Please standby. Good morning, everyone. And welcome to the Delta Air Lines December Quarter and Full Year Financial Results Conference. My name is Ebony, and I will be your coordinator today. At this time, all participants are in a listen-only mode until we conduct a question-and-answer session following the presentation. As a reminder, today’s call is being recorded. I would now like to turn the conference over to Jill Greer, Vice President of Investor Relations. Please go ahead, ma’am.

Thanks, Ebony. Good morning, everyone, and thanks for joining us for our December quarter and full year earnings call. Joining us from Atlanta today are CEO, Ed Bastian; our President, Glen Hauenstein; and our CFO, Paul Jacobson. Our entire leadership team is here in the room for the Q&A session. Ed will open the call and give an overview of Delta’s financial performance, Glen will then address the revenue environment and Paul will conclude with a review of our cost performance and cash flow. To get in as many questions as possible during the Q&A, please limit yourself to one question and a brief follow-up. Today’s discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements. Some of the factors that may cause such differences are described in Delta’s SEC filings. We’ll also discuss non-GAAP financial measures. All results exclude special items, unless noted otherwise. We’re also providing cost comparisons on a normalized basis as this better matches the retroactive expense we incurred in the fourth quarter 2016 from our pilot contract to the appropriate quarters of 2016. You can find a reconciliation of our non-GAAP measures on the IR page at ir.delta.com. And with that, I’ll turn the call over to Ed.

Well, thanks, Jill. Good morning, everyone. We appreciate you joining the call this morning. Earlier today Delta reported December quarter and full year results, including a December quarter pre-tax profit of $1 billion and an EPS of $0.96 ahead of consensus, which sat at $0.88. These rounds out the year with a $5.5 billion pre-tax profit and a 14.4% operating margin. Operationally, the month of December presented us with several unique challenges, a significant southeastern snowstorm and the Atlanta Airport power outage. Together these events drove a $60 million impact and roughly 2,900 cancellations. And thus far in January, our teams have persevered through the storm that hit the east coast earlier in the month and water main break at JFK this past weekend. I want to thank the Delta people for their incredible work in taking care of our customers, while recovering from these difficult events. Once again, they demonstrated that our people and our culture are Delta’s strongest competitive advantage. But it also reflects the importance of the significant airport infrastructure investments that we are a making to enhance the tools available to our employees to improve our customers’ experience. For their outstanding work, we are pleased to recognize the Delta team with over $1 billion in profit sharing this year, which will be the fourth consecutive year of paying the $1 billion. With our culture at the foundation, we are focused on the ways to improve our operational performance. We are running the best operation in the industry and ended 2017 with 242 days of no mainline cancellations, including a 50-day streak, 5-0, without a single mainline cancellation, while keeping domestic mainline on time arrivals at 85.4%. We also had 90 days in 2017 with no system cancellations on the entire Delta platform or brand perfect days…

Thank you, Ed, and good morning, everyone. With the momentum we’ve built throughout 2017, we are starting 2018 with a better revenue backdrop than we’ve seen in many years. Revenues in the quarter increased 8% driven by modest capacity growth, broad-based revenue improvement and strong ancillary contribution. These results included a $45 million impact from Winter Storm Benji and the Atlanta power outage. My thanks go out to the entire team for everything they have done this year to take incredible care of our customers, especially during the operational challenges it’s truly our people who make the difference. For the quarter, passenger revenues increased $527 million or 7% driven by strong demand and improving business yields. Our investments aimed at corporate travelers continued to gain traction as Delta was named Best Airline in the Business Travel News survey for an unprecedented seventh consecutive year. Our fourth quarter corporate revenue growth was our highest since 2014, with both passenger volume and average fare improvements. Going forward, we expect corporate momentum to continue. Our last survey of corporate travel managers showed more than 88% project their spend will be maintained or increased in 2018. This is a 3-point improvement from last year’s numbers and is the most positive outlook we’ve seen in three years. We also have continued strength in cargo and other revenues with cargo contributing a third consecutive quarter of double-digit improvement, up 14% in the December quarter. This caps off our first year of increases in the cargo revenue in six years. Our partnership with American Express produced an incremental $19 million of value in the quarter. In 2017 we enrolled over 1 million new SkyMiles credit card accounts, a record for annual enrollment. Co-brand spend was up 12% versus the prior year, outpacing the industry growth as reported…

Thanks, Glen. Good morning, everyone, and thank you for joining us. I’d like to start by echoing Ed and Glen in thanking the Delta team for all they’ve done to take care of our customers and each other through some pretty unprecedented challenges in the last year. For the December quarter, total operating expenses increased $1 billion, driven by a higher fuel and continued investments in our business. Non-fuel unit costs were up 5.6% for the December quarter and up 4.3% for the full year. This includes $85 million of accelerated depreciation, which hit in the back half of the year and pressured our full year CASM by about three-tenths of a point. The investments we made in our product, operation, fleet and our people were important, and are already driving benefits. But as we mentioned before, we cannot sustain unit cost growth at this elevated level over time. We expect the March quarter to be our peak cost growth of the year, with unit costs up 2% to 4%. The majority of our non-fuel expense growth should happen in the front half of the year and we are on a path to achieve zero to 2% non-fuel CASM growth for the full year. In order to get there, first, we will lap costs we began incurring last year with a 6% April employee pay increase. Second, depreciation expense will trail off markedly in the back half of the year, as we annualize the accelerated depreciation on our fleet and facilities. To give some perspective on this, depreciation for 2018 is expected to be up $250 million with $200 million of that increase in the first half of the year alone. Finally, our maintenance expense has been weighted towards the front half of the year as we gear up for…

Ebony, we’re now ready for questions from the analysts, if you could give them instructions.

Thank you. [Operator Instructions] And we’ll take our first question from Andrew Didora with Bank of America. Please go ahead.

Hi. Good morning, everyone, and thank you for taking the questions. I guess, first, Glen, you have previously talked about how your -- I think, it’s your corporate contracted business had fares, I think, roughly 20% below where they were in 2014. I guess, can you give us an update on where they stand now and how much of a benefit is in your 1Q PRASM guide for a return of business -- really a return of business travel demand stemming from the tax cuts?

Well, we are very excited about the potential for business -- increased business demand with the tax cuts. We haven’t seen that materialize yet but we expect that to materialize in the first quarter and our guide does not have that, because we can’t see it yet. So the fare levels have stabilized and started to improve. But fare levels are only a few percentage points higher than they were in the trough. So, I think, there’s a lot of opportunity moving forward as demand continues to improve.

Great. And then, second question is just for Paul, two on the cost side. I guess, one, what is your Brent assumption in your new EPS guidance and did that change from Investor Day? And then, secondly, just the timing of maintenance costs, why is 1Q different from other first quarters in terms of maintenance spend ahead of a busy summer period, are you just expecting to run the network harder or is there something else I am missing there? Thanks.

Sure. Good morning, Andrew. Thanks for those questions. On the maintenance question, I would say, it’s a little bit higher than traditional first quarters. As you know, the -- with the mitigation of the C Series delays that we’ve seen, we’ve got a little bit more work to do on the existing fleet versus expecting that the new aircraft we’re going to deliver for the summer schedule. So I would say it’s a little bit disproportionately weighted from that perspective and if you wouldn’t mind, repeat your first question, sorry?

No. I just -- curious what your assumption for Brent was in your full year guide and did it change since your Investor Day? Thanks.

Yeah. Yeah. Sorry about that. We haven’t changed the full year guide. It’s obviously very early in the year. I would say we’re slightly ahead of what our expectations were for 2018 in terms of the rapid pace of the price appreciation. But we have a long way to go and we know that, that is volatile, but we did assume the forward curve as we always do. But we feel okay about where it is right now, but we’re obviously watching it closely.

Great. Thank you.

Our next question will come from Michael Linenberg with Deutsche Bank. Please go ahead.

Yeah. Hey. Just a question to Glen, you talked about FX showing up in the international unit revenue having a positive impact. What about the return of fuel surcharges? It looks like that they’re now coming back into the Pacific, are you seeing that, have they increased recently, can you just give us some update on that?

Yes. Clearly, internationally, we’ve seen fuel surcharge increases due to the higher level of fuel and we expect that to continue if fuel stabilizes at this or higher level.

Just a question to Paul, can you -- as I recall from the Republic bankruptcy, I believe you own a piece of that, what is the percent and is that being accounted for under the equity method?

No. That all - all the changes in value there flow through equity, so it doesn’t -- the ownership itself doesn’t have an impact on the P&L.

Okay. But you own -- what is it -- you own what 25% of that, I believe?

Yes. Yeah. It’s in the 20%-ish range.

Okay. Okay. That’s just being run through the non-op. Okay. Great. Thanks, Paul.

And we will take our next…

No. Hey, Mike. Just to clarify -- yeah, I am sorry, operator. Mike, just to clarify that, no, it runs through the balance sheet, it does not run through non-op because it’s not publicly traded.

Okay. Okay. No. Thanks. I appreciate that. That’s helpful.

Our next question will come from Jamie Baker with JP Morgan. Please go ahead.

Hey. Good morning, everybody. First, Paul, I know your trailing view on hedging, but as you’re obviously aware, the market has returned to backwardization now for the first time in, I don’t know, two and a half years, if memory serves. Just wondering if this might influence your thinking on this topic, the hedging topic?

No. Jamie, thanks for the question. There’s no change. I think the -- as I’ve said, I am relieved to be able to say the legacy losses are behind us and we feel good about where we are competitively…

Okay.

…especially the work that we’ve put into the supply side of it, both harvesting the benefits of the refinery, but also looking across self-supply at multiple stations and feel good about where our position is and I think the industry is at a parity level on fuel input costs that it hasn’t seen in quite some time.

Okay. And second for Glen, I thought Mike’s question on fuel surcharges was a good one, they’re not permitted domestically. I think it was the legion that took a stab a couple of years back unsuccessfully at that to potentially revise that. It does make me wonder and thanks, Mike, I only began to wonder this in about the last 90 seconds, given the current political and regulatory climate, perhaps, you would have a more receptive year in Washington on the topic of domestic fuel surcharges, is that anything we should be thinking about?

I think I am going to toss that to Peter Carter, our General Counsel because…

Okay. Yeah. Perfect.

And Jamie, hi. Good morning. I would say we haven’t given that particular issue much thought, but there is no question that the Trump administration has been very open to the airline industry in general and I think, frankly, business. So interesting question and I appreciate it.

Okay. Fair enough. Thanks, gentlemen. Take care.

We will take our next question from Duane Pfennigwerth with Evercore ISI. Please go ahead.

Hi. Thanks. Good morning. Glen, can you expand a little bit on your comment about keeping unit revenue growth rates at the level of your March guidance despite a tougher comp, how do you see that playing out? And I wonder -- and sorry if I missed it, would you be willing to rank the geographies in terms of unit revenue growth rates you expect in the March quarter?

Sure. Let me start with the second one first because I think it’s the easiest. I think we would expect the transatlantic to be number one, Latin to be number two, domestic to be number three and Pacific to be number four. So that’s a pretty easy question and the second question was, what again, I am sorry?

I think you made a comment in the prepared…

So our business plan is predicated on 6.5%, 7% total revenue growth or passenger unit -- passenger growth and that equates to a 2% to 3% capacity increase and around a 3.8%, right around 4% unit revenue. So we’re kind of treading at the rate that we need to get to generate that revenue throughout the year. And so we feel pretty good about where we sit today versus what we need to achieve to get to the business plan, which is very different than where we were last year when we started the plan, because if you remember, we were in negative territory last year when we had the same call, the fourth quarter call and we had to move that to positive momentum, but that was a much heavier lift than really just playing out what we had and as you go through the year then just keeping that baseline moving. So I think we feel a little bit better, not that it’s not challenging, not that there won’t be a lot of things we don’t expect between now and December of next year and we know that. But we feel a little bit better about the line of sight to getting from where we are to where we need to be versus last year and turning from a negative unit revenue growth to positive.

Thanks, Glen. And if I could sneak one more in on Paul, your operating cash flow was up materially year-over-year in the fourth quarter. Looks like you had about a $700 million working capital benefit, can you talk about what drove that? Thanks for taking the questions.

Well, it was a number of things, but I think it also bears mentioning that as a result of our investment grade balance sheet. We have done an initiative with the supply chain to go out and work proactively with our vendors to extend some of our payment terms and do other things to drive working capital in the business. So we were focusing on that very consciously.

Thank you.

Our next question will come from Hunter Keay with Wolfe Research. Please go ahead.

Sorry. Can you guys hear me?

We can now.

We hear you Hunter.

Sorry. I apologize for that. Are you expecting a headwind from the change in frequent flyer revenue recognition around the airline for the prevailing market rate or whatever it’s called, I think, I had heard about $100 million, is that factored in to the EPS guide or is that a static number, can it change, how are you thinking about that?

Hey, Hunter. This is Paul. So, yeah, as we talked about at Investor Day, we don’t expect materially year-over-year changes from revenue recognition on the full year basis.

Okay. Thank you. And then…

Yeah.

… on the 2018 guide, pardon, sorry, Paul, what?

No…

Sorry. On the 2018…

I was just supplementing that. Go ahead, Hunter, appreciate…

Okay. I don’t know if my phone -- I don’t know if my phone is breaking up or I can’t hear you. So, on the 2018 earnings guide, if you find yourself drifting out of the low end of the range for whatever reason, where do you think you have the most incremental opportunity to get back in it? Is it non-fuel costs, is it revenue or is it something else?

Hunter, this is Ed. I’ll take that. I mean, it’s really premature to be speculating how 2018 is going to be rolling out. We feel optimistic given the guide and our commitment to getting our non-fuel costs back to flat with zero to 2%, but you’ve heard me say before, my expectation is closer to zero than 2%. And the demand environment is the healthiest we have seen in years. And so, I think fuel is a little bit of a wild card there. We’ll see how that plays out. It seems like the market has gotten overheated over the last few months. We’ll see where that settles out. But we feel pretty confident that the -- it’s roughly a 20% to 30% bump year-over-year on EPS is our best look and I wouldn’t get into how do you manage some of the levers, it’s way too early.

Okay. Thanks

Our next question will come from Darryl Genovesi with UBS. Please go ahead.

Hi, guys. Thanks for the time. At your Investor Day, you had suggested that perhaps if passed -- if Tax Reform were to be passed that there would be some incremental pension contributions. Is that something that you’re looking at for 2018 or would that basically be on hold until 2019 when the cash tax savings kind of starts to appear?

That’s right, Darryl. We obviously are not going to see any cash savings in 2018 from Tax Reform since we weren’t anticipating paying any taxes and we still don’t anticipate paying taxes in ‘18. But as we become a taxpayer between ‘19 and ‘20, the reduced level of taxes that we ordinarily would pay, one of the sources for those proceeds would be to continue to fund and hopefully get as close to a fully-funded status in pension over the next several years as possible. So that to me would be high on the priority list.

Okay. Thanks for that. And then, I guess, just on -- I wanted to ask you a little bit about aerospace manufacturer and supplier consolidation. It would appear that the proposed Airbus deal with Bombardier would benefit you in some way, but now you’ve got media speculation that Boeing and Embraer are talking, and you’ve already seen some suppliers get consolidated away over the last couple of years like glitch and the airspace and others. Is this, I mean, would you anticipate this being a problem for you in terms of how you’ll manage your fleet costs over the next few years?

We don’t anticipate that being a significant issue. As you mentioned, the Airbus-Bombardier deal we’re supportive of and we think that will enhance the ability for the C Series to come to market. With respect to further supplier consolidation within the OEMs, we have conversations with all those OEMs and we are certain that we set expectations around performance for them, and ensure that Delta is not harmed from any of that, and we’ve received their commitments that this is actually only going to enhance their service levels to Delta, not put us in a competitive disadvantage.

Great. Thanks very much.

Our next question will come from Brandon Oglenski with Barclays. Please go ahead.

Good morning, everyone, and thanks for taking my question. So, Ed, I wanted to come back to one of your prepared remarks talking about how fuel can drive greater stability in the long run for the industry, I think you were saying higher fuel prices. But then, Glen, also talked about accelerating revenue recapture that the industry historically has done. So, I guess, it’s not the same as Hunter’s question, but we do know fuel costs are higher here, so what are some of the things that Delta can do specifically to help drive that revenue recapture and really push down fuel volatility for your investors?

Well, our ability to push down fuel volatility is, I think, that’s a little outside our control. We do our best to manage the fuel environment that’s in front of us. I think the biggest thing we have going in our favor in 2018 is a strong economy with a lot of optimism. We’ve got a significant list of commercial initiatives that are coming to fruition. We have a strong international environment, which we haven’t seen in a number of years. So that’s the main focus in terms of being able to recover and recapture fuel. Historically, the industry has always managed spikes in fuel by offsetting reductions in capacity. I think it’s premature and early yet to start to adjust our 2018 capacity plans. But we will look as the next few months unfold, as fuel prices continue on this tear, it certainly will have an impact and we’ll be prepared to deal with that going forward, we know how to do that well. But I think the economy is the biggest benefit and I think that’s the lever we’ll be using to manage the fuel environment.

Okay. I appreciate that. And, Glen, it might just be my phone is not too good here either, but you were talking about three platforms for revenue expansion. I think what I heard was up-gauging and airport investments, but maybe I am simplifying that. So can you come back to some of those longer term revenue initiatives and really focus us in on what are the keys there?

Sure. I think the key for us domestically is the continued up-gauge strategy and one of the benefits that that provides is a higher level of the premium products and services that have been so successful in the marketplace. If you think about where we started many years ago with selling First Class and then introducing the enhanced Economy products domestically, we’ve come a long way since then and every year we think those products -- how do we continue to mature, well, in some ways they’re very established now. They’re still very young products. They’re only in the marketplace three, four, five years. And some of the things we have on the horizon which we think are really exciting are different ways to be able to buy those products and services. So, for example, if your company’s plan -- travel plan doesn’t allow you to sit in Premium, Economy or in First, this year we allowed you to buy that and a post purchase and we sold almost $100 million of that in the first six months of that being available to sale. By this summer, we’re anticipating being able to now also offer that post purchase in miles and if you think about how that opens the aperture to control your travel experience for people who want to buy those premium products and services, we think that’s going to be key to our ability to drive revenues moving forward. And the fleet itself just in 2018 alone provides for 5% greater seat availability by the end of this year in those premium products and services. So not only do we have the base but we now have the premium products and services and different ways to buy them at different points in the purchase path. And as we continue to work on our digital evolution, we could see expanding that so that we can actually market to you. And those are things that we have coming in the pipeline in the next months and years that we’re really excited about is not driving to the bottom end in the commodity once a year flyer, but to really the people who are discerning and who want to buy premiums in products and services. And we’ve been at the forefront of that for years. We have a very good view of how that’s going to play out over the next couple years and that’s really the cornerstone of our ability to continue to drive premium revenues at Delta. Is that too long?

Thank you.

Our next question will come from Joseph Denardi with Stifel. Please go ahead.

Yeah. Thank you very much. Glen, you talked about the strength of the AMEX partnership and record card acquisitions. I think you guys gave the $2 billion -- the $4 billion by 2021 target, I don’t know, a couple years ago, is there upside to that at this point just based on how strong the trends have been recently?

Joe, this is Ed. I’ll take that. I -- yeah, I think, there’s potential upside too. I’d say again, we got close to $1 billion to go to get there yet and we’re having good success, and we’ve got a great partner at AMEX who is fully committed to that trajectory as well. So we’ll see over the next several years. But it’s safe to say from when we did the deal a couple of years ago we’re running ahead of expectations.

Got it. Okay. And then, Paul, just on the guidance for the year, is there anything explicitly in the EPS guidance related to mark-to-market adjustments for your equity investments?

No. That’s all timing and out of period, so we wouldn’t be putting that in.

Okay. Thank you.

Our next question will come from Jack Atkins with Stephens. Please go ahead.

Good morning, everyone. Thanks for taking my questions. Ed, if I could ask you sort of a conceptual question about Tax Reform. I guess, the question I’ve been getting a good bit from investors is around potential for this to get competed away over time. And so when you think about the P&L savings from the lower book tax rate related to the Corporate Tax Reform, how do you think about the airline industry potentially competing that away over the next several years and I would have thought given that most U.S. airlines are not cash taxpayers that perhaps it would take some more time to do that, but we’re already seeing some of the airlines not Delta but others who are not cash taxpayers giving cash bonuses. So I am just curious to get your thoughts on the potential for this book tax savings get competed away over the next couple of years.

Well, Jack, we have no intent to compete away the tax savings. We will certainly use the tax savings to reinvest in the business to strengthen the balance sheet. I mentioned pension is one of the things that we’re focused on. But the core of your question is right. There’s very little cash tax being paid by the U.S. airline industry at this moment. So it’s hard to compete away something you don’t have. I won’t comment on the other airlines giving away cash bonuses to their employees. That’s great for the employees and I am glad to see that. We have a sustainable profit sharing plan over the long-term that has been far superior to any cash bonuses that any of the others have given out and that’s how we pay our employees. So I understand the question. I understand the concern. But it’s pretty hard to compete what you don’t have.

Yeah. No. That’s definitely fair. One other high level question, would a U.S. withdrawal from NAFTA impact your partnerships with WestJet or Aeromexico?

I am not going to get into speculation. I don’t know.

Okay. Okay. Thank you for the time.

We will take our next question from Savi Syth with Raymond James. Please go ahead.

Hey. Good morning. Just on the entities, I was kind of curious if you could share, one, the capacity growth expectations by entity for the year, and then, two, with the JVs that have kind of recently been strengthened, when should we see that kind of start to flow through and drive more of the revenue upside?

So, Savi, good morning. We don’t give into the capacity by region on that detailed level. But on the JV benefits, we’re seeing some of that building in now, you see it coming through both on the revenue lines with the sharing, but also inherent in the Delta P&L with the synergies that we get from the network. There’s a ramp-up period, obviously, as we work through those issues. But I think the international team has done a terrific job and we’ll start seeing those -- some of those benefits in 2018.

Got it. And Paul, if I might just a quick question on the refinery, what’s your expectations there for 2018?

So, on the refinery, so 2018 is a turnaround year. We’re currently expecting to have a similar year, but obviously, it’s still very early in the year. But we’ll have some down period especially towards the back end of 2018, but we expect a small contribution from it this quarter based on where cracks are and continue to provide that kind of $0.02 to $0.03 benefit quarter-by-quarter when it’s running.

Got it. All right. Thank you.

We will move next to Helane Becker with Cowen and Company. Please go ahead.

Thanks, Operator. Hi, team. Thanks very much for taking the time. I have just two questions. One is when you talk about up-gauging, are you talking, is that 100% mainline aircraft that you’re talking about or is there a percentage that’s mainline and a percentage that’s regional?

It’s mostly mainline at this point, Helane.

Okay.

And not just that Helane, as you know, we’ve been shrinking the fleet at the regionals, which has also contributed to that. If you think about the mix of where our fleet evolution, we had I believe almost 800 regional jets at one point in time and we’re down less than half of that now. So it’s not only growing the gauge at the mainline, but reducing the reliance of the regional fleet.

The big up-gauge that we’ve got here in the next couple years is the retirement of the MD80s. We still have over 100 of those that we’re flying and we’ll be retiring them over the next -- by 2020 and bringing those all up to the 321s and 739s, as well as some MD90s as well. So that’s where the bulk of the up-gauge is.

Okay. Perfect. Yeah. I think at one point you guys were the largest operator of RJs in the world. And then my second question is with respect to air traffic control delays in the Northeast and maybe, Ed, this is a question for you, as you plan for the summer months, because I feel like that was the biggest problem last year here in our New York markets, are you thinking about adjusting capacity in this New York, maybe Boston corridor to allow for those delays that we get, what are they, ground stops on a daily basis?

We do, Helane, as you know we take our operational integrity incredibly important, it’s at the core of what we deliver to our customers, as well as to our employees and to the extent the Northeast corridor continues to be problematic with respect to delays. We take that into account. It’s hard to predict at some level when the storms occur. But we work very closely with air traffic control and with all of our partners out there to ensure that we’re getting the very best intel, transparency and through-put as we can. But it’s a challenging environment. It will stay challenging for everybody up there for a period of time.

Okay. Thank you very much for your help. I appreciate it.

Sorry. I can’t be more optimistic.

Our next question will come from Rajeev Lalwani with Morgan Stanley. Please go ahead.

Hi. Good morning. Thanks for the time. Glen, a couple of questions for you on the international side, what gives you confidence that we’re not at some sort of peak, I mean, I think, we’re going to put in about plus 5 on PRASM. And then just relating to that, where do you have more confidence, is it more on the demand side or the supply side?

Well, I think when you read all the headlines about the synchronized global economic expansion, that’s kind of what we’re seeing manifesting itself. So we’ve seen not only an uptick in the average realized fare of business travel in the international entities but we’ve also seen an increase in core demand there as well. And so I think that when you think about how the U.S. is probably still growing and still accelerating growth, and when you think about Europe, when you think about the economies in the Pacific, it gives you a lot of confidence that as we move through the year, this is going to continue to improve and our advances would substantiate that. So we have a little bit more visibility on international, because it books earlier than domestic generally and so those two combinations give us a pretty good confidence level that it’s accelerating rather than decelerating.

And to the extent that tax reform benefits start to come through from a demand perspective, is it fair to say that the domestic side should do a bit better or do you think international would be able to keep up as well?

Well, I am bullish about international for this year, not the least of which, which I didn’t mention in the earlier question -- answer is that foreign exchange becomes a tailwind this year. And we’ve been fighting two or three years of arriving dollar and so now having that also running in our favor is also another great tailwind for international.

I think it’s also fair to say, Rajeev, that the domestic business should certainly receive a benefit as consumers start to see lower paycheck deductions in terms of lower tax rates as corporations start to invest further to take advantage of the benefits U.S. corporations that the Tax Reform facilitates. I think it’s fair to say that domestic should receive at least as much a benefit as international.

Very helpful. Thank you.

Ebony, we’ve got time for one more question from the analysts.

Thank you. Our next question will come from Dan McKenzie with Buckingham Research. Please go ahead.

Hey. Good morning. Thanks guys for squeezing me in here. Glen, just a couple questions and these are kind of tied to some of the earlier questions, but I would have expected Delta to trim its full year outlook, and of course, that wasn’t the case. So if I can probe just a little bit more on what if anything, has changed versus the Investor Day, and I guess, I am wondering is fuel surcharges and that also going back to your observation about global synchronous growth driving international demand, has there been an improvement in the outlook of your JV partners since the Investor Day?

I am going to turn that over to Paul because he is more in tune with the complete level of the guidance, so Paul?

Yeah. Well, I think, we expect some good year-over-year performance from our partners going forward, not just from the synergies, but from their own appreciation. We’ve spoken a lot about the improvement in the economic environment in Latin America in particular as it relates to GOL and to Aeromexico. So they’re a contributing piece to it. But, I think, overall as we look at the year going forward, as Ed mentioned, it’s too early to hit the panic button on fuel prices. The revenue environment has a lot of momentum headed in the right direction. We feel good about where we can hit from the cost side. So it’s a driver, but I think at the end of the day it really comes down to our ability to execute on the plan and continue to watch those external variables.

Dan, this is Ed. If I could weigh in for a moment, we as an industry have demonstrated our ability to cover higher fuel prices. Don’t forget we were profitable with fuel well over $100 a barrel. And I think over the medium-term, if the new level is at $70, the industry will adjust reasonably quickly to that level. I don’t know if that’s three months or six months or nine months. But over time we don’t adjust our capacity or start making short-term decisions based on where the fuel numbers hit on a week-over-week basis. So we’re optimistic, we’re confident, we’ve got all the levers within our control, the most important of which are the best employees and the best customer service in the business that’s going to really cover fuel forever or us.

That’s great. Thanks for that, Ed. And then, I guess, just my second question here, just ties to the basic economy part of the business here. We seem to start the quarter out pretty clunky on this and since November was pretty bad, of course, that all changed pretty dramatically in December. And so as we look at the uptick in demand that occurred during the quarter, is it really as simple as increased consumer confidence around the tax cut or did the industry perhaps get a little smarter about how to market basic economy throughout the quarter?

We don’t think basic economy, as we’ve stated in the past, is a huge driver of the ancillary products and as a matter of fact, the three that we track, it is the smallest contributor to the incremental revenue base. But we do see, as we continue to roll it out internationally, that there are significant benefits and as we move into selling and from selling into flying in the transatlantic, our lowest fares will now have baggage fees attached to them and that’s really a first for U.S. carrier in the transatlantic market. And so we’re looking for that to drive some incremental revenues and really to be very competitive similar to how we are competitive with the ULCCs domestically, a great tool for us to be more competitive in terms of the fare itself with the ULCCs and the transatlantic. And we’re very optimistic about how that will play out in the Consumer segment that we need to be and although, that’s not where we’re making our big investments.

That’s terrific. Thanks, guys.

Okay. That’s going to wrap up the analyst portion of the call. I am now going to turn it over to Ned Walker, our Chief Communications Officer.

Hey. Thanks, Jill. Ebony, we’re ready for the media Q&A. Would you please review the process for the media to go ahead as a question. Also for the media, we’d request that you limit yourself to one question and a quick follow-up. That way we should be able to accommodate most of your questions. Go ahead, Ebony, please.

Thank you, sir. [Operator Instructions] We will take our first question from David Koenig with AP. Please go ahead.

Yeah. Hi. To clarify something that Glen said on the analyst portion about the tax law. So even though you think it’s going to increase business travel that is not in your revised full year EPS guide and can you say anything more about how the law is going to help you since you don’t pay cash taxes?

David, this is Ed. What Glen was talking about is we don’t -- we haven’t yet seen the evidence that there’s going to be stimulated travel demand given that it’s so early with the law just coming out over the last couple of weeks. But we at the same time are optimistic that the law will help us deliver on our revenue guide, and we do anticipate and we do have factored in our revenue expectations for the year seeing improvements from Tax Reform. The second part of your question that was around competing away the tax benefits, I believe or not seeing the cash.

Well, it is…

What?

No. It was more just if there’s anything else in the law that is going to help you, are you talking about the faster expensing or maybe something else in the other provisions in the law?

Yeah. I mean, the law in addition to providing a stronger economic outlook for our consumers, it’s going to provide a much stronger economic outlook for Delta. We expect the benefit will probably be about $800 million a year at our current earnings level. We are not a cash tax payer today, but we will be a cash tax payer in the next couple of years and so you’ll see that value ramp as we work off the last remaining NOLs that we have. So it will be a significant benefit for Delta and our owners.

Okay Thanks.

Our next question will come from Michael Sasso with Bloomberg News. Please go ahead.

Yeah. Good morning. Yeah. Maybe this is for Ed. Can you tell me, I know there’s some wiggle room in when you expect to take the C Series, but can you for your own -- what are some assumptions you’re making for your own operations --can you tell me what the latest thinking is when you’ll actually take the C Series? And the second part is, what are all the impacts that you’re doing, ways that you’re trying to cope with not having that, are you having to delay or roll back certain routes that you had anticipated? I think Paul mentioned that it’s boosting maintenance costs, just what are some of the impacts that it’s having by having those delay?

Well, we’re waiting to hear the results of the International Trades Council that is scheduled to rule before the end of January. So I’d say, it’s -- I can’t really respond fully to your question, Michael, until we hear the results in which Boeing was expected to be able to prove harm. So I don’t know what the actual tariff will be, if there is any at all and once we know what that is, then we will set our plans accordingly. With respect to incremental impacts that we are already experiencing, yes, we do know that we will not be taking the C Series according to the current schedule, which we’d be taking delivery this spring. And to that end we have had to invest in maintaining some aircraft, particularly MD88s to keep them around a little bit longer than we were otherwise anticipating.

And just follow, have you had to delay certain routes and is it just changing how you’re flying that you had anticipated in the next year or two?

We will make those decisions once we know what the rules are.

Our next question will come from Susan Carey with Wall Street Journal. Please go ahead.

Good morning, everybody. Two little questions, is it still true that your F -- your full year ‘18 EPS includes $1 for the tax cuts? And second question, there was some speculation that Delta was going to go after Georgia Power or the airport/City of Atlanta for the power outage, is there any kind of new thinking on that?

Your first question, Susan, yes, $1 is the current ballpark estimate on the value -- the benefit of the Tax Reform that we have rolled into the EPS. With respect to your second question, we are having very productive conversations with Georgia Power, as well as with the airport authority here in Atlanta and the City of Atlanta about, number one, making certain that we learn from the experience. We all persevered in December and ensure that never happens again and putting in the right design and structure, both in the short and long-term to protect our power source with respect to any compensation. It cost us around $40 million and we’ll have the conversations at the appropriate time with those parties.

Thank you.

Ebony, we’ll have time for two more questions.

Thank you. Our next question will come from Alana Wise with Reuters. Please go ahead.

Hi. Good morning, everybody. Thanks so much for taking my question. So quickly I just wanted to revisit the question of the C Series. At this point it doesn’t seem unlikely that the ITC won’t recommend duties of some sort. So I was wondering would Delta, I know you’ve said in the past that you’re not willing to put the bill, but with Tax Reform having passed, I am curious would Delta be willing to use some of this tax savings to put some off the bill? And secondly, previously Delta said that tax savings would not be used for share buybacks and I was just curious if that was still the case? Thanks so much.

The answer to your first question is, no. We are not using Tax Reform to pay tariffs and subsidies. We have no intent to pay any tariffs on the C Series. And the second question is again, given that we are not seeing a cash benefit in the next couple of years from Tax Reform given that we have NOLs, there’s no cash to go buy incremental shares with.

Thanks so much.

Final question, please, Ebony.

Yes, sir. Our final question will come from Edward Russell with FlightGlobal. Please go ahead.

Hi. I was wondering if you could update us on the status of the Korean Air joint venture? Have you sought regulatory approvals in Korea yet and are you still on track for implementation this year perhaps?

Yeah. We received the approval from DOT to move forward and we’re currently working…

Yeah.

… with the Korean authorities together with Korean Air. We anticipate receiving authority sometime hopefully in the first half of this year, is what our Korean counsel tells us.

Okay. And then implementation before the end of the year or in 2019?

As soon as we get approval we’ll move to implementation rapidly.

Great. Thank you.

And actually, Ebony, we’re going to take a question from one more and that’s from our local hometown newspaper, Kelly Yamanouchi.

Perfect. Kelly Yamanouchi with The Atlanta Journal-Constitution. Please go ahead.

Thank you so much for squeezing me in. I just wanted to check, on the impact from the airport outage and winter storm Benji, of the $60 million, so $45 million of that was revenue impact and $15 -- would it be $15 million in cost impact?

Kelly, this is Ed. $40 million was the rough impact of the outage and $20 million was the rough impact from the winter storm.

Oh! I see. Okay. And was most of the winter storm impact on the Atlanta hub?

On the -- no, it was in the Southeast, as you recall. But the Atlanta hub, obviously, took the biggest impact. We -- if we had 1,200 cancellations, most of which were in Atlanta that day.

Okay. Great. Thank you so much.

Hey. Thanks, Ed, Glen, Paul and Peter. That concludes the December Quarter 2017 Earnings Call. We’ll talk again in April. Thanks, everyone. We appreciate it.

This concludes today’s conference. Thank you for your participation. You may now disconnect.