Good morning, everyone, and welcome to the Delta Airlines December Quarter and Full Year 2020 Financial Results Conference Call. My name is Kathy and I will be your coordinator. A question and answer session following the presentation. As a reminder, today's call is being recorded. And I now would like to turn the conference over to Jill Greer, Vice President of Investor Relations, please go ahead.
Thanks, Kathy. Good morning, everyone, and thanks for joining us for our December quarter and full year 2020 earnings call. Joining us from Atlanta today are our CEO, Ed Bastian our President, Glenn Hauenstein and our Interim Co CFO, Gary Chase. Our entire leadership team is available for the Q and A session. Ed will open the call with an overview of Delta's performance and strategy, Glenn will provide For analysts, we ask you to please limit yourself to one question and a brief follow-up, so we can get to as many of you as possible.
After the analyst Q and A, we'll move Forward looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward looking statements. Some of the factors that may cause such differences are described in Delta's SEC filings. We'll also discuss non GAAP financial measures, and all results exclude special items unless otherwise noted. You can find a reconciliation of our non GAAP measures on the Investor Relations page at ir.delta.com. And with that, I'll turn the
call to Ed. Thanks, Joe, good morning everyone. This morning we reported pre tax losses of $2,100,000,000 for the December quarter $9,000,000,000 for the full year, Capping the toughest year in Delta's history. We've been saying all along that this recovery wouldn't follow a straight line with demand choppiness as COVID infections rose Across the country, in government and public health officials issued travel advisories, our revenues of $3,500,000,000 for the 4th quarter, Just 30% of last year's levels. And although we still have a tough winter ahead of us, we're encouraged by the progress that's been made on the vaccine front and are Confident that Delta is positioned to successfully lead our industry into recovery as the year unfolds.
While 2020 was a challenging year, we delivered results for all of our stakeholders. For our employees, we protecting their health and safety and preserving our culture. For example, throughout the past year, we have offered and continue to For an extensive employee testing program and pay protection programs for employees diagnosed, exposed at high risk of COVID-nineteen. We have had remarkable volunteerism, up to 40,000 employees taking unpaid leaves throughout the summer to protect jobs and preserve cash. And in fact, we still have over 10,000 employees in the month of January out on unpaid lose.
And we have made it through this year Without furloughing any employees. Our emphasis on taking care of our people is reflected in Delta's recognition this week by Glassdoor as one of the best places to work for the 5th year in a row, coming in 7th overall on a list of 100 large companies, the highest rank Delta has ever received, all In the face of the pandemic, really incredible work by our team. For our customers, we're keeping them at the center of our recovery. Our health and safety efforts From being the only major U. S.
Airline that continues to block middle seats to partnering with leading names like the Mayo Clinic, Embry Healthcare, Lysol And Purell in developing the Delta Care standard to launching the industry's first COVID tested transatlantic flights with No quarantine on arrival are all targeted at restoring consumer confidence in travel and reopening borders, which will be an driver of revenue growth in the future. Our customers recognize the outstanding service our people provide with an all time high December Net Promoter Score of 71, up 20 points year over year and by business travel news naming Delta, the top airline for corporate travelers for the 10th year in a row and once again coming in 1st place on all twelve metrics that they measure in the survey. That customer preference and loyalty is what underlies our revenue premium and has never been stronger. And finally, for our shareholders, we We secured our liquidity position and rescaled our cost structure. We reduced liquidity risk by raising over $25,000,000,000 in capital since the pandemic Again, with approximately $17,000,000,000 of liquidity, our adjusted net debt, however, only increased $8,000,000,000 year over year, And we don't expect that net debt will increase going forward.
We've swiftly removed costs from the business with 3 consecutive quarters of operating expenses declining by nearly 50% or more, increasing the variable nature of our cost structure. In fact, in the December And by keeping our costs under control, we leveraged the modest increase in net sales to reduce our average daily cash burn to $12,000,000 a day for the December quarter, half of what it was in the September quarter and a decrease of 90% since the early days with the pandemic in late March. Turning to 2021, we expect the March quarter to look similar to the December quarter, with March quarter revenues at 35% to 40% of March quarter 2019 levels and our cash burn for the quarter holding at $10,000,000 to $15,000,000 per day. We expect that will be followed by an inflection point this spring as vaccine distribution continues, travel restrictions Start to ease and consumer confidence begins to grow, hopefully resulting in cash burn reaching breakeven or better by the second quarter. And as the year progresses, we expect demand will start to accelerate as vaccinations become more widespread and the virus is in a contained state And customers gain greater confidence to make future travel commitments.
This should enable a sustained recovery to begin in the second half 2021 with the return to profitability this summer. So as we work through this environment, we're focused on 5 things. 1st, as always, We're committed to keeping our culture intact and our employees engaged. The Delta people are our most strategic asset. They They've done a tremendous job this year and together we'll lead our airline through the recovery.
2nd, we'll continue to prioritize The customer with a focus on health and safety and the maintenance of the industry's strongest network, thereby increasing loyalty and preference For our brand, customers have shown they're willing to pay more for the quality of our network, product and our service. The gains we've achieved in Customer satisfaction position us well to drive sustainable revenue growth in the future. 3rd, we'll maintain our Focus on innovation, which will enable our employees, improve the customer experience and drive efficiency through the business. And innovative thinking will Our ability to tackle big challenges in front of us like our goal of achieving carbon neutrality in the next decade. 4th, will drive a competitive cost structure.
Given the changes we've made over the last year, our goal is to sustain our non fuel unit cost at or below 2019 levels by the December quarter of this year on roughly 75% of 2019 capacity levels displaying continued agility in managing our cost. And finally, we're committed to debt And creating long term shareholder value, including continuing to protect our owners so that they can participate in future upside without dilution. Because for investors, while the near term demand path is murky, industry fundamentals remain intact. Following almost a year of subdued travel, Customers are beginning to exhibit behavior that is indicative of pent up demand. Shopping visits across Delta's Digital channels are significantly outpacing the passenger volumes we're carrying.
In our most recent corporate survey, 40 Standard respondents expect full recovery by 2022. Our partners at American Express are often seeing encouraging signs, whether it's card holding on to their points in anticipation of redeeming them for air travel for a recent survey that suggested approximately 70% of Respondents expect to take a trip in 2021 after not traveling in 2020. Although it will take Customers want to travel again when they feel it's safe. They feel they've had a year of their life taken from them and they're starting to get ready to reclaim it. Until then, We're fortunate to have the support of the U.
S. Government, which recognizes the importance of the airline industry. And we thank Congress and the administration for passing the COVID relief bill last As a result of that bill, we anticipate receiving approximately $3,000,000,000 in addition in additional payroll support funds, Largely on terms similar to the initial CARES Act program. These funds have been critical to saving thousands of industry jobs during an unprecedented level of demand decline. And it's why the U.
S. Airline industry is in the best position to recover from the pandemic over any other International market. So while 2020 was a difficult year and challenges will continue in 2021, I'm encouraged at That's some of the data that we're seeing and I'm proud of the foundation that we've built at Delta. This company is well positioned to emerge in a stronger competitive position on this crisis and will continue to lead our industry in the years ahead. And with that, I'll turn the call over to Glenn.
Thanks, Ed, and good morning, everyone. As Ed mentioned, we started the December quarter seeing encouraging demand trends, but with rising COVID cases And Travel Advisory, we began to see some weakness around Thanksgiving and into December. Despite that softness, The peak periods continue to outperform non peak periods and we've seen sequential improvement in total revenues, which recovered from being down 80% in the September quarter to down 70% in the December quarter on sellable capacity that was down 62%. On January 3rd, we had a $50,000,000 ticket revenue day and carried more than 250,000 customers. Both of these were the highest Since the onset of the pandemic.
And despite having meaningfully less inventory for sale given our middle seat call. We outperformed on passenger revenue generation in the 1st 9 months of the year. This is a testament Customers' willingness to pay
a premium for the delta difference.
Leisure markets and sun destinations are the best performers in our network. With our approach of Targeting sellable capacity to match demand, we are biasing restoring capacity to leisure markets. As a result, roughly 1 third of our domestic capacity is Currently deployed into leisure destinations. Our coastal hubs, especially New York and Boston are still some of the weakest areas in our network The demand in those hubs only 20% to 25% recovers. International demand remains weak and is limited to essential travel.
That said, we continue to work towards opening additional COVID tested lanes of travel with no quarantine on arrival, Similar to our Atlanta to Rome and Atlanta to Amsterdam flights. This will be important in restoring confidence in long haul international As vaccine rollouts continue, our premium seat strategy is holding up well. Domestic premium revenues performed in line with Main Cabin in the quarter, a good outcome considering that we're continuing to operate a largely leisure driven environment with a higher proportion of premium seats held back due to our middle seat blocks.
As all
of you are aware, corporate demand continues to be depressed and was only 10% to 15% restored for the quarter. Corporate revenue was about 3 points Higher than the September quarter with small and medium accounts, which make up half of our corporate revenues recovering 5 points faster than large corporates. While While the passenger revenue environment remains challenging, we're encouraged that efforts to diversify our revenue streams have paid off. Our American Express remuneration in 2020 was nearly $3,000,000,000 down only 30% on a year over year basis. In fact, American Express has shared that spending on our co brand card portfolio has performed in line to slightly better than their overall Card portfolio spend in 2020.
In the December quarter, MRO revenue was down almost 30% relative to the same period last year, while Cargo revenue was up 10% on a year over year basis. This marks the Q1 of cargo revenue growth since the December 2018 quarter. Our December quarter results reflect the challenges that the pandemic has brought not just to Delta, but to the entire airline industry. I am incredibly grateful for the efforts of the entire Delta team in managing through the challenging year that we faced. Now that we think about 2021, we see 3 distinct phases to the year.
And for each phase, we have levers to help us react to the emerging demand environment. In the first phase, we expect demand choppiness to continue, the booking curve to remain more compressed and the results For example, our January February domestic schedule seats will be down 3% to 6% versus The non holiday period in November. That will result in our March quarter sellable capacity being approximately 55% lower relative to the same period in 2019, consistent with the expected 60% to 65% revenue decline. We'll also continue to leverage our non ticket revenue streams like cargo, loyalty and MRO that we believe should continue to outperform passenger revenues. Customer confidence begins to grow.
As that happens, we expect to see an extension of the booking curve resulting in a Cash led recovery with revenue recovery to follow. We anticipate this will happen in the spring and will result in us achieving our cash In response to the second phase, our middle seats will be a very powerful tool for one we can use to add capacity in a very cost efficient way, generating a meaningful margin tailwind. In the final phase, vaccinations become more widespread and offices begin to reopen. We expect that to occur in the second half of twenty twenty one And as a result in a sustained improvement in demand and yield with progression in cash generation As the booking curve normalizes. With the recovery initially fueled by leisure demand, Delta's success will be driven by With 34 new aircraft deliveries this year, we'll also leverage higher gauge and more efficient aircraft that produce lower seat costs, more premium seats and a better customer experience.
This will allow us to capitalize on our brand affinity and upsell opportunities, which are enabled by the elimination of change fees for U. S. Customers and the redemption of e credits. It will take longer for corporate demand to return, but we are encouraged by the results of our recent corporate survey. Our corporate accounts are telling us that they largely We anticipate returning to their offices and travel in the June September quarters.
They are also telling us by the end of 2021, Half are expecting to return to 50% to 100% of pre COVID domestic travel and up to 50% of pre COVID international travel. To our corporate customers, our commitment to you remains unchanged. Delta is ready when you are.
We will
be ready to serve our corporate customers by leveraging the strongest domestic and international networks, rebuilding focused cities and point based on customer needs and by capitalizing on our efforts to always put the customer experience at the center of what we do. We're optimistic for the future, having built the right foundation and focusing on what we can control. We are confident in our ability to successfully navigate the post pandemic recovery. And with that, I'll turn the call over to Gary.
Thanks, Glenn, and good morning, everyone. Let me touch on the Q4 in 2020 and then I'll turn to the outlook for costs and the balance sheet as we head into 2021.
Our December quarter pre tax Loss
of $2,100,000,000 is about $500,000,000 better than the September quarter, given the revenue improvement Glenn just discussed combined with strong We reduced costs by approximately 50% from 2019 levels for the 3rd consecutive quarter. More importantly, our costs We're up just 6% from the 3rd quarter on 30% capacity growth and 3 quarters of that increase came from higher fuel. Total unit cost including fuel was down 4.5% compared to 2019 on 44% lower flown capacity. Our average daily cash burn for the December quarter was $12,000,000 half of the third quarter is $24,000,000 We closed the year with $16,700,000,000 in liquidity And adjusted net debt of $18,800,000,000 up about $8,000,000,000 versus year end 2019.
Now as We look into
the year ahead, improving demand fundamentals will underpin a transition of our financial focus from protecting our liquidity to positioning the company for a return to profitability and free cash flow. I'll explain our approach to costs and our balance sheet as we make this transition.
Let's start with costs.
We need to stay flexible and maintain our discipline in order to position the company for the Turn to profitability, Ed mentioned, as we expect continued choppiness and demand in the early part of the year, we've already taken structural steps to resize our business. Our 2 largest cost drivers fleet and headcount are both 15% to 20% smaller than they were in 2019. Headcount reductions were a difficult but necessary decision. It was hard to see 18,000 talented and dedicated co workers leave, But it's a testament to the Delta culture that these reductions were achieved entirely through voluntary means. We accelerated our fleet transformation by retiring aircraft with relatively short remaining lives and simplified our fleet by eliminating 2 entire families while increasing our gauge.
On a run rate basis, these changes will drive more than $400,000,000 in annualized cost benefit. As we add capacity in 2021, we will drive Higher utilization of our system and we have room to rebuild our network from current levels at low incremental costs Ultimately 40% to 50% of our December quarter non fuel CASM. Our goal is to produce and sustain non fuel unit cost below 2019 levels by the Q4. That cost focus will be a key driver of profitability later in the year when demand returns. Looking to the March quarter, We're preparing for stronger demand by reactivating aircraft and restoring our people to full hours, driving about $200,000,000 in additional costs versus the December quarter.
Our March quarter total operating expense will be 35% to 40% lower than March quarter 2019, with a total unit cost including fuel down 5% to 10% on approximately 35% lower flown capacity.
Let's move now to capital,
the balance sheet and liquidity. As we begin the year, conditions are similar expect average daily cash burn between $10,000,000 $15,000,000 similar to the December quarter. With further improvements in net sales as customers gain confidence, we expect our Cash burn to cease this spring. With that goal in sight, we're turning our focus to how we will balance reinvesting in the business while reducing our Given our expectations for cash flow in 2021 and proceeds from the PSP extension, we expect our Earn adjusted net debt levels to be the high watermark for that important metric. For the full year, we're expecting $2,500,000,000 in gross CapEx, A significant reduction from the $4,000,000,000 to $5,000,000,000 that we were spending pre COVID.
We have $1,300,000,000 of aircraft purchase commitments for 34 new deliveries this year, which we have the option to fully finance and about $1,000,000,000 in non aircraft CapEx. Including retirements, we expect our fleet count at the end of 2021 will be 15% smaller than at year end 2019 with total fleet declining from About $13.50 to about $11.30 An equal priority is to work on our balance sheet by reducing our liquidity and We have approximately $1,800,000,000 of debt maturities in 2021 $2,100,000,000 in 2022. Our debt Has an average interest rate of 4.6 percent, which will drive approximately $350,000,000 in quarterly interest expense. However, we will begin reducing those expenses by paying down debt this year. We do not have mandatory pension contributions until 2025 under airline relief, but we expect to make at least $500,000,000 in voluntary contributions this year.
In terms of the quarter end outlook with about $3,000,000,000 of PSP support expected from the government on March quarter, we project ending the period with $18,000,000,000 to $19,000,000,000 in liquidity and net debt of approximately $18,000,000,000 Let me close by saying this, the Delta difference has never been more important and I'd like to thank the Delta stronger and more resilient than ever. With that, I'll turn the call back over to Jill to begin the Q and A.
Thanks, Gary. Kathy, we're ready for questions from the analysts. If you could give the instructions on how to get in the queue.
Certainly. Systems. And we'll go first to Savi Syth with Raymond James. Good morning, everyone. I'm just kind of curious after the kind of vaccine news, have you seen a change in booking behavior?
And also, I know the testing requirement is probably positive longer term for opening up international demand. But are you seeing travelers perhaps shifting from more to more domestic finance and destinations from international?
Savi, we The vaccine deployment still is very early and we haven't really seen much in the form of changed behaviors. We hear a lot anecdotally, but it's also one of the weakest travel periods of the year in the current month that we're in. We've not seen the booking curve Start to expand. We certainly hope to see that as we get through the quarter and vaccines continue to become more
Makes sense. I'd be curious, just
a follow-up on some of the kind of
the changing dynamics here. I was wondering if Do you have any kind of preliminary thoughts on how maybe the American and JetBlue partnership might impact kind of the Northeast position?
We're not going to comment on our competitors or speculate. We you know us well. We love competition and I think competition makes you better.
All right. Appreciate it. Thank you. Next, we'll go to Jamie Baker of JPMorgan.
Hey, good morning everybody. First question for Glenn, sort of a follow-up I suppose on Savi's question. In normal times, what Percentage of international revenue is made up of trips that last fewer than 4 or 5 days. I'm asking because I would think a trip of Duration would be particularly jeopardized by the need to land and almost immediately take a COVID test so that you could come home. Well, I think that's dependent on how far customers are traveling.
Generally, the longer they travel, the longer the stay is. So I think what we are seeing is a very good response from the closer in Caribbean and Mexico Resorts That's where hotels are now going to be offering that as part of the package. And so while there may be some choppiness as there has been through this whole environment As we start adopting those testing procedures, we think in pretty short order here that customers will adapt. And to the extent that Travel does shift from short haul international back to domestic. We'll be ready to move the airplanes back too.
Jamie, I'd like to add to Glenn's comments. We're still working obviously with the CDC. We endorse and support the testing requirements they've Finest they've put in place, but a new feature is the inclusion of rapid testing into the mix. So it doesn't necessarily mean it only has to be a PCR test. And With the growth of antigen testing, the quality of antigen testing that's out there and the supplies in that place, you literally could get Some of these tests done within a 10 minute interval shortly before we return.
Excellent. Thank you for Hi, gentlemen. And a question for Gary. How are you thinking about the optimal level of liquidity to carry in the future, sort of a post pandemic question? And if you haven't reached that conclusion yet, is that because it's just not a priority right now?
Or do you simply need to wait and So you have the recovery plays out before reaching a decision.
Jamie, I think what I would say is, it's obviously less than today. We need some time. We have I think some work in front of us to think through where we ultimately want that to be. But But I think the important point is we're getting started and I think you see some of that. During the quarter, we prepaid Our term loan that was matured in April for about $3,000,000,000 We mentioned during the We do plan to make a pension contribution, which as you know we consider part of our financial obligations.
So we are getting We don't have more specifics, but we are getting started. And we're very focused on that $350,000,000 number that I And using the liquidity that we have where it makes sense to drive that down.
And just A fine point on PSP, a simple yes or no question. Have the terms been achieved? And if so, are they the same as the first round? Thanks. Yes, Jamie, it's Peter Carr.
The terms are identical to PSP-one. We've already signed the agreement with the government. Thank you, everybody. Take care. Thanks, Jim.
Our next question will come from Han Turekki of Wolfe Research.
Good morning.
Ted, about a year ago, we talked on
this call about intentionally running lower load factors and it's Happening, but in a weird way, but you're getting paid for it and your NPS scores are, as you mentioned, at an all time high. So unblocking
middle seats is obviously Tactical choice, but even
when you unblock them, you don't have to sell them. So I guess the question is longer term, how are you thinking about running less full airplanes As an opportunity to differentiate yourself for that premium traveler.
Yes, Hunter, it is an interesting year. I hope I will say We've not made a decision beyond the end of March relative to our when to unblock The middle seats, we have some time, so let's continue to look at that. I think it's going to be very much driven by customer demand, Customer input, the confidence customers have in those seats, but no question about it. We are generating a meaningful premium due to that decision. Hunter, if I could have just a quick follow-up on that.
Is there I guess are 2 2 ways as we discussed last year to do that. 1 is by creating more premium seats and the other is by running lower load factors. As As we go through this fleet transition, our premium seats as a percent of our total seats continue to rise. And I think that's our primary Our way to satisfy the demand for premium customers is to continue to provide them with a higher level of quality.
Got it. Yes. Thank you, Glenn.
And then, on the 18,000 early outs, can you achieve 2019 capacity Without backfilling any of those positions.
Could you speak louder? We missed your question
Sorry about that. Yes, that's cool. The 18,000 early hours, the question is like how much can you achieve 2019 capacity
levels without back Filling the majority or the entirety of those positions?
We can achieve 2019 levels, so that will cost 20% of our people. No question about it. But there is a we don't need to backfill it entirely either. So, yes, there's a middle ground there. Okay.
And then just one more quick one since we
have 90 minutes, just to follow-up
on Jamie's Follow-up. Have you Peter, have you negotiated the new strike prices for
the warrants attached to BSP too?
We have and it's $39 and some change. Thank you.
And now we will go to Andrew DeRidore of Bank of America.
Hi, good morning, everyone. Gwen, my first question is for you, probably a little tough to answer, but just curious about how you're thinking about the kind of the trade off yield and load factor as you move through kind of different phases of the recovery that you talked to. As I think as travel restrictions ease, do you see the Can you maybe stimulate more demand with price or do you think there's enough pent up demand in your network that load factor is a bigger driver? Just curious how you're thinking about that.
I think we're taking a yield bias as we go into the peak summer, Hoping that demand exceeds supply. And if that doesn't materialize, we can make those adjustments later. But we have Anticipated that there will be a nice recovery in demand as we get towards the summer and we've taken a conservative approach. I hope that answers your question.
And certainly, I'm streaming it a bit. And then Ed, I know Gary gave Some information about CapEx this year, but I guess how are you thinking about that over the next few years, especially in light You're, you guys should delever here. And what do you need to see in order to feel more comfortable in placing New aircraft orders. Thank you.
Well, Andrew, I think we're a little early yet In terms of thinking about the long term CapEx picture, I was thinking that we moved $5,000,000,000 of aircraft CapEx alone with out over the next several years. The degree to which we Want to take positions new positions coming up, we'll continue to evaluate that based on demand. But right now, I feel pretty comfortable with where we sit.
Okay. Thank you.
And now we'll go to Brandon Oglenski of Barclays.
Hey, good morning everyone and thanks for taking my question. Gary, can you talk about some of the structural things that you've taken out of the cost structure to reset CASM target by the end of the year? And I I think you made a comment about incrementally like 40% to 50% of your 4th quarter CASM would be variable. Is that can I hear that right?
Yes. So, Brandon, let me start with the first question. The structural costs, The 2 biggest ones in our business are really headcount and fleet as we mentioned. The fleet really determines an awful Out of the infrastructure that we need from a cost standpoint. We expect to get leverage out of all of Our costs associated with assets, we look about a third of our cost structure on a monthly basis is fixed.
So as we grow, we'll obviously get leverage there and we have pockets of opportunity opportunity in terms of better utilization of just the overall system. When I think about what we're doing here and this gets to your second question, Ben, there are kind of 2 big things that I talk about or that we all talk about internally as we Think about this effort that we're embarking on the first is baseline aggressively and it's really have a laser Focus on what's in the cost structure now and what makes sense. You see that in the 50% reductions that we've been staying now for several quarters. The second thing we say is leverage to build and that's really where the incremental thought Process comes. That's about being very thoughtful about better leveraging the system as we start to rebuild.
Now I think in terms of your second question incremental cost, it's pretty simple the way we're thinking about it. It's just Change in cost divided by change in ASMs. And we wanted to give some guidepost as to the leverage that we do expect going forward. That's where the 40% to 50% of December capacity comes in. I'll just note if you take a look The second half of twenty twenty was quite a bit better than that.
And that was why I emphasized that comment in the prepared remarks about How we scaled the system, particularly in the Q4.
Well, thank you, sir. I think those were my 2.
Our next question will come from Ravi Shanker of Morgan Stanley.
Thanks. Good morning, everyone. A couple of questions on business travel. You said that small and medium sized corporates are coming back first. Are you surprised by that?
And is that good news or bad news for when the bigger guys come back when the world opens up again?
Ravi, we're not surprised by that. These are small business owners who need to get out to their customers, who have We work hard every single day to keep their sales and their business moving. And we do see a meaningful Continued improvement in small business traffic. Some that we can measure, others that we can't say because they're not Under contracts with us, but we know that's an important part of overall business travel. But I do want to talk about the overall corporate Travel results, as you probably know, we extensively survey our corporate customers, our large corporate customers on a quarterly In addition to just being with them on a weekly basis as to their thoughts on the return of travel.
And the most recent Survey that we conducted, which just ended a couple of weeks ago, indicated that 40% of our big corporate customers expect they will be Fully back to 2019 levels by 2022. And another 11% said that they expect to be fully back By 2023. So that's a little over 50% of the customers and these are the people I won't speculate what's Having the business trouble using the customers who make those decisions. 7% said we'll never be back to 2019 levels, only 7% and 42% said they weren't sure, needed more time to figure it out. So with all the dialogue and speculation around the debt of business travel, just looking at that survey, it's very interesting.
If you take the 51% that said they'll be fully backed by 2023, the majority of which is in 2022, and then you consider the 2nd quadrant of 50% who said they'll never return or they're not sure of the return. And even if you assumed only 50% of their travel returns, that That gets you 75% of the way back, no later than 2023, and I think that's a very pessimistic view on business travel. So what we've been talking about corporate travel and business travel returning, I felt optimistic when I saw those results. We know it's going to It could be different going forward. I've said many times, it could be 10% to 20% lower over a period as it's substituted and complemented.
There'll be different types of travelers, different reasons for people traveling, but I think business travel has got a very, very Strong opportunity return over the next 2 years and we're going to be well positioned to carry
it. That is great color on the demand side of business travel. Thank you for that.
If I can just follow-up with a question
on the supply side, clearly you guys are leaders from a corporate travel standpoint, But we have seen some of your LCC competitors start to and maybe try and make some inroads as that traffic comes back. So maybe you can kind of can you give us more color on kind of how you maintain that leadership and through How you see the competitive environment looking like for business travel when that does come back?
I think that the delta difference has Never been more pronounced than it is right now. And if you look at our share of corporate travel that is traveling, we have experienced the Highest levels in our history. So demand for our products and services is incredibly high for people who want it. And I think that's Where our challenge remains is to continue to provide industry leading products and services that our corporate travelers Want and need. And that's been what we've been doing over the past several years and what we'll continue to do as we get to the end of this pandemic.
And I think that's going to be what differentiates us. And clearly, there's always people who would like to take that travel away from you because it is Some of the highest yielding travel in the system, but I think that's our goal and our mission is to stay ahead of that and provide it through a pull. People want to fly Delta and as opposed to very push, which is, hey, we can lower fares and try and niggle at the sides right at the bottom of this.
Very good. Thank you.
And now our next question will come from Catherine O'Brien of Goldman Sachs. Good morning, Yaron. Thank you so much
for the time. So my first question is actually about your comments earlier About seeing a cash recovery before revenue recovery and just trying to square that with the 65% of your ATLS vouchers. As maybe early prospective bookings are coming in for later in the year, are these majority new bookings, or maybe there's a higher Percentage of those vouchers that are corporate and you expect the early part of the recovery to be leisure, would
you just love some color on that comment? Thank you.
Yes. Katie, some of that came through
a little garbled, but let me say this.
I think the distinction is really About timing, in the spring what we expect
And I've mentioned it
a few times. We think as confidence starts to build, what you'll see is that people will Our booking
for further out in
the booking curve. And so, we will have a build in our air traffic liability that helps us Cross cash breakeven earlier in the spring. P and L breakeven is something that will take
a little bit more.
So that's when our revenue is going to be covering our expenses and that is something that we expect will lagged a little bit behind the build in bookings and we'll be there by the summer as we've mentioned.
Maybe just a little bit on our redemptions for the eCreditsu. We are running in the low to mid teens right now in In terms of total revenues, will the eCredits coming back and we expect that to stay below 20 as we move through this next And that number has been pretty consistent throughout the entire year. So we have a pretty good sense for what that's going to look like.
Okay, understood. And can you guys hear me a little bit better now?
Yes.
Okay, great. Understood. And I know you guys have one of the furthest So, periods through which people can redeem. So that makes sense. Maybe one on the cost structure, Of course, this pandemic has created a lot of pain for the industry.
So I don't want to glaze over that. But outside of speeding up your Have you found other opportunities to make the operation more efficient, perhaps maybe speeding up some of your automation plans on the customer facing side, would love to hear about other opportunities that have been even born out of this crisis? Thank you very much.
We have Katie. I'm not sure where to get into some
of the specifics. I will
say that the fleet Simplification has been something actually that we think is in our run rate today. You're seeing Some of the benefit in the Q4, but we it's something that will have a much bigger impact as we move to rescale the network through 2021. When I mentioned the concept of leveraging the build and maybe one of the reasons why I'm Thinking through it, just as I'm thinking through it is, there are a lot of things that we want to think about doing differently. One of the unique Opportunities of you always want to make something good out of what has transpired and it does give us an opportunity to start Fresh. One of the reasons I think we are showing the kind of leverage as we rebuild is because we have a clean sheet of paper in some sense to start from.
Yes. I'd like to add to Gary's comments. I think it's remarkable the work the team has done on the cost side to get out In the Q4 to the point where our all in unit costs are 4.5% lower quarter over quarter despite Having over 40% less capacity to work with, this speaks to the ingenuity of the team, Rethinking as we speak what the not just the current environment, but the future environment is. And these are not Costs that we're deferring out into the future, we're making real changes real time here and it touches every part of our business. So it's been one of the since demand has been low, we've been all over costs the entire year and the team has done really, really good work here.
Yes, definitely some impressive stats you're able to throw earlier. Well, thank you all for the time.
Thank you.
Our next Question will come from Duane Pfitzworth of Evercore ISI.
Hey, thanks. Good morning. You covered this in pieces and I'll follow-up to a A couple of other analysts, but one of the things that Delta has been talking about during this crisis, which makes a lot of sense Is getting to 2019 CASM on a capacity footprint that's smaller. So I wonder if you'd Kind of quantify how much smaller a footprint can Delta still deliver 2019 CASM? And is the thinking or the logic and the focus really more on CASM recovery and margin recovery before Necessarily capacity recovery?
Duane, I'll take that. Listen, they're all interrelated. You need to put the revenue and the capacity out there in line of demand, not in line of your CASM strategy. And but they're certainly connected to the ability to drive costs down. One of the things that we have been a leader For many, many years, really the last decade is on our up gauging strategy domestically particularly.
And that That will continue to be important as we move forward. And while we talk about simplifying the fleet, we've taken some big steps in that direction. We're also going to be advancing the The up gauging of the domestic fleet at the same time. So that's a big contributor. We'll continue to be a contributor with Both driving down cost as well as improving the customer experience in revenue, including premium revenue opportunities.
We said in I said in my remarks that we our goal is to get that 2019 unit cost By the end of this year on roughly 75% of 2019 capacity level, we think that's a pretty good marker. We hope our capacity level is higher. I'll be honest with you, that the demand environment is driving that. But that's going to be driven by demand, not by cost.
That's very helpful. And then maybe just broad brush strokes. You gave
us the
75% by year end. Is that how we should be thinking about your view of And how are you thinking again, it can change, but how are you thinking about the summer as a percent of 2019?
No, we're not using that as a guide for capacity levels. We're using that for our own For no calculation in terms of where we need to get our cost structure down. It won't be 75% and maybe higher, maybe lower. I don't know. There's a long way to go Between here and there, and we'll keep you posted as we go.
Okay. And then just last one, maybe a question from a different era. But could you walk us through the comps on revenue monthly? Because it seems like Guidance, puts well. January, February, similar to kind of 4Q levels.
But March, It seems like there's a wide range of outcomes on March and obviously the comps fall off materially middle of March. So I
don't know if you have
the data handy, but how much easier is March April relative to kind of Jan Feb?
Duane, we're not going back to giving monthly revenue guidance. So I'm sorry I didn't have to pass.
Fair enough.
The comps do get easier. Thanks for taking the questions.
The comps will get easier.
And now we will go to Joseph DeNardi of Stifel.
Thanks. Good morning. Ed, you talked about,
I guess, the corporate travel environment.
In a scenario where corporate traffic is impaired 15% to 20%, what does that mean for your all's earnings power? And why shouldn't we be concerned that I guess that the fleet Strategy is adding more premium seats into a declining premium
market.
Joe, I wouldn't draw the conclusion that corporate travel is impaired at all. In fact, I've not said that. I think we may see lower corporate travel, But I also think it will be changed, potentially different mix. So I don't think we should be or either ringing Beginning in the second half of this year, we are smaller airline. We've got 200 fewer planes today.
We've already right sized the business to be smaller, which will help protect the premium revenue sources and the margins of the business. And that's why we've spent a lot of time on this call talking about our cost performance. That's going to The key to make sure that we protect the margins in an environment where corporate travel will be down for the foreseeable future. Maybe it's permanently down by a little Lower amount, but I'm not ready to declare that quite yet. Could I add something to that is that I think when you think about our premium Products and services, you also ought to think that these are not only filled by corporate travelers.
As a matter of fact, only less than 1 third of the seats are actually filled by the corporate travelers and 2 thirds are filled by non corporates. And I think it's our ability to provide the right Products and services for non corporates as well with the right sell off opportunities so that we can match their Preferences to our products and services, and I think that's really been one of the great hallmarks of the transformation is to say, this is really available Everybody at reasonable prices and that's been our one of our key successes I think.
Got it. That makes sense. Ed, it's my understanding that owners of your SkyMiles debt are getting access to quarterly updated financial disclosures For SkyMiles similar to those you provided when you marketed the transaction, to my understanding that equity investors are not. So my question for you is how is that fair? How do you expect your equity investors to make a fully informed decision on your stock if they're not being provided with Updated disclosures for what you guys have proven is your most valuable asset.
Thank you.
Joe, I'll let Gary take that because he's closer to the financial disclosures. But I will say, while the Wealth and Partner is a very important asset, our most important asset are our people. Gary? Yes, Joe, we are providing some disclosures
to those debt holders as you Rod, look, I think we agree with some of the sentiment that you have expressed Over time, we see the value there. I think Glenn did a good job of articulating how well It is holding up. We've been on a path to provide more information there. I think you'll have to be a little forgiving. We've A lot on our mind and I think you can expect us to continue down that path for the reason for For the very same reason that I think you've been asking about it, because we do see the value there.
Thank
you. And now we will go to Greg Konrad of Jefferies.
Good morning and thank you.
Just to follow-up on some
of the past questions, I mean, I guess in terms of the competitive environment, And your yields have held up relatively well, only down 2% or 3% on a relatively short booking curve with reduced corporate Travel, I mean how do you think about that potential trajectory for yields as you the booking curve normalizes and some of the corporate travel returns? I mean is there Opportunity to kind of be above where you were in 2019?
I think there's always opportunity to be above where we were in 2019. That's Clearly our goal in the any if it could be a short term goal, it could be, but I think it's more medium to a long term goal. I think we are going to come out with a higher preference than we've ever had. And that higher preference will drive a higher demand set, which enable us To work on yields as we come out the back end of this. So I think it goes back to how did people react to The pandemic and how did Delta's brand come through this.
And I think from all the research we've done and from all the data that we see that our Our brand has never been stronger and demand for our products and services has never been stronger on a relative basis, and we're planning on capitalizing on that On the back end of this.
Thank you.
And then just one quick follow-up, just a cleanup question. I mean, how should we think about Sales for the year, any change versus what you saw in Q4?
What are you referring to the 3rd party sales? Is that what you're asking?
Yes. Sorry, 3rd party?
Yes. The phenomenon that you're seeing in the 3rd party sales is Anything we produce and do not exchange for jet fuel, we sell to 3rd parties. Obviously, with our Jet consumption being way down. We've had a lot more of those sales to 3rd parties. So that It's going to likely trend with how we rebuild our network and how much jet fuel we're consuming.
I do think it's Important to point out that those sales have no margin. If you look Again, some of the reconciliations in the back of the release, you'll see that those are offset dollar for dollar rather on the cost side. So they're all wrapped into the economics of the refinery, but you should expect those to start trending down as our consumption picks Back up and we're exchanging more for our own use.
Thank you.
And next, we will go to Mike Linenberg of Deutsche Bank.
Hey, good morning, everyone. Hey, I'd just like to go back on the mandatory COVID test for international arrivals. Are you aware of any potential carve outs, You know like for those 24, 48 hour round trips, and if you were to have a vaccine to be vaccinated, would you be precluded From actually having to provide that test on entry?
Hey, Mike, it's Ed. We're still working through The guidance from the CDC is evolving. We have mentioned I So we've had a number of conversations with Doctor. Redfield on this. We've mentioned the needs to consider some waivers in unusual circumstances where, For example, COVID testing resources are not available or if there's some relatively short term, as you mentioned, travel.
So we're working through the implementation details. I think it's absolutely the right thing to do for the long term for our industry, It's going to create some short term hiccups.
Okay, agreed. And then just a question to Glenn and possibly Peter Carter, I know that you had sort of deferred on JetBlue American. What I'm more interested is it looks like as part of that transaction, It does look like that there's going to be a slot divestiture and that would obviously be at airports that are near and dear to Delta. Are those slots that From what you know, are those slots that only new entrants can bid on? Or are those slots that all carriers can bid on?
And if that's the case, is that something that would interest Delta? Thank you.
Thank you.
So the DMP has not made it clear what
the rules are with respect to those slots, But I think it's suffice it to say that we are deserving in DCA without question because of our market position.
And now we will go to David Vernon of Bernstein.
Hey, good morning. So Ed or Jerry, could you talk to how as
we move through these next three phases,
How and when discretionary cost may come back into the system. I'm wondering if there's going to be a need to prime the pump a little bit on the cost I have to prepare for what should be a pretty, pretty, steep recovery as vaccinations roll out.
Well, there will be some, David. We expect, for example, activation expenses around maintenance and aircraft through the remainder of the year. So we expect that pace To continue, I'm not sure I quite heard the non was it discretionary or non discretionary expense
that we're at?
Yes. I imagine you guys have curtailed a lot of discretionary expense, whether it's marketing or IT development or systems work or training programs, what have you. I'm just wondering If there's going to be a need to step up that spend ahead of recovery here in the intervening months.
Well, I'd prefer to think of it not to pick it up before recovery, but we will have a need to revisit Some of the things that we've done. If you take a look, David, at what we're Pointing to in terms of incremental costs that we leverage as we leverage the network, it does look different than what we Saw in the second half of twenty twenty and one of the reasons is we do expect to have pressure in pockets. We have to be really mindful And balance some of those needs with the realities of the business because we are determined here To turn the profit equation around and to be printing these releases with black ink this year.
Hey, David. This is Hans Ed. Let me expand on that just a bit. We are whether it's maintenance expenses, we've got our staffing levels Back to where we need to be starting the 1st of this year, we restored the pay in terms of some of the pay cuts, the voluntary pay cuts That our employees took last year. So there's a meaningful step up already in the numbers we've given you for the cash burn in the Q1 To get ready for the recovery.
So I'm very comfortable with where we've set. In fact, if we wanted to continue to run the same cost structure Sure. And forgo, some of those expenses, you'd see our cash burn coming down, relatively meaningful levels in the Q1 as well, We've maintained the same level of cash burn to get ready for the spring.
That's helpful. And then maybe just as a follow-up, you noted in the release
the amount of CapEx that's Come out
of the budget over
the next couple of years. I'm wondering if there's been a discussion at the Board level about goalposts or guideposts for profitability before we kind of go back to renewing the fleet in earnest?
David, again, I think that question is a little premature. Yes, we talked about that topic of the Board. We obviously haven't made any determinations quite yet. The goal we have at the Board is very much what we set to you Is that we get to our goal is to get to a cash breakeven position for the 2nd quarter and a return to profitability Starting in the Q3. All right.
The pace of that recovery over the next couple of years, obviously, we still Got some work to do, yes.
Okay. Thanks.
Kathy, we're going to
have time for one more question from the analysts, if you can queue that.
And that question will come from Joe Scioto of Credit Suisse.
Hey, good morning, everyone. Thanks for the time.
Ed, One just a quick clarification question regarding your annual corporate travel survey. 1, 40% of respondents say fully recovered by 2022. Are they referring to their businesses being fully recovered by 2022 or their corporate travel budget being fully recovered by them? Or do they Yes, one of the things.
Your corporate travel being backed by that.
Got it. Okay. Understood. That's helpful. And my second question, And just it's clear that you're not seeing any elongation of the booking curve yet at this stage, but what about clicks or looks, Dropping short of actual bookings, but is there any data like that that you're tracking analytics on the website, something like that that provide the basis Your recovery outlook beyond Q1 and sort of saying that you have a good shot at P and L breakeven in Q3 or you're just hopeful that that's going to be the Are there any analytics that you can share with us that maybe give you a better indication?
Thank you for the time.
Absolutely. Corporate looks are actually doing quite well. We're 40% up over quarter over quarter where we were last quarter in terms of looks. And look The book is very low. So people are looking, they're aspiring to travel and they're just not ready to commit yet.
And I think that's what really gives us that sense That there will be a point in which people feel comfortable again to travel and that look will turn into a click, turn into a booking. And so we are monitoring that Very, very carefully and we're looking forward to the opportunity to serve these customers as they come back.
Thanks for that
color. That's going
to wrap up the analyst portion of this call. I will turn it over to Tim Mays, our Chief Marketing and Communications Officer.
Well, Good morning, everybody. I want to thank all the members of the media who have gathered on the call today. Your interest in Delta is not only appreciated, it's It's never been greater and we're very pleased today to provide you with an expanded period of time To make sure that we address your questions, I'd also like to thank Ed and Glenn and the members of the Delta Leadership Committee, all of whom are on this call for their involvement as we turn the page on 2020 and optimistically look at 2021. So Kathy, if you could please review the instructions And then mention to everyone how they go about asking the question.
Certainly. And we'll go first to Alison Snyder, Head of The Wall Street Journal.
I was wondering if you could talk a little bit about some of the operational issues you saw around the holidays, Thanksgiving and Christmas. And what Looking back, you think we're kind of the root causes of that and what if any changes you've made to prevent the same sort of thing from happening again?
Sure, Ali. We certainly had a much better Christmas holiday than the thanks Giving break, there were a number of factors going on in the staffing levels of the company with a lot of the changes That we had implemented and you couple that with COVID and some of the exposures which everyone's seeing the no fly capability as some of our staffing, which came in. We learned from that for Thanksgiving. We made some pretty Aggressive changes in December in terms of getting the schedule fine tuned to anticipate that. And we were in really, really good shape and then we got hit with a massive storm in Minneapolis on 23rd December, which cost us probably a couple of 100 cancels, incremental cancels over that next couple of day Timeframe, which was concerning, but unavoidable unfortunately.
The most important thing in all of that is one that the Delta people and I know there were some bloggers Others out there wondering whether the Delta pilots weren't doing everything again. The Delta pilots were amazing through the bulk holiday periods and showing up and getting the flights going and giving up their holidays and their Time away with the families to help the company out. So it had nothing to do with pilot staffing at all. The other thing was the number of customers who may have been canceled while it's higher than we've been expecting. The vast majority of People got to their destination within hours of their original schedule time.
So the team did a very, very good job and that issue was pretty much Over with by 26, 27. And that really manifests itself in the record net promoter Where we had in the December time period. So as Ed mentioned, despite the fact that we had to cancel some flights, our average lateness was not very versus the original itinerary and our customers over the holiday period were quite satisfied posting record high net promoter scores.
And just
a follow-up, is there anything you can share about what you're seeing in terms of crew member infections at this point? I know the pilots have said they saw a big Increases in COVID infections in the late fall. I'm just wondering if you're still seeing that or if that's Would have been brought under control.
Well, we're a microcosm of the country. And as the pandemic has It accelerated over the course of the last few months. It's accelerated across airline employees as well. But Our teams doing the road drive, they're not seeing its spread within the company when they're at work. It's unfortunate in community is where the where people are getting So I'd say every work category of the company is experiencing an increase in exposures as we've all seen Over the last couple of months.
Thank you.
And now we will go to Tracy Luscinski of Reuters. Hi, good morning. I'm wondering if you
think we'll see COVID-nineteen testing being required for domestic flights.
Tracy, I don't think so.
Okay. And Just to follow-up with a separate question, should we expect to see a deal with Boeing this year For a 737 MAX order?
We're not going to speculate on that.
Okay. Thank
you. Sorry.
And now we'll go to Claire Wuschi of Financial Times. Hi.
I know Delta has been growing its a list of
people who are not able to fly
in the airline that I was wondering if the company had any visibility into whether more names are being added to the Federal notes wireless based on last week's capital attacks.
The last part was Will Garble. Is your question, are we adding increased numbers to our no fly list based on Federal information?
I was
asking whether Delta knows if names are being added to the federal NOFI list based on the capital attacks.
We certainly know that the TSA He is looking very carefully at those that were in the capital Building the Rykers and we are working closely with them and I do anticipate if the DSA Yes, is able to identify individuals who have people added to the no clause. That's no question about it.
Thank you.
And next we have Leslie Joseph of CNBC.
Hi, good morning everybody. You mentioned that there was a lot of pent up demand
and also the hoarding of points from the frequent flyer program. What happens if A lot of people try to redeem at once. Is that something that you're expecting based on search data and other things? And then also you mentioned a recovery And half of the year, where are you seeing demand? Are those sort of outdoor social distancing destinations showing more strength than others?
Where is the demand coming from? Thanks.
Well, clearly leisure destinations are at the forefront of the recovery right now. And I think it doesn't matter whether or not it's a beach or a mountain, Pete, that's where people are headed at this point in the recovery. And then your second question was?
About the point, so
if people are hoarding, yes.
What happens if revenue and
are you foreseeing, I think they will or trying to redeem
We are Happy and really have are indifferent whether or not people who are booking are using points or whether or not they're using actual dollars or whether they're using e credits. What we are anticipating is a that all of those will increase and we have plenty of capacity to meet that demand as we head to the second Half of 2021. So we're hoping that all of the above happens. From talking to American Express, good Partners there, it's clear that people place great value on their loyalty points with Delta and like to see the values grow Over time and so while they've been in the pandemic, we've seen redemptions down for points because Flying levels are down, but they haven't stopped the spending on the card, our co brand card is as good if not better than almost any other Cardamax has. So
it has great appeal and
we expect it's not going to be a run on the bank type situation that you're referring to.
Okay. You could just adjust the awards, the availability and things like that too, right?
Absolutely. We're looking forward to that day.
Thank you.
And now we will go to David Keon of The Associated Press.
Hi. Real quick question, unless I missed it. I had not heard an update in a while on the number of people you have banned for not wearing face masks.
Is there
a current figure on that? And Any changes in cabin policy? I think that number is north of 800 at this point, David. Okay. Okay.
Very good. And then how many of those are since last week? Do you know? A number, not a huge number, but a number. Yes.
And now our question will come from Kelly Yamaguchi of The Atlanta Journal Constitution.
Hi there. I wanted to ask about profit sharing With no profit sharing next month from 2020 results, I was wondering what impact you think that may have on employees and satisfaction? And And also wondering if there's a if you think there's a possibility of profit sharing a year from now?
Well, I think everyone is aware why there's not profit sharing in this year. And I can tell you employee satisfaction At a very high level, I mentioned during the script, Kelly, that we just were awarded the 7th Best Employer by Glassdoor. Glassdoor is an entirely employee driven Acknowledgment the company hasn't had any input or any insight into that. That's it's purely by employees talking about their employers. So that gives you a sense for the sentiment.
The sentiment is very strong. The volunteerism with the tens of Thousands of people that have taken unpaid leaves of absence over the year indicates that. We've been mindful of the fact that there won't be a profit sharing payout and We're providing added services and assistance around financial health and financial well-being and credit Counseling and other services to employees that may need it. We're going to be ramping we have been ramping it up and talking about it. We're going to continue to talk about it On an ongoing basis going forward with our people providing that support.
And relative to next year's profit sharing, I certainly hope We'll be paying it. It's hard to speculate it now. It's just only a couple of weeks into the year, but I'm hopeful that we'll be paying it.
Great.
I also heard mentioned during the call so far about the value of connecting economics, but also the importance of point to point and focus cities. I was wondering, if you expect how you expect the Atlanta hubs role to be different going forward in terms of size or the role in your network?
Well, clearly the Size of Atlanta is relative to the size of demand in the United States as the world's largest hub. It is a micro Cosmos global airline demand. So we expect it to recover as the airline continues to recover. The two things that I would say is that we're going to continue to work on average gauge, which I think is something that's really important and that we'll be bringing more Sales about, but bigger airplanes with better products and services. And so I think you'll see the departures get back to 2019 levels at some point in the future.
But Before that, you'll probably see the enplanements start to rise dramatically and using really the gauge lever as much as the departure lever. This is, As you know, our most valuable asset here in Atlanta and we're very proud to be a part of the Atlanta community and it It led us in the rebuild of our network so far.
Great. Thank you so much.
Our next question will come from Ted Reed of Forrester.
Thank you for taking the questions. I have two questions for Glenn. First one, Glenn, when you said earlier, Delta is ready when you are talking about when you come back, were you talking about in terms of capacity or Something else?
I think that when customers are wanting to fly on Delta, we'll be ready for them. And I know you're I know you for a long time and I know you remember that slogan. So it's harkening back to a little bit
of history there with Telco.
So So
you're just saying you'll be ready though, you'll have the capacity suited to what you anticipate customers will want? Correct. All right. Secondly, we've been talking a lot about middle seats being empty and being, you said, a powerful tool. How are you measuring what the How can you tell that these are so valuable to their to your customers?
Our revenue premiums have never been higher. And so customers are valuing the Delta difference. And I think that's how we're looking at that is when we look at our revenue production versus our competitive set Despite having the least amount of sellable capacity, our revenues have kept pace. So I think we're seeing not only the highest share of corporate demand we've ever had, although albeit on depressed levels, but a real differentiator when customers They're shopping to identify Delta versus some of our competitors.
And you think that's due to middle seats being emptied longer than others?
I think it's an entire Delta difference. Clearly, that's a piece of it. But whether or not it's the Delta Care standard, Whether or not it's the Delta people, which are really always at the heart of it, but this is one component of ensuring that Delta is seen as the brand you want to Associated with me.
All right. Thank you. I appreciate it.
And now we'll We'll go to Dawn Gilbertson of USA TODAY.
Hi, good morning. I also have questions on your Middle C policy. Ed and Glenn, I know you both said no decision has been made yet, but Glenn, your comment about in the second phase of the middle seats would be a very powerful It sounds to me at least like you're certainly leaning towards unblocking them. A, is that a fair assumption? B, can you
talk Talk about the timing
of this decision, when will you decide whether they are blocked beyond March 30th? Thank you.
Don, this is Ed. No, I would not say that's a fair What we said is that when the demand returns, which is that next inflection point, that will Inform our decision around what to do with the middle states. So we've not made any decisions To unblock them post March 30.
But can you give us a sense of when will you make That decision because pretty soon I know the booking curve is still short, but you're kind of optimistic about summer. So will you make that Decision in the next month, the next few weeks, a couple of months. Can you give us any sense of that please?
We continue to monitor it on a regular basis. It's not imminent. We have some busy time, but it's going to be informed by customer sentiment, demand. We have in addition to Moses, we had a lot of other states still on our planes and confidence in travel Relative to COVID and vaccine deployment. So it's not a clear Clear line and there's a lot that has to go into that.
We know that it's been an important, not the only, but one of the important reasons why Delta Has been able to earn continue to earn an even higher revenue premium during this past year than we've historically had. And so we want to be very, Very careful as to how we make that decision.
Thank you very much.
And now we will go to SKIS Edward Russell.
Hi. I was wondering if
you could talk a little
bit about Changes in the competitive environment, American JetBlue Alliance, the Northeast and then how that how you intend to respond to that?
No, I think we're very confident in our products and services. And we compete well against both those carriers Individually and I'm sure we'll compete very well against them together. So we have a lot of confidence in our And services in the Northeast.
Okay. And then there's also been some expansion of some of your focus cities, Raleigh, Durham, Austin, does Delta plan to return there and keep there as well?
Focus cities will be an important part of our We are moving forward and we have continued to work on making sure that we have the right capacity in those cities as demand returns. And so We're looking forward to demand continuing to return in all of
our focus cities. Thank you.
And now we will go to Robert Silk of Travel Weekly.
Thanks for taking my call. Couple of questions. Do you see CDC given any indication, I know that A4A had called for Wanted testing, Nylon, you all wanted testing to be put in place, but in exchange a rollback of travel bans. Any indication But that could be
coming. Your question, I'm sorry, was a bit garbled. Could you We think that we're having a hard time with some of our communications this morning.
Can you hear me a little better now?
Yes.
Okay. So the question is, any indication or sense from the federal government CDC that with this Blanket testing requirements that there could be a rollback of travel bans, Which is something that the airlines have called for. And I'll also follow the other another question is any sense that Vaccines ultimately could be included in the mix if you're vaccinated. It relieves testing requirements. There could be an either or.
We're still working with the CDC on the specific testing strategy and deployment. This is something that we Delta endorsed. I know our industry similarly endorses. We would like to see the travel restrictions lifted once the testing protocols are in place and That will be a decision by the new administration, is my understanding when they take office. And but I think by having The testing protocols in place then gives confidence to the regulatory authorities to sort of lift the bands, which Why we endorse the testing strategy.
Your question relative to vaccines, yes, Obviously, once vaccines are at scale, we would hope that Information evidence would supplant the need to show a test result, but of course we're still With the authorities on that.
Okay, thanks.
Kathy, we have time for one final question for the group, please.
Certainly. And that will come from David Swatnik of Business Insider.
Hey, everyone. How are you? Thanks for the question. I was just wondering at the phases, the few phases that Glenn outlined earlier. With that timing in mind and with the responses that you've gotten from your corporate travelers, is Delta still expecting Recovery to 2019 revenue and travel levels in line with the rest of the industry with the I think it was 2023 or 2024 IATA and A380 was previously forecasting or has that moved up pretty well?
Again, I'm sorry, it was hard to hear the question. Let me take a shot
at it.
The information we shared on the call about Corporate travel is the sentiment we're getting from our own customers. As you are aware, we are the largest carrier of corporate travel Amongst the U. S. Carriers, I think we have probably some of the best insights as compared to IATA or any other I don't know how they determine what 2023 or 2024 looks like, but wouldn't place too much confidence in that. But what our corporate travelers Corporate travel managers are telling us is that 50% expected to be fully backed by 2023.
The other 50% is largely uncertain, but we expect a meaningful amount of that travel to return as well.
So does Delta have a forecast for when will return to 2019 travel levels?
The numbers worth comparing are 2019 travel volumes, yes. Okay.
Thank you, David. With that, we'll turn it over to Ed to make some final comments. Again, Thank you everybody for your time this morning.
Well, thanks, Tim. Just in closing, I I think you can all appreciate that 2020 was a difficult year, but we're on a recovery path. We see the start of it Beginning to crystallize here, particularly with the vaccine development. And as you've heard earlier from Glenn and Gary, I'm Confident that we've got the foundation in place to return Delta to revenue growth, profitability and free cash flow generation. We're committed to keeping our Their loyalty and drive affinity towards our brand.
We're very focused on innovation, which is allowing us not only to enhance The customer experience and drive efficiency, but also the tackle of big challenges that still lie ahead for us. We'll remain very focused on cost We talked a lot about that during the call to ensure that the leisure led demand environment that emerges will be able And finally, we're committed to reducing debt, strengthening our balance sheet and creating long term shareholder value And allowing our owners to participate in future upside without dilution. We have the very best employees in the And we're ready to see the strategy through, which gives me optimism, confidence in our ability to thrive and emerge as the industry leader. So thanks again for joining And we look forward to speaking with you soon.
And that concludes today's conference. We thank you for your participation today.