Good morning, everyone, and welcome to the Delta Air Lines March Quarter 2021 Financial Results Conference Call. My name is Travis, and I will be your coordinator. At this time, all participants are in a listen only mode until we conduct a question and answer session following the presentation. As a reminder, today's call is being recorded. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations.
Please go ahead, ma'am.
Thank you, Travis. Good morning, everyone, and thanks for joining us for our March quarter 2021 earnings call. Joining us from Atlanta today Our CEO, Ed Bastian our President, Glenn Hauenstein and our Interim Co CFO, Gary Chase. Ed will open the call with an overview of performance and strategy, Glenn will provide an update on the revenue environment, and Gary will discuss costs, fleet and our balance sheet. Similar to last quarter's call, we scheduled today's call for 90 minutes to make sure we have plenty of time for questions.
For analysts, We ask you please limit yourself to one question and a brief follow-up, so we can get to as many of you as possible. After the analyst Q and A, We will move to our media questions, after which Ed will provide a brief closing statement. Today's discussion contains forward looking statements that represent our beliefs or All forward looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward looking statements. Some of the factors that may cause such differences are described in Delta's SEC filings. We'll also discuss non GAAP financial measures 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.
Thank you, Julie. Good morning, everyone. Thanks for joining us today. It's been a little over a year since the onset of the pandemic and our customers are gaining confidence in air travel and beginning to reclaim their lives. Reflecting on what it's been in a year like no other, I'm tremendously proud of the progress that we've made and the agility that we've demonstrated.
I developed an even deeper appreciation for Delta's strength and firmly believe that the pandemic has served as a catalyst for us to find new and better ways to serve our customers and our communities. Thanks to the incredible dedication and sacrifices of our people, Delta has weathered the storm with our culture, our Brand and our value stronger than ever before. And I want to thank every member of the Delta family for your incredible efforts over the past year. Collectively, you've carried us through and shown that unique spirit that we call the Delta Difference. I also want to thank the administration and Congress for continued payroll support, which has protected thousands of airline jobs throughout the industry and will help speed the U.
S. Economy in the recovery. Thanks to that support, We've been able to return our people to full work schedules despite running an operation that will be at 65% to 70% of 2019 levels in the June quarter. The first quarter had 2 distinct periods with the first half feeling very much like an extension of 2020 as demand was slower than expected. But as case counts declined and vaccinations accelerated, demand picked up meaningfully later in the quarter, allowing us to achieve $4,000,000 of daily positive cash generation in the month of March, the first positive cash generation since the onset of COVID-nineteen.
This marks a critical milestone in the path to restoring our financials. It is truly a great accomplishment, especially considering that our middle seat block Limited, the inventory that we're selling and business and international travel remain muted. It's also important to note that this metric takes into account all expenses that we're incurring as we rebuild our business. To have turned a true net positive cash flow position within a year The biggest crisis ever seen in the history of this industry is a real testament to the resilience of the company that we have built. Consumer confidence in air travel continues to increase with the pace of vaccinations in the U.
S. Rapidly accelerating and predictions of herd immunity as soon as this summer. We said throughout the pandemic that one of the most important objectives was to restore confidence in air travel. We are now seeing more normal booking behavior as customers make plans for spring and summer travel. In fact, our daily net cash sales in March were twice what they were in January.
As volumes grow, keeping our employees and customers safe and healthy will always be our top priority. We've taken a science based approach to cleanliness and are being guided by our own Chief Health Officer, Doctor. Henry Ting, as well as by medical experts at the Mayo Clinic and Emory. And earlier this month, the CDC confirmed that it is safe to travel within the U. S.
For those who have been fully vaccinated, an important step forward for the recovery of our industry. We are aligning with the recommendations of health professionals and government officials who continue to ensure the safe and effective distribution of vaccines and listening to our customers. Based on our survey work, 75% Our customers expect to be vaccinated by Memorial Day. With improving demand and vaccine trends, we announced that we'll start selling middle seats May 1, providing a powerful tool for improving our financial performance. We also launched other customer experience and loyalty enhancements to increase confidence in travel and maintain the trust and loyalty that we've built over the last 12 months.
Looking ahead and assuming that these recovery trends hold, We expect to cut our pre tax loss by more than half in the June quarter to between $1,000,000,000 $1,500,000,000 and we see a path to returning to profitability in the September Delta's resilience has helped us navigate the worst days of the pandemic, driven by the competitive advantages that are core to our DNA. Those advantages, our people, our brand and loyalty program, our reliable operations, our network and our balance sheet Will be even more important as we accelerate through the phases of recovery. These modes were tested like never before, and I'm proud of the resilience that they've demonstrated. Our people and our culture of service remain our most strategic asset. Loyalty to the Delta brand has never been stronger.
Thanks to the outstanding service that our people provide. They are truly the best professionals in the business. This is evident in our domestic customer Net Promoter Scores, which have been in the low 70s throughout the pandemic, a full 20 point increase over 2019. We've also seen our Despite a large reduction in T and E categories, March co brand spend on the card overall was up relative to March 2019 levels. Our operational performance remains strong.
During the quarter, we led the industry in all on time metrics, including A0, D0 and completion factor, which was more than 99%. And our network rebuild leverages the strength of our core hub structure in our international partner gateways. At the same time, we are renewing and simplifying our fleet, improving the customer experience, Driving efficiency and reducing emissions as we push toward our carbon neutral goals. And finally, the strength of our balance sheet enabled us to manage through the risk crisis We've begun our journey of delevering and by the end of the June quarter, we will have reduced financial obligations by nearly $10,000,000,000 through a combination of paying down debt and accelerating pension funding since last fall. This reflects an unprecedented turnaround in the health of our pensions over the last decade, securing the future of our retirees.
Later this year, we expect to make one final contribution to the plan of up to $1,000,000,000 which should enable our pension to reach fully funded PPA status by the end of this year, largely mitigating the need for any additional cash contributions going forward. And finally, as we look toward the future, it's important to acknowledge that the commitment We made last year to achieving carbon neutrality is as strong as ever. The only future for Delta in our industry is a sustainable future. This is why we're accelerating our fleet renewal and balancing near term needs for verifiable offsets with long term investments in sustainable aviation fuels, Carbon sequestration advancements in clean propulsion technology. And because we can't do this alone, we are collaborating with corporate customers as well as large energy producers in order to address aviation emissions together and work to scale up sustainable aviation fuels.
We're excited about the progress that we're making to combat climate change and enable a cleaner, more sustainable world. These steps are vital to Delta's long term future, and we owe it to the next generation of customers and employees to continue down this path. The time for action, not talk, Is now, and I'm proud of the steps our team is taking. As the recovery takes hold, glimmers of hope are now optimism for the future. Demand for air travel is accelerating in a meaningful way, and we are well positioned to build a stronger delta as demand recovers to pre pandemic levels in the next few years.
With our competitive advantages having been fully tested, we have built the platform to extend Delta's leadership position in the years to come. More than ever, I am confident in the future of Delta and our people. Over the last year, we've taken meaningful actions to become a better, More sustainable, more inclusive company, driven by our mission to connect the world. And with that, I'll turn it over to Glenn. Thanks, Ed, and good morning, everyone.
As Ed mentioned, the pace of demand recovery accelerated over the course of the quarter. With growing confidence, customers are now buying tickets for travel further out speeding our cash recovery.
In the month of March, daily new bookings improved 50% from the January February average, well ahead of its normal seasonality. As customers are now buying tickets for travel further out, our booking curve has extended and our air traffic liability has grown for the first time in 3 quarters, up more than $800,000,000 from December. On our January call, I outlined 3 distinct phases to the year and our levers for each. To progress to the 2nd phase, we need to see higher vaccination rates, easing travel advisories and growing consumer confidence, all of which are now evident in the United States today. Approximately 50% of the adult population in the U.
S. Have now received at least one dose of the vaccine And by May, all states will have lifted mandatory domestic quarantine restrictions. Leisure bookings 85 percent recovered to 2019 levels and Latin leisure markets more than fully restored. Beyond our own bookings, we see encouraging data points in the broader economy. This includes accumulated savings, restaurant dining, Credit card spend, hotel occupancy rates, web search data on travel and corporations announcing more concrete office reopening plans.
In response to these developments and the reduction of COVID-nineteen cases as well as accelerating vaccination rates, We will sunset our middle seat block as of May 1. That provides us with a very powerful lever to add capacity in a cost efficient way and generate meaningful margin tailwind. Removing our Middle C block results in our sellable capacity increasing from 46% of 2019 levels for the month of April to 67% of 2019 levels for the month of June. And with this increase coinciding with strong customer demand for our product, We expect our passenger unit revenue to improve by 20 to 25 points over that period. With this added And a continuation of the leisure recovery heading into peak season, we expect our June quarter revenues to improve by
approximately the March quarter.
The corporate travel recovery has been slow, but steady. Corporate volumes in March were nearly 20% up from 15% at the end of 2020. Small and medium enterprises continue to outperform other corporates by about 5 points. And given our investments in the customer experience, we've been able to grow our domestic corporate share lead, which is now significantly higher than pre pandemic levels. To progress to the next leg of the recovery, we need corporate travel to return in earnest.
While we expect continued improvements to business travel through the summer, we anticipate the significant increases will occur after Labor Day as we enter the more traditional business travel season. That will happen as vaccinations become even more widespread and offices continue to reopen. We continue to expect operational and sales related travel to lead We've traveled to large conferences and internal meetings likely the last to recover. Our views on corporate demand recovery are consistent with what we've in our most recent quarterly corporate survey, where 1 third of our accounts expect to increase travel volume in the June quarter And majority of our corporate customers expect to return to office in the second half of the year. Vaccine distribution and lifting of government travel remain the top two drivers of corporate willingness to travel.
International travel remains muted With long haul international booking volumes at only 15% to 25% recover. We're seeing some early signs of life in Europe with That said, Europe lags the U. S. And Pacific is expected to be the last region to recover. We do not anticipate meaningful international demand Until later in the year when borders reopen.
Once the recovery of those segments are underway, we'll expect They also proved to be a powerful cash and profitability lever for our business. Considering our operating leverage improvements in those segments will be cost effective and highly margin accretive, a dynamic that is very similar to what we expect from lifting our middle seat blocks and one that I am very enthusiastic about. In the meantime, we'll continue to benefit from the strengthening demand environment in the domestic and short haul Latin regions and from our non ticket revenue streams, which have proven more resilient. Our cargo revenues in the March quarter improved 5% sequentially and were up 12% versus the March quarter of 2019. The performance of our loyalty is indicative of Delta's strong brand affinity and our customer aspirations to return to travel.
As Ed mentioned, co brand spend in the month of March was higher than 2019 levels. This was a result of solid growth in non T and E And continued momentum in T and A, which is now down 35% in March from down approximately 55% in November in December, I'm sorry. Card acquisitions are also rebounding nicely and our attrition rates are below pre pandemic levels. For the month of March, Co brand acquisitions were over 60% recovered with less than half of our customer base line. Our long term partnership with American Express combines 2 strong consumer brands, enhancing customer loyalty, while also providing a higher margin revenue stream that has We have driven stronger engagement through our digital channels resulting in more direct relationships with our customers and record high digital satisfaction scores.
Over the last year, we've created a more flexible and enhanced experience for our direct channels, Increasing self-service and making it easier for our customers to do business with Delta. Digital adoption is on the rise and direct channels like .com and the Flydelta app account for 66% of our sales in the March quarter, up 15 points from 2019. While we expect that will normalize, especially as corporate travel recovers, direct channels will continue to be preferred, particularly among medallions and young customers. As we restore our business, we're rebuilding our industry leading network with a simpler, younger and more fuel efficient fleet. At the same time, we have preserved optionality with levers to flex our capacity restoration in either direction depending on the shape of the recovery.
We are also capitalizing on the industry's best domestic hub structure with the highest return profile. The combination of our strong core hubs and coastal provides us with the unique opportunity to leverage cost efficient gauge with large narrow body aircraft providing meaningful efficiency and scale advantages. In addition, we now see the opportunity to significantly improve our international returns from pre pandemic levels, driven by an improved competitive position, a stronger cargo business, the acceleration of our fleet renewal, stronger partnerships and an improved product offering. Reflecting on what has been the most difficult 12 months in the company's history, I could not be prouder of what our teams have accomplished. So I want to thank them for their commitment and continue to put the customer in the center of what we do every day.
Looking forward, I'm optimistic about Delta's bright We have a powerful brand, loyalty program that's proven their resiliency. We continue to improve our customer experience both in the air and on the ground As we've accelerated our robust array of airport projects, our focus on health and flexibility has won the confidence of our travelers
Thanks, Glenn, and good morning, everyone. I'm excited to see our recovery begin to take root and our focus shift from stabilizing the company's financials Creating value by returning to profitability, generating cash and restoring our financial position to its pre COVID strength. Let me start with some highlights from the quarter, then I'll address the upcoming quarter, our fleet strategy and the beginnings of our deleveraging journey. Our first quarter pre tax loss of $1,500,000,000 includes a $1,200,000,000 benefit related to the payroll support program. Net of this benefit, restructuring items and extinguishment charges associated with the prepayment of debt, we reported an adjusted loss $2,900,000,000 Our people out in the operation along with the commercial and finance teams came together nicely to produce great cost performance.
Adjusted operating costs of $6,300,000,000 were 33% lower than 2019, slightly higher than we anticipated at the outset of the quarter with half due to higher fuel expense and the other half due to recovery and COVID related items. Non fuel CASM was up sequentially as expected on 10% higher capacity as we restored our employees to full work hours and incurred costs to prepare for the recovery. Adjusted fuel price of 1 $0.91 per gallon was 33% higher than 4Q driven by market prices and losses at the refinery, which drove a $0.23 per gallon headwind in the quarter. On the consumption side, we realized a 12% fuel efficiency gain compared to 2019, with nearly half of that a direct result of our fleet renewal. Daily cash burn averaged $11,000,000 in the quarter, improving from $12,000,000 in the December quarter despite stepped up expenses.
Improved receipts in March drove $4,000,000 of daily and positive cash generation. We ended the quarter with $16,600,000,000 of and adjusted net debt of $19,100,000,000 roughly flat with the December quarter though above where we expected to be due to aircraft financing decisions. Let's now look forward into the June quarter. We expect a nearly $2,000,000,000 improvement in our pre tax result. If the recovery progresses in line with our And fuel remains at current levels.
We expect to narrow our pre tax loss to between $1,000,000,000 and $1,500,000,000 with progressive improvement through the quarter to breakeven in the month of June. A key driver of improvement will be the sunset of our middle seat block, Increasing our inventory available for sale at minimal cost. We also expect continued strong performance on our non fuel cost And still target levels below 2019 by the Q4. In 2020, the teams delivered strong cost performance by baselining aggressively. In 2021, we are focused on driving cost leverage as we rebuild the network and revenue returns.
We are seeing that leverage materialize in the June quarter With a small increase in costs on a 20% increase in capacity, driving a 12% to 15% improvement in non fuel costs sequentially. Compared to the same period in 2019, non fuel CASM is expected to be 6% to 9% higher, including 3 points to 4 points from rebuild items. Adjusted fuel price is expected at $1.85 to $1.95 per gallon and fuel efficiency for the quarter is expected to remain better than 2019 by more than 10%. Bringing these items together to the point of our guidance, June quarter total operating Expense is expected to be down approximately 35% from June quarter 2019. We expect daily cash generation in the June quarter as demand further improves.
Now let me comment on our fleet strategy, a key enabler of our cost performance. Our accelerated fleet transformation drives more than $400,000,000 in annualized cost That discipline combined with the great work of our fleet and tech ops teams have positioned us to capture fleet efficiencies While preserving optionality on upside capacity levels for the future that will utilize flex fleets if demand warrants additional capacity. As Glenn said, we have the ability to flex capacity in either direction based on the demand. The teams have plotted a path to invest in our fleet with maintenance that will either support higher flying levels if warranted or largely offset costs we'd otherwise incur in the future. Let me now move to the balance sheet.
With our cash flow and earnings close to inflection, we've begun to reduce our debt levels And chip away at our $4,000,000 daily interest burden. In the March quarter, we set in motion our first phase of debt reduction. Using $3,000,000,000 of our liquidity, we are paying down debt funding our pension and acquiring aircraft in the June quarter with cash. Combined these initiatives drive $240,000,000 of annualized savings and free up $2,000,000,000 of lending capacity. On April 1, we contributed $1,000,000,000 to the pension.
This accelerated contribution along with strong returns produced by our pension team Position the funds to be more than 95% funded by year end under the Pension Protection Act that determines cash funding obligations. On a GAAP basis, we expect to be more than 85% funded by year end. We are now assessing an additional contribution of up to $1,000,000,000 to achieve fully funded PPA status by year end. It is really exciting to see our long term pension vision crystallize. The combination of contributions and strong returns over time now position us where we expect no material contributions to the plan beyond 2021, freeing up an average of more than $1,000,000,000 annually of our cash flow.
Adjusted net debt is expected to be $19,000,000,000 to $19,500,000,000 in the June quarter we draw down liquidity to fund the pension plans and pay cash for aircraft deliveries in the June quarter. We expect normal amortization of debt including the 600,000,000 and improve upon the strong financial position we enjoyed pre COVID. Our financial foundation has greatly helped us to weather this crisis, while investing in our future and avoiding dilution for our owners. In closing, I am proud of what the Delta team has accomplished over the last year. The Delta difference that Ed mentioned has never been more important nor has it been more pronounced.
Thanks to all 75,000 of you for protecting each other, our
Thank you, Gary. Travis, we are ready for the analyst questions. If you could give the instructions on how to get into the queue.
Yes, ma'am. Our first question comes from Duane Pfennigwerth, Evercore.
Hey, good morning. Thanks. I wanted to ask you about restart bottlenecks. As we travel more, It feels like staffing levels are very tight and that's just not an airline observation, but really across service providers, hotels, Car rentals, it feels like there's under staffing right now relative to demand. And I think there's been some anecdotes about A hard time filling open positions.
Obviously, the airline industry is in a different position given PSP, but I wanted to ask you, As you gain confidence in the demand recovery, what are the bottlenecks in getting spooled back up? Are you short staffed today relative to any of your work groups? Or is it really just a pilot training exercise?
Hi, Duane. I think the issue you talk about in the broader hospitality sector is an issue. I don't think it's an issue for the airlines, I know the hotels, the rental car providers, as you say, are having a difficult time getting staff back, given the level of Unemployment and other stimulus that's been provided into the general economy. We're not experiencing that issue at all here at Delta. Our people have been At work throughout the entire time, I'd say the biggest bottleneck 2 bottlenecks that we face, which I feel very good about where we're It's clearly getting our pilot training and our pilots into the right categories and ready to fly.
And secondly, maintenance, making certain that got our aircraft and our engines and all the work ready for a pretty quick rebound. It's We had some cancellations on Easter Sunday a couple of weeks ago, about 100 in the business and we've Noticed, it's been a trend on some of the holiday weekends, but for the last few holidays, certainly Presidents' Day and Easter, Not nearly the challenges that we experienced earlier in Thanksgiving and Christmas, and it's because our business is dealing with the tension between Making sure that we've got as many costs out and saved and people on whether it's voluntary to Leave or some other alternative plan and being ready to respond to demand as it comes back. I feel pretty good about where we sit for the coming spring summer. We spend an awful lot of time understanding that. You also need to appreciate that in certain parts So the country, the virus is growing at a faster rate than others.
We've had vaccinations moving and that's impacted a little bit On the pilot availability, because pilots need to sit for a couple of days once they every time they get a shot. But all in, I think our team It's well positioned and ready for the rebound that we see coming this summer.
Thanks for that, Ed. And then just for follow-up, And I think Gary touched on it, but how do you think about the range of outcomes on June, whether it's capacity or revenue, What ability do you have here in 2Q to flex up if demand plays out better than what your guidance assumes? Thanks for taking Questions?
Well, the biggest flex lever we have is the Middle C, which comes available May 1. And You're going to see a significant capacity bump from April to May because of the seats. So we're not Anticipating a significant amount of schedule, additional schedule requirements, probably the biggest question mark we have is the international Space and we're working closely with the international authorities to be ready to fly when they're they enable travel, What particularly in the transatlantic markets, but I'm not contemplating us having a big challenge getting seats in the market for June.
Our next question comes from Brandon Oglenski, Barclays.
Yes. Thanks for taking my question. Gary, you walked through a lot of changes on the balance sheet there, but I think you said you're going to end the quarter, 2Q That is with about $19,000,000,000 to $19,500,000,000 in net debt. And I guess could you just talk to again the priorities on the fleet and the pension pay down as well as Like where you'd like to see that net debt number by the end of the year and then maybe a longer term goal around the balance sheet?
Yes. Well, Brandon, we're not
going to comment on where we'll be by the end of the year. What we've been very clear about as a long term goal is that we want to be back To an investment grade quality balance sheet, if you think about it simplistically, our net debt is up about $8,500,000,000 Since the end of 2019. So one easy way to think about what we need to do is get that back down to the $10,000,000,000 range. In terms of near term priorities, you noted 1, we did make beyond the quarter on April 1, we made $1,000,000,000 contribution to the plan we've discussed in here, the potential for up to another $1,000,000,000 to achieve that Fully funded PPA status. The other things that you should expect to see from us would be we're going to continue to pay cash for our aircraft, which not only prevents us from incurring debt, but it obviously builds our unencumbered Collateral base.
And then we have ongoing debt maturity. So in this quarter alone, in fact, on Monday, we will pay a 6 $50,000,000 of regularly scheduled amortization and another $400,000,000 of that across the second half. So you'll continue to see those debt levels work Down for all of those reasons.
Appreciate that. And has the pandemic made you rethink your minimum What is the threshold that you're comfortable carrying going forward?
Well, we've looked at this A number of different ways. We're thinking about it on an interim basis. We've looked at it a number of ways and they're all kind of pointing to the same zip code. So we've sketched out about a $10,000,000,000 to $12,000,000,000 interim floor for liquidity that we want to see. I think it's important to note though that we don't have that thought process in isolation.
And I'll just repeat, One of the things that you see us very deliberately doing is consciously building the unencumbered collateral base as we go. So in addition to thinking about where we want to be with liquidity, our mind is also on continuing to build that unencumbered Asset based so that we've got the flexibility.
Appreciate it.
Our next question comes from Jamie Baker, JPMorgan.
Hey, good morning, everybody. First question for Ed or maybe for Glenn. I appreciate the endorsement of the 3rd quarter Profit, from a high level, can you expand on what it's going to require? I mean, can you get there solely on domestic leisure recovery or do you need Some percentage of international reopening or corporate to improve from down 80% to down 60%, that sort of thing?
Hi, Jamie. Obviously, there's still a ways to go between here and there to get to the Q3. Clearly, the number one dependency is And we're pleased to announce that the number of patients in the United States are in the United States. And we're pleased to announce that the Is when we should expect our country to be in some form of early herd immunity and that will continue to inspire additional travel. Yes, we're working on reopening international corridors.
I think the one that is most likely to be open for the 3rd quarter Hopefully, it's the U. S. U. K. Travel quarter and we're spending a lot of time with the authorities both here in the U.
S. As well as the U. K. As to what's going to be required to Get that done and hopefully early summer that we'll see that quarter to open, which will then bring some pressure I'm sure on other markets to follow similar Suit and protocol. The middle seat opening is another huge leverage point.
The fact that we've been carrying Such a significant amount of our capacity deliberately not selling is going to be a big add on there. So when you think about all these factors, you need to think about the additional scale that we have from better utilizing our fleet. Our fleet is still somewhat probably 10% to 15% underutilized as we're operating it today. These are the types of things we look at to give us some real optimism that there's a pathway to get into profitability this summer.
Okay, that's helpful. Second question for Gary, and I suppose this builds a little bit on Brandon's question. But you cited the build in the ATL In the release, in the prepared remarks, that was helpful. Thank you. A competitor of yours has said that one of their most important lessons learned From the downturn is you just can't count on the ATL anymore.
Is that consistent with how Your thinking and how it ties back to how you manage liquidity going forward?
Jamie, I think I'll answer it this way. There are a number of factors that we put into the thought process about liquidity. It is safe to say that That was one of the stress points that we considered.
Okay.
So it Wrapped into the analysis I was describing that has us kind of landing in that $10,000,000,000 to $12,000,000,000 zone.
Got it. Okay. I appreciate it. Thank you, gentlemen. Look forward to seeing you next month.
It's good to be getting back to in person.
We look forward to it, Jamie.
Our next question comes from Helane Becker, Cowen.
Thanks very much, operator. Hi, everybody, and thank you very much for your time. So two questions. Ed, you referenced and you and I talked about this last month too, You're asking for sustainability and the things that you're doing with respect to carbon sequestration and I think you mentioned other changes in the fleet. And I'm just kind of wondering, how should we think about getting to net carbon 0 by 2,040 and the costs involved in that and if you think that that helps Your corporate market share going forward?
Sure, Helane. As I mentioned in my Opening comments, sustainability is a real issue for us for our business and is a problem now and it can't wait till later to be addressed. We're doing as we've committed to, invest in verified carbon offsets with the highest certification, Which are the really the only real solution in the marketplace right now and we appreciate there's a lot of concerns about efficacies We are concerned also and that's why we're so specific in terms of what we're investing in. But there is real evidence they have Clear impact and we can't wait for those longer term investments to start paying off to reduce the footprint in the meantime. We're working with a lot of providers, whether it's in the energy arena or other technology providers seeking solutions to decarbonize Our operations and our footprint, we've committed $1,000,000,000 over this decade towards investments along these lines.
And as you see this become an increased importance to the current administration, their priorities, we're hopefully going to get some support From our government, particularly in the area of sustainable aviation fuels, which is critical. It's critical. We don't have as an industry a clear roadmap to net carbon 0 By 2,040 at the present time, but it's important that we have the mindset that we're going to do what it takes to continue to invest in a better future for all.
That's really helpful. Thank you. And then just on another subject, when we were down there For Investor Day in 2019, one of the things that we saw was the Delta Tech Ops and the maintenance operation and so on. I'm just wondering how you guys are thinking about that business going forward given the huge reduction in older aircraft that Exists out there in the world now and your non Delta customers and how they're thinking about Renewing contracts or whatever and how you're thinking about that business?
Well, we're excited about
the Sure, Helane. We're excited about the MRO And it's future. And you're right, in 2020, there was a dip in volumes as airlines pulled back, Not just flying levels, but retired on a global basis, some of the older fleets. But our MRO revenues are not down nearly In line with what we're flying levels have come down to. And as we look to the pipeline of opportunities, there's still a pretty good backlog to dip into.
So the team is doing a great job over there. 1st and foremost, taking care of the Delta fleet, but looking for opportunities to expand going forward. And I think as the earlier question that Duane answered or asked around pipeline of blockages or obstacles to getting our businesses back. The MRO is going to be key for us not just helping Delta, but also helping some other airlines around the world
Our next question comes from Hunter Keay, Wolfe Research.
Thank you. Good morning, everybody. With so much liquidity and demand improving, is there a better than 0% probability that you Do not participate in PSP3.
I'm sorry, Hunter, you said with the liquidity, let me rephrase it. The liquidity we have, will we be participating in PSP3? Is that your fundamental question?
I guess, yes, I'm just wondering if there's a chance that you turn down PSD III if things continue to improve like this or not to participate in it?
Yes. We don't anticipate turning that down, no.
Okay. Thank you. And then, Glenn, as you talk to the corporates, I know it's early, I know you think about 2022 spending. Are you starting these conversations from 2019 spend and working Down or are you starting at 0 and sort of building it up?
Yes. I think we're looking at what we have today and building it back up again. And We don't know the outcome or when, but we do see is that slow and steady build and we think as we get to the end of the summer, As we said in the script that as the vaccination rates continue to improve and offices continue to return that we will see an acceleration as we head into the fall. And I think still unknown where we'll wind up this year and where we'll wind up in summer of 2022. And that's I think where we're going to work The flexibility of our fleet to flex up or down depending on what we see in the market at different points in time.
To add to Glenn's We did update the corporate survey that we commented upon last quarter and the numbers continue to look favorable. 36% of and this is many of our large corporations participated, 36% expect to be fully back travel to pre COVID levels by 2022 and another 16% by 2023. So 52% say they're anticipating give back levels. Only 8% of the corporations that we survey say that we'll never get back to pre COVID levels. And there's 40% that are unclear as to what level of additional flying that we that they anticipate.
So if you take a fairly conservative view on the 40% uncertain and the 8% that never get Fully back and say that only 50% of that returns, then we're looking at 75% to 80% Of our corporate revenues coming back over the course of the next couple of years, which I continue to think is conservative and We're working hard as people feel confident getting back out into the sky to get that business volume back to where it was.
Thank you both.
Our next question comes from razzi Shanker, Morgan Stanley.
Thanks. Good morning, everyone. Two questions from me, one near term and one longer term. In the near term, how would you Troy, is the current competitive environment out there, obviously, early days yet and everyone's trying to obviously add capacity to places that people want to go. But are you encouraged by what you're seeing right now and do you think it gets better or worse from here as we open up more?
Yes. I think there's really 2 things that we would talk about and there are different scenarios. One is internationally coming out of the pandemic, I think we see a vastly improved competitive scenario with a lot of the ultra low cost or low cost players in each region Coming out of this much weaker or gone. And so as we see Europe come back, as we see Latin and the Pacific come back, I think we're going to see a much Improved environment for many years ahead of us. And domestically, I think you characterized it quite well as people are traveling differently than they were And while we are back at 85 percent of demand, that 85% is going different places than it was pre pandemic.
So you see a lot more Capacity from the industry in places that people are interested, basically the West, the wide open spaces, The Florida markets, the Latin leisure markets. And so we've put our capacity where people want to fly and I think that's where we'll continue to And I see ultimately, I can't tell you what our competitors are going to do with capacity, but I think we feel really comfortable about how the U. S. Arena is developing.
Great. And just looking a little longer term, I don't know how much of your time is spent thinking about 2022 and even 2023 at this point. But look, everyone is looking at 2019 as a baseline, but given the huge pent up demand and the huge amount Excess savings with the consumer, do you think there's a likelihood that we significantly surpass 2019 levels of travel in 2022, 2023 and beyond? And if so, do you have the ability to service that without bringing on
Ravi, I wish I had crystal ball that was that clear to know with some degree of confidence. Certainly, there's an enormous pent up demand. Consumers have built up a lot of wealth over the pandemic. People have really lost The connection that they look to recreate and get back together, whether that's for leisure purpose or business. And I think over the course of the next 12 to 18 months, we're going to see a strong surge as markets reopen for different Looking out into the next couple of years, does that mean we'll be beyond 2019?
I think it's possible. We have flex in our fleet and in our order book to address that. We're not going to be limited. If there's demand out there, we're going to be positioned to be
Great. Thank you.
Our next question comes from Savi Syth, Raymond James?
Hey, good morning. This is actually Matt on for Savi. Thanks for the time. Couple of quick ones for me. Bina, we're just on the international topic.
In terms of leveraging your How you plan on positioning your domestic network for that? Are there any issues necessary or priorities to your coastal hubs?
I think one of the things we're excited about as we come out of this pandemic is the strength of our international partners. As I mentioned earlier is international has taken much more of a reshape than domestic given the fact that Carriers didn't receive government support through the pandemic and are going to either be much smaller or not be there as the pandemic way Eases off. And so we are very encouraged about continuing to leverage our partner hubs as the first wave of Pre pandemic, international travel comes back and that's really what we've done so far. And I think, yes, there will be opportunities for us to reshape our domestic To better feed our internationals coming out of this than we had going in, but we'll deal with that as it occurs as opposed to anticipating it.
Got you. Thanks, Glenn. And then one quick one on the fleet. The fuel inflation
As we said, about half of the 12% improvement that you saw in the quarter versus 2019 It's really structural change driven by the fleet renewal that we've been talking about. So you can think of the remainder as Conditional on where we are on the system. We did say, however, that as we look into the Q2,
we expect
Back to continued fuel efficiency certainly through the June quarter of significance.
Very good. Thanks for the clarification there.
Next question comes from Andrew Didora, Bank of America.
Hi, good morning, everyone. Glenn, just curious on your booking curve commentary in terms of how it continues to lengthen. Are there any data points you can put around this? Maybe how much of your 2Q budgeted revenues are already on the books Versus how that typically compares to normal times or anything you can help quantify that for us?
Well, through the pandemic, the Booking curve had compressed and starting about middle of last month for the first time ever we saw advanced bookings Outside of the 60 day window is actually surpassing the percentage of bookings that were in that category in 2019. So They're feeling much more comfortable in domestic flying, knowing they'll get their shots, knowing they'll be able to travel, still waiting for more and more Events to open and places to open
and that's kind of one of
the things that continues to accelerate the domestic demand and then really Waiting for the internationals to reopen in earnest, I think people are now looking at it the fall and making some speculative bookings that Europe will be open in the fall. There are not a great number of those out there yet, but certainly there is interest out there. And I do believe that in the next Month or 2, we'll see at least some of the European countries attempting to reopen and that will hopefully put pressure on the others to figure out ways to reopen their markets.
Got it. Makes sense. And then my second question here just for Ed, I guess more bigger picture here. We're coming out of the pandemic after past downturns that meaningfully affected the industry. There have been some pretty big Changes out there, right?
But this time around, we really haven't seen that. There's plenty of liquidity, airlines survive, no consolidation, No hub closures. Has any of this surprised you? And why do you think a lot of these have not happened this time around?
Sure, Andrew. No, it doesn't surprise me at all. And it's primarily because of the government support that the U. S. Airlines have received in terms When you think about the significant levels of support and ensuring that that support goes to retaining employment Across the industry as a national priority, there really isn't a lot of change structural.
You use that money to try to get your business back up, which It was what they were intended to do. Certainly, on an international level, you're seeing a lot of change. There's been a lot of international Restructurings, bankruptcies, liquidations, changes, which I don't think we really fully appreciate the full It's going to take some time yet to play out. I think it will help and benefit the U. S.
Industry because we're going to be competitively stronger than in the international landscape than we were previously. So we'll see how that plays out.
Great. Thank you.
Our next question comes from Mike Linenberg, Deutsche Bank.
Hey, good morning, everyone. Hey, just 2 here, the first one to Glenn. Glenn, have you come up with an estimate of what you think the net revenue Hit that you incurred because of the middle seat block and I would be most focused on the month of March where you actually had pretty good demand and we're probably spilling traffic.
Yes, we've looked at that and I think maybe for the month of March in particular and clearly as we got to the end of Or as the traffic continued to rise, it got to be and confidence returned, it got to be a more expensive proposition. So for the month of March, It was probably between $100,000,000 $150,000,000 of gross revenue that we left on the table, not blocking the middle seat, but really Ensuring that demand came back and ensuring that our brand came out of this very strong. And I think had If we had the choice to do it over again, we would do it in a heartbeat because I think it's something that really set Delta apart through this pandemic is Putting consumer confidence and the confidence in health and safety first was a very important part of We've invested in our brand through this pandemic. So I think that's when we see this real confidence returning in the April May time period.
And then just my second question to Gary. On the $1.85 to $1.95 fuel guide, is there an embedded Refinery loss in there, what is it if there is on a per gallon basis and sort of a part 2 to that. As I recall, I believe The voluntary participation in the Corsia program was supposed to commence, I believe, in 2021. In fact, is that true? And where is that going to show up on the Delta P and L if in fact that does kick in this year?
Thank you.
Good morning. It's Peter Carter. So from the CorSoa perspective, this is the Year where we benchmark. So this is the year where our use will be determined for future years.
Okay. Yes. And Mike, on the first Part
of your question, the $1.85 to $1.95 it does contemplate a loss at the refinery. It's not as substantial as what we The fuel curve that we're using is generally what you see out there, Crude in the low 60s and cracks in the $5 to $6 range.
Our next question comes from David Bernstein.
Good morning, guys. A couple of questions for you on the contours of the revenue environment. If we look at kind of where average fares are sort of trending based on some of the ARC data and other sources out there, It looks like the average fare level is lower than we were in 2019. Can you talk to how much of that is sort of mix and loss of business travel demand And what maybe a like for like leisure yield would look like today versus 2019?
Maybe I'll take a stab at that is And may I give you a little bit of a forward look is, we have clearly in the month of May, we're calling May a transition month because we are putting the middle As we get into June and the more peak travel season and with those seats being absorbed into the marketplace, We believe that we will move from the 70s into the mid-80s. That gives us a little bit of an opportunity to start to manage yield a little bit more than we have in the past. And so structurally, we think we're in a pretty good space in terms of the structure of leisure travel and fares Being within the range of where we were in 2019 and so as we head into the summer, we believe that the real Pressure on domestic yields will come primarily from the lack of business travel, not from the structure themselves or not for leisure travelers Significantly less than they did in 'nineteen. Does that help answer your question?
It does, I guess. And maybe just as a follow-up, How long do you think from a domestic standpoint, like when do you think you'll actually be at a level where you're not just starting that process, but you're kind of more at a run rate of getting that full benefit of managing up yields?
Well, remember that the way the yield curve works We're always saving for the last minute business traveler, who's there are not that many of them out there this year or they're substantially less than they were for 2019. So you won't see, I think the full impact of yield management flow into the revenue equation until a little bit later, probably early fall. So summer is going to be about managing leisure demand and there's a little less opportunity in terms of saving that last seat for the business customer. So as we move through the year, I think we're going to get say September, October to really be in a much better position to manage yield through the traditional RM systems. Great.
Thank you.
Our next question comes from Catherine O'Brien, Goldman Sachs.
Good morning. Thanks so much for the time. So a little bit of a shorter term take on Ravi's question earlier. Regarding your plans to get to 75 percent of 2019 capacity in the Q4, is that the structural maximum based on your fleet and crew retirements? And if we do see that wave of pent up demand you discussed on your CNBC interview this morning, Ed, would you consider sourcing additional aircraft to be able to add More capacity back sooner or is that capacity planned that's really in line with your views on the pace of the recovery through year end?
I realize a couple of questions in there. Thank you.
Thanks, Katie. We certainly have in the very near term for this coming summer limitations to how much demand we can serve and It's these decisions that are taken 6 to 12 months in advance in terms of getting pilots into the right categories. That said, with a significant amount of capacity we're adding through the middle seat being returned to service, I don't think it's going to be a substantial impact on our ability to serve the demand that we see out there.
Got it. And then maybe one on the cost outlook. You previously announced expectation that the company can achieve 2019 I guess, first, is that still the expectation? And then second, Is inflation contemplated in that figure or is that a like for like figure assuming 2019 labor, maintenance costs and the like that typically do see some
Katie, that's a number that we expect to hit this And I would say I'm really pleased with where we are. I mean, we are on the trajectory. The 6% to 9% as I mentioned that we're In the Q2, I mentioned the four points of rebuild that are included in there, but you heard Glenn talk about Some of the international flying that we're not doing now, our international mix is down quite a bit. In particular, we're not flying a lot of the long All international network yet. If you look like for like and what you're seeing in the second quarter that's also about a 5 point headwind.
So, kudos to the team here. Everybody has really embraced it and they've just done a great job. The whole company really has come together around it. As I mentioned in 2020, it was really about aggressively attacking the cost base. We understand the mission this year is really getting that incremental leverage as the network rebuilds and you're really seeing it in the second quarter If you take a look at how the ASMs are coming on and the cost incurred to do that, It's really nice operating leverage.
So very happy with where we are and fully expect to be on that 2019 number by the time we
Katie, one other thing I'd like to add to the point. People Probably don't appreciate the fact that for the last couple of quarters, Delta has actually been flying the most scheduled service of anyone out there. So when people worry whether we are going to have the capacity and the seats in the market to fill it, we're flying more scheduled service because we're blocking so many of the seats on the individual airplanes. As we open that inventory up, we're going to be right with anybody in terms of being able to provide service and Strength into some of our key hubs and markets domestically. So we're not concerned in the short term that we're going to be short aircraft We're short staffed.
Okay, great. Thanks for the additional color, Ed.
Our next question comes from Sheila Kahyaoglu, Jefferies.
Good morning, everyone, and thank you. I guess, somewhat related to the last question, how are you thinking about international markets coming back? Up here gave relatively upbeat guidance on International capacity for summer 2021, how are you thinking about that in terms of geographically? Are you seeing any dispersion in bookings so far?
Well, on the reopening of international borders, I think there's still more many more questions that are answers. We are focused on trying to get the U. S, U. K. Travel quarter open.
I think that's the most logical as the greatest value To us, and I think those are the markets where we'll start to see demand grow quickly when we can get that open and we're working with Our partners at Virgin from the UK standpoint as well as across not just the airline industry, but within the broader travel and hospitality sector to Figure out how we can get it open for summer and we're making progress in that regard. When you think about other parts of Europe, There may be some occasional markets open this summer based on Southern Mediterranean leisure traffic that people will be Interested in, but I don't think you're going to see Continental Europe open in any meaningful way till later in the year. We'll probably unfortunately miss much of the summer On the other end of the extreme, I think Asia is going to be the long pole in the tent. I think that could take a year or more to start travel Back up at scale. When you think about China and Japan and many of the other Pacific Markets, the one market that we will be spending a lot of time trying to support is Korea with our partner at Korean.
And South America is going to be somewhere in the middle. It's really going to be based on the success they have in trying to get the buyers under containment in their countries, which we all know right now is a very difficult That's probably late this year into the winter when you'll start to see South America open up.
Thank you for that color. And then how should we think about progression of yields, particularly given that you guys have been successful in doing so? You mentioned summer is all about leisure And limited capacity. So how are you thinking about that progression on yield?
I think we're really focused on the unit revenues and I think we outlined the progression and There's a yield traffic trade off that we're always monitoring. But when you think about getting 20 to 25 points of unit revenues Sequentially between the end of March June, that's a huge improvement and one that I think is indicative of what we'll be looking at For summer travel and I outlined earlier, we think that the traffic will be in the mid-80s for peak summer domestic And that presents our opportunity to manage yield.
Thank you.
Our next question comes from Joseph DeNardi, Stifel.
Good morning. Thanks for squeezing me in. Maybe Ed or Gary, just looking at the fleet pre COVID, you guys had You talked about NMA as an option for 7/57 replacement. I'm wondering if that's still the Thinking or maybe kind of what the updated thoughts are with that, are there new options kind of out there on the used aircraft side that Changes the approach or how are you all thinking about that? And maybe kind of when do you need to order something to for that?
Hey, Joe, it's Ed. As you probably have seen or read, the NMA is not being actively discussed at Boeing Nothing imminent or on the short horizon here, but we are looking at the longer term opportunities with our friends in Seattle.
Okay. And then you talked about March co brand spend being up versus 2019, seems very bullish to me. Can you talk about The longer term target and your ability to get to the $7,000,000,000 that you had talked about pre COVID, can you do better? And then specifically, How sensitive is that to corporate demand or not? It would seem more tied to leisure, but just Interested in your thoughts there.
Thank you.
Well, clearly the co branded cards are an array of products including a lot of small and medium sized enterprises where we're seeing a lot of success with the cards right now. And so I think we feel very, very confident that we can get to the $7,000,000,000 and clearly the crisis has put a little delay on that and we're sizing up How significant that delay is and how we can shorten that delay by new and innovative programs to stimulate demand for the card. And I think We feel confident coming out of this that the card performed at or above our expectations of how it would do in a scenario, a recessionary scenario. And so we think a very bright future for that card.
Thank you.
Now we'll go to our final analyst question.
Our next question comes from Myles Walton, WBS.
Great. Thanks. Ed, maybe a reflective question. Given the level of government support and assistance the U. S.
Airline industry has gotten in the last 12 months, does it reframe how you and others in the U. S. We'll look at subsidization of international carriers that was clearly a complaint pre crisis and is there a potential for I mean, almost the turning of the tables as they look at us and the level of support we've gotten in the U. S.
That's an interesting question, Myles. And certainly, we've depended upon the support from our government here to be able to Sustain an essential service for our economy. I don't know what that means in terms of long term. The early the Middle Eastern subsidies were not there as a support tool for essential service. They were there to grow Their economies and grow their businesses, so I think fundamentally the nature of the intervention, not just in the U.
S, but around the world that we've seen over the last year It's of a very different character and we'll see on the other end of this where the international markets land and the level of subsidies That continues. So yes, we've been appreciative of that. But no, I don't think it changes the character of what our issues were in the past.
Okay. And maybe Glenn, the shape of the quarter in June, obviously, 1Q was January, February versus March, is April, May, June more linear in the recovery profile?
Well, clearly the big step up is from April to May as the seats get released, and then June is just sequentially better. So more of a traditional seasonality Moving from May to June. And really it's about the capacity absorption of that middle seat is the story of the 2nd quarter. Clearly, in the 1st few weeks of the it will people have to leave to come back, so there'll be some imbalances. So we see the 1st 2 weeks of May being a little bit lighter and then the second 2 weeks as you get into Memorial Day and a more traditional peak leisure period, which should be much stronger.
Okay, thanks.
And that's going to wrap up the analyst portion of the call. I'll now turn it over to Tim Apes, our Chief Marketing and Communications Officer
So Travis, if we could just repeat the instructions as the members of the media line up in the queue. And just as a reminder, one
Our first question comes from Leslie Joseph, CNBC.
On the pilot training issues, how much of that is contributing to your costs? Same question for the maintenance issues you discussed before, the kind of the ramping up. And do you expect to hire pilots at all this year?
I think Leslie, we mentioned that in the cost guidance for the Q2, the rebuild, the maintenance and as well as some training is So it's a meaningful amount that we're investing to get the business back. We've not made a decision yet with respect to Hiring, but I do anticipate if we see the recovery continue to gain strength that
Our next question comes from Alison Sider, Wall Street Journal.
Hi, thanks so much. Yes, I was wondering if you could talk a little bit about what you might be seeing at some of these leisure destinations that are proving to be really popular. Are there any constraints on any airports that you're looking at or that you've been talking to? Or are they are any of those airports starting to get really crowded?
We haven't encountered that yet. So we've been able to fly schedules that we wanted to fly to all those leisure destinations.
Got it. And I guess I'm curious if you're thinking about or planning to do any More point to point flying, flights that overfly some of your hubs as some of your competitors have. Is that something that you're looking at ramping up for the summer?
We have a very, very strong performance from our core hubs and our coastal gateways. So we're going to stay focused on them.
Thank you.
Our next question comes from Mary Schlangenstein, Bloomberg News.
Thank you very much. We saw Southwest yesterday increase the number of rapid reward points That it's going to take to redeem an award. They increased it by about 6%. I'm wondering if you can comment at all on whether that's something that Delta might be considering or we might see you do down the road here?
No, we're not considering that. And we're very excited about the value we're bringing We've actually used the program to stimulate a lot of demand with really some very attractive offers that we've had in market Across the U. S. And hopefully our frequent flyers are enjoying the benefits associated with those attractive offers.
And can you talk about how you've seen the build up points? I mean, very few people are traveling, especially internationally, as we all know. But what did you see keep up your level of points being built? Was it credit card use? Did that surpass Travel or can you comment on that at all?
Well, if you think about it, unfortunately, there weren't very many people traveling on the airline, which is a vast majority that we issue. And on the credit card side, clearly that had a much more sustained. So We don't feel that there's a huge imbalance coming out of the pandemic with the difference between what points of finic crude versus what we anticipate being able to supply in the marketplace. And we're pretty excited about people returning to use their points.
Great. Thank you very much.
Our next question comes from David Zlodnick,
Good morning, everyone. Thanks for
the call and the question. I want to
go back to what we were talking about before. As you pointed out, What kind of demand you're expecting there and how you would plan to capture that demand, especially if it's a last minute reopening kind of thing without being having aircraft and crews over committed to some of the domestic and regional leisure markets?
Well, clearly what we've seen is when customers can travel internationally, they are willing to and excited about it. And I think when you think about The places that you can go today, whether or not it's the Caribbean or the Latin, we have said that there's more than 100% of the demand restored to those So, we're over indexing already versus where we were in 2019. So, as those open, We will be able to supply and as you think about it, there's still a significant number of our places that will be closed. So if the UK were to open, we'd be able to satisfy as many seats as people needed to fill the demand. I think We're excited about that and we'll see how it goes.
But one thing I would have a takeaway is Americans want to travel and they want to travel abroad.
Our next question comes from Robert Silk, Travel Weekly.
Yes, hi. Where is Delta at as far as digital Health Passport development? And also, You all see how much impact do you see Digital Health Passports has been able to have, particularly when you talk about on a global scale Interoperably across nations versus simply the vaccines and the end of the pandemic being really what brings back International
demand? So we're spending a considerable amount of time building an open source platform. As you probably know, there's a lot of different marketing technologies for digital health credentials, which I think is probably the more appropriate Right versus passport, which gains a lot of negativity calling in passports. The challenge we face is every government Around the world is looking at their questions uniquely and we need to start looking collectively at answers. So that will be important, for example, As we reopen the U.
S, U. K. Border as to what technology will be available to actually evidence If indeed the regulators even require a vaccination, it's not clear that that's been that that's even going to be a requirement. So we're working to try to keep as open a framework as possible, working with health providers, technology providers and our customers to ensure that When they need to show that they've been vaccinated or have been tested, they can do it in as efficient manner as possible.
Okay, thanks.
Our next question comes from John Beers, AFP.
Thank you. Hi. John Beers at Agence France Presse. I wanted to ask, there was the whole Controversy about the Georgia election law and there was a briefly there was a boycott delta Hashtag that went viral and so forth. And you came out strongly against the law after it passed.
I wondered if you had seen Any impact on from customers either positive or negative and it's curious if you could discuss whether you think there'll be any lasting impact on your brand with the public?
No, we haven't seen any significant impact from the different discussions that have been going on in Georgia.
With that, Travis, we have time for one final question before we turn it
Our next question comes from Elliot Blackburn, Argus Media.
Good morning. Thanks for making the time for me. I just hope you could talk a little bit about, especially in light of Delta's decarbonization goals, How does the Trainer Refinery fit into Delta? And how do you how are you guys looking at that facility going forward now?
Well, it fits in as it always has. It's an offset to our exposure to jet cracks and That's one of the things that we are seeing. We had some questions about impact at the refinery and one of the primary drivers of that, there are 2, But the first primary driver is just the fact that jet cracks right now are very low. I mentioned they were in the $5 to $6 range. We've seen them historically in the $15 to $20 range.
The other contributor to the near term performance has just been a huge escalation in the cost of RINs, Which have gone towards the end of the Q4. They were in the $0.60 to $0.70 range and they're well north of $1 now. That's a market dislocation that we just don't see as sustainable.
I think given that, I mean especially with the RIN uncertainty and Also with your interest in SIF, I mean, are you guys looking at possibly converting that refinery to renewables Or would you change operations at that refinery going forward?
Look, I think it's safe to We're always evaluating all our options. What we're not going to do though is let some of these short term dislocations guide our This is an asset that has contributed a lot to the company over the last in the time that we've owned it, which is the better part of the last decade. We've got a world class team there operating it. They're operating it safely. They're operating it efficiently.
They're operating it cost Effectively and as I mentioned it is serving the purpose that we've always had for it which is an offset to the crack exposure that we have.
Thanks very much.
With that, we'll turn it over to Ed for Final closing comments, and thank you everybody for your participation today.
Yes. So I'd like to thank you all for your participation and joining us this morning. As we sum up the call, it's clear that at Delta, we've reached an important inflection point as we navigate the pandemic And move into the recovery phase of 2021. As the pace of vaccinations accelerate, our customers are reclaiming their lives. Air travel will be central as people reconnect with loved ones and business colleagues, replacing their screens with real human touch points as they venture out of their homes And communities to experience the world again.
Looking forward, with customer demand steadily rising, there is a lot of runway ahead of us As we open our middle seats to Booking, in corporate and international begin to recover in earnest. And once the recovery of those segments are underway, we expect they'll prove to be powerful cash and profitability lever to get our business back to where we need it to be. The strength of our balance sheet has been critical and I'm excited that we're Our focus to delevering, which will also be an important accelerator in our recovery. So with all of this, I have great confidence that Delta is well positioned to lead the industry in the months and years ahead. I thank all of the people at Delta for your tremendous job, particularly over these last 12 months in positioning us for success.
And we look forward to welcome all of you back aboard our flights in the days months to come. Thank you all.
Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.