at the end of the third quarter was 8.6. Our 9 buildings at Istanbul Airport have been registered as LEED certified by American Green Building Council. Turkish Airlines was again entitled to enter this Sustainability Index in 2021. For the first time this year, we participated in the Carbon Disclosure Project Climate Change Program in order to contribute to reducing the effects of climate change and protecting natural resources. This concludes our presentation and now we can continue with the Q&A session.
[Operator Instructions]
Thank you. Hi, everyone. This is Kadir from Investor Relations. I'm now going to read all the names of analysts who are sending the questions but we received questions from Citi, Goldman Sachs, HSBC, JPMorgan, Bank of America, Tab Invest, Yapi Kredi Yatirim, BGC Partners, Ak Yatirim, VTB Capital, [indiscernible] Yatirim, Is Yatirim and Kona Capital. Thanks for all of them sending their precious questions. Now the first question, Murat bey is about the capacity plans for 4Q and 2022. What is the outlook for the following quarter and for 2020 (sic) [ 2021 ] full year at 2019 levels?
I could be a little bit more elaborate on the fourth quarter. We are already 1 month into the quarter and our October traffic is going to come out probably sometime around next week. Yes, it is true that we have put more capacity that we were initially planning by the summer months. Just the magnitude of the recovery that we observed in the summer months pushed us to put more capacity, and the speed of vaccination also helped us with that. In the fourth quarter, we believe we can reach about 75% to 80% of the 2019 ASK level. 2022 is still -- has some uncertainties. We still are not very comfortable with the opening -- the speed of countries opening in the Far East region, some of the African countries as well. So we would like to still stay a little bit more on the cautious side. But given what we have achieved in '21 on the top of 2020 performance, we believe we can attain a capacity level of something around 90% to 100% of the ASK levels of 2019 ASK levels.
Next question, what is the currency impact in P&L and balance sheet? What is the impact of Turkish lira depreciation in outbound travel? Can it be offset by incoming foreigners?
Well, the currency -- there are the 3 big currency, dollar, euro and Turkish lira are affecting our balance sheet. But when we look at the overall effect, our commercial loans and financial liabilities, aircraft leases are -- the financial lease parts are heavily on the euro side. And the depreciation of euro that we observed in this quarter had a positive effect on the P&L., and the Turkish lira depreciation also has a positive effect on the P&L. On the overall, when we look at the balance sheet because our -- the share of Turkish lira in total expenses is higher than the share of Turkish lira in total revenues. Having said this, when we look at the Turkish lira's depreciation effect on passenger ticket sales, yes, we saw some decline there because of the lack of appetite, when we compare this all throughout the year. However, the inbound effect, which is usually the stronger arm, the incoming tourists and ethnic travelers from abroad to Turkey has always been a much, much more stronger than the outbound demand from Turkey to outside -- to international tourist destinations. So the net effect, overall, the strong contribution of inbound tourists coming to Turkey has been significantly above the potential losses we had because of the Turkish lira depreciation on outbound travelers.
Have you seen a decrease in bookings after the summer season? Where are the bookings as a percentage of 2019 levels? How do you compare the forward bookings for different regions? And which regions are the strongest?
Well, there is -- obviously, as the summer season ended by the end of September, we see a natural decline in forward reservations up until the holiday season start again, which are the -- starts after the middle of December. So having -- so that's part of the natural course of our business. However, when we compare to 2020 and 2019 levels, the last quarter, we still see tickets sold of being around 90% to 95% of 2019 levels in September and October. So still, the drop in demand is not very, very abrupt and very dramatic. And we see -- we are still having an operational performance in this quarter better than we were anticipating by the summer months. About the stronger -- strong regions, it's mainly Americas, as we also showed in the presentation, amount of capacity booked -- put, and the load factor is performing well. And in October, tickets sold to America was about 50% higher than 2019 level. And the weakest region is Far East, and that's merely because of the continuing restrictions in the region.
After the U.S. plan to relax travel restrictions, can you share your expectations on the outlook for long-haul flights? Do you expect to see a stiffer competition for your flights to the U.S.?
It is true, as also expressed in the presentation, we have benefited because of the travel restrictions imposed by the U.S. to Europe and U.K. region. And as that restriction is removed, definitely competition is going to increase from that region. However the further -- especially East Europe region and Balkan region, we still provide a significant detour advantage compared to the big network carriers on the Western Europe part. That one advantage is going to continue to sustain. Furthermore, we are adding new destinations in Americas. Recently, we opened one, as I explained in the presentation, and there is Dallas, Denver, Seattle, Detroit on the pipeline to be opened in the U.S. So with these new destinations, we will be able to maintain our competitiveness.
How yields will evolve in 4Q '21 and '22? There are some other questions related to this. But in short, we can consolidate the meaning of the questions, yields evolving.
In the last quarter of this year, we expect the yield to be parallel to the levels we observed in 2019. Next year is, of course, brings in quite a few uncertainties, especially the first quarter, how -- whether we will see any negative impact from the COVID crisis. But our base case scenario is in 2022, we will have flattish yields compared to 2021 levels. And the contribution to the bottom line is going to come from increased amount of capacity, as I was answering in an earlier question. When we look at the different regions, Africa and Far East have the highest yield growth compared to 2019 because of the lack of capacity provided not just by Turkish Airlines, but by any other airline in the world. And the weakest region in terms of yield is domestic, and that's mainly due to the Turkish lira depreciation.
How long does it take to reflect higher oil prices to passenger fares? And how much of the cost increase can be covered through fares?
Generally, the prices are -- we align them with the fuel surcharge through fuel surcharge mechanism, and that takes around 6 to 9 months' period. And as of now, industrial players are not responding to fuel price increase by changing the fuel surcharges. But compared to pre-pandemic demand environment, we feel more comfortable to transfer a sufficient portion of this increase to ticket prices. Because of our widespread network, we are flying currently to 250 destinations and providing a huge connectivity that most of our peers are not being able to provide. So that is going to help us to transfer this fuel price increase into the ticket prices.
What's your delivery schedule for 2022 and 2023 in terms of entries and exits?
After the negotiations we had with both Boeing and Airbus in 2020, we had some deferrals, some cancellations, which we announced them last year. This year, we got about like 15 to 20 aircraft. Next year, the number is going to decrease to overall 19 aircraft, but some of those financings were already done this year because of the aircraft could not be delivered on time. Some of our 787s, they will be delivered next year.
And the year after, is going to decrease to 9 aircraft. And the year after, around 8 or 7 aircraft. So the delivery of new aircraft is going to steadily decrease in the next 3 years. In particular, for next year, we have already sent out the RFP and have got some good responses from the financiers already. We are going to be having 9 wide-bodies, 2 A350s and 7 787s and 8 narrow-body aircraft and 2 cargo freighters next year.
Cargo operations continued to be a major contributor to our bottom line in Q3. How do you see the cargo market outlook in terms of volume and unit revenues? And how much more volume growth can you accommodate in this line in light of your existing fleet program?
As you know, the fourth quarter is the busiest period for our cargo operations, so we expect slightly higher cargo yields compared to the third quarter of this year. In 2022, we expect some decrease in the unit revenues because -- our base case scenario is more of the airlines are going to be in operation with the long-haul flights and it's going to provide a larger amount of belly cargo capacity, which is going to put some pressure on the unit revenues. But on the other hand, the e-commerce that have facilitated our lines is not going to vanish anytime soon, so that is going to keep -- help us keep the yields higher. Currently, we are utilizing our freighters at their maximum capacity. As I just said, we will be getting some new freighters in 2022. Furthermore, the 9 wide-bodies are also going to increase the belly cargo capacity in the coming year. Lastly, the contribution of cargo in '21 was higher than the passenger side, which was roughly about -- slightly above 50% contribution came from cargo operations.
Could you please elaborate plans on cargo operations with the move to new airport?
So there is -- the facility, which we call as Smart East, is already completed. And the facility -- the cargo terminal facility, is going to be able to handle up to 4 million-tonne cargo capacity. We were planning to move in the summer months, but there were some technical issues that we had to solve. And the facility at the moment is completed. It's ready to be moved.
But then the peak season of cargo was approaching and we did not want to take the move in a busy month to have the opportunity cost would be higher. So we're planning -- our current schedule is probably in early 2022, we will be able to move to Istanbul Airport.
Can you give us an update on your spin-off plan for cargo operations? When do you expect the completion of the spin-off?
The progress on the carve-out of cargo operations is ongoing. Recently, we applied to Capital Market Board for the approval of the parties on the merger transaction. And we are planning to be able to finalize the process by the end of this year. It's a quite involved process, and there is actually no example of having such a big operation being carved out. As we might have expressed earlier, we have -- we are operating in about 95 points with our freighters. So just like on the passenger side, we have a very widespread cargo operation, and transferring and carving out all of these operation and responsibilities is requiring a large amount of planning. But by either end of this year or early next year, we believe we can sustain this operation.
New hike wages once again recently. How we should think wages in 2022 and onward?
Yes. As we have all seen today, the financial results were quite strong and our staff -- and also as we have expressed in the presentation, their sacrifice on their salaries made a big contribution to our strong financial performance. So as a result of which, prior to announcing our results, we decided to have a wage increase. And we were -- initially, when we decreased the wages in 2020, we were introducing it as a transitory period. And as we are seeing the recovery, we are trying to give it back to our staff. And in 2022, it's -- of course, it's a little bit more tricky for 2 perspectives. For number one, the negotiations with the union are going to start to take place probably at the early beginning of the year, and that's something to be seen. But at least inflation adjustment will be on the salaries, and -- so that's something more on the safe side we will be seeing for salary increasing in 2022.
We have an online question related to the current wage increase. Can you provide some guidance on the effect of 25% increase in cockpit wages on EBITDA margin?
Overall -- well, the effect of this wage increase will be slightly above 10%, so it won't make a substantial impact. First of all, the change was ineffective for the just last 3 months of the year. And as you saw on the EBITDA, we had a $1.3 billion EBITDA. And the overall total impact of this would be slightly above 10% level. Sorry, sorry -- 1.5% level, not 10%. Apologies.
What ex-fuel CASK level should we expect for 2022?
So in 2022, we will be seeing some normalization, of course, on the expense side. In 2020 and 2021, we had very strong cost-cutting initiatives. The biggest item was deferred personnel expenses. But on top of it, with some of our subsidiaries and some of our suppliers, we renegotiated the contracts and had very strong cuts on the profit margins. And then because of the pandemic, we cut in-flight catering significantly. We reduced in-flight entertainment services significantly. So as more and more travel demand is coming back, we will be reintroducing these. And our -- the period where we would -- where we wanted to cut the cost is coming to an end. So in 2022, we will be expecting some increase on the costs. However, the increase on the capacity provided, ASK, we expect that also to be high compared to '21 level. So overall, ex-fuel CASK could be either parallel to '21 level or it could go slightly -- it could be slightly below the -- 2019 level, sorry, or it could be slightly below 2019 level.
But we will be focusing more strongly on the revenue generation side next year, because Turkish Airlines, for a very long time, has been at the very bottom of the schedule compared to our peer network carriers on the cost base and CASK base. So next year, our strong effort will be on ancillary revenue generation capacity, on increasing the sales distribution channels of our network and decreasing the sales generated through the agencies and stuff like that.
We have a long question about fuel hedges. As of 3Q '21, 44% of '21 and 24% of '22 fuel consumption seems to be hedged. Have you accelerated your fuel hedging level? What is your latest hedge level for '21 and '22, the latest, since these hedges are crude oil-based swaps and options? Given the surge in jet fuel prices, should we expect fuel CASK to increase faster than crude price during Q4? And what is your expectation about fuel price in '22?
Okay. There's a lot of questions here. So our hedge ratio is -- yes, it's below our usual long-term target level of above 50%, because we started the hedge a little late at the very beginning of this year. And our projections, when we were planning the amount of hedge were -- ended up being below the amount of production we had in the summer months in particular. So hedging amount came -- kind of fall -- fell short of our actual production. And for -- and currently for 2021, as I think I've expressed in the presentation, was below 50% for '21. For 2022, it's about 24% levels. And -- but currently, we are adding new positions of around 35% to 40% levels of our overall fuel consumption. The second question was our fuel price expectation for next year. It's obviously moving very, very dynamically. We were not expecting it to reach $8 levels at all. And yet being -- reaching that level this quickly, the volatility seems like to be continuing. But our base case scenario for next year is more stable Brent level of something around $80 to $85 level. Fuel CASK will be increasing less than the increase in crude prices in the last quarter because of our hedged position. And then breakeven hedged fuel price level is significantly below the current level.
What is the impact of rising fuel prices with lower hedging as most of the European carriers hedged at around 60% for '22?
I think I just kind of answered this question as well. As of September for the next year, 24% of our fuel consumption is hedged. One of the main reasons was the lower -- of this lower hedge position was higher-than-expected capacity we introduced, especially through the summer months and also the cargo operation.
Considering the current wage increases and the softening of the savings measures related to the demand recovery, how much savings can be achieved on the cost side compared to the pre-pandemic period for 2022?
Yes. I think I kind of also answered this question earlier. So that area will be definitely limited, or -- even -- but before the pandemic, our normal cost base was also very tight and significantly below than most of our peers. Going forward, our big strategic importance will be given to the ancillary revenue generation capacity. And on the expense side, more structural issues, like having a more -- having some organizational improvements and increasing our organizational efficiency levels.
What was the monthly cash burn in third quarter?
Well, there was no cash burn on the third quarter. We had actually -- on the opposite side, excluding the loans and the financing expenses, the cash generated from the operation was slightly above $100 million per month for each month in the third quarter.
Any changes to your guidance for the full year post 3Q results, especially on leverage and particularly cash, you were expecting $260 million cash burn per month for the full year as discussed at second quarter conference call. How do you see cash burn generation in 2022?
It is true. We had burned very slight amount of cash in the second quarter. And then our expectation was -- I mean, we were expecting a positive third quarter. We were expecting to generate some cash. But then again to lose -- burn some cash in the fourth quarter, that picture did not end up being as we were anticipating. Starting from June, actually, the last month of the second quarter, we started to see a very strong amount of demand and then the ticket sales numbers were very strong. So -- which then continued, persisted in the -- throughout the third quarter. As also we mentioned in the presentation in August, we came as high as 82% of the 2019 ASK level and record yields. So this operational performance together, of course, with the cargo's success, allowed us to generate cash. We -- overall, now our new projection is to generate a cash amount of roughly $40 million to $50 million per month throughout '21, excluding new commercial loans generated and then loan payments.
Is there any change to your net debt-to-EBITDA guidance of 5.7x and 2021 year-end net debt guidance of USD 14.5 billion to USD 14.8 billion? Could you provide also initial guidance for 2022? How do you see leverage in 2022?
Just following up on my answer on the earlier question, because of this performance, our net debt amount decreased to -- we expect that to decrease to $13.5 billion due to the better-than-expected financial results. And then for next year, our investments are ongoing. As I also expressed, the new aircraft deliveries are going to continue. So our net debt expectation for next year will be around $14 billion. And net debt-to-EBITDA level definitely came down from that peak of 5.7x. It is -- by the end of this year, probably it will be around 4.5x level. And then in '22, '23, we will -- we are expecting to see a steady decline to 3.5x level by the end of '23 or early '24.
What is the CapEx projection for 2021 and 2022?
For '21, mainly it will be aircraft financing. A very little amount of remaining infrastructure needs and engine maintenance needs, that will be the main factors that will seek overall an amount of EUR 1.3 billion CapEx for -- sorry, overall $2.1 billion CapEx needs for this year. And next year, we expect that to be around $3 billion, mainly being composed of the same items.
How do you see the competitive environment at Sabiha Gokcen airport, given the delays in the runway construction?
The competition definitely turned out to be fiercer for other players in Sabiha Gokcen after we transferred the operation to our low-cost arm, AnadoluJet. And currently, there is no slot pressure as the capacities haven't reached the pre-pandemic levels. But in short term, at least until the end of the pandemic, the pent-up demand will support strong pricing, both for domestic traffic and the point-to-point deep short-haul international traffic. We expect more competition for both of these markets in '23.
Do you see any threat of pilot shortage going forward as USD equivalent of your salaries materially dropped compared to pre-COVID levels?
So it is true that in dollar terms, the salaries dropped. They were -- all throughout the remaining part of '20 after we cut the salaries and all throughout '21, we first of all gave the inflation adjustment. So in Turkish lira terms, none of our staff was -- had salaries below the inflation. Then in July, we had a 10% increase. Now to our pilots, we had a 25% increase. That is kind of roughly bringing them back to the levels they were in 2019. And depending on our year-end results and depending on the negotiations with the unions, I'm sure all our staff, not just the pilots, but the cabin and as well as the ground staff, will be happy with their salaries going into 2022. And in terms of shortage, we don't feel there is a threat of the pilot shortage at the moment. And the amount of pilot trainees that we have, there will be sufficient amount of pilot candidates that can start operation in the coming years.
Q3 was a great performance compared to -- Q3 '21 was a great performance compared to Q3 2019, despite lower passenger traffic and revenue. How should we think about Q4 compared to the same period of 2019 from revenues to costs and core operating profitability?
Well, this is similar to a question we answered earlier. Last quarters of each year are usually the -- we get into the low season up until the travel season by the -- that starts again by the Christmas time. But it's the high season for the cargo operations. So -- and there might be a slight risk of number of new cases increasing again. However, we don't feel too much of a threat because of the vaccination levels are much in a different level than they were in -- by the end of 2020. As long as the flight corridors are open, remain open, demand -- we don't think the demand will be decreasing dramatically. Our flight availability, last year's Christmas time, put us in a very, very strong position, and we had actually an operational profit by the end of last year. So -- and it was a period where many countries were putting relatively more restrictions on international travel. So this year's Q4 is likely to be much better than the performance of Q4 of last year. And like in October, we have better sales numbers than last year. And the fuel cost, yes, has some more uncertainties. But I think they are not going to be a huge threat to the operational performance. Core EBIT side, yes, it's going to be below 2019 level. But it still is going to be something that will keep us happy as the performance of Q4 for this year.
What are your plans after the spinoff of cargo operations, IPO, M&A or any other options?
Actually, all of our -- all of those options would be on the table, but we haven't planned that far. At the moment, our focus is heavily on the carving out of our cargo operation and letting it stand on its own feet. But we have been approached by many strategic and financial investors to be a partner with us in cargo business.
The last question -- we covered all the questions sent by the analysts, what general trends do you expect in 2022 in traffic, yields, unit costs and margins -- you already answered some part of the questions, versus '21?
Yes. Well, this is a question, which answer, we are still working on it. We are working on our 2022 budget. As I kind of gave little glimpses of information for this question throughout my answers, it's rather not very straightforward to put this into numbers yet. But on the capacity front, I think that's the most sound guidance we can provide. We are expecting to get much closer to 2019 capacity level, and we are expecting to keep the unit cost levels flattish and the yields probably flattish with last year -- sorry, with 2019 levels. And -- but I mean, hopefully, in the coming months, we will be able to put more flesh into these assumptions, and we'll be able to share more with you by our year-end results, when we announce our year-end results.
Well, thank you very much for your participation in our call today and looking forward to having face-to-face meetings in the coming period. Thank you.
Ladies and gentlemen, this concludes today's webcast call. Thank you for your participation.