Good morning everyone, and welcome to the Delta Air Lines December Quarter and Full-Year 2020 Financial Results Conference Call. My name is Cathy, and I will be your coordinator. 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. And I would now like to turn the conference over to Jill Greer, Vice President of Investor Relations. Please go ahead.

Thanks, Cathy. Good morning everyone, and thanks for joining us for our December quarter and full-year 2020 earnings call. Joining us from Atlanta today are our CEO, Ed Bastian; our President, Glen Hauenstein; and our Interim Co-CFO, Gary Chase. Our entire leadership team is available for the Q&A session. Ed will open the call with an overview of Delta's performance and strategy, Glenn will provide an update on the revenue environment, and Gary will discuss cost liquidity in our balance sheet. We have extended our call today to 90 minutes total to make sure we have plenty of time for questions. For analysts, we ask you to please limit yourself to one question and a brief follow-up, so we can get to as many of you as possible. After the analyst's Q&A, we will move to our media questions. After this, Ed will provide some closing remarks. 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 will also discuss non-GAAP financial measures, and all results exclude special items unless otherwise noted. You can find a reconciliation of our non-GAAP measures on the Investor Relations page at ir.delta.com. And with that, I'll turn the call to Ed.

So thanks, Jill. Good morning, everyone. This morning we reported pretax losses of $2.1 billion for the December quarter, and $9 billion for the full-year, capping the toughest year in Delta's history. We've been saying all along that this recovery wouldn't follow a straight line, with demand choppiness as COVID infections rose across the country, and government and public health officials issues travel advisories, our revenues, of $3.5 billion for the fourth quarter, was just 30% of last year's levels. And although we still have the tough winter ahead of us, we're encouraged by the progress that's been made on the vaccine front, and are confident that Delta is positioned to successfully lead our industry into recovery as the year unfolds. While 2020 was a challenging year, we delivered results for all of our stakeholders. For our employees, we prioritized protecting their health and safety, and preserving our culture. For example, throughout the past year we have offered and continue to offer an extensive employee testing program and paid protection programs for employees diagnosed, exposed, or at high risk of COVID-19. We have had remarkable volunteerism, up to 40,000 employees taking unpaid leaves throughout the summer to protect jobs and preserve cash. And in fact, we still have over 10,000 employees in the month of January out on unpaid leaves. And we have made it through this year without furloughing any employees. Our emphasis on taking care of our people is reflected in Delta's recognition this week by Glassdoor as one of the best places to work for the 5th year in a row, coming in seventh overall on a list of 100 large companies, the highest rank Delta has ever received, all in the face of a pandemic, really incredible work by our team. For our customers, we're keeping…

Thanks, Ed, and good morning everyone. As Ed mentioned, we started the December quarter seeing encouraging demand trends, but with rising COVID cases and travel advisory we began to see some weakness around Thanksgiving and into December. Despite that softness, the peak periods continue to outperform non-peak periods, and we've seen sequential improvement in total revenues, which recovered from being down 80% in the September to down 70% in the December quarter on salable capacity that was down 62%. On January 3, we had a $15 million ticket revenue day, and carried more than 250,000 customers. Both of these were the highest since the onset of the pandemic. And despite having meaningfully less inventory per sale giving our middle seat block, we outperformed on passenger revenue generation in the first nine months of the year. This is a testament to customers' willingness to pay a premium for the Delta difference. Leisure markets and sun destinations are the best performers in our network, with our approach of targeting salable capacity to match demand we are biasing restoring capacity to leisure markets. As result, roughly one-third of our domestic capacity is currently deployed into leisure destinations. Our coastal hubs, especially New York and Boston, are still some of the weakest areas in our network with demand in those hubs only 20 to 25% recovered. International demand remains weak and is limited to essential travel. That said, we continue to work towards opening additional COVID tested lanes of travel with no quarantine on arrival similar to our Atlanta and Rome -- Atlanta to Rome and Atlanta to Amsterdam flights. This will be important in restoring confidence in long haul international travel as vaccine rollouts continue. Our premium seat strategy is holding up well. Domestic premium revenues performed in line with main cabin in…

Thanks, Glenn, and good morning everyone. Let me touch on the fourth quarter in 2020, and then I'll turn to the outlook for costs in the balance sheet as we head into '21. Our December quarter pre-tax loss of $2.1 billion is about $500 million better than the September quarter, given the revenue improvement Glen just discussed combined with strong cost discipline. We reduced costs by approximately 50% from 2019 levels for the third consecutive quarter. More importantly, our costs were up just 6% from the third quarter on 30% capacity growth. And three quarters of that increase came from higher fuel. Total unit cost including fuel was down 4.5%, compared to 2019 on 44% lower flow and capacity. Our average daily cash burn for the December quarter was $12 million, half of the third quarters 24. We closed the year with $16.7 billion in liquidity and adjusted net debt of $18.8 billion up about $8 billion versus year-end 2019. Now, as we look into the year ahead, improving demand fundamentals will underpin a transition of our financial focus from protecting our liquidity, to positioning the company for a return to profitability and free cash flow. I will explain our approach to costs on our balance sheet as we make this transition. Let's start with costs. We need to stay flexible and maintain our discipline in order to position the company for the return to profitability Ed mentioned, as we expect continued choppiness and demand in the early part of the year. We've already taken structural steps to resize our business. Our two largest cost drivers, fleet and headcount are both 15% to 20% smaller than they were in 2019. Headcount reductions were a difficult, but necessary decision. It was hard to see 18,000 talented and dedicated co-workers leave, but…

Thanks, Gary. Cathy, we're ready for questions from the analysts, if you could give the instructions on how to get in the queue.

Certainly. [Operator Instructions] And we'll go first to Savi Syth with Raymond James.

Hey, good morning, everyone. I'm just kind of curious after the vaccine news that have you seen a change in booking behavior? And also, I know the testing requirement is probably positive longer-term for opening up international demand, but are you seeing travelers perhaps shifting to more domestic sun and sand destinations from international?

Savi, the vaccine deployment still is very early, and we haven't really seen much in the form of changed behaviors. And we hear a lot anecdotally, but it's also one of the weakest travel periods of the year in the current month that we're in. We've not seen the booking curve start to expand. We certainly hope to see that as we get through the quarter, and vaccines continue to become more prevalent.

Makes sense. And I'd be curious just to follow-up on some of the kind of the changing dynamics here. I was wondering if you have any kind of preliminary thoughts on how maybe the American and JetBlue partnership might impact the northeast position.

We're not going to comment on our competitors or speculate. We -- you know us well. You know we love competition, and I think competition makes you better.

All right. Appreciate it. Thank you.

Next, we'll go to Jamie Baker of JPMorgan.

Hey, good morning, everybody. First question, for Glen, sort of a follow-up I suppose on Savi's question. In normal times what percentage of international revenue is made up of trips that last fewer than four or five days? I'm asking because I would think a trip of that duration would be particularly jeopardized by the need to land, and almost immediately take a COVID test so that you could come home?

Well, I think that's dependent on how far customers are traveling. Generally, the longer they travel the longer the stay is. So, I think what we are seeing is a very good response from the closer in Caribbean and Mexico resorts, where hotels are now going to be offering that as part of the package. And so while there may be some choppiness, as there has been through this whole environment. As we start adopting those testing procedures we think in a pretty short order here that customers will adapt. And to the extent that travel does shift from short-haul international back to domestic, we'll be ready to move the airplanes back too.

And, Jamie, I'd like to add to Glen’s comment. We're still working obviously with the CDC. We endorse and support the testing requirements they've put in place. But a new feature is the inclusion of rapid testing into the mix, so it doesn't necessarily mean it only has to be a PCR test. And with the growth of antigen testing, the quality of antigen testing that's out there and the supplies in place you literally could get some of these tests done within a 10-minute interval shortly before you return.

Excellent. Thank you for that, gentlemen. And a question for Gary, how are you thinking about the optimum level of liquidity to carry in the future, sort of a post-pandemic question. And if you haven't reached that conclusion yet is that because it's just not a priority right now or do you simply need to wait and see how the recovery plays out before reaching a decision?

Jamie, I think what I would say is it's obviously less than today. We need some time. We have I think some work in front of us to think through where we ultimately want that to be. But I think the important point is we're getting started, and I think you see some of that. During the quarter, we prepaid our term loan that was -- matured in April, for about $3 billion. We mentioned during the script that we do plan to make a pension contribution which, as you know, we consider part of our financial obligation. So we are getting started. We don't have more specifics, but we are getting started. And we're very focused on that $350 million number that I described, and using the liquidity that we have, where it makes sense to drive that down.

And just a fine point on PSP, a simple yes or no question, have the terms been achieved, and if so are they the same as the first round? Thanks.

Yes, Jamie, it's Peter Carter. The terms are identical to the PSP 1.

Perfect.

We've already signed the agreements with the government.

Thank you, everybody. Take care.

Okay, thanks, Jamie.

Our next question will come from Hunter Keay of Wolfe Research.

Good morning. Ed, I thought a year ago we talked on this call about intentionally running lower load factors, and it's happening, but in a weird way. But you're getting paid for it, and your NPS scores are, as you mentioned, at an all-time high. So, unblocking middle seats is obviously a tactical choice, but even when you unblock them you don't have to sell them. So, I guess the question is, longer-term how are you thinking about running less full airplanes as an opportunity to differentiate yourself with that premium traveler?

Yes, Hunter, it is an interesting year, I'll say that. We've not made a decision beyond the end of March relative to our -- when to unblock the middle seats, but we have some time to continue to look at that. I think it's going to be very much driven by customer demand, customer input, the confidence customers have in their seats. But no question about it, we are generating a meaningful premium due to that decision.

Hunter, if I could have just a quick follow-up on that, is there -- I guess there are two ways, as we discussed last year, to do that. One is by creating more premium seats, and the other is by running lower load factors. As we go through this fleet transition where premium seats as a percent of our total seats continue to rise, and I think that's our primary way to satisfy the demand for premium customers is to continue to provide them with a higher level of quality.

Got it. Yes, thank you, Glen. And then on the 18,000 early outs there or can you achieve 2019 capacity without backfilling any of those positions?

Could you speak louder, we missed your question -- the start of your question, Hunter? Or I did.

Sorry, about that, Ed. That's cool. The 18,000 early outs, that the question is like how much of -- can you achieve 2019 capacity levels without backfilling the majority or the entirety of those positions?

We can't achieve 2019 levels without [of course] [ph] 20% of our people, no question about it. But there is that we don't need to backfill it entirely either. So there's a middle ground there.

Okay. And then just one more quick one since we have 90 minutes, just -- it's a follow-up on Jamie's follow-up. Have you -- Peter, have you negotiated the new strike prices for the ones attached to PSP 2?

We have, and it's $39 and some change.

Thank you.

And now we will go to Andrew Didora of Bank of America.

Hi, good morning, everyone. Glen, my first question is for you, kind of little tough to answer. But just curious about how you are thinking about the kind of the tradeoff between loads and load factor as you move through kind of the different phases of the recovery that you talk to, as I think as those travel restrictions ease, do you see -- can you stimulate more demand with price or do you think there is enough pent up demand in the network that now load factor [indiscernible] driver, just curious how you're thinking about that?

I think we're taking a yield bias as we go into the peak summer, hoping that demand exceeds supply. And if that doesn't materialize we can make those adjustments later. But we have anticipated that there will be a nice recovery in demand as we get towards the summer, and we've taken a conservative approach. I hope that answers your question.

And certainly helps a bit. And then, Ed, I know Gary gave some information about CapEx this year. But how are you thinking about that over the next few years, especially in light with your [indiscernible] to de-lever here. And what do you need to see in order to feel more comfortable in placing new aircraft orders? Thank you.

Well, Andrew, I think we're a little early yet in terms of thinking about the long-term CapEx fixture thinking that we move $5 billion of aircraft CapEx alone over there to Airbus out over the next several years. You know, to a degree to which we want to take positions and new positions coming up, we'll continue to evaluate that based on demand. But right now, I feel pretty comfortable with where we sit.

Okay, thank you.

And now we'll go to Brandon Oglenski of Barclays.

Great. Good morning, everyone, and thanks for taking the questions. Gary, can you talk about some of the structural things that you've taken out of the cost structure? Can you reach that CASM target by the end of the year? And I think you made a comment about incrementally like 40% to 50% of your fourth quarter CASM there'd be variable event, if I hear it right.

Yes, Brandon, let me start with the first question, that the structural costs, the two biggest ones in our business are really headcount and fleet, as we mentioned. The fleet really determines an awful lot of the infrastructure that we need from a cost standpoint. We expect to get leverage out of all of our costs associated with assets, we look about a third of our cost structure on a monthly basis is fixed. So as we grow we'll obviously get leverage there. And we have pockets of opportunity in terms of better utilization of just the overall system. When I think about what we're doing here, and this gets to your second question, there are kind of two big things that I talk about or that we all talk about internally as we think about this effort that we're embarking on. The first is baseline aggressively, and it's -- really have a laser focus on what's in the cost structure now, and what makes sense. You see that in the 50% reductions that we've been posting now for several quarters. The second thing we say is leverage the build, and that's really where the incremental thought process comes. That's about being very thoughtful about better leveraging the system as we start to rebuild. Now I think in terms of your second question, incremental costs, it's pretty simple the way we're thinking about it. It's just change in cost divided by change in ASM. And we wanted to give some guidepost as to the leverage that we do expect going forward for the 40% to 50% of December capacity comes in. I'll just note, if you take a look at the second-half of 2020, it was quite a bit better than that. And that is why I emphasized that comment in the prepared remarks about how we scale the system, particularly in the fourth quarter.

Okay. Thank you. I think those were my few.

Our next question will come from Ravi Shanker of Morgan Stanley.

Thanks. Morning, everyone. A couple of questions on business travel. You said that small and medium-sized corporates are coming back first. Are you surprised by that? And is that good news or bad news for, when the bigger guys come back when the world opens up again?

Robin, we're not surprised by that. These are small business owners who need to get out to their customers who have to work hard every single day to keep their sales and their business moving. And we do see a meaningful continued improvement in small business traffic, some that we can measure, others that we can't say, they're not under contracts with us, but we know that consuming important part of overall business travel. But I do want to talk about the overall corporate travel results. As you probably know, we extensively survey our corporate customers, our large corporate customers on a quarterly basis, in addition to just being with them on a weekly basis as to their thoughts on the return of travel. And the most recent survey that we conducted, which just ended a couple of weeks ago, indicated that 40% of our big corporate customers expect they will be fully back to 2019 levels by 2022. And another 11% said that they expect to be fully back by 2023. So that's little over 50% of the customers and these are the people everyone's speculating what's going to happen to business travel, these are the customers who make those decisions, 7% said we'll never be back to 2019 levels, only 7%. And 42% said they weren't sure needed more time to figure it out. So with all the dialog and speculation around the depth of business travel, just looking at that survey, it's very interesting. If you take the 51%, that said they'll be fully backed by '23, the majority of which is in '22. And then you consider the second quadrant of 50%, who said they'll never return or they're not sure of their return. And even if you assumed only 50% of their travel returns; that gets you 75% of the way back no later than '23, and I think that's a very pessimistic view on business travel. So what we've been talking about corporate travel, business travel returning, I felt optimistic when I saw those results, we know it's going to be different going forward. As I've said many times, it could be 10% to 20%, lower over a period as it's substituted and complemented, there'll be different types of travelers, different reasons for people traveling. But I think business travel has got a very, very strong opportunity return over the next two years, and we're going to be well positioned to carry.

That is great color on the demand side of business travel. Thank you for that. If I can just follow-up with the question on the supply side, clearly you guys are leaders from a corporate travel standpoint, but we have seen some of your LCC competitors, start to maybe find make some inroads as that traffic comes back. So maybe can you give us more color on kind of how you maintain that leadership and how you see the competitive environment looking like for business travel, when that does come back?

I think that the Delta difference has never been more pronounced than it is right now. And if you look at our share of corporate travel that is traveling, we have experienced the highest levels in our history. So, demand for our products and services is incredibly high for people who want it. And I think that's where our challenge remains is to continue to provide industry leading products and services that our corporate travelers want and need. And that's been what we've been doing over the past several years. And what we'll continue to do as we get to the end of this pandemic, and I think that's going to be what differentiates us. And clearly, there's always people who would like to take that travel away from you, because it is some of the highest yielding travel in the system. But I think that's our goal. And our mission is to stay ahead of that and provide it to people who want to fly Delta. And as opposed to a push, which is, "Hey, we can lower fares and triumphs, move to all the sides for the bottom of this."

Very good. Thank you.

And now our next question will come from Catherine O'Brien, Goldman Sachs.

Good morning, everyone. Thank you so much for the time. So my first question is actually about your products earlier about seeing a cash recovery before revenue recovery. And to try and square that with this 65% of your ATL is vouchers. As a really early perspective, bookings are coming until later in the year, are these majority new bookings or maybe there's a higher percentage of those vouchers that are corporate and you expect that early part of it probably be leisure, I would just want some color on that comment? Thank you.

Yes, Katie, some of that came through a little garbled, let me say this, I think the distinction is really about timing, in the Spring, what we expect and I mentioned it a few times, we think as confidence starts to build, what you'll see is that people will start booking for further out in the booking curve, and so we will have a build in our air traffic liability, that helps us cross cash breakeven, earlier in the Spring, P&L breakeven is something that will take a little bit more, that's when you know, our revenue is going to be covering our expenses. And that is something that we expect will lag a little bit behind the building bookings. And we'll be there by the summer, as we've mentioned.

Maybe just a little bit on our redemptions for the E-credit suites, we're running in the low to mid teens right now in terms of total revenues, with the E-credits coming back, and we expect that to stay below 20 as we move through this next period here.

And that number has been pretty consistent throughout the entire year. So we have a pretty good sense of what that's going to look like.

Okay, understood. And can you guys hear me a little bit better now?

Yes.

Okay, great, understood. And I know you guys have one of the furthest out periods through which people are doing, so that that makes sense. Maybe one of the cost structure of course, the pandemic has created a lot of pain for the industry. But I don't want to glaze over that. But, outside of speeding up your fleet simplification, have you found other opportunities to make the operation more efficient, perhaps maybe speeding up some of your automation plans in the customer facing side, wanted to share about other opportunities maybe born out of crisis? Thank you very much.

We have Katie, I'm not sure we're going to get into some of the specifics. I will say that the fleet simplification has been something actually, that we think is in our run rate. Today, you're seeing some of the benefit in the fourth quarter. But it is something that will have a much bigger impact as we move to rescale the network through '21. When I mentioned the concept of leveraging the build and maybe one of the reasons why I'm thinking through it, just as I'm thinking through it is there are a lot of things that we want to think about doing differently. One of the unique opportunities, we always want to make something good out of what has transpired. And it does give us an opportunity to start fresh. One of the reasons I think we're showing the kind of leverage as we rebuild is because we have a clean sheet of paper in some sense to start from.

I'd like to add to Gary's comments, I think it's remarkable, the work the team has done on the cost side to get out in the fourth quarter to the point where our all-in unit costs are 4.5% lower quarter-over-quarter despite having over 40% less capacity to work with. It speaks to the ingenuity of the team, rethinking as we speak, what not just the current environment, but the future environment is and these are not costs that we're deferring out into the future. We're making real changes, real time here. And it touches every part of our business. So it's been one of the, since the demand has been low, we've been all over costs the entire year, and the team has done really, really good, good working.

Yes, definitely fantastic staff, they're able to tell it earlier. Well, thank you all for the time.

Thank you.

Our next question will come from Duane Pfennigwerth of Evercore ISI.

Hey, thanks. Good morning. You covered this in pieces in a follow-up to a couple of other analysts. But one of the things that Delta has been talking about during this crisis was, which makes a lot of sense is, getting to 2019 CASM on a capacity footprint that's smaller. So I wonder if you'd kind of quantify, how much smaller a footprint can Delta still deliver 2019 CASM and is the thinking or the logic and the focus really more on CASM recovery and margin recovery before necessarily capacity recovery.

Why not? I'll take that. Listen, they're all interrelated. You need to put the revenue and the capacity out there and remind the demand of the CASM strategy, but they're certainly connected to the ability to drive costs down. But one of the things that we have been a leader for many, many years, really the last decade is on our up-gaging strategy, domestic particularly, and that will continue to be important as we move forward and while we talk about simple flying to fleet, we've taken some big steps in that direction. We're also going to be advancing the up-gaging of the domestic fleet at the same time. So that's a big contributor. We'll continue to be a contributor with both driving down costs as well as improving the customer experience in revenue including premium revenue opportunities. I said in my remarks that our goal is to get that 2019 unit cost by the end of this year on roughly 75% of 2019 capacity level. We're in this pretty good market. We hope our capacity level is higher. I'll be honest that the demand environment is driving, but that's going to be driven by demand, not by cost.

That's very helpful. And then maybe just broad brushstroke, you gave us the 75% by year-end. Is that how we should be thinking about your view of exit rate, and how are you thinking again, it can change, but how are you thinking about the summer as a percent of 2019?

No, we're not using that as a guide for capacity levels. We're using that for our own internal calculus in terms of where we need to get our cost structure down. It won't be 75% and maybe higher, and may be lower. I don't know. There is a long way to go between here and there, and we'll keep you posted as we go.

Okay. And then just last one, maybe a question from a different era, but could you walk us through the comps on revenue monthly, because it seems like your guidance foots well, January, February similar to kind of 4Q levels, but March, it seems like there is a wide range of outcomes on March and obviously the comps fall off materially middle of March. So I don't know if you have the data handy, but how much easier is March and April relative to kind of Jan fab?

Duane, we're not going back to get in monthly revenue guide, so I'm starting to have to pass.

Fair enough. The comps do get easier. Thanks for taking the questions.

Right, comps will give you -- it will be easier.

And now we will go to you Joseph DeNardi of Stifel.

Hi, thanks, good morning. Ed, you talked about the corporate travel environment in a scenario where corporate traffic is impaired 15% to 20%. What does that mean for your earnings power, and why shouldn't we be concerned that I guess that the fleet strategy is adding more premium seats into a declining premium market?

Joe, I wouldn't draw the conclusion that corporate travel is impaired at all. In fact, I've not said that, I think we may see lower corporate travel, but I also think it will be changed essentially a different mix. So I don't think we should be for either ringing alarm bells relative to the future of corporate travel. All indications is corporate travel is ready to start coming back and we'll come back pretty aggressively beginning the second half of this year. We are a smaller airline, was there 200 fewer planes today, we've already right-sized the business to be smaller, which will help protect the premium revenue sources and the margins of the business. And well, that's why we spent a lot of time on this call talking about our cost performance that's going to be the key to make sure that we protect the margins in an environment where corporate travel will be down for the foreseeable future. Maybe it's permanently down by a little bit of lower amount that I'm not ready to declare that call yet.

Could I add something to that? I think when you think about our premium products and services, you also ought to think that these are not only filled by corporate travelers. So as a matter of fact only less than a third of the seats are actually filled by the corporate travelers, and two-thirds are filled by non-corporates, and I think it's our ability to provide the right products and services for the non-corporates as well with the right sell up opportunities, so that we can match their preferences to our products and services. And I think that's really been one of the great hallmarks of the transformation is to say this is really available to everybody at reasonable prices. And that's been one of our key successes I think.

Got it. That makes sense. Ed, it's my understanding that the owners of your SkyMiles are getting access to quarterly updated financial disclosures for SkyMiles similar to those you provided when you marketed the transaction. It's my understanding that equity investors are not. So my question for you is how is that fair? How do you expect your equity investors to make a fully informed decision on your stuff if they're not being provided with updated disclosures for what you guys have proven is your most valuable asset? Thank you.

Joe, I'll let Gary take that because he was closer to the financial disclosure as well say. Well, the law department is a very important asset, our most important asset are people, Gary?

Yes. Joe, we too, we are providing some disclosures to those debt holders as you described. I think we agree with some of the sentiments that you have expressed over time. We see the value there. I think Glen did a good job of articulating how well it is holding up. We've been on a path to provide more information there. I think you'll have to be a little forgiving. We've had a lot on our mind and I think you can expect us to continue down that path for the reason, for the very same reason that I think you'd been asking about it, uh, because we do see the value there.

Thank you.

And now we will go to Greg Konrad of Jefferies.

Good morning and thank you. Just to follow-up on some of the past questions. I mean, I guess in terms of the competitive environment, your yields have held up relatively well, only down 2% or 3% on a relatively short booking curve with reduced corporate travel. I mean, how do you think about that potential trajectory for yield as you -- the booking curve normalizes and some of the corporate travel returns? I mean, is there opportunity to kind of be above where you were in 2019?

Well, I think there is always opportunity to be above where we were in 2019. That's clearly our goal, if it could be your short-term goal would be better. I think it's more medium to a long-term goal, but I think we are going to come out with a higher preference than we've ever had and that higher preference it will drive a higher demand. So -- which should enable us to work on yields as we come out the back end of this, so I think it goes back to how did people react to the pandemic and how to Delta's brand come through to us, and I think from all the research we've done from all the data that we see that our brand has never been stronger and demand for our products and services has never been stronger on a relative basis. And we're planning on capitalizing on that on the back end of this.

Thank you. And then just one quick follow-up, just a cleanup question, I mean, how should we think about a refinery sales for the year or any change versus what you saw in Q4?

Are you referring to the third party sales is that what you are asking?

Yes, sorry, third-party.

The phenomenon that you're seeing in the third party sales is anything we produce and do not exchange for jet fuel. We sell to third parties, obviously with our jet consumption being weighed down, we've had a lot more of those sales to third parties. So that is going to likely trend with how we rebuild our network and how much jet fuel were consuming. I do think it's important to point out that those sales have no margin. If you look in some of the reconciliations in the back of the release, you'll see that those are offset dollar for dollar rather on the cost side. So they're all wrapped into the economics of the refinery, but you should expect those to start trending down as our consumption picks back up and we're exchanging more for our own use.

Thank you.

And next we will go to Mike Linenberg of Deutsche Bank.

Hi, good morning everyone. I would like to just go back on the mandatory COVID test for international arrivals. Are you aware of any potential carve-outs like for those 24-48 hour roundtrips? And if you would have a vaccine to be vaccinated, would you be precluded from having to provide that test on entry?

Hey, Mike. It's Ed. We are still working through the guidance from the CDC. While we have mentioned - I've personally have had a number of conversations with Dr. Wakefield around this. We've mentioned the need to consider some waivers in unusual circumstances where, for example, COVID testing resources are not available, or if they are some relatively short term as you mentioned air travel. So, we are working through the implementation details. I think it's absolutely right thing to do for the long term for our industry. But, it's going to create some short-term hiccups.

Okay, great. And then, just a question to Glen and if possible, Peter Carter, I know that you had sort of deferred on check all American, what I am more interested is that it looks like as part of that transaction, it does look like that there's going to be a slot divestiture. And that would obviously be at airports that are near and dear to Delta. Are those slots that -- from what you know are those slots that only new entrants can bid on, or are those slots that all carriers can bid on? And if that's the case, is that something that would interest Delta? Thank you.

So, the DOT has not made it clear what the rules are with respect to those slots, and I think it's suffice to say that we are deserving a DTA without question because of our market position.

Very good. Thank you.

And now, we will go to David Vernon of Bernstein.

Hi, good morning. So, Ed or Gary, could you talk to how as we move through these actual savings, how and when discretionary cost may come back in the system? I am wondering if there is going to be a need to prime the pump a little bit on the cost side to prepare for what should be a pretty steep recovery as vaccination rollout.

Well, there will be some, David. We expect, for example, to have reactivation expenses around maintenance in aircraft through the remainder of the year. So, we expect that pace to continue. I am not sure I quite heard the non -- was it discretionary or non-discretionary expenses that you were asking?

I imagine you guys have curtailed a lot of discretionary expense, so there is marketing, right, new development or systems work, or training programs what have you. I am just wondering if there is going to be need to step up that spend ahead of recovery here in the intervening months?

Well, I prefer to think of it not to pick it up before recovery. But, we will have a need to revisit some of the things that we've done. If you take a look, David, at what we are pointing to in terms of incremental cost as we leverage the network, it does look different than what we saw in the second half of 2020. And one of the reasons is we do expect to have pressure in pockets. We have to be very mindful and balanced on those needs virtual realities of the business because we are determined here to turn the profit equation around and to be printing these releases with black ink this year.

Hey, David, this is Glen. Let me expand on that just a bit. We are -- leveraged maintenance expenses. We have got our staffing levels back to where we need to be starting the 1st of this year. We were still to pay in terms of some of the pay cuts -- the voluntary pay cuts that our employees took last year. So, there is a meaningful step up already in the numbers we gave you for the cash burn in the first quarter to get ready for the recovery. So, I am very comfortable with where we sit. In fact, if we wanted to continue to run the same cost structure and forego some of those expenses, you would see our cash burn coming down in a relatively meaningful level in the first quarter as well. But, we have maintained the same level of cash burn to get ready for the spring.

That's helpful. And then maybe just as a follow-up, you noted in the release the amount of CapEx that's come out of the budget over the next couple of years. I'm wondering if there's been a discussion at the board level about goal posts or guideposts for profitability before we kind of go back to renewing the fleet in earnest?

David, again, I think that question is a little premature. Yes, we talked about that topic of the board. We also haven't made any determinations quite yet. The goal we have at the board is very much what we said to you, is that we get to a goal is to get to a cash breakeven position for the second quarter and return to profitability starting in the third quarter. The pace of that recovery over the next couple of years, obviously, we still have some work to do there.

Okay, thanks.

Cathy, we're going to have time for one more question from the analysts, if you can see that.

Certainly, and that question will come from Joe Caiado of Credit Suisse.

Hey, good morning, everyone. Thanks for the time, Ed, Glen just a quick clarification question regarding your annual corporate travel survey, 40% percent of respondents say fully recovered by 2022. Are they referring to their businesses being fully recovered by 2022, or their corporate travel budgets being fully recovered by then? Or do they see everyone in the same?

Yes, corporate travel being back.

Got it, okay. Understood, it's helpful. And my second question, just it's clear that you're not seeing any elongation of the booking curve yet at this stage. But what about clicks or looks, stopping short of actual bookings? But is there any data like that, that you're tracking analytics on the Web site, something like that, that provide the basis for your recovery outlook on Q1 and sort of saying that you have a good shot of P&L break even in Q3? Or you just, hopeful that that's going to be the case? Are there any analytics that you can share with us, that maybe give you a better indication, thank you for the time.

Absolutely corporate, looks are actually doing quite well were 40% up quarter-over-quarter where we were last quarter in terms of looks, and look to book is very low. So people are looking, they're aspiring to travel. And they're just not ready to commit yet. And I think that's what really gives us that sense that there will be a time in which people feel comfortable again to travel. And that will turn into a click, turn into a booking. And so we're monitoring that very, very carefully. And we're looking forward to the opportunity to serve these customers as they come back.

Thanks for that color.

That's going to wrap-up the analyst's portion of the call. I will turn it over to Tim Mapes, our Chief Marketing and Communications Officer.

Well, good morning, everybody. I want to thank all the members of the media who have gathered on the call today, your interest in Delta is not only appreciated, it's never been greater. And we're very pleased today to provide you with an expanded period of time to make sure that we address your questions. I'd also like to thank Ed and Glen and the members of the Delta Leadership Committee, all of whom are on this call for their involvement as we turn the Page on 2020 and optimistically look at 2021. So, Cathy, if you could please review the instructions and mention to everyone how they go about asking a question?

Certainly. [Operator Instructions] And we'll go first to Alison Sider of the Wall Street Journal.

I was wondering if you could talk a little bit about some of the operational issues we saw around the holidays, Thanksgiving and Christmas. And what looking back and think were kind of the root causes of that. And, what if any changes you've made prevent the same sort of thing from happening again?

Sure, Ali, we certainly had a much better Christmas holiday than the Thanksgiving break. There were a number of factors going on in the staffing levels of the company with a lot of changes that we had implemented. And you couple that with COVID and some of the exposures into everyone seeing the No Fly capability to some of our staffing, which came in. We learned from that for Thanksgiving. We made some pretty aggressive changes in December in terms of getting the schedule fine tuned to anticipate that. And we were really, really good shape. And then we got hit with a massive storm in Minneapolis on the 23rd of December, which cost us probably a couple of 100 cancels, incremental cancels over that next couple of day timeframe which was concerning, but unavoidable unfortunately. The most important thing in all of that is one the Delta people. And I know there were some bloggers out there wondering whether the Delta pilots weren't doing everything, the Delta pilots were amazing through the full holiday periods and showing up and getting the flights going and giving up their holidays and their time away with the families to help the company out. So it had nothing to do with pilot staffing at all. The other thing was the number of customers who may have been canceled, while which is higher than we've been expecting, the vast majority of the people back to their destination, within hours of their looking to time. So, the teams did very, very good job and that issue was pretty much over by the 26, 27.

And that really manifests itself in the record Net Promoter Score we had in the December time period. So as I mentioned, despite the fact that we had to cancel some flights, our average lateness was not very late versus the original itinerary. And our customers over the holiday period were quite satisfied posting record high Net Promoter scores.

And just a follow-up, is there anything you can share about what you're seeing in terms of crew member infections at this point, I know that the pilots have said they saw some big increases in COVID infections in a late fall, I'm just wondering if you're still seeing that or if that's sort of been brought under control?

Well, we're a microcosm of the country and as the pandemic has accelerated over the course of the last few months in order to accelerate across airline employees as well. But our team's doing real job, they're not seeing it spread within the company, when they're at work, it's in community is where people are getting sick. So I tell you, every work category of the company is experiencing an increase in exposures as we're all exceeding over the last couple of months.

Thank you.

And now we will go to Tracy Rucinski of Reuters.

Hi, good morning. I'm wondering if you think we'll see COVID-19 testing and being required for domestic flights?

Tracy, I don't think so.

Okay. And just to follow-up with a separate question, should we expect to see a deal with Boeing this year for a 737 MAX order?

We're not going to speculate on that.

Okay, thank you.

Sorry.

Now we'll go to Claire Bushey of Financial Times.

Hi, I know Delta has been growing its own list of people who are not able to fly in the airline, but I was wondering if the company had any visibility into whether more names are being added to that Federal No Fly list, based on last week's Capitol attacks?

Sorry, your last part was real garble. Your question, are we adding increased numbers to our No Fly lists based on Federal information?

I was asking whether Delta knows if names are being added to the Federal No Fly list based on the Capitol attacks.

We certainly know that the TSA is looking very carefully at those that were in the Capitol building the writers and we're working closely with them and I do anticipate if the TSA is able to identify individuals who have people added to the No Fly List, no question about it.

Thank you.

And next we have Leslie Josephs of CNBC.

Hi, good morning, everybody. You mentioned that there was a lot of pent-up demand and also the hoarding of points from the Frequent Flyer Program. What happens if a lot of people try to redeem it once? Is that something that you're expecting based on Search data and other things? And then also you mentioned a recovery in the second half of the year, where are you seeing demand? Are those sorts of outdoor social distancing destinations showing more strength than another? But where's the demand coming from? Thanks.

Well, clearly leisure destinations are at the forefront of the recovery right now. And I think it doesn't matter whether or not it's a beach or a mountain view. That's where people are headed at this point in the recovery. And then your second question was about…

So if you're reporting, what happens if everyone, I know you're foreseeing they will or trying to redeem?

We're happy and really have are indifferent whether or not people who are booking are using points or whether or not they're using actual dollars, or whether they're using the E-credits, what we're anticipating is that all of those will increase. And we have plenty of capacity to meet that demand as we head to the second half of '21. So we're hoping that all of the above happens.

From talking to American Express, good partners there, it's clear that people place great value on their loyalty points with Delta and like to see the values grow over time. And so while they've been in the pandemic, we've seen redemptions down four points, because flying levels are down. But they haven't stopped spending on the card, our Co-brand card is as good if not better than almost any other product card, AmEx has. So it has great appeal. And we expect it's not going to be, not to be run on the bank type situation that you're referring to.

Okay, you could just adjust in words, the availability and things like that to write.

Absolutely. We're looking forward to that day.

Thank you.

And now we will go to David Koenig of The Associated Press. David?

Hi, real quick question. Unless I missed it, I have not heard an update in a while and the number of people you have banned for not wearing face masks. Is there a current figure on that? And any changes in cabin policies?

I think that number is north of 800 at this point, David.

Okay, very good. All right and then how many of those are since last week, you know?

That number is not a huge number but a number.

And now our question will come from Kelly Yamanouchi of The Atlanta Journal-Constitution.

Hi there. I wanted to ask about profit sharing with no profit sharing next month from 2020 results. So I was wondering what impact you think that may have on employees and satisfaction? And also wondering if there's if you think there's a possibility of profit sharing a year from now?

Well, I think everyone is aware why there's not profit sharing in this year. And I can tell you employee satisfaction is at a very, very high level. I mentioned during this trip, Kelly that we just were awarded as the Seventh best employer by Glassdoor. Glassdoor is an entirely employee driven acknowledgement, the company hasn't had any, any input or any insight into that. It's purely by employees talking about their employers. So if that gives you a sense for the sentiment, the sentiment is very strong. The volunteerism with the 10s of 1000s of people that have taken unpaid leaves of absence over the year indicates that, we've been mindful of the fact that there won't be a profit sharing payout. And we're providing added services and assistance around financial health and financial well being and credit counseling and other services to employees that may need it. We're going to be ramping. We have been ramping it up and talking about it. We're going to continue to talk about it on an ongoing basis going forward. We have people providing that support. And relative to next year's profit sharing, I certainly hope we'll be paying it, it's hard to speculate it now, it's just only a couple weeks into the year. But I'm hopeful that we'll be paying it.

Great. I also heard mentioned during the call so far about the value of connecting economics, but also the importance of point to point in focus cities. I was wondering if you expect how you expect the Atlanta hubs role to be different going forward in terms of size or the role in your network.

Well, clearly the size of Atlanta is relative to the size of demand in the United States. As the World's largest hub, it is a microcosm of global airline demand. So we expect it to recover as the airline continues to recover, the two things that I would say is that we're going to continue to work on average gage, which I think is something that's really important and that will be bringing more details about bigger airplanes with better products and services. And so, I think you'll see the departures get back to 2019 levels at some point in the future. But before that, you'll probably see the employments start to rise dramatically and using really the gauge lever as much as the departure level. This is as you know, our most valuable asset here in Atlanta and we're very proud to be a part of the Atlanta community, and it has led us in the rebuild of our network so far.

Great, thank you so much.

Our next question will come from Ted Reed with Forbes.

Thank you for taking the questions. I have two questions for Glen. First one, Glen, when you said earlier, Delta is ready when you are talking about when you come back, where you talking about in terms of capacity or something else?

I think that when customers are wanting to fly on Delta, we'll be ready for them. And I know you've heard a long time and I know you remember that slogan. So it's hearkening back to a little bit of history there with topic.

So you're just saying, you'll be ready though. You'll have the capacity suited to what you anticipate customers will want?

Correct.

All right. Secondly, we've been talking a lot about the middle seats being empty and being up, you said a powerful tool. How are you measuring what the value, how can you tell that these are so valuable to your customers?

Our revenue premiums have never been higher. And so customers are valuing the Delta difference. And I think that's how we're looking at that is when you look at our revenue production versus our competitive set despite having the least amount of syllable capacity, our revenues have kept pace. So I think we're seeing not only the highest share of corporate demand we've ever had, although albeit on depressed levels, but a real differentiator when customers are shopping for that apply jobs with some of our competitors.

And you think that due to middle seats being emptied longer and others?

I think it's an entire Delta difference. Clearly that's a piece of it. But whether or not it's the Delta care standard, whether or not it's the Delta people, which are really at the heart of that. But this is one component of ensuring that Delta is seen as a brand you want to associate with.

All right. Thank you. I appreciate it.

And now we'll go to Dawn Gilbertson, USA Today.

Hi, good morning. I also have questions on your middle seat policy, Ed and Glen I know you both said no decision has been made yet, but Glen, your comment about the second phase is the middle seats will be a very powerful tool. It sounds to me at least like you're certainly leaning towards unblocking them. A, is that a fair assumption. B, Can you talk to us about the timing of this decision when will you decide whether they are blocked beyond March 30th? Thank you.

Dawn, as you said, no, I would not say that's a fair assumption. What we said is that when the demand returns, which is that next inflection point that will inform our decisions around what to do with the middle seat. So we've not made any decisions to unblock them post-March 30.

Can you give us a sense of when and when will you make that decision, because pretty still, I know the booking curve is still short, but you're kind of optimistic about summer. So will you make that decision in the next month, the next few weeks, a couple of months, can give us any sense of that please?

Well, we continue to monitor it on a regular basis. It's not imminent. We have to have some bit of time, but it's going to be informed by customer sentiment, demand, in addition to message, we have a lot of other seats still on our planes, and confidence in travel relative to COVID and vaccine deployment. So, yes, it's not a clear line, and there is hope that has to go into that. We know that it has been important not the only, but one of the important reasons why Delta has been able to continue to earn an even higher revenue premium during this past year than we historically had. And so we want to be very careful as to how we make that decision.

Thank you very much.

And now we will go to [indiscernible].

Hi, yes. I was wondering if you could talk a little bit about the changes in the competitive environment, American JetBlue Alliance, the Northeast, and then how that -- how, I guess, you intend to respond to that?

No. I think we're very confident in our products and services, and we compete well against both those carriers individually. And I'm sure we'll compete very well against them together. So we have a lot of confidence in our products and services in the Northeast.

Okay. And then there's also been some expansion of some of your focus cities, Raleigh-Durham, Austin. This helps the plan to return there and [compete] [Ph] there as well?

Focus cities will be an important part of our portfolio moving forward. And we'll continue to work on making sure that we have the great capacity in those cities as demand returns. And so we're looking forward to demand continuing to return in all of our focus cities.

Thank you.

And now we will go to Robert Silk with Travel Weekly.

Well, thanks for taking my call. Simple question, do you see, has CDC given any indication? I know that A4A had called for -- wanted testing there on you all, wanted testing to be put in place, but in exchange a rollback of travel bans. Any indication if that could be -- coming?

Your question, I'm sorry, was a big garble. Could you repeat that? We're having a hard time with some of our communications this morning.

Can you hear me a little better now?

Yes.

Okay. So the question is if there's indication or sense from the federal government or CDC that with this blanket testing requirement that there could be a rollback of travel bans, which is something that the airlines has called for? And I'll also follow, another question is any sense that vaccines ultimately could be included in the mix, if you're vaccinated it relieves testing requirements, there could be an either/or?

We're still working with the CDC on the specific testing strategy and deployment. This is something that we -- Delta endorse. I know our industry similarly endorses. We would like to see the travel restrictions lifted once the testing protocols are in place, and that will be a decision by the new administration, is my understanding, when they take office. And -- but I think by having the testing protocols in place it then gives confidence to the regulatory authorities to start to lift the bans, which is why we endorse the testing strategy. Your question relative to vaccines, yes, obviously once vaccines are at scale we would hope that the vaccination evidence would supplant the need to show a test result. But of course, we're still working with the authorities on that.

Okay, thanks. [Technical difficulty]…

Cathy, we have time for one final question for the group, please.

Certainly. And that will come from David Slotnick of Business Insider.

Hey, everyone, how are you? Thanks for the question. I was just wondering what the phases, the three phases that Glen outlined earlier. With that timing in mind and with the response you have gotten from the corporate travelers, is Delta still expecting a recovery to 2019 revenue travel levels in line with the rest of the industry with the, I think it was 2023 or 2024 with the IATA, and if you're able, previously forecasting or has that moved up pretty well?

Again, I'm sorry; it's hard to hear the question. Let me take a shot at it. The information that we shared on the call about corporate travel is the sentiment we're getting from our own customers. As you are aware, we are the largest carrier of corporate travel amongst the U.S. carriers, so I think we have probably some of the best info, referred to IATA or any other group that, you know, I don't know how they determine what 2023 to 2024 looks like. I wouldn't take too much confidence in that. But what our corporate travel managers are telling us is that 50% expected to be fully back by 2023. The other 50% is largely uncertain, but we expect a meaningful amount of that travel to return as well.

Makes sense. So, does Delta have a forecast for when they'll return to 2019 travel levels?

The numbers we're comparing are 2019 volumes, yes.

Okay, thanks.

Thank you, David. With that we'll turn it over to Ed to make some final comments again. Thank you, everybody, for your time this morning.

So, thanks, Tim. Just in closing, I think you can all appreciate that 2020 was a difficult year, but we're on a recovery path. We see that the start of it beginning to crystallize here, particularly with the vaccine development, and as you've heard earlier, when Glen and Gary, I'm confident that we've got the foundation in place to return Delta to revenue growth, profitability, and free cash flow generation. We're committed to keeping our culture intact and our employees engaged. We'll continue to listen to our customers and put them first in order to further enhance their experience on Delta, increase their loyalty, and drive affinity towards our brand. We're very focused on the innovations, which is allowing us not only to enhance the customer experience and drive efficiency, but also to tackle the big challenges that still lie ahead for us. We'll remain very focused on cost performance. We've talked a lot about that during the call, to ensure that leisure-led demand environment that emerges, we'll be able to respond to it. And finally, we're committed to reducing debt, strengthening our balance sheet and creating long-term shareholder value, and allowing our owners to participate in future upside without dilution. And we have the very best employees in the industry, and we're ready to see this strategy through, which gives me optimism, confidence in our ability to thrive and emerge as the industry leader. So, thanks again for joining us today. And we look forward to speaking with you soon.

And that concludes today's conference. We thank you for your participation today.