Ladies and gentlemen, welcome to the Turkish Airlines second quarter 2023 conference call and webcast. There's gonna be a question and answer session after the presentation. If you wish to ask an audio question, please press star five on your telephone keypad, and then to participate in the written question and answers, type your question into the Ask a Question text area, and then click the Submit button. Right now, it is my privilege to hand you over to your hosts, Associate Professor Murat Şeker, Member of the Board and the Executive Committee, as well as the Chief Financial Officer of Turkish Airlines, and Mr. Mehmet Fatih Korkmaz, Head of Investor Relations at Turkish Airlines. Gentlemen, the floor is yours.
Thank you very much. Good afternoon, everyone. Thank you for joining us today. A warm welcome to all of you from Istanbul. The results we announced yesterday underpinned our industry-leading position with sustainable profitability. Combining the current demand environment with our structural advantages and agile execution, our post-pandemic growth trajectory continued. One of the main pillars of this success is the dedication of our staff. Our employees are working hard to serve our customers flawlessly all around the world. With their efforts, Turkish Airlines is among the few global carriers to successfully adapt itself to the new normal and exceed 2019's capacity level by almost 25% in the first half of the year. Thus, I would like to thank to all of our staff for such a remarkable performance.
Before going into the details of our second quarter performance, I want to provide a broader perspective regarding to our historical return relative to the industry. Utilizing our structural advantages with the well-executed business plan, our Return on Invested Capital as a measure of value creation, was over 3x above the industry in the last decade. The divergence between us and our global peers on ROIC became even more evident during the pandemic. While many carriers around the globe recorded significant losses, our robust business model helped us to create value even in the most challenging environment. In our vision for the next decade, Return on Invested Capital and strong Free Cash Flow generation lie at the center as we commit ourselves to sustainable and profitable growth. We believe this focus will provide significant value for our investors.
We are also working diligently to enhance our brand recognition and create value for our stakeholders. Recently, Turkish Airlines was recognized as Türkiye's most valuable brand for the sixth consecutive year by Brand Finance. In terms of passenger experience, we have been awarded with Best In-flight Entertainment and Best Food and Beverage awards in Europe by APEX. Furthermore, our commitment to a sustainable future was appreciated again by World Finance, as Turkish Airlines was named as the Most Sustainable Flag Carrier Airline, second year in a row. Now, I would like to turn your attention to our second quarter highlights. 2023 had a strong, strong start, although the devastating earthquake in Türkiye created a drag for our operational and financial performance. Thanks to the dedication of our team, we carried 22 million passengers during the second quarter, making an 8%, 19% increase year-over-year.
As a result of robust international demand, especially in the Far East and Americas, total load factor climbed by more than 2 percentage points to 71.7%, exceeding the 2019 level. Our revenue performance in the second quarter saw significant improvement year-over-year, despite strong headwinds from the decelerating global cargo demand and the earthquake impact. Our total revenue for the quarter reached to $5.1 billion and was recorded as our highest second quarter revenue. Passenger revenue increased by 31% compared to the second quarter of 2022, and surpassed $4.4 billion. I believe this is particularly noteworthy considering the high base we set last year. Our cargo revenues, on the other hand, decreased by 44% to $600 million, due to weaker pricing and the dedication of capacity for the earthquake relief efforts.
Even in this weak market environment, in May, Turkish Cargo ranked the third in terms of Freight Tonne-Kilometers in the world, according to IATA. In the second quarter, we generated a profit of almost $800 million from main operations, previously only seen in the third quarter of the year. We achieved an EBITDA of $1.5 billion, with an EBITDA margin of 30%. Net income was realized as $635 million, making our eighth consecutive profitable quarter. Excluding the financial impact of the earthquake and personal compensation against inflation, profitability figures would be $240 million higher in the second quarter. During the first six months of the year, $1.1 billion of Free Cash Flow increased cash equivalents and financial investments to $5.8 billion.
Our high liquidity level and low indebtedness provide us a significant resource for our future growth. In the first half of the year, Turkish Airlines maintained its position as the busiest network carrier in European airspace, while Istanbul Airport continued to be among the top three in Europe, with over 35 million passengers. As we expand our global footprint, Istanbul also solidifies its position as a global travel hub. According to ACI EUROPE, this year, Istanbul Airport became the most directly connected airport in Europe. We are well into the third quarter, our current forward bookings reveal confidence about the demand strength for the rest of the year. Lack of sufficient aircraft availability, manufacturing problems in the OEM's supply chain, engine durability issues, and congested European airspace remain to be main constraints in the robust demand environment.
As a result, we expect the industry's supply-demand imbalance to persist at least until the end of the year. Considering these factors on our fleet plan, we aim to increase our passenger capacity in the third quarter by 6%-9% year-over-year. Accordingly, for the full year, we expect our capacity to be 15%-20% higher, with low single-digit increase in passenger yields. In closing, I believe with our current momentum and second quarter performance, we are on the track to reach our targets set for this decade. Your ongoing support and interest in Turkish Airlines play a definite integral part in our accomplishments. Now, let me turn to Fatih to elaborate on our key financials and provide additional insights.
Thank you, Murat Bey. Good afternoon, everyone. In the second quarter, we continued to increase our passenger capacity parallel to the strong demand environment. Capacity surpassed the same period of 2022 by 14%, slowing down from 32% increase in the first quarter due to the base effect. As a proportion of the pre-pandemic level, our international passenger capacity remains substantially above European and global averages. Our passenger traffic at Istanbul Airport continued to be robust. In the three months to June, the number of international transfer passengers surged by 22% compared to last year and reached 23% above the pre-COVID level. Similarly, our direct international passengers surpassed 2019 figure by 26% in the second quarter.
As you know, Turkish tourism is the best performer in the past post-pandemic era, as Turkey became the third most visited country in the world last year. During the first six months of the, this year, the growth trend stayed on course and the number of visitors traveling to Turkey increased by 21% to 22 million. Carrying almost half of these visitors in the first half, we are strongly contributing to Turkey's target of 60 million tourists in 2020. Moreover, through our world-leading network and connectivity, we are committed to provide a platform for our country's goal of 90 million tourists by 2028. From a regional perspective, Far East and Americas were the top performing regions in the second quarter. The latest opening of Far East provides a significant momentum for our revenues.
The acceleration of business and leisure activities, along with strengthening group, group reservations, resulted in higher demand and yield throughout Far East. Accordingly, we increased our capacity to the region by around 26%, and load factor rose by 4 percentage points year-over-year. Turkish Airlines continues to be preferred choice for transit travel in the region, especially in Japan, where network and schedule consistency are particularly important. By gradually ramping our operations in China, we've fully restored our pre-pandemic network as of July. With other carriers deploying more capacity in the region, we expect competition to intensify towards the end of the year. Strong ethnic demand, along with the higher business class preferences, resulted in more than 20% higher revenues in America.
As we increased our capacity by only 3% compared to the same period last year, the region's load factor climbed by more than 6 percentage points. We anticipate strong demand in the region to continue in the third quarter as well. Our operations in Europe experienced a healthy growth in parallel to the capacity increases in the Far East, which fed our transit destinations within the region. Champions League final in Istanbul also strongly contributed to the local traffic. Even though we recorded a drop in traffic following the protests sweeping France, we reached our targeted load factor and yields in the country. Towards the end of the quarter, increasing congestion in European airspace also affected our on-time performance. This issue persists in the third quarter as well. Fortunately, it is not threatening our network integrity.
In Middle East, intensifying competition, protests in Israel, and problems related to pilgrimage permits had an adverse effect on the demand, causing the load factor to deteriorate by 3 percentage points. The region's revenue increased by 29% year-over-year on the back of higher capacity. Our African routes performed relatively well in the second quarter, with contributions of Umrah travel and increasing group reservations in the northern part. The number of passengers in the region rose by more than 11%, with yields increasing by 12%. In July, our daily passenger sales remained higher than last year's. Currently, we are not seeing any negative sentiment that feeds into our forward bookings. As a result, our passenger revenue trajectory continues to be encouraging.
In the second quarter, strengthening yields and higher volumes resulted in passenger revenues to increase by over 50% to $4.4 billion. Our cargo revenues, on the other hand, decreased by 44% year-over-year to $600 million, mainly due to the global oversupply pressures and fading impact of the earthquakes on our operations. Although weakness in cargo operations persist, cargo yields and revenues were still substantially higher than the 2019 levels by 35% and 53% respectively. On a global basis, cargo demand continues to be muted. Tighter financial conditions, decelerating global trade, and weak new orders are putting significant pressure on cargo prices. As global air cargo capacity climbs above pre-pandemic levels, the increased availability of vessels compounds the supply and demand imbalance.
With recent declines in containerized pricing, the relative advantage of air cargo compared to sea freight has deteriorated. As a result, sea-to-air model shift that was experienced during the pandemic slowed down. On the bright side, even in this negative environment, Turkish Cargo unit revenues hovers more than 10% above the global average. Our outlook for the peak season remains subdued, with the expectations tempered by a mixed macro picture, relatively high inventory levels, and supply environments. Before going into the next slide, I also would like to highlight Turkish Technic's performance. One of the most important players in the global aircraft MRO market, our subsidiary continued its growth trend and increased external revenues by 34% in the first half. For the full year, we are targeting to surpass $400 million of third-party revenues for the first time.
Let us now head to the financial highlights. As you can see, our on-hand liquidity increased by around more than $1.1 billion in the first half to over $5.8 billion. Strong operational cash inflow reduced net debt by $6.6 billion to $7.5 billion as of June, from its peak level of $14 billion at the end of 2020. As a result, our LTM net debt to EBITDA multiple decreased to its lower level of 1.4x by the end of the second quarter. Our total revenues exceeded 2022 by 25% in the first half. Robust operational performance on the back of lower fuel prices translated into $2.3 billion of EBITDA, up more than 25% versus last year.
In the first two quarters, we had several one-off items due to extraordinary circumstances. Following the earthquakes in February, we conducted evacuation flights and transported relief materials to the region. These operations had $92 million impact on our profitability on a net basis and concluded as of May. Furthermore, we made $108 million of cash and in-kind donations. Related to our commitment to fund construction of 1,000 homes to be built in the earthquake-affected region, in the upcoming months, we expect to incur additional $75 million of costs spread over a couple of quarters. On the positive side, we recorded around $65 million of compensation income related to late aircraft deliveries and $74 million of expired ticket revenues in the first half.
Excluding these one-offs and personal compensation against inflation, our profitability figures would be $370 million higher. Looking at the unit expense breakdown, we recorded 3% decrease in total cost and 22 increase in extra cost during the second quarter compared to the same period of last year. The main driver of the decrease in the unit expenses were lower jet fuel prices. On the other hand, the increase in extra unit cost was largely resulted from inflation and personal compensation against inflation. Additional contributors to the increase were tariff escalation in airport expenses and higher commissions due to rising sales. Excluding bonos, our extra cost would increase by around 10% instead of 22%.
In the second quarter of 2023, the capacity and passenger number of AnadoluJet rose by 28% and 40%, respectively, compared to the same period last year. With 17 net additions in the first half, its number of aircraft reached to 81. We are aiming to expand this fleet to 88 aircraft by the year end. In line with our 2033 targets, we are investing in AnadoluJet by redesigning its revenue and cost base to attain higher profitability levels. To that end, we recently announced our decision to incorporate AnadoluJet brand as a separate, separate entity called AJet. After obtaining the necessary operating permits, we are planning AJet to be fully operational within next year under the new structure. In the coming quarters, we will also unveil its new corporate identity and brand repositioning with detail.
Turning to our outlook, as Murat mentioned, for the entire year, our capacity is expected to be between 15%-20% higher than the last year, excluding any unexpected aircraft-related problems. Currently, we are not seeing any significant change in the global travel appetite as the demand environment remains constructive. At the same time, we observe that the seasonality and booking windows are reverting back to pre-pandemic patterns, increasing predictability. We will continue to monitor our bookings, macroeconomic backdrop, and adjust our projections if necessary. On the cost side, as one of the impacts from the earthquake relief efforts and inflation payments abate, our actual unit cost increase will normalize from the levels we have seen in the first two quarters. Accordingly, we anticipate that the extra cost to be up by high single percentage points compared to the last year.
Annual gross CapEx, on the other hand, is expected to be around $5 billion-$5.5 billion, with 41 net additions, aircraft additions, which also includes other fixed investments. On sustainability, our modern fleet and carefully designed sustainable initiatives are the key to lessening our environmental impact. Working with a zero operation policy, we are carrying out several projects such as biofuel usage and R&D collaborations with the prominent university in Turkey to combat climate change and offer our passengers a sustainable travel experience. To that end, we also signed Global SAF Declaration, which aims to decarbonize aviation industry. Additionally, we recently committed to implement TCFD recommendations to have a better understanding about the impacts of climate change on our business model. In our vision for the coming decade, sustainability is at the center of our plans.
By increasing the number of new generation aircraft in our fleet, expanding SAF consumption, and boosting renewable energy usage in our buildings, we are aiming to manage our carbon footprint carefully and became a carbon neutral airline by 2050. Our dedication for a sustainable future remains steadfast as we steer towards fulfilling our objectives. With this, we conclude our presentation, now we can continue with the Q&A session.
Thank you very much for that presentation, speakers. Right, ladies and gentlemen, it's time for the Q&A session. I'd just like to clarify, there will be written questions only, no audio questions. If you wish to ask a question, please type your question into the Ask a Question text area and then click the Submit button. Speakers, over to you.
Hello again. Murat, we are starting our Q&A session with one of the issues on the headlines about recent quality issues on Pratt & Whitney engines. One of our analysts asked about this issue. Could you comment on the quality issues on GTF, GTF engines and their effect on your operations? Do you have any grounded aircraft related to these problems?
Sure. As you know, this turned out to be quite an uncertain growth projections for a lot of the airlines that have A320neo aircraft. We have currently about 56 neos in the fleet that have GTF engines. Additionally, we have about 10% additional spare engines. Also, this 56 aircraft, we have grounded nine aircraft, overall, we have included nine aircraft. In the coming months, we are. Technical team is looking in the situation closely. We might be adding two or three more aircraft to the list. Overall, we might finish the year with about 11 or 12 aircraft, narrow-body aircraft, grounded due to the engine GTF engine problem.
Murat, I combine several questions on a similar basis about the increasing competition pressures. Do you feel intensifying global competition? Also, what are your initial thoughts about the evolution of the demand environment in the upcoming quarters?
In particular, this year, as the recovery was more well distributed around the world, we have been seeing, observing more competition coming through the Europe and Middle East regions. In Europe, the long-haul capacity additions of our peer airlines and aggressive pricing of the low costs have been putting somewhat pressure. Yet still on our schedule consistency and availability, along with the increasing transfer traffic from our Far East routes, allow us to withstand this competitive pressure. The diversity of the network and having a huge connection power, as we expressed in the presentation through our Istanbul hub, we have been providing more alternatives with better connection times, that is helping us to face this competition.
In the Middle East regions, the addition of new capacity we observed in the Gulf region, in particular, have intensified the competition, and the demand is somewhat weaker. There are other challenges, like the schools this year are going to start earlier in a lot of the Gulf countries, so the summer season is going to be shorter than the earlier years. That is also putting some demand pressure. On the global basis, our connection power and then the fleet composition, the composition between our narrow bodies and wide bodies, provides us an efficient allocation of the fleet and allow us to serve more profitably. Additionally, constraints due to the aircraft and engine availability and airspace congestions are putting all airlines in the same level of pressure, so we are not in a more disadvantages than many of our peers.
Consequently, in this current supply-demand environment, we believe it's still placed in our favor. How the situation is going to develop still remains to be seen. There is a lot of factors that are, that are in place, and I think at least until the end of the year, our strong position is going to continue.
Some of our analysts raised their concern about peak earnings. Murat, conceptually, how do you think about sustaining our earnings capacity over the next years?
Well, obviously, our strong results and margins in the last two years have set a really a high base, going forward, we expect our margins to converse, converge towards more sustainable levels. If you look at our long-term averages, they are above 20% and below 25% levels, we expect to be within this range in the coming year. In our strategic plan, we also specified additional glo- growth levers to support our margin, and embedding these levers to our business plan is going to allow us to reach our profitable targets. Just to recap some of those, we are trying to increase the fleet efficiency with higher proportion of new generation aircraft. We have up gauged some of our old aircraft with changing into high density form.
We have introduced a logistic ecosystem, and we are going to be focusing on special cargo segment, and we are going to keep enhancing our network, looking into adding a new destinations in the Far East region. Our chairman and C-level executives were headed tour to Asia, about a month ago, covering a large set of countries to increase our operations in the region. Additionally, new routes on the Americas is also going to contribute to our network depth.
Furthermore, we are planning to increase our penetration in the low-cost segment, as we have announced earlier, through our low-cost arm, AnadoluJet, and increase the customer experience with improving our product and bringing more standardization in our aircraft and so on and so forth, improving the Turkish Cargo and increasing our digitalization capacity are going to be the pillars to keep our profitability high.
One question is about the potential effect of the recent credit card installment restrictions in Türkiye for outbound travel expenses.
This, the outbound from domestic to international makes actually a quite a small portion of our total sales revenue. Usually it's between 1% and 2%, 1.5% levels. That limitation, and given that we are in the middle of the summer, I mean, almost middle of August, for this year, it's not going to pose a big uncertainty for our sales. Even if it's going to decrease the potential demand of Turkish citizens who want to go to abroad for vacation, the overall impact on our revenue stream is going to be limited.
Murat, could you give us the details of one-off item in the first half? Also, should our analysts expect any additional charges for the rest of the year?
Big chunk of those one-offs were materialized in the first half. On the positive side, the delayed aircraft deliveries, we got some compensation, and there were the expired ticket marks and ticket refunds revenues. Overall, these were around $150 million on the positive side. On the negative side, the earthquake-related expenses, as we announced in our first quarter results and as we publicly disclosed, they were around $200 million on the negative side. Due to high inflation in Turkey, the compensation on the personnel in the first six months, and some of the premiums that we paid ended up around like $300 million. Overall, about $150 million positive one-offs and about $500 million negative one-offs, so total it would make $350 million losses.
For the remaining part of the year, we are expecting about like a $70 million-$80 million further spending for the earthquake-related construction support that we are going to make in the region. On the positive side, with the upcoming aircraft deliveries, some of those compensations are going to come up again. Net on net, we don't expect to have a further change in this one-off losses.
We got numerous questions on our yield expense, expectations, and capacity evolution. What are your expectations for the full year?
On the capacity, as we announced in our earlier calls, we expect to have about 15% increase in ASK terms for this year. The first half has been on par with our expectations. Far East region, compared to last year, is going to be the main driver of this capacity increase, and second to that, Middle East region is going to follow in ASK terms. For the third quarter, in particular, ASK growth is going to be around 6%-9%. Regarding to the yields, we expect to finish this year with about 1%-2% increase in the revenue yield in compared to last year. As Fatih explained, in the first half, the yield increase as well as the RASK increase was much stronger than that.
Through the third and fourth quarter, as the base was higher last year, you know, we had quite a high yield environment in 2022, especially in third quarter. We will see some normalization in the yields, and kind of a, a reversion to mean, and we will finish the year with about mildly 1%-2% above 2022 yield environment. About a little bit of the capacity, in compared to last year, as I have said, the highest capacity increase is going to come from Far East, and then Middle East, and then Domestic, and then Americas and Europe regions.
Can Yücel from the previous asked one question about the current transit market. Could you comment on the impact of current increase in international to international transit tax share on your consolidated yield? How dilutive are they when compared to point-to-point passengers?
Actually, we are observing the share of international to international transit passengers is returning back to its historical levels. In the past, before the pandemic, in like 2017, 2018, the share of transit passengers among international passengers was about 55%. In the first half of this year, we observed it at 57%. Last year, because the lot of the countries were still shut down for summer vacation, the demand to Turkey was very strong. The share of these transit passengers dropped to 51%. That year was an abnormal year, this is this year, for the coming years, we expect that to be within our historical levels of around 55% levels.
Of course, the direct traffic passengers provide a higher yield, at least like a 20%-25% higher yield than the transit passenger. Given the depth and the vast of the network, the about 55% transit passenger is within our expectations.
Murat, Esra Şener from İş Yatırım, is asking about one of the news in the current flow. Do you expect material impact on your operations from the recent decision of China lifting the ban of group travels to more than 70 countries?
Indeed, we do. Even at the ministerial level, we have been... Our Ministry of Tourism, Ministry of Foreign Affairs, have engaged a lot with the respective Chinese authorities to take Turkey, Turkey out of this zone. We are very happy to hear the news. Initially, in our budget, when we were making the budget at the beginning of the year, we were not very sure how much Chinese market would open. At the end of June, we have recovered all of our operations in China. Before the pandemic, we were flying to three cities daily. We are back on that capacity level. Compared to what we have budgeted, our capacity provided to the region is 50% higher. The revenues are almost 70% higher.
We are quite satisfied with this decision taking by the Chinese authorities.
What portion of your capacity will be allocated to Domestic flights in 2023? Also, do you have any thoughts about the, the current price cap decision from Domestic traffic?
This year, we added a significant amount of capacity in the domestic market, as I said in the earlier question, of about 30%. It was because last year the capacity was, we had a lot of shortages due to air traffic issues, delays. We could not put the capacity we intended to. With the capacity introduced this year, the domestic market came back to its normal level. Usually, our overall domestic share in terms of capacity is about 10%, 10.3% in the first half, and we expect that to be around this level for the remaining part of the year. This is within our expectations.
With the new price cap, this was an item we have been discussing with the Ministry of Transportation for quite some time. We are very happy with the increase from TRY 1,100 to TRY 1,650. There is also an additional price increase allowance for the high load factors introduced in the aircraft. We can increase the price up to TRY 2,500. This is going to also provide some additional comfort for the yields of the domestic market.
We are now heading to financial outlook questions. Is it possible to provide updated revenue and margin guidance for this year?
For this year, overall revenue, We expect that to grow, given the strong summer seasons, about low double digits on the revenue front, as a result of which, we are going to revise our EBITDA margin to 25%-27% levels. Earlier, we have announced it as somewhat between 23%-25% levels. Given the strong profit environment in the first half and the strong outlook we have for the summer months, we are revising our EBITDA margin up by about 2 percentage points. Regarding to next year, I mean, this summer is going along strongly. The demand to Turkey is also strong. We are expecting the number of tourists to increase by about 17% on the top of last year, to reach a 60 million tourists to Turkey.
Given our dominance in the Turkish market, we'll be able to get the benefits out of it. For next year, it's still a little early, and we have started our budgeting process for 2024. Hopefully, by our third quarter results, I'll be able to elaborate more on our 2024 expectations.
What ex-fuel cost level should we expect for the full year?
This was a, a pressing issue for us throughout the first half. The high inflation that we have been observing, not just in Turkey, but globally, have put pressure on our cost items. Despite of the decreases we see in fuel cost, ex fuel cost, and almost all around the place, our handling items, catering, ATC costs, maintenance costs, and personal costs, they all went up. Throughout this year, we expect the ex fuel cost to increase in like a very high single or very low double digit figures for 2023.
What is the expected fuel cost for this year, on which assumption, and what is your current hedging ratio?
Our, the fuel cost. Well, first of all, the Brent price is continuing to be quite volatile. Like about two weeks ago, when we had a simulation where the Brent could be for the end of this year, we were looking into $82-$83, but today we revised that to $84. That is in a volatile market, and that's going to affect the fuel cost. Overall, we are expecting the fuel cost in 2023 to be about 15% decrease as opposed to last year. About the hedging, our current hedge ratio is about 18%. We keep adding new positions. We expect to finish this year with about 25%-27% hedge ratio.
Erdem Kayış from TEB Yatırım and Emil from Alkimis, ask similar kind of question. Considering the current market price and your relatively low fuel hedging ratio, you seem to be in a good spot. Yet, are you comfortable with current hedging level? What is your plan for next year?
We look at it as a whole package, not just our hedge ratio, but how much of the increase in fuel price we are able to reflect on the ticket price through the surcharge. When you combine those hedge ratio and then the surcharge as a percentage of ticket revenue, we cover almost, almost 80% of the change in Brent price, on the fuel price. We are comfortable in the current environment because we have been able to benefit from the strong demand environment significantly. Going forward, of course, as the demand is going to, sorry, as the competition is going to increase, we will be facing more pressure on the yield side. We are definitely going to be increasing our hedge ratio, as I said in the previous question. Currently, it is at 18%.
By the end of this year, it's going to be around 25%-26%. By next year, it's going to be probably around like a 35%-40% levels.
We got one question on fuel efficiency. Based on the recent additions to fleet and current capacity allocations, do you expect any decline in fuel consumption per ASK in this year or the next?
Well, in the first half of this year, our fuel efficiency, fuel consumption per ASK increased by about 1%, this was pretty much benefited with the addition of new generation aircraft in the fleet. Through their inclusion, we expect to have fuel efficiency of about 1%-2% annually. In the meantime, to decrease our fuel consumption, we are running certain projects on the operation side, like the reducing APU usages, in decreasing the fuel consumption through the taxi times, and a better, more efficient takeoffs, and better fuel consumption actions taken through our maintenance practices and ground operation practices. We expect these projects to contribute overall 1%-2% decline in our fuel consumption.
We are heading one of the most important question on fleet. What is the year-end fleet size, and could you provide details regarding aircraft entries and exits?
This year, overall, we expect 56 deliveries, and actually, we have already received more than 44 of them. For the remaining part of the year, there are 11 more deliveries that are scheduled, and they are. Overall, we are expecting to finish the year with about 435 aircraft and an increase of roughly 40 aircraft on the top of last year. We finished 2022 with about 394 aircraft.
Murat, you got similar questions from Erdem Kayış, Cenk Orcan. After you announced your intention to order up to 600 aircraft, there wasn't any update. What is the current status on that issue? Also, when are you planning to finalize the deal? How will you secure these orders considering the sizable backlog on the OEM delivery slots?
Exactly the last portion of the question is the reason why we have not made any public announcement regarding to our RFP. This is a very, very large scale of order, and given the close relationship Turkish Airlines has with both of the OEMs, we are working closely and we have got the revised proposals. But of course, here, the engines are playing a key role. While we are trying to decide on which aircraft type to place, we are also very closely investigating which engine types to get and which kind of a maintenance contract to get in addition to it. That's the reason why we have not announced any decision yet, but it's not going to take too much further time.
In the coming, soon, let's put it that way, soon we will be able to announce the results of this tender.
Esra Şener from İş Yatırım, Kurt and Ayşe Avcı from JP Morgan, is asking about the fleet plan for the upcoming years.
I mean, yeah, that has a lot to do with the previous question. Currently, with the both OEMs, we have an order book of about 78 aircraft remaining on the A321neo, and then, there are the A350s and 787s. These we know how many we are going to be having in the coming, three or four years up until 2028. Yet, as there are difficulties to get the new orders, we are trying to fill that blank with the operating leases and even some wet leases. That's the how we received, for this year, about, like, a 35 operating lease aircraft to fulfill our aircraft needs. Going forward, our intention is to grow the capacity in terms of ASK by about 7%-10% growth year-on-year over the next five years.
We will try to accommodate the necessary aircraft through operating leases if we cannot get new contracts with the OEMs. Putting this into some perspective, it's difficult to provide an exact fleet numbers for the coming years, but as we are going to be finishing this year with about 435 aircraft, next year, we expect to reach a size of 460-470, roughly speaking, and then in 2025 to roughly 500 aircraft, and to reach a fleet size of 600 by 2028, which we believe is going to give us that 7%-10% ASK growth for the coming five years. Of course, we are going to be much more clear with this fleet growth as soon as we finalize our tender with the OEMs.
Murat, what will be the estimated CapEx this year?
As we are getting new aircraft, the CapEx is decrease- increasing. This year, we expect that to be around $5 billion, $5 billion-$5.5 billion, and roughly $3.2 billion is going to be on aircraft. The remaining $2 billion is going to be on heavy maintenance, spare parts, some infrastructure needs.
I think one of the highlights of our second quarter performance was obviously net debt levels and the decrease that we achieved compared to last two years. We got a lot of questions on that front from Erdem Kayış , Esra Şener, Muhammed Küçük. We would like to thank them all. Murat, what is your expected net debt level for this year?
In the beginning of this year, we were anticipating about 2x-2.5x leverage in terms of Net Debt to EBITDA. Given the strong financials we achieved by the end of first half, and with our strong outlook for the remaining part of the year, we expect this year's leverage to be around 1.5x-2x levels. For the next year, given the deliveries of especially the wide-body aircraft, it can be around 2x-2.5x in 2024.
Cargo continues to be a weak spot. Mert, could you please comment on the unit revenue, in terms of carried tonne and your forward expectations?
Regarding to the cargo, we have been expecting to come to these days. I mean, cargo had a very strong few years, actually, almost two years. It's very strong two years, 2021 and 2022, and we are seeing the normalization. The yields dropped by about 35%. Overall, we expect to finish this year by about 25%-30% drop in cargo yield terms. In terms of total tonne carried, probably, like a very low single digit drop can be observed in terms of total tonne carried. On top of this, as we said out through the presentation, during the most profitable months, some of the months, April and May, our huge portion of our cargo capacity was dedicated for the earthquake zone. That also played an, a role in the decline in total revenue we observe.
Still, cargo, compared to our peers, Turkish Cargo is showing a very strong performance. We are optimistic that by the last quarter of this year, when the cargo's high season starts, we'll be able to see some recovery in cargo operations. Going forward, we keep investing in cargo. We got two wet lease cargo freighters this year, which wasn't in the plan, and we increased the cargo fleet to 24 aircraft, and we are looking into new cargo freighters, aircraft for our coming year demand.
Murat Şeker, we got a question about one of the strategic levels that you mentioned at the beginning of the Q&A session. Görkem, from your previous session, is asking about the details about our door-to-door delivery platform launch.
This project came as a part of our growth, building and cargo ecosystem, and play an important role in e-commerce logistics market in Turkey. With the advantage of our higher unit revenue in a door-to-door project, compared to the conventional air cargo, which is more from airport to airport, we are expecting to increase our sales and add a new stream of profit center to our cargo operation. We will be starting, in the first phase of this project, we will be starting to export shipments originating from Turkey to U.S., EU, and U.K. markets. Until, probably until 2026, this company is going to be targeting to carry out transit transports in Turkey, to these three pilot regions and countries I expressed, then it's going to keep growing.
I mean, we are still working on the feasibility regarding to how much income we expect to receive from this operation, but at the earlier stages, its gross profit margin is going to be on the vicinity of 15% levels, but it's going to be utilizing our deep cargo network. You know, we have been flying to more destinations than any other cargo operators, with our 100 destinations with the freighters and then more than 300 destinations with the passenger aircraft. This is going to bring us a huge connectivity with this door-to-door project. By the 2028, we are expecting to be an important player in this e-business sector.
Is it possible to provide an update on AnadoluJet spin-off, and what is your mid- and long-term targets?
The teams are working quite hard on the AnadoluJet project. We recently completed the incorporation, in the coming weeks, we are going to announce its new corporate identity and its new brand repositioning. Probably in the next few weeks, we are going to apply to the Civil Aviation Authority for the respective permits. Our intention is, of course, this is a very vast change. We are not establishing a low-cost carrier from scratch. We are trying to transform an existing budget with about 80 aircraft, with a significant amount of staff, to a new company. There are a lot of technical details that we are trying to solve, but our intention is to have the AnadoluJet operate on its own self by the, before the summer of 2024.
Gürkan Mangtay from investment team is asking about our recent subsidiary, Turkish Support Services. What drives you to set up that subsidiary?
Turkish Support Services was established for three key factors. We wanted to... I mean, there are, we are receiving such personal services through at least we have been, I mean, at least 5 different companies. We pay commissions to each of them. We have less flexibility in their adjustments of the personnel and the obligations, the, on the expenses. The severance payments were on our shoulders anyway. We decided to streamline all these operations and increase the efficiency. We are talking about the size of almost 11,000 employees who were under different companies and different management fees, and we wanted to optimize this, generate cost advantages, and optimize the human resources, standardize our HR policies on these different companies, and establish a more quality assurance.
Internally, we transferred about 7,500 staff at the beginning, and then through the past few months, we increased that number to almost 11,000. Of course, there is certain some costs we had to incur through this change, but in the coming years, we expect cost savings by reducing the overhead costs, eliminating the commissions, and there is also potential to generate revenue by providing third-party services.
What if we got number of online questions. You already answered most of them. Just one I would like to highlight is that, how is corporate traffic versus 2019 level? What is premium, premium traffic load factor versus 2019 from city?
In the first half, the business class passenger increased by more than 20% compared to 2019 levels. The load factor is also up by roughly around 10 percentage points.
One additional question from Denis Kinguc. Is there an expansion strategy which is aiming regional expansion and similar to the Air Bosna, Air Albania acquisitions, or SunExpress partnership that we have observed in the past?
I mean, not in that nature, but we are looking into more collaboration efforts in the kind that we have with Indigo in India, some JV agreements, and increase our presence, especially in the Far East and America markets. Having a establishment or joint venture in Balkan region or Europe region is not on the top of our agenda.
I think we answered all of the questions. With this, we can, to conclude our call. I would like to thank all of our participants for joining us. We are looking forward to meeting with you in the next quarter.
Thank you, gentlemen. Thank you, speakers. Thank you for the presentation. Ladies and gentlemen, like was said, this concludes today's webcast call. Thank you for your participation. You may now disconnect.