Good day, everyone, and welcome to the Delta Air Lines March Quarter 2022 Financial Results Conference Call. My name is April, 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 today’s presentation. As a reminder, today's call is being recorded. And I would now like to turn the call over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

Thank you, April, and good morning, everyone. Thank you for joining us for our March quarter 2022 earnings call. Joining us from Atlanta today are our CEO, Ed Bastian; our President, Glen Hauenstein; our CFO, Dan Janki. Ed will open the call with an overview of Delta's performance and strategy. Glen will provide an update on the revenue environment. And Dan will discuss cost fleet and our balance sheet. After the prepared remarks, we will take analyst questions and we ask – please limit yourself to one question and a brief follow-up so we can get to as many of you as possible. And after the analyst Q&A, we will move to our media questions. 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 factor's that may cause such differences are described in Delta's SEC filings. We'll 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 over to Ed.

Well, thank you, Julie. Good morning, everyone. We appreciate you joining us today. Before we begin, I want to acknowledge the humanitarian crisis in Ukraine. We are proud to have raised the Ukrainian flag at our global headquarters in Atlanta in solidarity with the people of Ukraine. At Delta, we've provided meaningful financial and operational support to assist the people of the region in connection with our partnership through the International Red Cross. This morning, we reported March quarter results, marking another important step forward in our recovery. We generated $200 million of free cash flow in the quarter and a 10% operating margin in the month of March. Our revenue recovery in the March quarter reached 79% of 2019 levels, five points ahead of the midpoint of our initial guidance. As expected, January and February generated operating losses. As Omicron receded, we saw a surge in demand, supporting an inflection to a solid profit in the month of March. Delta continues to provide best-in-class operational, customer and financial results in a dynamic environment. This results from the dedication, professionalism and hard work of Delta's more than 75,000 people worldwide. Restoring capacity during a period of rapid demand recovery has proven challenging for all of us in the industry but Delta people continued to lead the way, I want to thank our customers for their patience and understanding as we navigate the challenges of ramping up operations into the peak travel period. And I know, our teams have been working incredibly hard, and I want to thank all of them for what they're doing for our customers and for each other. We rewarded our people with a special profit sharing payout in February based on the second half of 2021 profitability and announced a 4% pay increase that's going to…

Thank you, Ed, and good morning, everyone. With robust demand, growing preference for the Delta brand and quick actions to recapture higher fuel prices, we achieved significant milestones in the month of March and have momentum as we head into the summer. None of this would be possible without our people, and I couldn't be prouder of the Delta team and the results that they are delivering. A huge thank you to all. During the March quarter, we generated $8.2 billion of revenue. This was approximately $500 million higher than our initial guidance in January, resulting in a revenue recovery of 79% compared to 2019. We continue to execute a disciplined approach to keeping capacity in line with demand. For the quarter, capacity was 83% restored versus 2019 and at the low end of our initial guide and below the industry. The quarter was a tale of two halves. While Omicron depressed demand in the January and early February, we saw an unparalleled demand recovery from Presidents Day on. Our revenue recovery versus 2019 progressed from 70% in January to approximately 80% in February to 85% in March, with momentum building into April. March was the first month in two years of positive unit revenue compared to 2019 with PRASM up 1% and TRASM up 3%. Premium products once again led the way with domestic premium revenue approximately 100% restored to March of 2019 levels. We also achieved our highest ever monthly cash sales, as Ed mentioned, our highest direct sales, highest co-brand acquisitions, highest co-brand spend and highest cargo revenue in the month of March. Business travel volumes reached the highest post-pandemic levels we've seen and, importantly, in March, corporate fares inflected to positive versus 2019 for the first time. This drove an acceleration in the recovery of business…

Thank you, Glen, and good morning to everyone. Starting with the highlights of the March quarter. Our operating loss was $793 million, was better than our expectation. As anticipated, we saw losses in January and February due to Omicron and seasonal weakness. And we inflected to a solid profit in March, with a 9.4% adjusted operating margin. Fuel expense was $2.1 billion. It increased 32% sequentially from the December quarter. Fuel price per gallon averaged $2.79 for the quarter. This included a $0.07 per gallon benefit from the refinery. Non-fuel costs rose 6% sequentially, with non-fuel CASM up 15% compared to 2019 on 17% less capacity. We generated operating cash flow of $1.8 billion. We reinvested $1.6 billion into the business, resulting in free cash flow of $200 million. Delivering a profit in the month of March and positive cash flow for the quarter were important achievements, especially considering the impact of Omicron and higher fuel prices. We ended the quarter with adjusted net debt of $20.9 billion. This was more than $1 billion better than our initial expectations due to strength in cash receipts that Ed and Glen spoke to. We repaid $1.4 billion of gross debt, ending March with nearly $13 billion of liquidity. Now turning to the outlook. We expect the June quarter non-fuel CASM to be up 17% compared to 2019. The two point increase from the March quarter is driven by higher selling-related costs, an expected 45% sequential increase in revenue and our anticipated step-up in maintenance costs on a similar level of capacity restoration. With the first half non-fuel CASM in the mid-teens, which is two points higher than planned on lower capacity, we expect to be closer to the high end of the full range of up 7% to 10%, implying the second…

Thanks, Dan. April, can you please remind the analysts how to queue up for a question and then go to our first question.

Absolutely. [Operator Instructions] And we'll first hear from Mike Linenberg of Deutsche Bank.

Oh, hey, good morning everyone. Fantastic outlook. I guess, I want to focus on capacity with -- so my question is to Glen. Look, you operated 83% of 2019 in the March quarter and things have obviously gotten a lot better for the June quarter. I mean I just sort of think about the Omicron impact in January and February, it was pretty impactful. And yet we're just moving up one point sequentially, 83% to 84%. So I guess, Glen, is this as much driven by the fact that it's all about maintaining operational reliability and really just running the best schedule that there is and that will drive not just the revenue premium, but overall revenue and less re-accommodation costs? And I guess as a sort of corollary to that question, are you watching what's going on over in Europe and seeing how several European carriers are being forced to cancel because of the spread of this other variant and so you guys want to make sure that you're just well prepared and well reserved?

I think it's all of the above. I think you asked and answered your own question there. You did a great job of articulating our viewpoint is the priority is to operate reliably and the other priorities do not get ahead of demand. So this is a very recent demand increase that we've seen. The uptick just started about six to eight weeks ago, in late February and March. And so as we get through the year, if these demand trends continue, we have the opportunity to take another tick-up or we could pivot in a different direction if warranted. But I think, it has made it very clear to us that being nimble until we get to the very end of this is the key to our success. And I think we've done a very good job as a company being nimble in our offering throughout the pandemic and really been closest to actual demand if you look back at what demand was.

Great. We and investors love the discipline. Thanks.

Next, we'll hear from Catherine O'Brien of Goldman Sachs.

Hey, good morning everyone. Thanks so much for the time. So maybe a bit of a follow-up to Mike's question. I've been hearing from some of your peers and other industry folks that labor supply is continuing to weigh down on the ability to ramp up capacity. And as we enter 2Q, labor might actually be a bit tighter than we thought at the beginning of the year, just given Omicron-driven training delays and higher attrition rates. I guess, first, are you seeing the theme at Delta? And if so, did that impact your 2Q capacity plans versus your plans back Investor Day at all? Thanks.

Hi, Catie, this is Ed, I'll take that. We've been at this for the better part of the last 18 months getting ahead of it. And we hired over 10,000 people last year. We hired another 4,000 people already this year. So we've hired 15,000 people. And we are largely where we need to be on staffing. Yes, pilots have a training pipeline and it will take some time before pilots are fully in category and where we want them positioned. It'll probably take another year or two. Flight attendants, likewise, we're hiring flight attendants and there's a queue as to how much many people we can put through the training pipeline. But that's not where the real congestion is. It's in the airport, it's on the ground experience, it's making sure we have our suppliers ready and positioned. One thing we did last year, really almost two years ago now, is we took over a lot of the functions at the airport that had been outsourced, catering, cleaning, wheelchair pushing. And we have Delta people in position, and we've hired Delta people to do it to make certain that we get the best experience for our customers. And you know what? Not only are people doing a much better job at it, we're also doing it much more efficiently and effectively and customers are appreciating it. So the labor situation, you're right, has changed pretty dramatically over the course of the last two years. We've been out ahead and that's why you look at our operational stats over that time frame, we've led the industry consistently.

That's great. And maybe just a quick one for Glen. The AmEx remuneration is a bright spot again this quarter. But would I be correct to think maybe Omicron created some noise at the start to the Q and maybe we see that accelerate even further as we move through the year? I know you just reiterated your goal that you said at Investor Day for $5 billion plus contribution this year. But if we do see an acceleration from 1Q, might still be some upside to that. And thanks again for all the time. Congrats.

Yes, I think we're always hopeful for upside. I think what we're excited about when we dissect the spend is that you can really see the spend moving from goods to services and particularly increases in the airline spend on the card. So those are very encouraging statistics for us to continue to monitor as we move through the year. But I think you’ve really seeing that as the moving away from goods and the movement towards experiences and services.

Anything further Catherine?

No. That was it from me. Thank you so much for the time.

Next, we'll hear from Brandon Oglenski of Barclays.

Hi. Good morning and thanks for taking questions. Glen, you provided an update. I think you said domestic corporate travel 70% recovered and international 50% in March. Can you just give us some insight on how those bookings are shaping up here early in 2Q? And then second to this question, how much do you think the international testing requirement is holding back trips across the Atlantic right now?

First, I'll answer the second first. I think that is the next leg up that we see in the demand set, and we think we have very quite robust demand. But there certainly is, in the minds of some consumers, some hesitancy to go abroad and risk being caught, not being able to get back because of catching COVID. So hopefully, we can see that roll back in the next few weeks here. I think the – we are hearing good signs from Washington. We'll see, hopefully, that comes out here. And that would be one of the final things that we would need in place for us to really say that COVID is in our rearview mirror. So hopefully, that happens. And then your second question was what, I'm sorry.

I think – when you were talking about, I think, domestic corporate travel at about 70%, international at about 50% in March, can you give us any insights into how that's improving in 2Q?

Absolutely. And I think the one that we're really excited about right now is Transatlantic business which for the first time last week crossed domestic restoration in terms of volume. And so that was a big improvement from where we had been just six or eight weeks ago. So it does look like Transatlantic business is returning robustly, and that's very exciting for us. And I think what we're also excited about is this survey that we just got back that said 90% expect to travel more in 2Q than they did at 1Q. So I think when we report to you next quarter, we'll see both of those numbers continuing to move up. And of course, the big question mark is when will Japan and China reopen? And that's probably not in this next quarter and hopefully some time this fall, but that's a little bit further out. What I would say is when these countries are open, business returns quickly. So to Korea, to Australia, we've seen very rapid increases in business demand as those countries have opened.

Thank you.

Next, we'll hear from Helane Becker of Cowen.

Thanks very much, operator. Thank you for the time everybody. So just a couple of questions on the cost side of the equation, I know, there's not a lot you can do about fuel. But on the labor cost side, to attract people, I mean, I think, Ed, you said you're not going to have to hire that many more people this year. But to retain people, are you finding that you have to raise salaries more than the 4% that you've already slated for May first?

Hi, Helane, no, we're not. One of the great things about our brand is throughout this period we've been able to attract and bring in the 15,000 people I talked about with fundamentally not having to change the scales we've used in select high-priced markets, some sign-on bonuses, very judiciously. But fundamentally, no, our scales are intact and the 4% increase May 1st helps.

That's very helpful. Thank you. And then my other question is like kind of unrelated, but I think – I feel like, it was Glen who mentioned that you saw a record cargo number in March, I want to say. So I'm thinking about what you're carrying and what you're seeing in air freight rates and why you think it was so strong and whether that can continue into the second quarter, and if it's meaningful. Like 18 questions in there, Glen.

Right. Well, clearly, we know about supply chains trying to catch up. And clearly, airfreight has been one of the ways to relieve that pressure. And so we've seen airfreight rates continue to move in a favorable direction. I'd say the one caution I have right now is the closure of China. And China has been, of course, a very strong, strong market for us in the cargo area. And with Shanghai closed and we're literally not flying to China right now until Shanghai reopens, so that's going to weigh a little bit on cargo revenues as we move forward. But as that does reopen, then you can see that pent-up demand for goods that need to get shipped out of China and potentially even another leg up. So I'd say, we're in a temporary pause right now because of the issues in China, but I expect, as China comes back online, and I don't know the exact date, I don't think anybody does, but we could see an even stronger demand coming out of that.

Off a good year last year.

Yes, off a great year last year.

That’s very helpful. Thanks. Thanks team. Very helpful.

Conor Cunningham, MKM Partners.

Hi everyone. Thanks for the time. You've really invested in the operation over the years and just the customer experience in general. And maybe this is a follow-up to what Mike was getting to. Just, there's been a lot of meltdowns around you. And I'm just curious on how you, as Delta, go after those customers that have maybe been displaced by another airline. I think about like Boston this past week and just curious on how you attract them and make them permanent Delta passengers.

Well, thanks, Conor. I think, again, throughout the pandemic, we have, as Glen said, been the most disciplined in the return of supply and have -- probably have a better match to demand than anyone else. And it's been interesting to watch because a lot of airlines have taken different approaches over the course of the last two years. Fundamentally, our commitment and our promise to our customers is to give them a great, safe, on-time, reliable experience, and we continue to invest more and more in the premium categories of our aircraft, of our service elements and the quality of our -- of the service that our people drive and it speaks for itself. We take, very humbly, the various awards we've won over the course of the last couple of years. I think we've expanded our leadership during COVID. We had the most to lose, and I think we gained the most over that time frame, candidly. And we've got some really nice momentum as we're bringing and opening new airports. We've got the new LaGuardia opening in June, which will all be very pleased to be the new LAX that we cut the ribbon on with the mayor a couple of weeks ago and the new international facility in Seattle and continued expansions in Salt Lake and improvements in Minneapolis, many other places. So we're going after the customer experience on the ground as well as in the air with a heightened focus on premium. That's about all we can say.

Myles Walton, UBS.

Thanks. Good morning. There are some concerns about looking forward potential consumer softening through the course of the year. And obviously, you're not seeing that in 2Q. But I was wondering, Ed, if you're looking for signals of softening in your business, do you think it would sort of start to show up first in a lower uptake of premium products? Show up first in maybe leisure roads, demand drying up there or somewhere else. Maybe you can just talk to what you'd look for in your watch tower.

Well, you're right, Myles, we're not seeing it. But at the same time, we acknowledge our crystal ball is only as good as the next 60 to 90 days or whatever we have in terms of kind of a decent build of bookings on hand. And certainly, the next 60 to 90 days look good, as evidenced by our guidance. So we expect a very strong summer coming through that. Consumer -- the health of the consumer is something we spend a lot of time talking about and watching and looking at. But there's other elements at play here with respect to the consumer. One is that, consumers have not been traveling over the last two years. So this is a category that they're prioritizing as they're looking at where their spend is going into travel. You see it in credit card data, you see it all across the board. And this is not just true at Delta, this is true within our industry. Hotels are seeing it, rental car companies, et cetera. People are looking for experiences. You're seeing a pretty significant shift coming out of goods and retail into experiences and services. And that's not just the fact that people haven't traveled, they've also saved money as they've accumulated some meaningful cash and discretionary income for what they have been doing over the last couple of years. So we feel pretty strongly that we're going to continue to see the strong demand extend beyond just the normal summer surge but into the fall. At the same time, we're watching it. I think the place we've been looking for is pricing resistance. When we start to see pricing, particularly with high input costs like fuel, starting to challenge our demand and supply assumptions, then we'll take the next step-up. For now, we're feeling cautiously bullish about the summer.

Thanks. Great. Thank you.

Next, we'll hear from Duane Pfennigwerth of Evercore.

Hey, thanks. Good morning. Glen, if I could, on your commentary on yields improving sequentially through the balance of 2Q, I assume that is based on what you're seeing in advanced book yields. Can you just comment on like when you add it all up, not just advanced book yields but also bookings, how would you characterize kind of your visibility into May, June versus a normal time? Is it also running ahead? I mean it's not as snarky as a question as it sounds. I guess my question is, as you offer higher fares out into the any pushback, or are you seeing any hesitancy?

Well, I'd say absolutely not. As a matter of fact, we've been trying to catch up to this robust demand. And our quest in the revenue management team, who I think has done an excellent job in managing this surge, is to not run out of seats as we get towards the peak travel, summer travel season. So we want to have reasonably priced offers in market right up to day of departure and we don't want to be running out of seats. Having said that, we are running ahead in terms of absolute bookings domestically in the rest of the quarter. And so we're actively managing that down a little bit so that we don't run out as we get very close to departure date. So I hope that gives you some color as to what we're looking at right now. But we're, right now, in the mode of trading traffic for yield.

That's helpful. And then I don't know if we've seen enough of kind of an off-peak environment yet here in 2Q, but can you contrast for us how are you seeing sort of peak yield improvement relative to 2019 versus off-peak yield improvement? Are you starting to see any, I guess, torque on off-peak? Thank you.

No. As a matter of fact, when you look at where we're booked ahead, we have had the offers slightly ahead in peak days and peak travel periods versus off-peak. And we've seen the consumer demand that you would expect, travelers moving into the off-peak period, but at higher yields. So really, really encouraged by what we see as we head into late spring and summer and we'll see how it actually materializes. But everything we see right now points to a very, very robust travel through the remainder of spring and summer. Q – Thank you, Glen. Excellent.

Next, we'll hear from Jamie Baker of JPMorgan.

Yes. Good morning. Glen, a question on premium revenue. What percent is sold at the initial time of ticketing as opposed to during the window between ticketing and departure? And how has that changed over time?

We have moved more and more to ticketing, time of ticketing. So I'd say, and I don't have these numbers, I can follow-up with you, but my guess is that they're around 70% is done at time of ticketing and about 30% post-purchase.

Andrew Didora of Bank of America. Andrew, your line is open, if you can release your mute function.

Hi. Can you hear me?

We can hear you now.

Glen, I know it's really early on in the corporate travel recovery, but we've been hearing from some hotel companies that the corporate booking curve has just shortened tremendously. I think they've been mentioning under two weeks versus normally 30 days to 45 days. Are you seeing a similar shortening in the corporate booking curve? And I guess, are you beginning to see any other changes to the way corporates behave here as the recovery unfolds. Thanks.

Yes. I would not say that we're seeing that same phenomenon. Our corporate booking seems -- outside of 21 days now, seems to be trending similarly inside of 2021. So I'd say we're seeing very normal booking curves in terms of business. And I think what we're seeing, and this is more anecdotally than you see in the type of transaction you have, but people's reason for traveling for business is slightly different. We are seeing an increase in meetings, an increase in groups, and I think that may be why hotels are seeing further out APs because it's harder to get big blocks.

Thank you.

April, can we please go to the next question.

Savi Syth of Raymond James.

Hey. Good morning. Hello, everyone. Just a quick follow-up to, I think, Brandon's question earlier. So just if you look at the 2Q guide, what's the level of demand recovery that's reflected in that guide? Business demand.

The business demand is in the low 70s.

Okay. Got it. And then just switching a little bit to the regional airline segment. You started a transition in that segment getting back to, I think, 2012. And kind of accelerated here during COVID. I was just curious if you kind of view the kind of the pilot supply issues of the regional industry are facing, are those kind of transitory, or is there a need to revisit the regional airline strategy at Delta?

Thanks, Savi. Yes, there is certainly a challenge to the business model that the regionals are experiencing. And you're right, we've moved pretty aggressively to transition out of the lower category, the 50-seat regional jet, over the last 10 years. So as a result of that, we have less lift coming out of the regional in terms of aggregate shelves and pilot requirements and staffing obligations than some of our other competitors in the industry. They were down to less than 150-seat regionals, probably meaningfully less, at the present time and we don't intend to grow that. It's going to continue to drop. It's a reset period. I think everyone is dealing with their partners in a certain way. Certainly, it's driving up costs on the pilot side, to keep the pilots in the regional category until we're ready to bring them up to the main lines. But fundamentally, it's still a good business for us. We've got a considerable investment in it, and we're going to do our best to continue to grow it, but not at the lower category. We're happy with our 76-seat product. And to the extent, we can get more of those, we would.

Next, we'll hear from David Vernon of Bernstein.

Hey, good afternoon – or good morning. Dan, I appreciate the color the incremental cost guidance, I think we can back into what that number looks like in absolute dollar terms. Could you give us some sense of what are the risks and upside, downside risks achieving that cost guidance? Do we need international to really kind of reopen on some set schedule, or do you feel pretty good about where we're going to be? And then as a follow-up, as you think about 2022 to 2023, given that we've hired ahead, as Ed had mentioned, resourcing the network, bringing people in, getting the training up, how should we think about that incremental cost in absolute dollars for the next 5% of capacity relative to what we're seeing in the back half of this year? Not looking for guidance, just trying to get a sense for how we think about – or how we should be thinking about that cost build from 2022 to 2023 given the hiring ahead of this demand recovery that we've seen at Delta.

Yeah. The -- so when you think about it, related to it, the biggest risk when you think about the step-up and step function change that we talked about an opportunity ultimately comes back to capacity. And it's the ASMs that we fly. And so that is the – and you saw that, as we talked about the first half, we're two points lower on capacity and that translates us to being higher than where we thought we'd be. So put that out there, that's the biggest element of it. That's two-thirds of three-quarters of it. The other quarter of it is driving the efficiency, it's the efficiency in the aircraft, it’s the efficiency in the airport, and facilities and the people, but the biggest one is related to the restoration of ASMs. We're building this to be back restored and it's a progression of that. So we think we're – when we set the multiyear framework, if you go back to that capital markets, said where we'd be this year, would be 7% to 10%, we'd be low to mid-single digits as it relates to 2023 and then very low single digits as it relates to 2024. That again has you stepping up to being 100% restored in that period of time. So you really have, at that point in time, all that transition expense that we've talked about just now has been sunset, your pull through the restoration, now you're getting the real benefit of running it at 100%.

Ravi Shanker of Morgan Stanley.

Thanks. Good morning, everyone. Just a follow-up on the previous commentary on the 1Q to 2Q transition, I mean, obviously, your 2Q guidance is pretty strong. Is it fair to say that the kind of extreme peaks that we saw in the back half of 2021 juxtaposed by extreme troughs between it, kind of that is in the past? So when you think of a spring break to summer travel transition, you're not going to see as much of a trough in between those peaks? Is that because of corporate? And kind of what does that mean for your network reliability and your abilities around the airline?

Well, I think one of the issues is moving out of COVID, we probably will not run the peaks as peaky as we had in the past in order to create more efficiency in the network on a year-round basis. And I think we've really come -- we've instituted a lot of plans in that space to try and ease out some of the peakiness of our operational schedules. And I'll give you an example is, historically pre COVID, we operated about 20% more widebodies in the summer than we did in the winter. So when you think about the way that we utilize our pilots or our flight attendants in those categories, that they had very easy rosters in the off-peak and very tensed rosters in the peak. And what we've been really working on during COVID is to come out of this with a more deseasonalized network, so we can improve the asset utilization, flatten out the peaks and build up on the troughs. And we spent a lot of time thinking about that and creating it. And I think as we get to the fall and winter schedules, you'll see how we've dealt with that. I don't want to talk about that right now in detail, but I think those are the real things that we're looking at doing.

Next, we’ll hear from Sheila Kahyaoglu of Jefferies.

Hi. Good morning guys and thank you for the time. It's Sheila Kahyaoglu from Jefferies. Can you maybe talk about your pricing strategy in this inflationary environment? How you've managed it, how that's changed. And then how you've seen the impact to load factors? I think you said in an earlier question, demand hasn't changed. But obviously, for Q2, the guidance for capacity is still 16% below 2019 level. So maybe can you talk about how you're managing all that in?

Yes. I mean, we don't talk about future pricing as a rule, so we'll stay away from that subject. And I'd just say that when you have stronger demand, you clearly have opportunities on the margin to improve the offer in the marketplace and see if consumers respond to that. And that's really what we've been doing as fuel prices have continued to run up and demand continues to remain strong. So, those levers alone have gotten us to where we feel very comfortable about the 2Q revenue environment.

Great. Thank you.

Sheila, did you have another question? I'm sorry. That will wrap up the analyst portion of the call. I'll now turn it over to Tim Mapes, our Chief Marketing and Communications Officer, to start the media questions.

Good morning, everybody. April, if you wouldn't mind reminding everybody about how to ask a question. And we have a lot of energy in the room, if we want to keep the pace of these moving, we'll try to knock out as many of these as possible.

[Operator Instructions] And we'll first hear from Leslie Josephs of CNBC.

Hi. Good morning everybody. I was wondering if you could talk a little bit about the union drive of your flight attendants. There's been a lot of attention on other companies like Amazon and Starbucks. Do you expect your flight attendants to be unionized this year? And what is the impact on Delta? Do you think it helps or hurts your recruiting? And then my second question, are you still charging $200 a month additional for unvaccinated employees' health insurance? Thank you.

Well, Leslie, on the question with respect to labor and union, this is not new at Delta. We've been the unions for many, many years looking at the Delta employees and have been actively seeking their support. So we, on the one hand, absolutely support our employees to make the best interest -- the best decision that's in their best interest. But at the same time, we know historically that the employees of Delta have been best served by having the direct relationship with our leadership. So we don't -- this is not anything new or different. It's really more of the same. So I wouldn't read too much into what the -- what's going on at Amazon or Starbucks or other places and try to equate that to Delta. It's a very different situation. And we've dropped as of this month the additional insurance surcharge given the fact that we really do believe that the pandemic has moved to a seasonal virus and any employees that haven't been vaccinated will not be paying extra insurance costs going forward.

Thank you.

And next, we'll hear from Alison Sider of Wall Street Journal.

Hi. Thanks so much. Just curious what your take is on all the discussions of consolidation among some of the midsized airlines without asking you to comment any specific deal that may or may not happen. Just how would that sort of change the competitive landscape if you did start to see more consolidation among some of these carriers?

Ali, that's a really good try, but we're not going to bite on that either.

Okay. Thanks.

Next, we'll hear from David Koenig of Associated Press.

Hey, good morning. Glen, you said you were hearing good signs, as you put it about Washington perhaps rolling back the pre-departure test requirement. What exactly are you hearing and from whom? And I guess I'd ask the same question about the mask mandate.

Maybe I'll turn that over to Peter, our Chief Legal Officer.

We were obviously engage throughout the administration, and I will tell you that we are getting a strong indication that the testing, the pre-departure testing will be phased out in the near future which is, of course, quite encouraging.

Dawn Gilbertson, USA Today.

Hi. Good morning. Two questions. First for Glen. There are a lot of questions about pricing resistance. And just a quick check of your fares for a July trip showed $1,500 round trip from Atlanta to Maui, $750 from LAX to Orlando. Are a lot of Americans going to be priced out of vacations this summer? And do you fear any backlash? That's my first question. And the second one is, Ed, you mentioned at the top of the call about travelers' patience? Where are you still seeing issues? And how long before -- I mean, how long will travelers put up, say, with long waits on the phone and other ways to reach you guys? Thank you very much.

Sure. We haven't seen a lot of resistance to the price points that we have in market, and our goal is to have reasonable price points in market up to day of departure. And as we head to the peak, there are going to be constraints on peak days. And so as you shop around, if you're looking for lower fares, you have to be flexible in terms of which days you'd be willing to fly. But as we sit today, we have a load factor cushion versus where we sat in 2019. So we have a higher percentage of our total seats already booked which is, of course, putting a little bit of pressure on the ones we have remaining to sell in terms of increasing the offers on the margin. So look, my advice to travelers is to book early and be flexible if fares are your most important attribute. But what we're seeing more and more is that, that is not the only attribute. The quality of service and that level of service counts more and more. So I hope that answered your question.

And Dawn, on the question to reservation specifically, if that's what you were asking. We have continued a very, very aggressive drumbeat of hiring in reservations to the point we're now over 50% of our total employees and reservations have been hired just within the last couple of years and we're continuing to grow that. And as our people are getting more experienced and more comfortable, the service levels continue to improve. And we've also invested aggressively in our digital self-service options where, several years ago, maybe only 20% of the reasons people would call us could -- they could actually manage it digitally through self-service channels. Today, that's over 60% of the reasons people call us can be handled digitally. And people are continuing to expand and the adoption of self-service is growing substantially. Obviously, as demand has surged, that continues to put more pressure on the phones. As international is opening, that puts more pressure on the phones. But on balance, our phones are generally even -- and we allocate based on the level of service and the dial-in category, they get responded to the quickest. But on average, the wait times in the phones are less than 30 minutes.

I'd just make one -- the number of transactions that you could actually complete on digital is in the low 80s. The adoption rate is in the low 60s. So continuing to push people. And since you have a direct line to the consumer is encouraging, continue to encourage them to seek a digital answer first rather than calling and waiting on the line because most -- only very complicated transactions now can't be handled digitally.

With that, April, we have time for one final question before we turn it back over to Ed, please.

Absolutely. Our final question will come from Niraj Chokshi of The New York Times.

Hi. Thank you. I just had two questions on fuel. First, I was wondering if you could speak to the effect of the higher cost of fuel could have on fares. And the other is if there's anything more you could add about sort of the role that refinery playing and helping to offset that?

I'll take the first question, and Dan can talk to the refinery. It's really a function of demand. To the extent we continue to see very, very strong demand for our product, our ability to push on not just the increased cost of fuel, but all of our cost inputs, we're shortening the time lag between when we experience that cost and when it's in the pricing structure. But it's really a function of demand more so than any decisions that we take on our own.

And then related to the role of refinery as it relates to managing the fuel. 20% of the refinery production is jet, and that jet fuel goes to our New York operations. So it is a direct hedge as it relates to the spreads associated with that. So it's really 100% hedged as it relates to how we run our operations and what it provides. The rest of the 80% production is diesel and gasoline as you go through that process. And so that provides a partial hedge related to of diesel and gas to jet. And so by and large, the refinery when you think about in aggregate as it relates to spreads, it's about a 40% to 50% hedge as it relates to our fuel costs.

Thanks. And just on fares, last month at the JPMorgan Conference, Glen had given an estimate that Delta would need to recover, I think, it was 15% to 20% each way on a $400 round trip average. Are you able to kind of provide any update on that kind of figure given the higher fuel costs now?

This is Ed again. We – fares are all over the place, they move every day and fuel prices move every day, so we're not going to track to any specific comment. I think you heard in our remarks that we're actually seeing in pricing today real-time coverage for where fuel costs are.

And now at this time, I'll turn the call back over to our presenters for any additional or closing comments.

Well, I want to thank you all for joining us. We are thrilled with the performance of our team, the progress we've made in terms of serving the demand that is returning, we've been waiting for two years to see this, and we're ready to go, customers are ready to go, and we look forward to a very, very strong spring and summer season and look forward to speaking to you all in July, when we can report on the second quarter results. Everybody have a good day. Thanks for joining us today.

That does conclude today's conference. Thank you all for your participation. You may now disconnect.