Q4 2019 Earnings Call

Improvement of more than $1 billion over 2018, setting a new record for Delta and the us airline industry.

Full year earnings per share improved 30% over the prior year, and we generated $4.2 billion of free cash flow with $3 billion returned to owners.

These results simply would not be possible without the incredible work of our Delta team.

I'm pleased we will recognize our employees performance in 2019 with $1.6 billion and profit sharing this marks the highest profit sharing and deltas history and is the six consecutive year of $1 billion or more in profit sharing we could not be happier for people.

For our customers, we continue to run the world's most reliable airline.

We ended the year with 165 cancel three days across the entire Delta branded system with 281 zero cancel days on our mainline operations, representing an entire months worth of improvement over the record performance. So that we set in 2018.

Recently Delta was named 2000, Nineteens, most ontime North American airline by for Michael for the third year in a row.

Exceptional operational performance, along with unmatched customer service is wide more people than ever are choosing to fly delta.

In 2019, we flew 204 million customers, a 6% increase over 2018.

And over the last decade, we significantly improved the quality and reliability of deltas operations and as a result, our customer satisfaction scores have more than tripled domestic net promoter score is now regularly in the fifties with nearly five point improvements over the course of 2019.

Delta is continued investment in our operations products service airports and technology are reshaping customer's perception of our brand and our journey ticket to improve continues daily and we plan to keep climbing by powering our culture of service through technology.

Last week I had the honor of delivering the opening keynote address at the consumer electronics show, where we outlined deltas vision for the future of travel unveiling innovative technologies to better serve customers and give our employees the best tools to use in the world.

Delta is leading the industry in every dimension and five short years Delta will celebrate its 100th anniversary the amazing the thank out how far we've come but even more exciting to look ahead.

2020 is off to a good start.

Yes, consumer and travel demand remain healthy our brand has strong momentum and we have a pipeline of commercial initiatives that support another year of revenue growth in excess of GDP.

Consistent with our plan that we outlined at Investor Day last month, we expect to grow 2020 revenue by 4% to 6%. This is on top of the 15% growth that we've delivered over the last two years.

Our full year earnings outlook of $6.75 to $7.75 per share positions Delta for the six straight year of pre tax profits in excess of $5 billion free cash flow is also expected to remain strong at $4 billion. In 2020. This would bring deltas three year.

Cumulative free cash flows over $10 billion by the end of this year.

Leveraging a solid financial foundation, we've increasingly diverse revenue streams and building brand momentum, we are demonstrating an unprecedented level of earnings and free cash flow consistency for this industry.

This is enabling us to reinvest in our business at a level that others cannot match.

This reinvestment is extending our competitive advantages and when combined with a great brand powered by the very best people in the business. We have the engine to drive meaningful long term value for our customers our employees and our owners with that I'd like to turn the call over to Glenn and to Paul to go through the details of the quarter.

Thanks, Ed and good morning, first I'd like to thank the entire delta team for delivering a record year end 2019.

Their hard work that enabled 47 billion in revenue an increase of more than 3 billion over prior year.

The 7.5% growth was broad based with strength in both business and leisure improvements in domestic and international and double digit growth and loyalty and MRO.

Total unit revenues improved 2.8% sustaining our revenue premium to the industry or more than 110% and outpacing non fuel unit cost growth of 2%.

We continue to diversify the topline with 53% of our revenue generated by premium products royalty and other non ticket revenue sources.

Premium product revenue grew 9% in the year to 15 billion.

We've continued to improve and invest in the premium experience and we are seeing increasing product affinity.

On average 70% of customers that fly in premium products pursuits, and equal or better product on a future trip.

We are providing skymiles members more options to use miles anywhere they can use cash with delta since launching upsale would miles a little over a year ago 1.2 million customers have redeem miles contributing 135 million of incremental revenue.

And we continue to expand capabilities, most recently with the ability to pay for bag fees using Myles.

Brand preference for Delta is stronger than ever we are seeing momentum and customer satisfaction scores and in 2019 business travel news named Delta the world's best airline for business travel for the ninth year in a row.

More customers are choosing to interact directly with us with 52% of trips purchased directly from Delta during the year.

Digital is our fastest growing distribution channel.

Mobile revenues grew by 35% driven by an active user base of over 24 million customers.

Total loyalty revenues grew 18% we added the highest number of Skymiles members in our history with over 6 million new enrollments.

We also acquired 1.1 million new co brand cards, setting, a new record and marking the third consecutive year of more than 1 million CRO brand acquisitions.

We deepened our customer engagement to drive 12% growth in mileage redemptions in program spend.

This is the 50 year of double digit growth for portfolio spend in 2019, our renewed contract with American Express benefited revenue by approximately 500 million.

Yeah, I'll just close relationship with American Express is a strategic advantage that is truly unique.

In 2019 internal contributions grew by 20% to 4.1 billion.

We expect this to reach 4.4 billion in 2020 and grow to nearly 7 billion by 2023 on a combination of improved rates continued acquisition momentum and spend growth.

Enhancing customer loyalty and building trust is at the heart of our business and together with American Express, we are finding new and innovative ways to reward customers for their loyalty.

Later this month, we will be launching our new portfolio a card offerings, the redesign cards deliver new and richer rewards that we'll continue to increase customer benefits and drive future card acquisitions.

Turning to the December quarter, we delivered a strong close to the year with topline revenue growth of 7.2%.

Total unit revenue growth of 2.4% beat guidance and marked our 11th consecutive quarter of improvement over prior year.

Passenger unit revenue was up 1.4% over prior year led by strength in domestic and Latin.

Holiday travel came in ahead of expectations, driven by strong consumer sentiment and a condensed booking period between Thanksgiving and Christmas.

Domestically, we saw strength in business and leisure demand with solid yield gains on peak travel days.

Premium product revenue outpaced our expectations growing 9% in the December quarter on top of last years, 10% growth.

Domestically revenue was up 7.7% on a 1.6% improvement in unit revenues.

Corporate demand was strong at up 6% and premium products remain a key contributor up 11% year over year.

Similar to the September quarter, we saw revenue and margin improvement in every domestic up with revenue up 10% and coastal hubs and 6% in core hubs.

Internationally revenue grew 2% on flat PRASM.

Latin was the best performing entity was 6.3% PRASM improvement a three point improvement sequentially, Brazil, and Mexico, both delivered double digit PRASM gains.

In the Atlantic PRASM declined 1.6% almost entirely driven by FX.

[noise] specific revenue stabilized on a three point sequential PRASM improvement, while China remained soft trends improved in Japan, and Delta premium select performed well as we continue our fleet in product transformation.

With new and reconfigured aircraft now on 80% of our Pacific routes, we have the Delta one suites and premium select products in place.

In the March quarter, we expect total unit revenues to increase by 5% to 7% on unit revenues up flat to up 2%.

The sequential change in unit revenues from the December quarter is due to lapping last year's American Express contract benefits and MRO engine volume timing.

Importantly, PRASM growth remains consistent at approximately 1.5% in both for Q1 9, and one Q2 0.

[noise] March quarter expected capacity growth includes approximately two points of leap year, and the watch a service to India.

In 2020, our plan at 4% to 6% revenue growth is driven by four areas.

Lengthening brand preference.

Better selling and servicing of our products.

Continuing to win with business in corporate travelers and driving increased loyalty with monarch customers.

Corporate and leisure demand trends remain healthy the overall outlook for corporate travel is positive.

And our most recent survey 80% of travel managers expect to maintain or increase their spend in 2020.

Momentum in premium product revenue is continuing in 2020 with the ongoing modernization of our widebody fleet and improvements in how we sell undistributed premium products.

We also expect additional growth from American Express and MRO, albeit at a more moderate rate than in 2019.

In our network, we are expanding service and personal hubs refocusing on opportunities in our core and developing our partnerships with laptop.

We expect to begin our co chair relationship in the March quarter.

In December we launched new service from JFK to Mumbai and revenue trends are ahead of forecast, we expect approximately a one point unit revenue pressure in the Trans Atlantic as the route develops throughout the year.

In the first half of the year Delta will consolidate Tokyo operations at the preferred downtown Haneda Airport.

We'll also shift Beijing service to the new Beijing Daxing Airport. These moves are strategically important and are the final steps in our multiyear restructuring journey in the Pacific.

Over the last decade Delta has established a global scale advantage through an unprecedented network transformation and by building a leading portfolio our partnerships around that.

This evolution provides the foundation for an acceleration of returns over the next decade, as we mature and grow investments in fleet partners facilities and technology.

Dealt us continued investment ensures that we extend our competitive advantages our culture operational reliability global network customer loyalty and an investment grade balance sheet retain our leadership position in the industry.

In closing we delivered an outstanding 29 team and are off to a very strong start in 2020, now I'll turn it over to Paul.

Thank you Glenn good morning, everyone and thank you also for joining us.

In 2019, we delivered pre tax income of $6.2 billion more than a billion dollar improvement versus prior year over $300 million higher than deltas prior record.

Pre tax margin expanded by 160 basis points to 13.2% earnings grew 30% to $7.31 per share.

Cash flow is also a key performance highlight we generated over $4 billion in free cash flow, while continuing to invest in our people our fleet our partners and technology.

These investments are generating strong returns with an after tax return on invested capital of 16.2% in 2019.

This represents nearly 500 basis points of improvements since 2010, all while doubling our invested capital base.

In the December quarter, a pre tax margin expanded 140 basis points to 12.4%. This was above guidance on stronger unit revenue lower fuel and in that $80 million gain that resulted from selling our stake in goal and beginning to unwind our relationship.

Excluding this gain pre tax margin grew 70 basis points and earnings beat consensus by approximately 21 cents.

Well total expense grew 6.9% in the quarter half of that growth was due to pension expense the markup of benefit related balance sheet obligations and profit sharing from the growth and profits.

These cost increases were partially offset by lower fuel expense, which declined $370 million, primarily on lower market fuel prices.

Nonfuel unit costs were up 4.4% in the quarter inline with our guidance.

For the full year non fuel unit costs came in at 2% consistent with our long term target. Despite the pressure as we saw in the back half a year.

For the March quarter, we expect non fuel unit costs to increase 2% to 3%.

Well feel has been volatile over the last month based on Yesterdays price, we expect March quarter fuel price of $2 to $2 in 20 cents per gallon in line to slightly above prior year.

Combined with the outlook on revenue Glenn provided we expect March quarter pre tax margin to be roughly flat year over year.

Turning to the balance sheet and cash flow. During 2019, we generated $8.4 billion of operating cash and invested $4.5 billion back into the business pre cash flow of $4.2 billion resulted in nearly 90% of net income converted to free cash flow.

As outlined at Investor Day, we're planning capital spending of $4.5 billion in 2020, as we continue to replace our fleet and invest in product and technology.

These investments are transforming deltas fleet to drive margin benefits through higher customer satisfaction increased premium seats and significant fuel efficiency improvements, which is helping to drive our sustainability goals.

Returns on these investments are strong and the compounding benefits of Reinvestments support long term growth.

Delta is investment grade balance sheet remains an important competitive advantage, including the debt we raised during the quarter. Our leverage ratio was 1.7 times at year end. This process. It puts us at the low end of our targeted adjusted debt to EBITDA range of one and a half to two and a half times.

That debt issuance was $1.5 billion of unsecured debt made up a five and 10 year notes the blended unsecured rate of 3.24% is the lowest for these durations in Delta history. The proceeds funded the majority of the acquisition of 20% equity stake in the Tam.

The Tam tender now complete we will begin recognizing 20% of the times earnings in the non operating line beginning in the March quarter.

Moving to pension we are actively managing our obligation through a combination of funding and asset returns in the December quarter, we contributed an incremental $500 million of voluntary contributions into the plant, bringing elective contributions in 2000 $19 billion to $1 billion.

For the year plan asset returns were about 19.5% fueled by strength in the U.S. equity markets, which will drive favorability in our 2020 pension expense.

And while lower discount rates impacted the liability I funding strategy and strong returns helped improve our funded status of 75%. This is a 700 basis point improvement over prior year and nearly doubled the funded status in 2012.

In 2019 deltas unfunded liability also improved by $1 billion.

We plan to make $500 million of elective contributions in 2020 .

Under airline relief recall, we have no mandatory contributions at through 2020 for.

Strong cash generation allows us to reinvest in the business. While also addressing these balance sheet obligations and simultaneously consistently returning capital to shareholders.

In the December quarter, we returned $225 million and share repurchases and $259 million in dividends for a total of $3 billion in 2019.

We ended 2019 with $1 billion remaining on our repurchase authorization, which we expect to complete by the middle of this year.

It is our powerful brand unmatched competitive advantages and the collective efforts of all Delta people that allow us to continue to deliver industry, leading results and drive long term values for our owners our customers and for our people and I'm truly excited for the year ahead.

Consistent with with the guidance changes announced at Investor Day, we're no longer providing quarterly EPS, but our well on track to deliver full year earnings per share of 675 to $7.75 per share in 2020.

And we expect another strong year of free cash flow with expectations for $4 billion again, this year rig, bringing our three year cumulative free cash flow total to over $10 billion by the end of 2020 and with that I'll turn the call back over to jail to begin the QNX. Thanks.

Ken and we're ready for that question and answer period, but the analysts if you take give them instructions on how to get into Q.

Ladies and gentlemen, just like no further questions. Please press star one if you are using a speaker phone. Please make sure. They gave me a function is turned off till I guess like now to retire equipment.

As a reminder, please limit yourself to one question and one follow up question. Once again, Please press star one no fair question.

And our first question will come from David Vernon and friends, saying.

Hey, good morning, guys. Thanks for the time.

So as you think about the decision to sort of accelerate the investments in technology and experience, maybe even going after some adjacent revenues in rideshare through partnership and that kind of thing is this are.

Are these activities going to be funded kind of within the existing capital envelope or do you expect delta the kind of maybe spend a little bit more over the next couple of years as you look on kind of executing division you laid out at CES.

Hey, David David Thanks, Yes, the capital that we spoke of at CES and the technology that we displayed is within the envelope that we've been working within in technology. One of the things that we've done over the last several years is up to our investment in technology, and we're now and our capital.

Level running at about $500 million a year in technology. However for the first couple of years of that a lot of it was focused on infrastructure in Brazilian C and and the data sets and data architecture. That's now finally, starting to be able to produce the this type of technology and innovation may you're you're seeing.

And so it's going to be more heavily weighed going forward towards business in commercial application as compared to infrastructure, but it's it's within the envelope we've been using.

And maybe just as a quick follow up as you think about.

The return on this incremental investment is is gonna be sort of a gradual.

Enhancement to the to the to the revenue premium that you earn or do you see some sort of step changes in an opportunity along the way, whether it's material cost out or or revenue opportunities kind of within the next three to five years.

I think it's both at it certainly the revenue opportunities are significant we we do go through in this past year, we looked at what we thought they are as our digital investments and new product offerings. This year generated we estimate about $200 million of incremental revenue, whether it be you'll using a skymiles.

As a currency to upsell or the new generation shopping and booking tools that we have opportunities also sit on the cost front and I was with better decision support in high Robertson.

Optimizing the the fleet and making certain that we're able to ensure that our crew our best utilized and a any downtime. So our minimized and I could go on there is a long list of opportunities that we have so I think it's going to be both the cost opportunity as well as a strong in.

Has been to the brand as we build closer and closer digital connections with our customers 204 million customers a year.

The only awfully only way you can you can build that connection with them at the personal level that they choose is digital and we're off to a great start.

Alright, thanks, guys.

Yeah.

Our next question will come from Helane Becker of Cowen.

And thanks, very much operator, hi, everybody and thank you very much for your time.

Glenn I know you said that you know you're seeing strong demand on the corporate side and I'm sure. That's true, but you know I'm starting to hear from some companies since you're thinking about cutting expenses and asking their employees to you know we think some.

Some travel and I'm wondering if you're seeing any science is that among your your top corporates or if you could just mentioned, maybe where you're seeing the strength since it's a particular industry group.

No I think we're seeing strength across the board and and a purchase from time to time that people are worried about corporate spend and travel, but it seems to be in a very good position as we head into 2020 and as a matter of fact last year, we did see a little bit of weakness in manufacturing, but we're starting to lap that and we're starting to see some pause.

I would have momentum coming out of that sector.

Generally we're we're seeing some very good signs from our corporate.

I think the only thing I'd say that land is is that is we're certainly seeing some weakness as Glenn touched on it and in Asia, a was with the China issues and some of the tariff discussions as bled over into Korea in a few of the other Asian economies.

So fundamentally Glens right you know the health of our businesses in the U.S. and the U.S. corporate is doing quite well.

Okay. Okay. Thank you and then just as a follow up to that would would you rather see faster growth in leisure traffic or faster growth in corporate traffic.

We we we've experienced both the I think we'd like them both equally.

And I think what to say leader is really what we're seeing and leisure really is an interesting a separation of people who are looking for quality and willing to pay higher fares or upsells and to better products and services.

Well you are at the highest quality airline in the U.S. So.

We see an outside.

The increase in yield Okay, hi.

Yeah, leisure, which is very good for the industry.

Right, so what you're seeing is.

Core leisure travelers buying up and fewer people in that basic economy bucket is is that a way to interpret your comment.

That's a way to look at.

Okay, alright, great well, okay. Thanks, very much for your help I appreciate it.

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

Hey, good morning, Thanks, Helane, just said blade nicely into my question actually.

You mentioned the leisure seeking quality Glenn is there a point where do you view.

Basically economy is being brands alluded to the point, where maybe it doesn't really fit the delta concept anymore. As you guys tried it sort of focus on that higher quality.

I think from the beginning we've been really clear that we want to have the best in class products and services no matter. What your travel needs are and I think we would always see for entry level customers, who are only sensitive to price that we would have best in class there as a matter of fact, it might think that.

Our over investment is highest and ER and basic economy, but that's the entry point and once they see the quality of service that Delta people provide I think they stay with us throughout their entire.

Lifecycle in there that's an important product for us to continue to maintain.

Okay.

And then you think big picture take a step back for a second think over that five to 10 years Ooh well you ever get so comfortable at sort of loyalty and value proposition to intentionally drive down your load factors just a few points with an eye on driving RASM pretty much entirely through driving the yield premium whiskey. So the idea would be really you change the overall feel to fly.

Variance with less crowded [laughter] unless pricing volatility to really truly differentiate yourself as a premium brand and feel airline.

All right I think we're always looking at what that is and I think we've taken steps really structurally a this same weve reinvented come for plus and domestic arena.

I think what we would see it maybe is the continued adoption and demand for that product.

Builds over time that we might create more of that on existing fleets, which would take the density out I can't see us ever wanting to fly with seats.

NCS wanting to.

Sell a plane.

Is meeting the demands of our customer base that might include more premium even than we have today.

Okay, great. Thank you.

Your next question will come from Andrew I know at Bank of America.

Hi, Good morning, everyone had actually had a a follow up Conversely, a follow up question on the the tech investments.

The $500 million, you're spending on non tech Capex, how do you think about the ROI needed on on that spend relative to say on on a new plane order or plane refresh.

Well, Andrew we need to do both right. This is not we're not trading off technology for plane. So we need to have.

Continued in.

Enhancement of our fleet. So that's clearly where the bulk of our Capex goes into our fleet and the modification of our aircraft, we're going to be taking 80, new airplanes into the fleet this year.

And does and but those fleet investments are also then facilitating technology as we bring new technology onboard. The fleet. So you know I don't I don't look at them as a differentiated or is tradeoffs, we've got an overall.

Capex budget that we look as a company we tried to stay within the 50% a threshold plus or minus of operating cash and that's how we we get there now we do certainly look at ROI in returns on every one of our digital investments in capital initiatives and I'm pleased to say they've they've been producing largely the results we.

We expect.

Great. Thank you and Glenn I know I'm in the press release, and even breaking out the the domestic results by both core hubs in coastal hubs as you think about growing your network over the next one to two years what segment of those you see the biggest capacity opportunity then and then as a follow up just.

Hi, I assume the core hubs are Atlanta, Detroit, Minneapolis in Salt Lake, but do you see any of the coastal markets moving into the core bucket anytime soon thank you.

Well I think their core or they're just not geographically centered so you're a ability to connect traffic when you're in Seattle is a lot less than when you're in salt Lake city or at last or the other ones your name.

So we have really used our first mover advantage post merger to.

Take advantage of having the opportunity to consolidate positions and some of the coastal markets like Seattle, Boston, Los Angeles, New York.

But we did that a little bit at the expense of growing connectivity and our interior hubs and so over the next several years, we'll be working on.

Continuing to improve the products and services, we offer the coastal hubs, but really focusing a little bit on growing the interior hubs to improve the connectivity the euro.

Great. Thank you.

Our next question comes from Michael Linenberg of Deutsche Bank.

Hey, good morning, everyone on I guess, two quick ones here, Paul I, just want make sure I heard you write the lactam I'm running that through the PNM <unk> I know it closed late in the fourth quarter, but I guess nothing really shows up in the fourth coronary easy beginning in the March quarter did I hear you right on that.

That's correct, Mike beginning in the March quarter.

Okay, and then with respect to you know getting to the 20% as I recall, I don't know standards and sort of conversation about whether or not it was going to be one or two board seats. Do you do you have a better sense do you know I'm, whether or not you have to board seats at most of that can as a result of that.

Yeah. Good out that said, we yes, we have that we have two board seats Mike.

Okay, great great corner, Thank you [noise].

Thank you.

And when I hear from Jamie Baker of JP Morgan.

Hey, Good morning, everybody first question for Glenn and its a follow up to a topic that we discussed last quarter regarding the potential to generate and international.

RASM premium at some point I'm curious if the fourth quarter result, [laughter] or the first quarter outlook shows any progress in this regard and.

Secondly, does the full year guidance.

I have any specific assumptions or should we treat any potential evidence of [laughter] you know in international RASM premium as upside to the guide.

Yeah, I think we're continually working to improve our international unit revenues and I think this fourth quarter was.

We're moving into right direction, or we see those trends continuing into the first quarter, we can't see yeah. What our competitors are doing but I think we have an opportunity to continue to increase or relative performance and our absolute performance as we go through 2020 and hopefully beyond what we have an airplane.

Okay.

Second for ADHD its related to U.S.G. I know you spoke about the topic at Investor Day.

You gave some examples of you know deltas environmental consciousness.

I'm not sure if you saw what he thinks letter this morning, I mean, what I, what I keep struggling with on this topic is fleet.

Weve commanded your fleet strategy for sometime now you know specifically running a higher average age than your competitors.

I just have to wonder if we're on the cost above that.

Possibly coming back into haunt you and and whether you S.G. compliance necessitate [laughter], bringing the fleet age down which in turn has no capex implication so I'm not quite sure and had a phrase the question but.

How would you respond to somebody telling you that your fleet strategy is incompatible with growing U.S.G. mandates have of that.

Uh Huh, let's say, a it's an interesting way to put it a feeling.

Listen we.

Take our E.S.G. and very specifically, our environmental and sustainability.

Requirements in goals to hard and hopefully you heard me.

Not only at the Investor day, but also at CES I closed on that topic specific <unk>. It's it's a it's something that sleep plays a big part of.

ER candidly being somewhat of a having an older.

Fleet actually has given us opportunities to move faster in that space, maybe than others, but every plane, we put in and we're putting in 80, new planes is EUR, 25% more fuel efficient than the planes that were retiring.

We had delta where the the only airline back in 2012 that voluntarily kept our carbon footprint a at 2012 levels. No. Other airline has done anything like that we're looking at ways by which we can go even more aggressively fleet is only plays an important part of the solution, but there's many more things to this.

In terms of how we engage and I think you're gonna be hearing us talk more and more about that over the course of the I didn't get a chance to see Larry's letters only did here a little bit about it. This morning, I think he's I think it.

This message is right.

That's helpful. I really appreciate it and I know, it's been a more busy morning, I wasn't calling out for not having seen the letter yet you got bigger things to do a thanks again, great quarter Bye bye.

Thanks, John issue.

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

Hey, Thanks for taking the questions [laughter] can you can you clarify.

Your your revenue growth guidance versus your RASM guidance into the first quarter.

It feels like based on what schedules are showing the implied RASM guidance is flattish, whereas your explicit RASM guidance is up one is that just a lower refinery year over year, what accounts for that difference.

Hi.

Fortunately fired.

Same twain its shell and the refinery cells are slightly lower year over year, but we excluded those from TRASM anyways.

And so.

I think you know you're just their schedule. There's a completion factory jobs that you have to make this schedule, but that the revenue growth that we're looking at is a solid 5% to 7% in the first quarter. The total revenue Brad.

Okay, Great and then just on the pension understand you expect a tailwind Oh this year, but can you just talk explicitly about what pension expense was in 2019, and what you expected to be in 2020, thanks for taking the questions.

Yeah. So thanks Wayne Yeah, we had.

Mentioned going in that we had about $250 million of pressure.

Year over year in 2019, as a result of the pension returns in 2018, while we haven't given specific guidance yeah. We Ah Ah if you look at year over year, we were up about a I think 16% in 2017. So you can look back and see the sensitive.

Tivity around that.

Okay. Thank you.

Your next question will come from Joe Canada Credit Suisse.

Hey, Thanks very much good morning, everyone. My first question just on on the last Tam partnership apologies, if I missed it and Glenn you may have talked about it but I think the co chair with some of the affiliate slated to begin here in Q1 can you just give us an update on where you are with those government approvals and one in Q1, you think you can launch.

Matt.

And just as a quick follow up to that is there a rough estimate that you could share with us on expected 2020 revenue contribution from why Tam.

I'll start with the first one which is easier is that no we're not going to share that today.

On the second issue its by country and I believe this week, we received or the ability to code in Colombia, We expect Peru, and Ecuador to follow shortly and then longer a little bit longer 10th in the fall. So there should all be up and running back in one Q, but little bit longer Oh.

Hold on the tenant is Brazil in Chile, which we expect later this year.

Got it. Thank you for that and then I'm just a quick one for Paul on CASM ex the your Q1 guidance right in line with a full year should we expect that should be fairly level loaded through the year are there any big sort of moving pieces that you expect in the or that could drive some quarterly swings in that and that 2% to 3% trajectory.

Yeah, Joe what I would say is you know, we're obviously not going to give quarterly guidance on CASM for the rest of the year, but as a general rule. If you look at our CASM trajectory in past years, it's been pretty skewed a with a lot of volatility we we've taken a conscious effort.

In 2020 to try to balance that across to make that a cost performance more discipline throughout the year and that's very intentional.

Okay I appreciate that thanks, everyone.

Our next question will come from Brandon Oglenski of Barclays.

Hey, good morning, everyone and congratulations on a pretty impressive quarter.

So Paul.

Yeah, you guys have had you know really strong cash flow here and you know not to be too much of a cheerleader, but it is a differentiated experience on your carrier So I guess.

It is there any you you know.

Positive momentum hearing Capex, where you'd say, hey, actually we want to spend a little bit more does that reprioritize, you know fleet over the airport screens or technology, or maybe strategic or do you want to stay with us very balanced.

You know capital allocation strategy.

Well first of all thank you for the further comments Brandon Yeah, I think the balanced approaches as worked very very well for us in an effort to balance multiple constituencies you know it whether it's a.

Cash flow performance into the enterprise, but driving return on invested capital a we obviously have a lot of demands on capital when you look across the space and the things that we want to do a prioritization and pace of implementation is an important piece of that it's it's not always just capital is having the resources to deploy.

Boy that capital and make sure that it's delivering the benefits and the result, so while I say, we do have we do have some room around the edges, you've seen us do that overtime take advantage of opportunities that are out there we want to hold <unk> roughly to that that balanced allocation overtime.

Randy This I could weigh in offices that I'd say, if there was any area that we the bulk if we had opportunities to do accelerate somewhat is it's in the airport infrastructure construction.

We're in the midst of a very significant build out in.

Clearly the sooner we can get that done the better so I'm not suggesting that we're going to change any capex assumptions, but to the extent we had any any capital that that was available to be allocated at the one place I look for you for using it.

Okay, everyone. Thank you.

Yeah.

And we'll hear next from Sabi sets of Raymond James.

Hi, Glenn I I'm, good morning, everybody as well I just wanted to ask a little bit more on the regional trends that you know lactam you had a topic Congress with three kids that they you know the performance is still pretty good and just wondering as you can I look forward generally what what are you seeing aframax tanker sector than it is any kind of reach.

I would start to come on tough comp.

Well.

We're seeing continued strengthens and administered U.S. arena, that's that's great news for us and we're seeing I think of some really good green shoots in the Trans Atlantic we've had currency issues over the last couple of years, It's 18, and now that were lot going to be lapping them as we move through this year I think we're poised really well for.

Nice run on the Trans Atlantic we've seen in the transpacific lift or a multiyear restructuring.

This is the last piece and there are some uncertainty maybe around the airport moves that we are going to have those are two major airport moves for us closing Tokyo Narita after being there for almost 50 years.

That's a big move and so uncertainty over how many people will prefer an eight up but I think ultimately we are very very confident that I need is a better airport to serve Tokyo than your Rita and so there maybe some ripples there that would be you need to Ah to us as we have the largest footprint Haneda and then of course moving to DOCSIS.

In Beijing might be a little bit of a headwind for short periods of time, but again, we think that's the right move for us because the connectivity at that airport is gonna be far superior in a long long to watch the capital.

So the Pacific I think we're encouraged that the signs you know today's Ah signing or the signing of the agreement is one agreement with China is going to be a good thing for us and you know if there's a upside to the Chinese there's been really no capacity would bring capacity reductions in the U.S. to China for the first time in years. So.

Traffic continues to build into China and capacity is being reduced so that's always a good thing for the airline industry.

And then in Latin we've seen really good strength in both Mexico, and Brazil, and we expect that to continue. It then accelerate as we can begin to code with what Tom.

Throughout the years. So I think we've got a really good base for international which is.

Encouraging in the sequential trends in the improvements or.

All moving into right direction for us.

That's helpful. Thank you and Holly I quickly after trainer.

The only what you're expecting especially now that I'm out of 2020 has come and gone.

Just a quick thoughts on what your expectations are for trainer and feel in general.

I'm sure Savi. So 2019 saw trainer produce a profit at $75 million I'm free cash flow positive and really a strong contribution to our overall relative fuel story.

And and 2020, obviously, we've seen a at least where we sit today significant improvement and Ah crack spreads at the refinery over last year, we expect about breakeven performance compared to about a 35 million dollar loss last year. So were looking forward to a another sizes.

Contribution overall, both in terms of the performance of the refinery as well as the contribution across the commercial space and our fuel procurement.

Thank you.

Our next question will come from Myles Walton have yes.

Thanks, Good morning.

<unk> a lot is changed in the in the month since the analyst day on the Max containing push out there shut down in line likely as well or a delivery rate and some kind of curious.

As you look at your place in the ecosystem <unk> are you taking a lot of active decisions to capture some of that or is this more of a view to to benefit through pretty much passive behavior. When it comes here I'm just curious how much active management you're thinking about.

Versus simply having a you know the premium revenue come your way. Thanks.

Miles this is Ed we.

We've all been watching the Mac story for the last year and.

None of us have a very good crystal ball, we're operating our plan we're not.

Deviating on the plan based on news flow or we have with a strong plan for 2020 and and to the extent a we pick up some marginal revenue, which we clearly have this year. That's great again, I would caution everyone I would not suggest that premium revenues that were picking up because I think the other airlines have done a very nice job will cover in there where most.

Important revenue pool, but on the margin, we've clearly a than a beneficiary and and as long as the Max days or how does this guy I guess, we'll continue to be more.

And the follow up on the M. arose benefit you might get from further.

You know aftermarket work running hot what's the what's the growth rate I know you said deceleration what was the growth or you've got baked in for 20.

The growth rate in 2020.

Yeah.

I don't I don't think we've we've disclosed a that what we've talked about really as longer term. There. There are some growth, but the big growth story near MRO is a couple of years out as the geared turbofan a platform and the roles of platforms or to enter more service in starts to mature that's where we do it.

Expect the Emerald revenues to double over the next two to three years from today's level.

Okay. Thank you.

Can't ever Gonna have time for one more question from the analyst community.

Certainly well take our final question kind of Stephen Trent City.

Good morning, everybody and thanks very much for taking my time, just you know first you mentioned.

Your next credit card growth.

Through 2023 now as to what degree to is through the revenue growth be driven by the.

The new brands you're introducing.

No. We don't disclose the makeup of the construction of the increases but what we have said is that we expected to grow from 4.1 billion. This year, two 7 billion by 2023, and we have a very good a component plan I think we outline the three pieces that include card spend growth.

Included in new acquisitions, and any changes or contract and those three make up to those components.

Okay very helpful and just one quick follow up on that follow up to Myplan embrace question a way back when do you think about Latam Airlines.

You know are there any things that you see in and the business that perhaps I just very early stage.

Stronger than you expected or maybe a little bit more challenging than you expected I. Appreciate you you might not be able to it gives us much color, but I just thought I'd ask.

No. These are the very early days and we're very very excited about that partnership and we think it's going to have great long term benefits. You know, we we can only see a a little bit as the relationship is just starting and we're just starting to put some of the key components in place with ER interline agreements, but what we have seen has exceeded our expectations in the early.

Ladies and we're very optimistic that this is going to be a game changer for us in Latin America.

If I could echo Glenns comments.

We're very impressed with what was the leadership team.

And so I'll, let them so platos.

Robert till the entire team as a first class a group I think we're going to find as we start to build out the JV with the appropriate regulatory approvals that you're going to see this school faster than you know probably anywhere other JV side is really good alignment.

There's focus and there's a lot of growth opportunity for both carriers throughout the Americas. So we're very very pleased.

Okay. That's very helpful. Let me leave it there and thank you again.

Thank you that's going to wrap up the analyst portion of the call I'll turn it over to 10 makes our chief marketing communication.

We have a few more minutes with the team I'd reiterate Joe's comments earlier to please just hold your questions to one maybe a short brief follow up then we'll try to get you as many of these this weekend. Thank you.

Thank you once again to signify question. Please press star one at this time as a reminder, if you are using a speaker phone. Please make sure. They your mute function is turned off.

Your signal to reach our time and again, that's star one I'm a pause for just a moment to assemble the queue.

And our first question what comes I'm glad we just see NBC.

Hi, Good morning, Thanks for taking my question or any investments on Tech do you guys see dealt a it's becoming sort of the a travel platform like for corporate travelers <unk> current sort of like an extra concur and something like that and then my second question. If you just have any update on what's going on with the pilots and had mediation. Thank you.

Leslie on on your first question, we absolutely do see ourselves as becoming an extended travel platform, we're not going to be looking to get into TMC space or or compete with with outfits like concur well. What we are doing is from a consumer standpoint looking to continue to exceed it.

Extend the brand using the slide Delta App is more of a digital concierge, bringing partners such as lift of closer in so the absolute making it easier for customers to have an end to end experience in travel on the Delta App and all the way to hope Walport partners, another although other ways by which weekend.

You can take stress out of that consumers are experience that's always the messages T.S. and I think it was received well and that's where we're going Oh, we're not going to comment on pilot negotiation. So I'll I'll pass on your second question, Okay, and just from the after that's more for individual consumers not a corporate platform or <unk> Corporation isn't that right.

Lets focus on individual consumers, there's clearly some corporate benefits, but right now we're we're really focused on serving more customers.

Okay. Thank you.

Our next question will come from Mary Schlangenstein of Lindbergh Man.

Hi, I'm I just wanted to try again on the pilots would you at least confirm whether or not sure seeking intervention by the national mediation board in the negotiation.

Right.

We are not gonna comedy on the state of any negotiations with the pilots on any questions starting there.

Okay. Thank you we think it just as opposed to clarify we think it's not appropriate to be talking publicly about it's a it's a obviously it's a it's a great a great opportunity for us on or Delta pilots to to work together to make sure that they're the best compensated reward rewarded for what they do.

Our next question will come from Ted Reed that's for ups.

Thank you my questions for Glenn I, It I imagine that the 10% coastal growth in hubs includes Boston and I'd like to know if you anticipated that American would start to grow so fast in Boston, but they are growing very rapidly there and they added three new routes. This morning.

Yeah, I I think we've had an incredible success in Boston and Boston or.

Customers are choosing a.

As a matter of fact, the third quarter data.

From the government just came out and we were supposed to hold that heat with Jetblue is the largest revenue or in Boston.

So I.

I think we made great progress and I think customers will stick with us and so a well see who ultimately are the winners and losers in Boston, but I know, where we'll be a winner.

Do you anticipate the American might start to grow there.

Oh, I I don't know what anybody else is going to do and so are you you know, there's a very competitive industry and people people grow and shrink and.

I think that in the long term the better products, what weve consistently stayed where it is as long as we think we can provide the best products and services girls and that we're going to win.

Alright, thank you.

And our next question will come from David Slotnick business Insider.

Hey, how are you thanks for taking my question.

I was just wondering if you're starting to think about the 757 replacement.

Are you waiting on boeing's offering for the M&A or are you starting to consider the 321 XLR.

David we have spoken many times on that topic, a we are looking at the end of May certainly we're looking at Airbus offerings, a we're not we're not close any decisions on that yet.

Okay do you have a timeline or anything that you're anticipating having to replace those claims.

We have not commented on timelines either.

Okay. Thanks very much.

And I hear next from Robert Soukup travel weekly.

Yes.

How did you spoke a walk or you.

Yes, you put out a lot of.

Technology really exciting stuff, but I wanted to ask about maybe some of things that aren't quite as exciting for example, a pizza.

Me on your what how you're coming in and distribution technology improvement.

Also I mean, yeah improvement desist your core system.

Atlanta and also your P.S.S.

I'm sorry. Your your your question broke out could you could use simplify maybe the a lot in there with good bad or time hearing.

Yeah I just can you hear me now the excess.

Yeah, Yeah distribution at your distribution technology, PSS and also just improvements to the core core systems, Oh sure how much you investing in that and how that coming along.

Oh, well clearly we've been investing a significant amount of money I'm trying to continue to improve their digital experience and the distribution system and giving customers more choices in more ways to interact with us and more optionality.

We have continued to release the new updates of Delta Dot Com and I believe we're now that 7 million downloads just this past year.

HM.

Yeah on the up so we continue to evolve in that space and we continue to work with all of our partners and continue to work on making sure that the distribution systems that are capable of describing the products that we're trying to solve our customers' which really can't be done any longer in green screens. So that's been a continual evolution.

We've been working with all the partners the GDF Suez and all the distributors where products and services to try and highlight what the differentiated products or that we're bringing to market.

Okay, thanks than anything else related to the core systems or the or you're a PFS improvement.

But we can't weekend.

Could you repeat that you know news, we don't have always I'm hearing it.

I'm, sorry, and anything else related to any additional improvements with the PFS or the core system.

Well I think this well its amount on the CIO together and we do lending that is our core engine. The P.S.S. Delta Matic, which me on we have a advantage because we own it we control the entire expedient enter glenn's point it allows us than to do better with the customer experience in and chattel improvement because we own the end.

When technology.

Okay. Thank you.

Yes, we have what time for a one final question.

[laughter] final question will come from Dan Marino Forbes Dot com.

Hi game and you guys.

We are gaining.

Yeah, [laughter] ends up in the above average yield the premium ER segment, where where can we look to see data is it actually shows you know it's competitive data are competitive metrics [laughter] or will you guys are gaining a gain the premium tier target it's hard.

Got a finger on that number.

Well you know there's.

A lot of data points out there there's no shortage of data and this is a in this industry. Most recently the U.S. government data came out a for the third quarter. That's always about 180 days in arrears here or 90 days arrears. So.

You know, we did really well and I think you could look at that you could look at U.S. as you could look at a corporate shares.

So there's plenty of data and it sounds like we could have somebody follow up with you on places you can go partner.

Hey.

What is what do you, even just you're selling quality guardianship the premium share gain.

No I think you know the Delta brand is really about providing the best quality airline service in the world.

[noise] emphasize that I'm focused on that we have 80000 up the world's best people delivering it every day.

Okay. Thank you.

With that but I will wrap up this call. Thank you operator, just to remind everybody, we'll see and look forward to being with everyone. On the next call on April night. Thank you again for your time today.

And that does conclude today's teleconference. Thank you all for your participation.