Please standby, we're about to begin. Good morning, everyone and welcome to Delta Air Lines September Quarter 2021, financial results conference call. My name is Jenn 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. I would now like to turn the conference over to Ms. Julie Stewart, Vice President of Investor Relations. Please go ahead.

Thank you, John. Good morning, everyone and thanks for joining us for our September quarter 2021 earnings call. Joining us from Atlanta today are CEO Ed Bastian, our President, Glen Hauenstein, our CFO, Dan Janki, and Ed will open the call with an overview of Delta's performance and strategy. Glen will provide an update on the revenue environment and our brand momentum, and Dan will discuss costs suite in our balance sheet. Similar to last quarter's call, we scheduled today's call for 90 minutes to make sure we have plenty of time for questions. For analysts, we ask you please limit yourself to one question and a brief follow-up so that we can get to as many analysts as possible. After the analyst Q&A, we will move to our media questions after which Ed will provide a brief closing statement. 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 also discussed non-GAAP financial measures in 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 over to Ed.

Thank you, Julie. And good morning, everyone. Appreciate you joining us this morning. The September Quarter marked another important milestone in our recovery. We achieved our First Quarterly profit since the start of the pandemic with the pre-tax results of $216 million and a pre-tax margin of nearly 3%, despite still missing 1/3 of our revenue base compared to the same period in 2019. We saw a full return of domestic consumer travel to 2019 levels, as our customers safely returned to the skies and our people delivered industry-leading operational performance through a very busy summer once again, showing why they are the best in the business. I want to thank every member of the Delta team for your hard work and dedication during a truly historic summer where we faced the challenges of standing up our operation after such unprecedented disruption. I'd also like to recognize the Delta teams who played a central role in transporting 10,000 Afghan refugees that were evacuated from harms way in Afghanistan over the last couple of months and delivering needed supplies. It was an amazing effort that involved everyone from Delta's flight crews to operations control, to government affairs, to our charter and fleet team. Our revenue recovery in the September quarter reached 66% of 2019 levels, progressing from 51% in the June quarter and just 25% at the start of this year. This was led by strong consumer demand, growing improvement in business and international travel, and reflected the resilience of some of our diverse revenue streams which are already back to or higher than pre-pandemic levels. While the recovery in business travel paused in August and early September as case counts increased, demand has picked up since Labor Day. Last week was our top corporate revenue booking week since the start…

Well, thank you, Ed. Good morning, everyone. Generating a profit for the quarter, even with the third of our revenue still to come, is a great achievement and is another important milestone as we continue down the path of recovery. Over the last 18 months, we have stayed true to our core strengths in our commitment to the customer, from improving our position in key markets to growing Infinity with our high-value customers, to driving outperformance in premium products and diverse revenue streams, we are extending our competitive advantages. The September quarter started out strong and consumer demand environment remained robust throughout the quarter. We had a profitable summer in Europe as vaccinated U.S. tourists were welcome back to the continent. With the variant taking hold in early August, we saw a temporary pause in demand, especially business travel as many companies delayed office reopening plans. Despite the variance impact, we remain within our initial guidance range with revenues coming in at down 33.8% versus 2019 or 2/3 restored. This represented a 1.9 billion sequential improvement in total revenue to 8.3 billion. Total unit revenue improved 17% versus the June quarter, on an 11-point improvement in load factor and a 4% improvement in yield. Since Labor Day, we've seen improvement in demand with daily cash sales growing each week. Domestic Consumer revenue remains fully recovered to 2019 levels. And we are seeing continued improvement in domestic corporate sold revenue, which as Ed mentioned, is at the highest level we've seen during the recovery. We expect continued improvement throughout this quarter. On the international front, we continue to see positive trends led by Latin with passenger revenues 84% recovered versus 2019, a 20-point sequential improvement driven by leisure traffic to beach markets. Transatlantic recovery improved by 20 points versus the June…

Great. Thank you, Glen. The teams world-class capability and continued commitment to delivering best-in-class service and reliability certainly sets the foundation for our financial success, and this quarter was no exception. The Delta people continue to execute well through a dynamic environment. Across our teams, we are focused on preparing the operations for the next leg of the recovery, taking the steps required to position Delta for the future, where we build upon our industry leadership position in the years ahead. Let me start with a few highlights for the September quarter. Even with the pause in the pace of recovery, we achieved our goal of profitability for the current quarter with earnings-per-share of $0.30, pretax profit of 216 million, and margin nearly 3%, and revenue of 8.3 billion. Total third-quarter operating expense was $7.8 billion. That was a 12% increase from second Quarter, driven primarily by non-fuel costs from the continued restoration of the airline. Fuel expense, $1.5 billion increased 5% sequentially as lower fuel prices, partly offset by 11% increasing capacity versus second quarter. Adjusted fuel price per gallon was $1.94, was 8% lower than second quarter, driven by refinery contribution versus a loss in the second quarter. We realized 4% fuel efficiency versus same period in 2019 as we continue to capture benefits of our fleet renewal. Non-fuel costs of $6.3 billion increased 14% sequentially. That was on revenue growth of 30% driven by higher capacity, double-digit improvement in load factors. We saw a step-up in costs in the quarter to support the operational performance, higher revenue capacitor volumes while we positioned for further demand recovery. The impact of these costs combined with a network that was 30% smaller, resulted in September Quarter non-fuel CASM 15% higher than 2019. Now, moving to cash flow and the balance…

Thanks, Dan. As a reminder, please limit yourself to one question and a brief follow-up. Jen, can you please remind the analysts how to queue up for questions?

Thank you. [ Operator Instructions]. And we'll go first to Jamie Baker with J.P. Morgan.

Hey, good morning, everybody. First question goes potentially to Glen and Dan. So pre -COVID, I had asked Paul about the amount of time that it would typically take Delta to recalibrate the higher fuel prices. I'm not staring at the transcript, but its estimate of time was 4 to 6 months, which was an improvement from historic levels. So my question I guess for Glen, is whether the booking curve is deep enough right now that you might actually be able to recapture the top-line more quickly than that? And similarly for Dan, whether there's anything we should be thinking on the costs or operations side that could accelerate the process and basically just trying to understand whether four to six months is still the right estimate for us to be using.

I would just comment. I think we're a bit in uncharted territory here as the recovery continues. And well, I think it might be difficult in the very short run despite the fact that the booking curve has moved in a bit, that I would estimate that 4 to 6 months is about right because we believe that demand and capacity will fall back into very good equilibrium by next spring, which would put you inside that window.

Okay. All right, so no structural changes that you can identify that would greatly alter it one way or the other then?

No. I think -- I would think that that would be where we would expect it to manifest itself in the same window.

And then second question, just as it relates to the international demand that you're seeing from Europe since the Biden announcement, can you say how skewed the improvement is to the European point-of-sale. I'm just trying to reconcile some data that we have here that largely excludes euro point-of-sale, just trying to get a feel whether it's 70-30, 60-40, 80-20 something like that.

Well, that time of year is actually -- the winter season has more European sales than summer season. So we're talking probably about more of a normal split if that's what you're asking, 60% U.S. origin, 40% European origin. And the interesting part about this is that we have seen an uptick in both sides, not just European sales. The assumption here is that there are a lot of Europeans in the U.S. that we're worried about getting back. So very nice uptake as we get to November and December beyond the 212(f) being lifted.

Okay. Very helpful. Thank you, Glen.

We'll go next to Duane Pfennigwerth with Evercore ISI.

Hey, thanks for the time. So in terms of the cost guidance, which is where we're getting a bunch of questions this morning. Can you just bridge from the early September commentary that you'd miss being down. You're over 2 by a little. And today where you see it up, 6 to 8 on a unit basis. What are the main buckets? What changed over that call in 5, 6 weeks.

Let me go -- What I'd say is first number 1, capacity as we pulled down the schedule in the fourth quarter, was driver and then also the pace as it relates to the rebuild and preparing for demand for 2022. Those were the two factors that led to that.

Okay. And then on fleet restoration, would you put some numbers to that, perhaps? What is that in 2021? And what do you expect that to be in 2022. And do you have a sense for when we cross over from leap restoration investment to the benefits we were hearing about a while ago from fleet simplification. And thanks for taking the questions.

Yeah. The restoration when you think about bringing aircraft into service through 2021 to '22, we'll bring back into service 160 to 170 aircraft. And that's really the element that vast majority of that rebuild is focused on bringing those aircraft back. And then as we restore to more fully restored capacity levels to '19, that will dissipate and trail off and be transitory in nature from that perspective.

Duane, this is Ed, if I could add a couple of points on the overall cost outlook. We are committed to our long-term guide and we'll talk more in December at the Capital Markets Day as to where we see costs going over the next couple of years. Clearly in our business, there is a race to try to capture the available demand and standing our business back up after an unprecedented level of disruption and ensure that we are not experiencing any kind of operational limitation in our ability to get our service levels and customer expectations met. So we put the paddle down to get the staffing in place to get our service levels back, to get the quality of performance that drives the brand premium that this Company stands for, and it may take us a few extra quarters to get down to that '19 and below levels, but that's still our goal.

Okay. I appreciate the thoughts. Thank you.

We'll go next to Brandon Oglenski with Barclays.

Yeah. Good morning, and thanks for taking the question. And Ed, you kind of answered it there; but I guess, Dan, is it still right to be thinking 2019 costs are the benchmark here, especially just given all the wage inflation that we're seeing across the economy?

Yes, it's certainly a clear marker for us. We believe as we restore this airline will be at or better than 2019 cost levels.

And so is that just literally a function of the network getting back to where you were utilizing that pre -pandemic, especially with longer-haul flying coming back?

Yes, there's -- certainly as we transition through this and we restore and get through the rebuilt, that will dissipate. You bring back the capacity you get that leverage. You also get the balance between the domestic and international. And then when you think about the more structural elements, the elements related to fleet simplification start to come through and you get those benefits related to that, both in fuel and fuel efficiency and also in our operating costs.

Brendan, this is Ed. I can echo what Dan is saying. We've taken the opportunity over the last year to rebuild this airline back piece by piece. And we're learning a lot more, about what we want to keep forward and retain, and what parts of the business that we don't need to be retaining and some of the cost structure until there is efficiency, whether it's a catering, whether it's in our operational performance; literally every part of our G&A, every part of our operations. Hard to see when our capacity is still only at 80% or more below -- at 2019 levels. But we are very determined to make certain that we retain the value for the period of time we've just been through and that efficiency will show through. It's just going to take a little bit longer and that's why it will be really important in the Capital Markets Day that we show you the pathway to get there. Yeah.

Thank you.

We'll go next to Catherine O'Brien with Goldman Sachs. Catherine O’Brien: Hey, good morning, everyone. Maybe just one last follow-up on the cost outlook. So I think you guys have made the point clear that we probably going to see more of an ASM recovery, not only in total amount of capacity deploy but of course on a network allocation as well as you restore on the longer haul, widebody flying. But I guess just -- if we could talk a little bit more about pace. Do we need to get to a full restoration for that to occur or going from 90% to 100% recover do we suddenly see a real acceleration in the leverage you're going to get across the business or just any high-level comments on how to think about pacing as we approach that, thanks.

We'll give you certainly more color and put a pin on it as we go to Capital Markets Day, give you the outlook and also get more into specifics around '20 to '22 guidance when we give you that. The real thing I think to look for is the 2 elements. It's going to be bringing back -- bringing down that rebuild costs related to the fleet, and when we get that restored. And that's going to really pace pretty closely with the return of capacity. And then obviously the incremental leverage. So I think on that piece you're going to get it throughout that period of time, but it's really that getting that fleet rebuild component down. And that will happen as we progress through that period. Catherine O’Brien: Okay. Got it. And then maybe just one more international. So at TNBC this morning, you noted that the Company saw a tenfold increase in international bookings following the announcement on the U.S. borders a couple of weeks ago. Can you just help us frame when we'll really start to see that momentum build in revenue? It sounds like there's some of that hitting in November-December time frame driving your more optimistic outlook on those months versus October. But are there also any early indications maybe for next spring or summer? Would love to hear when you think we're going to start to really see that show up in revenue a bit more. Thanks.

Sure, Katy. Yes, we're going to see it in November and December. We're looking at a 10-point recovery improvement, just going from October to November. October, we're estimating at the 65% restoration level, which is where we've been for the last couple of months and received the jump-up in November and December. International was a piece of that, the only driver of that. Business travel is an important piece of that as we see that continuing to improve. We see in our bookings I mentioned I think on the CNBC piece this morning that just in the last week, our cash sales were up 9% week-over-week and that's a trend we've been seeing here for some period of time, steady growth. So I think you're going to see it then. I think like we saw here in the summer, there's going to be a mad rush to -- for those that want to travel, that need to travel to get out and travel. You may see a little bit of a pause as you get into the January, February timeframe. But I think Spring and Summer is going to be another tick backup at an even higher level and I -- my view is that you're going to see, particularly for Europe, which is the biggest part of our international base, on Spring-Summer next year that look very much like the Spring-Summer which has been through here in the U.S. Catherine O’Brien: Okay. Thanks for that.

We go next to Hunter Keay with Wolfe Research.

Hey, good morning. Glen, these surveys that you say, are you asking corporate travel managers these questions or the travelers themselves? And also, how are you contingency planning if we get into late next fall and business travels up only 80% of what it was pre -COVID, what sort of contingency plans do you guys have in place?

Well, first of all, I'll answer the first part of the question. That is a survey that goes out to travel manager. So that's their reply.

Okay.

Second, and we do other surveys that go through our SkyMiles program for frequent travelers and their return to travel. And I would say that those surveys are pretty well in sync. Clearly, consumers feeling much more confidence than business travelers in terms of their -- what they expect to fly more, but more and more, we're seeing the business component accelerate. That's pretty exciting for us. And then on contingency plans, I think we are committed to remaining incredibly flexible. We know we're not fully out of the woods yet. We know there's going to be more chop. It's not going to be a straight line out, and they'll be twists and turns. Whether it's fuel, whatever it is, that's part of our business here and we're always managing to -- the sum of all the inputs. As it relates to business travel, what I'd say we're super excited about is the fact that we were able to report a profitable quarter despite 40 -- 60% of our business travelers still not traveling. And we know that number is greater than 60 for next year, we don't know whether it's 90 [Indiscernible]. It's somewhere between ending next year, between 80 and 100. But what -- if you look underneath the hood there, I think the point that we're trying to point out is that demand for premium products is actually exceeding our coach products with the business traveler out. So I think the big epiphany for us was there's a much broader demand for this than just business travelers. And if we have to pivot to demand sets for high-end leisure to fill those seats, that [Indiscernible] is a trade-off we'll make, and I think one that we can be quite profitable with under any scenario.

Okay.

And if I could go some of Glen 's comments there. None of us know what the -- if the classic business travel, the volume is going to come back. Obviously in our industry, we're bold, we're optimistic that it's going to come back, plus, but I think we -- it's also safe to say it's going to come back differently. And there's going to be some level of demand erosion, no question about it. Some element of behavioral change, no question about that, but there's also new opportunities to travel. Hybrid for one gives you a very different outlook in terms of where people work, how they work. I've spoken a lot publicly over the last number of months that video technology, not just doesn't force you to stay in your home, it actually allows you take the office with you when you're out on the road and stay connected better and many, many other reasons. So we're going to talk about that in December because we know that's a big question on a lot of people's minds as to what the future of business travel is. And I see as many bright spots coming out of this recovery as some of the demand destruction elements that video technology and other things and behavioral changes has ripped during this pandemic period.

Okay. I've always thought that the lack of unions wasn't so much a cost advantage for Delta, but a service advantage. Is there a way that you can get a little bit more creative next year to push that a little bit hard to drive some favorable CASM without sacrificing the frontline morale? Could you follow me?

I'm not going to comment on the benefits or lack thereof of unions. We have a union; we have a great relationship with our pilots and we have a lot of our employees are non-union. We have great relationships and great productivity from them as well. What I would tell you about our people is that they are incredible. The reason we have the revenue premium we have is not that we're necessarily smarter than anyone else. We provide the best service, the best reliability, the best product in the sky. And it's not a cost game, it's a performance game. And it drives better revenues, it also drives more productive cost efficiencies. And we talked a lot over the last few quarters here about the need to get our staffing levels back. I've mentioned this morning that we're bringing back 8,000 people, brought back 8,000 people this year. Don't forget, we had 17,000 that retired at this time a year ago. So we are getting significant flexibility and productivity from the team as we get out to the future. And well, our people will continue to lead the way.

Okay. Thank you.

We'll go next to Conor Cunningham with MKM Partners.

Hey, everyone. Thanks for the time. One issue I think people struggle with is just the baseline for capacity given the fluidity in the demand environment. You mentioned all the headwinds to revenue and higher fuel. I'm not asking for a number unless you want to give one, but how has the thought process changed towards first-half capacity over the past couple of months? I heard -- and I also heard that you made the comment about 2019 capacity being -- potential being achieved in the second half. Is that your expectation right now?

I think we've remained very fluid throughout the entire crisis and that's our commitment to remain very fluid until we get to -- back to full restoration. We don't know exactly when that's going to be and we put the marker out there, right now we wanted to be bigger than we are quite honestly, we couldn't be. We could be a little bit maybe. But not much bigger, without risking operational performance issues, like we've seen at some of our other carriers. We want to stay where we are confident that we can actually fly the schedules that we put out there. We think those and we talked about rebuild costs and getting people back and getting planes back. We're doing all that now in the background with the capability of achieving a 100% of 2019 sometime in the back half of next year. Whether or not as we get closer, we actually use that flexibility up or down, we'll give you more color on what those decision points are at Investor Day. But the name of the game for us right now is maintain flexibility. And as Dan alluded to, even in the quarter we're in, we're slightly below where we thought we'd be in terms of revenue production, just about 8 to 12 weeks ago.

Right. Okay. And then to follow up on Hunter's question for premium products continue to perform really well. And I guess in retrospect, it makes sense of pent-up demand and just the consumer being quest for cash. But how do you, how do you think about the premium cabin as demand starts to normalize? Do you think the changes are now like structural or is it really just too early to tell in it depends on what the demand environment is later on down the road?

We believe they're structural and we believe that through the pandemic, we've created kind of a new class of customer, which is the high-end consumer that wants these products that maybe didn't have as much access to them because they were given to the business customer earlier in the booking process. So that's one of the things we're wrestling through as we [Indiscernible] to does our fleet accommodate the higher levels of demand? I think these are things we'll be discussing more with you at Investor Day. But we do think that there's a higher level of demand for those products moving forward.

Okay. Thank you

Conor, I don't think it's only pent-up demand and consumers being flushed with cash. Consumers are looking at travel differently and they're looking at a lot of things differently in a post-pandemic world and the quality of their provider, the care which they're provider takes to them, it doesn't matter whether you're an airline, you are a hotel, or a restaurant, whatever you are, is continuing going to drive preference and drive influence at a higher level than ever before. And as we consider ourselves the premier provider of service in our country, we're going to continue to gain, hopefully, an outsized part of that share going forward.

Appreciate the thoughts.

Well, the next is Savi Syth with Raymond James.

Hey, good morning, everyone. Just a quick follow-up on Conor's question to start with. As you think about the capacity restoration, is there a difference between your narrow-body and wide-body fleet ability just given the fleet changes?

Well the answer is yes. There is a difference. I don't know what the question is on the difference. What I would say and we'll explain this a little bit more as we have our Investor Day, but where we sit today in the inefficiencies of our wide-body fleet, we're flying a significant number of wide-bodies at a stage length that they weren't designed to fly. So for example, if you fly between Atlanta and Salt Lake City today, all of our flights are flatbed, all of our flights have premium products and all of our flights are on planes that weren't designed to go 1200,1500 miles. Not only is it driving and the opportunity of not flying that long-haul, but it's driving a higher cost structure in the existing domestic environment, which will normalize as those plans get retrenched. Now, if you ask why, they're there, they're there because when we were in the earlier parts and we were in the cash mode, we wanted to use the planes that didn't have maintenance requirements, that didn't have -- that had available pilots in them. So now as we work to the rebuild, these were all part of the rebuild cost that we've got to identify and explain a little better. But this should have a double-whammy impact improvement because you get better cost structure in the domestic environment and a heavier waiting for the lower-cost international. And they're really two distinct components that are synergistic with each other.

That's helpful. And if I might, you've announced quite a few, I think in Boston new markets out of Boston. I was just wondering if you could provide a little color on the growth out of Boston and just, are those plans going to in line with the pre-pandemic strategy, or is there something different or newer or different opportunity that you see out of Boston?

I think we were clear about our intentions to be Boston's preferred airline in pre-pandemic. If you go back and listen to the calls, then it was something that was our intent and we saw some opportunities in the pandemic that availed themselves and we're believing that next summer is going to be a relatively robust demand set to Europe. So we wanted to fill out some of the big demand international markets from Boston and then some of the opportunistic markets in the pandemic for Boston business. Very happy with our -- we have a great team in Boston. They doing a phenomenal job. We have a great facility in Boston. Best in class up there. And I think when you put the suite of our products and services, it really is a winning hand for Boston.

Makes sense. All right. Thanks, Glen.

We'll go next to Chris Stathoulopoulos with Susquehanna International.

Hey, good morning. Thanks for taking my question. So as we look at the second half of next year and the expectation that you can recover to 2019 capacity levels, and drive the Nonfuel CASM X below 2019. Could you just help us and again, this is more of an Investor Day question, but we think about efficiency -- I think you said about a billion dollars off 2019, but we think about efficiency fuel initiatives and then also the change in the network with some of these longer haul markets that you're adding to come to mind [Indiscernible] out of Boston. Just how we could put some color around those buckets as we think about your CASM X into the second half of next year. Thanks.

Chris, this is Ed. It's way premature to be getting into 2022. CASM X and I appreciate the interest level, we're going to give you that in a couple of months in December. We need to have a better handle first on how the recovery shapes in 22. That's going to drive our plan, but I will confirm that our goal is to get at or below 2019 levels. And once we have our scale back and once, we get the operations, restored to where we want it to be.

Okay. And just a follow-up. What is the time to restart some of these international flights with the easing of, I think, it's inbound from UK, EU, and a few other areas? Is it few weeks, or is that -- should we think about that more of as a first-quarter event? Thank you.

Well, on the margin, we're adding back some flights into the winter schedule. But as you know, winter is never the peak season for Europe travel. So what we're really thinking is, given the lifting of these embargoes, it's going to make for a great spring and summer season next year. A lot of our rebuild costs and a lot of things we're preparing for to have our European largely intact by summer.

Thank you.

The next is Dan McKenzie with Seaport Research.

Hey, thanks. Good morning, guys. I guess first question is for Dan, referencing some of the balance sheet investment-grade commentary, big picture. I'm just wondering if you could put a finer point on the time frame for achieving that. In the past, Delta has been able to fix its balance sheet over a five-year period. Should we be thinking five years to get to that or could you potentially get there sooner?

We're going to talk about the multi -- your outlook as we talked about at Capital Markets Day. Certainly, the balance here between investing in restoration of the Balance Sheet are going to be key priorities that will be multiyear. And I do think that you referenced Delta 's historical track record there. They've shown real discipline if you look at over that period of 2010 through '19 of paying down debt while still building and investing in the airline. And those philosophies will be true as we think about this going forward, and that will be certainly part of our outlook, how we balance both at investing and restoring the balance sheet and the pace of that as part of Capital Markets Day.

Okay. Understood. And then, Glen, on corporate travel being nearly 80% to 100% recovered by year-end 2022, just looking at where we're at today, can you just help us connect the dots on the various buckets of spend in the fourth quarter here. How are the small and medium-sized businesses behaving versus say the large corporates. And then if you could just help us slice that a little bit differently, internationally versus domestically. So areas of corporate travel that are lagging the recovery year versus areas or segments that are in line or doing a little bit better?

Well, certainly on the positive side, the unmanaged travel for corporate -- for business is running between 5 and 10 points ahead of managed corporate travel. Those smaller, hungrier companies out there hitting the road sooner than maybe some of the bigger multinationals. And of course, it's more heavily weighted for domestic now, but we've seen a huge uptake with the 212(f) restrictions being lifted. Europe was about 15% restored through second and third quarter for corporates. We've seen that double to 30% just in the last couple of weeks. So seeing a nice uptick there, as well as South -- deep South America, which was pretty much non-existent for the long-haul South America, starting to show some signs of life. And then the [Indiscernible], of course, have been the Pacific, which is still largely locked down. But we are expecting those to improve significantly as we move through here as the vaccination rates in important places for us like Korea and Japan are now approaching between 70 and 80%. So hopefully, we get some good news out of that region of the world starting in the next few months here. And that's really all the color I have at this point.

Sure. Thanks for the time you guys.

Well, the next to David Vernon with Bernstein.

Hey, good morning, guys. Thanks for taking the time. I want to ask the cost question very differently. The capacity is supposed to be down 80% for 4Q. Can you give us a sense of where the operating resources are relative to 2019 in the fourth quarter? I'm just trying to think about how many crews and pilots and staff do we have who are working to produce [Indiscernible] schedule in relation to this capacity being down 20% level. Is it down in line with that, is it down less than that? Can you help us frame the productivity issue?

The -- I'm not sure I fully understand the essence of the question in regards to are you asking where the workforce is relative --

Yes. So productive capacity. If you had a 100 people producing a 100% last year, and now you're producing 80, do you have 85% of the resource from 2019 producing that 80. I'm trying to get -- understand the deleveraging that's happened because of the pull-down of capacity.

I think as we -- the way to think about it is when you think about productivity measures by group, as you restored, you're getting those productivity levels back and moving closer or beyond 2019. So that's whether it's in the airport, whether it's with catering or other types of activities. Those progress as you bring that back. There are also situations where we're hiring ahead to ramp up. So those are the unproductive people. That's where you're training them, you're scaling them before you inject them into the operation. And that's when you call out specifics associated therewith the rebuild.

Yeah. I was just trying to see better sense for if you could help us frame how the negative impact of the productivity loss.

Let me take a stab at this, David. We have a lot of premium pay over time. The lack of "productivity" given where we sit with the rapid rebuild of the airline, getting people in position, getting people ready for the future, as Dan said, just covering the operation. And so you have not only just more people than capacity relative to where we are eventually going to end up once our business is restored. But on top of that, you've got a higher level of added costs going into the current funnel to ensure that you're delivering great service and building for the future at the same time on a reduced basic capacity. So that's a big part of it. You also have the restoration costs and maintenance, and training, and other elements that are another layer and I appreciate you can't see that in the numbers broken out as clearly. But again, these are the things we're going to talk about in December at the Capital Markets Day to show you that trend line. None of us has ever been through something like this, as disruptive as this. And as it builds back, I can appreciate the questions. But we see it maybe a little more clearly over a longer period of time than looking at it in the existing quarter.

That's helpful. Thanks. If I could just squeeze one more in there, Glen. As you think about when we should be getting back to prior period load factors? Are you expecting the airline to get back to that high '18 level in 22 or 23. How should we think about load factor recovery?

Yeah, I think this summer we were running load factors that we're within that couple points of 2019 levels, so I would expect by next spring and summer that the industry would be back in that zone.

Great. Thanks very much, guys.

Thank you.

Well, the next to Mike Linenberg with Deutsche Bank.

Hey, good morning, everyone. Dan, can you just walk-through kind of the primary elements on the next [Indiscernible] going from 19 billion to 22 billion subdue and to December quarter and I guess seasonality plays a role there?

When you think about it, there's really three components related to it. One will be you work through -- right through the elements of free cash flow and the movements, right? Its earnings. It's ultimately the movement in working capital, which is the air traffic liability. And then it's ultimately Capex. So you have the guidance framework as it relates to the earnings framework. Capex, we've told you is 3.2, for the year gross Capex worth 2 billion year-to-date, say, implies 1.2% in the fourth quarter. And then you also have the working capital movement, which is really the air traffic liability. And normally in a period of time like this, when you think about that, that would be -- that will -- might move in a more seasonal traditional time in the low teens. But as we've talked about throughout this goal, we're not necessarily in traditional, seasonal periods of time. So we would expect that to be slightly more muted than that, as it relates to movement from it. But those are really the drivers there.

Great, very helpful. And then just second question to Glen. What percent of your revenue is actually tied to government contracts. I know we have craft and we have the TSA City-Pair program and then obviously you recently moved the Afghan people and I realize maybe the revenue number is a small component. when you think about some of the good press that you've gotten from some of your government services you have to weigh that as well. So a multi-prong to ask on that place in your business. Thank you.

Mike, this is Ed. I'll take a stab at that. I was just asking the same question the other day. And you've got to look at it at a 2019 level. Not necessarily at today's level, because government travel is way down, given where federal government has largely not open. When you see a lot of the offices, people aren't out on the road yet. But it's collectively in the 100s of millions of dollars for Delta on an annual basis when you consider the charters, you consider all the federal workers that do travel on Delta. We have a pretty significant share of those. When you consider the U.S. mail that we carry, it's a pretty large revenue base.

We'll now go to our final analyst question.

And we'll go to Ravi Shanker with Morgan Stanley.

Great, thanks for putting me in. A couple of follow-ups here. The 75% recovered for November and December, I just want to understand if that's what the booking curve is telling you now, or is that a number that you are extrapolating based on the current rate of improvement? I'm sorry. If things continue to get better here in the next 68 weeks if you can end up with a better than 75% recovered number for November and December.

Clearly, it's both. It's what we have on hand and what we expect to get, so it's the combination of those two.

Okay. Got it. And just a follow-up on the strong mix that you're seeing in the premium cabin. You said that that was structural. A, do you see that evidence in the surveys you're doing with people post flying? What's the evidence of that? And B, once the -- once corporate and international fully come back, let's say this time next year, do you expect to be flying more premium seats than in 2019 if this bounce, you're seeing is truly structural?

Yeah, I think both of those we're intending on answering it. Investor Day is to show you how we see this evolving and show you all the research behind why we're confident that more premium seats are a direction we want to hit.

Okay. Thank you.

That will wrap up the analyst portion of the call. I will now turn it over to Tim Mapes, our Chief Marketing and Communications Officer to start the media questions.

Well, good morning, everybody. Thank you to the members of the media who are gathered here today. We have about 20 minutes to wrap these. If we could just remind you one question and a quick follow-up. We'll try to cover as many of these as we can. And Jen, if you could remind everyone how to access their question.

[Operator Instruction]. And we'll go first to Alison Sider with Wall Street Journal.

Hi, thanks so much. Just wondering -- Just given the [Indiscernible] prescriptions coming off in they're saying early November. What do you have to do between now and then, if anything, to spool up the international operation? What sorts of preparation do you have underway?

Well, we have a -- a lot of the airplanes are still in the desert, so we're working on getting those already. We're also doing a lot of interior work. I think one of the exciting things that we want to talk more about next year is by next summer, all of our long-haul international will have our new premium economy. So that's another thing we're working on. That premium economy is really a new class. We started it in '19, we didn't get very far with it. But by the time we come out of the pandemic in '22 to most, all of Europe will have the new premium economy seats, which is something along the lines of a little bit better than domestic first-class and a class that we're really excited about. So getting that configuration redone. Our airports are another key thing we've been working very hard on our airports whether or not it's Seattle with the international terminal. Whether or not it's Los Angeles, which should be largely complete by next summer. There's a lot of work going back into the rescaling and it really is, it's all across the airline.

In LA, there's obviously we have a lot of seats for sale too. There are a lot of empty seats as we've been really only carrying close to 50% loads for much of the last year across Europe. So there's a lot of work going on, as Glen mentioned, but there's also a lot of fleets that already exist in the marketplace.

How are you thinking about your pipeline of pilots, longer-term over the next year, what retirements are looking like, adding what the competitive landscape is for pilot hiring going forward.

Well, we're going to be hiring over the next several years. I think at the present time, we're looking at hiring a couple thousand pilots over the next 18 or so months, forward to that question. At the same time, we had a pretty considerable number retire a year ago, about 2,000. So we've got this mapped out pretty effectively. We obviously need to forecast where the international demand is going to go to ensure that we're able to supply it and have pilots in the right spot. But we're, I think, doing pretty good job of keeping our pilots and our staffing availability for crews in line with how demand is shaping up.

Thanks.

The next Leslie Josephs with CMBC.

Hi, good morning, everyone. Just 2 quick things on your hiring. Are you seeing lower average salaries now and do you expect that to continue compared with 2019 as you ramp up? And then on the premium -- paid premium cabin, what are those pace load factors, and is this -- is with September a record and where are things trending now?

I'll handle the first, and Glen can handle the second question, Leslie. On overall labor cost, yes, we are getting a nice juniority benefit as we bring in a whole new generation of employees at essentially every level of the Company. We had close to 20,000 people retire a year ago. So the top end of our most experienced -- many of our most experienced employees had chosen to retire and that's open up opportunities for younger people. So there is a benefit to that. We have not changed our hiring weight skills in order to bring people in. We're able to bring people in at our current scales and not having any issue locating great talent.

And as it relates to the premium seats, we're selling 10 points higher than we did pre-pandemic and we always run relatively full in terms of sat load factor. But a lot of those are complimentary upgrades. But what we're seeing is people are willing to pay us for those seats. And that's why we want to create more over time. I'm not going to give away what we're going to talk about in Investor Day, but making sure that we have enough to satisfy both demands for people who are willing to pay us for them as well as having an adequate supply of complimentary upgrades for our most valuable customers.

Okay. Thanks. Do you have any number and how many people you want to hire in 2022?

We haven't put that number out yet, but we'll certainly be hiring pilots, we'll be hiring flight attendants and mechanics. I'd say it’d probably be the three main areas we will be hiring next year.

Thanks.

[Operator Instruction] We'll go next to Ted Reed with The Points Guy.

Hi. Thanks for taking the question. I want to ask first about Boston, your goals there. Do you have goals beyond the top 10 Atlantic and the top 20 domestic destinations? And in line with that, as for your competitors, if you're growing in Boston, don't they need to grow too, and wouldn't that be part of their case to the Justice Department that they also need to grow?

Well, Ted, I think you know us well enough to know we're not going to comment on what we think our competitors should or could do. But I think what we see is our products suit the Boston market quite well, being a premium carrier and having Boston be a very affluent city with a huge component of corporate travel. We think that we are best suited to deliver the best products and services to the customers of Boston. And we're going to, as I said in previous calls, we don't want to be the biggest, we just want to be the most loved and the most profitable.

All right. Thank you. And I need to ask about the vaccine. Do you think you can get where you need to get in terms of vaccines without having a mandate at Delta, without threatening firing, can you get where you need to?

Yeah, well, that's our goal, Ted. The goal here is to get people vaccinated. And we are on a plan to get people vaccinated. I think it's one of the reasons the order came out from the administration was they were uncomfortable that not enough companies had plans to get their people vaccinated. And we already have a plan. And the plan's working well. We're at 90% at the present time, vaccination. We expect to get to 95% as we get into November. And there'll be some exemption requests. So there undoubtedly will be a small number of people that will not be vaccinated. I think it's going to be in the 1% to 2% range, relatively small amount of people. And we'll have to assess that when the time comes. But right now, I think we're fully aligned with the intent of the EO.

Thank you.

We'll go next to David Koenig with The Associated Press.

Hi. Somebody, I think it was Les, who already asked about the pay for new hires which I was interested in. What are you seeing in terms of how many applicants you're getting per job? And how does that compare to pre-pandemic as some of your competitors have commented on that?

Hey, Dave. We're getting great interest in new hires coming to Delta. The flight attendants, as an illustration, we just opened up 3,000 new jobs for flight attendants. We had I think 35,000 to 40,000 applicants. We had to turn off the application portal within a week because we had so many applicants coming in for those opportunities. So we're not having issues in terms of attracting great talent. I'd say the rate of interest is comparable. Obviously, it depends on work category. Some jobs are more technical and we're having to go deeper into some pools to locate talent. But broadly speaking we're doing a great job bringing people to the company.

That's what I was also interested in. For some of those - the technical jobs, for example, you're not having to raise pay to attract people in this labor market?

We're not. We're not.

Okay. Thank you very much.

Thanks, Dave. Jen, we have time for one final question, please. Then we'll turn it over to Ed for closing comments.

We'll go to Robert Silk with Travel Weekly.

Yeah, hi. Thanks for taking my question. I'm wondering if you all have received any [Indiscernible] what's the date for the reopening of Europe and these other countries, Brazil, so forth? Have you gotten any sort of guidance on that? How important is it to get that specificity soon?

Well, I think we have a lot of intelligence on that, and it varies by country and it varies by region. So we're monitoring that very closely, and that's clearly a key component to getting international business travel back. But what I would say is that when people are able to travel, even with the tighter protocols such as testing and documentation requirements, we are seeing significant uptake in corporate travel. And I point to Europe, which is not yet reopened, yet our corporate bookings have doubled since the announcement of reopening, and we'll see exactly how that plays out as Europe does reopen in early November, how much further recovery we see there. But very encouraging. People want to travel. And as soon as they're capable of traveling and they have some certainty around it, I think we've seen it doesn't matter whether it's business or leisure, they want to get out and travel. Just to be more specific to your question though, I think it’s - we don't have an exact date as to when the 212(f) is [indiscernible] - it's early November.

Okay. Is it important to get that date?

Important to get the date? Absolutely. We've been asking every day.

Okay, thanks.

Thank you. With that, we'll turn it over to Ed for final comments.

Well, I want to thank everyone for joining us this morning. A lot of questions, a lot of good questions. And we look forward to taking you through our longer term strategy as we get into the Capital Markets Day in December and outline for you where we're taking this company and this brand, and I think it's a very exciting future. Also want to thank the people of Delta for the great work and the spirit of service in terms of how you took care of customers and each other over the course of a very, very challenging summer. Our team is truly the Delta difference, and we continue to be inspired by the accomplishments of the entire Delta team in this environment. So thanks to everyone for joining us today. We look forward to seeing you in New York at the New York Stock Exchange on December, the 16th.

That concludes today's conference. Thank you for your participation today.