Q1 2021 Delta Air Lines Inc Earnings 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.
US from Atlanta today are CEO, Ed Bastian our.
Glen Hauenstein.
Cause CFO Gary chain.
Ed will open the call with an overview of Delta's performance and strategy Glen will provide an update on the revenue environment and Gary will discuss car 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 from 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.
After the analyst Q&A, we will move to a media question after which Ed will provide a brief closing statement.
Today's discussion contains forward looking statements that represent our beliefs or expectations about future events. All forward looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward looking statements.
Some of the factors that may cause such differences are described in delta's SEC filings.
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 Dot com and with that I'll turn the call over to Ed.
Julie Good morning, everyone. Thanks for joining us today.
Spent 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 strengths and firmly believe that depend demick has served as a catalyst for us to find new and better ways to serve our customers and our communities. Thanks.
The incredible dedication and sacrifices of our people Delta has weathered the storm with our culture, our brand and our value is stronger than ever before.
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 called the Delta difference.
I also want to thank the administration and Congress for continued payroll support which is 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 65% to 70%.
2019 levels in the June quarter.
The first quarter had two distinct periods with the first half feeling very much like an extension of 2020 as demand was slower than expected.
But its case counts decline in vaccinations accelerated demand picked up meaningfully later in the quarter, allowing us to achieve $4 million of daily positive cash generation in the month of March the first positive cash generation since the onset of COVID-19. This marks a critical milestone in the path to restoring our financials.
It is truly a great accomplishment, especially considering that or middle seat block limited the inventory that we're selling in business and international travel remained muted.
It's also important to note that this metric takes into account all expenses that we're incurring as we've rebuilt our business book.
<unk> turned a true net positive cash flow position within a year of 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 our science based approach to cleanliness and are being guided by our own Chief Health Officer Doctor Henry thing as well as by medical experts at the Mayo clinic and Emory.
And earlier this month the C. D C confirm that it is safe to travel within the U S for those who have been fully vaccinated and 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 per cent of our customers expect to be vaccinated by Memorial day.
With improving demand in vaccine trends, we announced it will start selling middle seats made the first 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 built over the last 12 months.
Looking ahead and assuming that these recovery trends hold we expect to cut our pretax loss by more than half in the June quarter to between one and one $5 billion.
We see a path to returning to profitability in the September quarter.
Delta is resilience has helped us navigate the worst days of the pandemic driven by the competitive advantages that are core to our DNA.
There's advantages our people our brand and loyalty program are reliable operations, our network and our balance sheet will be even more important as we accelerate through the phases of recovery. These moats were tested like never before and I'm proud of the Brazilians that they've demonstrated.
Our people and our culture of service remain our most strategic asset flow.
Sales into 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 seventies throughout the pandemic, our full 20 point increase over 2019.
We've also seen our customers continue to invest in the Delta brand using their American Express co brand cards, demonstrating the resiliency of this unique revenue stream. Despite a large reduction in T&D categories March co brand spend on the card overall was up relative to March 2019 levels are.
Our operational performance remained strong during the quarter, we led the industry in all on time metrics, including a zero day zero 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.
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 worst crisis in our history with no dilution to our shareholders other than warrants related to the payroll support.
Program is something that continues to set us apart in the industry.
We've begun our journey of Delevering and by the end of the June quarter, we will have reduced financial obligations by nearly $10 billion through a combination of paying down debt and accelerating pension funding since last fall.
This reflects an unprecedented turnaround and 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 billion, which should enable our pension to reach fully funded P. P. A status by the end of this year largely mitigating the need for any additional cash contributions going forward.
And finally, as we look towards 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 and our industry is a sustainable future. This is why we are accelerating our fleet renewal and balancing near term needs for verifiable offsets with long term investments in sustainable aviation fuels carbon sequestration advancements Inc.
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 scaled up sustainable aviation fuels. We're excited about the progress that we're making to combat climate change and enable a cleaner more sustainable.
Annabelle World. These steps are vital to delta as 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 has taken.
As the recovery takes hold glimmers of hope or 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 a platform to extend delta is 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 Glen.
Thanks, Ed and good morning, everyone as.
As Ed mentioned, the pace of demand recovery accelerated over the course of the quarter.
With growing confidence customers are now buying tickets per travel further out speeding our cash recovery.
In the month of March daily New bookings improved 50 per cent from the January and February average well ahead of its normal seasonality.
As customers are now buying tickets for travel further out are broken curve has extended and our air traffic liability has grown for the first time in three quarters up more than 800 million from December.
On our January call I outlined three distinct phases to the year and our levers for each to progress to the second 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 per cent of the adult population in the U S have never received at least one dose of the vaccine and by May All states will have lifted mandatory domestic quarantine restrictions.
Pent up demand is also evident with domestic leisure bookings 85 per cent recovered to 2019 levels and Latin leisure markets more than fully restored.
Beyond our own bookings, we see encouraging data points from their broader economy. This includes accumulated savings restaurant dining credit card spend hotel occupancy rates web search data on travel incorporations announcing more concrete office reopening plans.
In response to these developments and the reduction of COVID-19 cases, as well as accelerating vaccination rates, we will sunset our middle seat blockers of me first that provides us with a very powerful lever to add capacity in a cost efficient way and generate meaningful margin tailwind.
Removing our middle seat 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 products. We expect our passenger unit revenue to improve by 20 to 25 points over that period.
With this added capacity and a continuation of the leisure recovery heading into peak season, we expect our June quarter revenues to improve by approximately $2 billion from the March quarter.
The corporate travel recovery has been slow, but steady corporate volumes in March were nearly 20% recovered up from 15% at the end of 2020.
Paul and medium enterprises continue to outperform other corporates by about five points and.
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 do 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 with travel to large conferences and internal meetings like lead the last to recover.
Our views on corporate demand recovery are consistent with what we've heard in our most recent quarterly corporate survey, where one third of our accounts expected increased travel volume in the June quarter, and a majority of our corporate customers expect to return to office in the second half of the year.
Vaccine distribution and lifting of government travel restrictions remain the top two drivers of corporate willingness to travel.
International travel remains muted with long haul international booking volume so it only 15 to 25 per cent recover.
We're seeing some early signs of life in Europe, with Iceland opening to travel to vaccinated U S citizens and increased demand for Israel and leisure destination. This fall.
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 improvement until later in the year when borders reopened.
Once the recovery of those segments are underway, we will 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 will 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 from 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 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 TD spend and continued momentum in TNA, which is now down 35 per cent in March from down approximately 55 per cent in November and 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, where over 60 per cent recovered was less than half of our customer base flying.
Our long term partnership with American Express combines two strong consumer brands enhancing customer loyalty, while also providing a higher margin revenue stream that has proven its resiliency.
We have driven stronger engagement through our digital channels, resulting in more direct relationships with our customers and record high digital satisfaction scores over.
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 Delta Dotcom and the fly Delta App account for 66% of our sales in the March quarter up 15 points from 2019.
While we expect that will normalize, especially ex corporate travel recovers direct channels will continue to be prefer, particularly among medallions and young customers.
As we start restore our business, we're rebuilding our industry, leading network with a simpler younger and more fuel efficient fleet at.
At the same time, we have preserved optionality with what 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 a highest return profile.
The combination of our strong core hubs in coastal position provides us with a 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 from the company's history I cannot 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 is bright future, 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 and where.
Being well served by our younger more eco friendly fleet and leaner cost structure.
I'd like to turn the call over to Gary.
Thanks, Glen 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 to creating value by returning to profitability generating cash and restoring our financial position to its pre COVID-19 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 5 billion includes a $1 2 billion dollar 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 of $2 9 billion.
Our people out in the operation along with the commercial and finance teams came together nicely to produce great cost performance adjusted operating cost of $6 3 billion or 33% lower than 2019.
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-19 related items.
Non fuel CASM was up sequentially as expected on 10% higher capacity as we've restored our employees to full work hours and incurred costs to prepare for the recovery.
Adjusted fuel price of $1 91 per gallon was 33% higher than for Q, driven by market prices and losses at the refinery, which drove a 23 cents 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 million in the quarter improving from $12 million in the December quarter. Despite stepped up expenses improve receipts in March drove $4 million of daily and positive cash generation.
We ended the quarter with $16 6 billion of liquidity and adjusted net debt of $19 1 billion roughly flat with the December quarter, though above where we expect it to be due to aircraft financing decisions.
Let's now look forward into the June quarter.
We expect to nearly $2 billion improvement in our pre tax result, if the recovery progresses in line with our expectations and fuel remains at current levels.
We expect to narrow our pretax loss to between one and $1 5 billion with progressive improvement through the quarter to breakeven in the month of June are.
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 fourth quarter in.
In 2020, the teams delivered strong cost performance by base lining aggressively in 'twenty. One we are focused on driving cost leverages, 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 cost sequentially.
Compared to the same period in 2019, non fuel CASM is expected to be 6% to 9% higher including three to four points from rebuild items adjusted.
Adjusted fuel price as expected at $1 85 to $1 95 per gallon in fuel efficiency for the quarter is expected to remain better than 2019 by more than 10 per cent, bringing.
Bringing these items together at the midpoint of our guidance June quarter total operating expenses 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 million in annualized cost benefit relative to 2019, driven by fuel efficiency simplification engage these benefits have enabled excellent cost performance and will support further inflection in our financials is the demand.
Recovery accelerates.
Since the pandemic began delta has taken a measured approach in matching supply with demand 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.
For the future that will utilize flex fleets if demand warrants additional capacity as Glen said, we have the ability to flex capacity in either direction based on the demand. The teams are plotted a path to invest in our fleet with maintenance that will either support higher flying levels, if warranted or largely offset cost we would 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 million daily interest burden in the March quarter, we set in motion our first phase of debt reduction using 3 billion of our liquidity, we are paying down debt funding, our pension and acquiring aircraft.
In the June quarter with cash and.
Combined these initiatives drive $240 million of annualized savings and free up 2 billion of lending capacity.
On April 1st we contributed $1 billion to the pension this accelerated contribution along with strong returns produced by our pension team.
And the funds to be more than 95 per cent 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 per cent funded by year end. We are now assessing an additional contribution of up to $1 billion to achieve fully funded PPA status by year end.
It is really exciting to see our long term pension vision crystallized 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 billion annually of our cash flow.
Adjusted net debt is expected to be 19% to $19 5 billion in the June quarter, as 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 million dollar unsecured maturity in April to be approximately $850 million in the June quarter.
We're also working on a longer term vision to restore and improve upon the strong financial position. We enjoyed pre COVID-19. Our financial Foundation has greatly helped us to weather this crisis, while investing in our future and avoiding dilution for our owners and.
In closing I am proud of what the Delta team has accomplished over the last year.
Delta difference that Ed mentioned has never been more important nor has it been more pronounced thanks to all 75000, a view for protecting each other our customers and our future we have exciting opportunities ahead.
With that I'll turn the call back over to Julie to begin the Q&A.
Thanks, Gary Travis we are ready for questions. If you could give the instructions on how to get into the queue.
Yes, ma'am, if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you were using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. You can press star one to ask a question what Paul just for a moment to allow everyone an opportunity to signal for questions.
Our first question comes from Duane <unk> Evercore.
Hey, good morning. Thanks.
I wanted to ask you about a 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 understaffing right now relative to demand.
And I think theres been some anecdotes about you know a hard time filling open positions.
Obviously, the airline industry is in a different position given P. S P, but I'll, but I wanted to ask you.
As you gain confidence in the demand recovery what are the bottlenecks, Inc. In getting spooled back up.
Are you are you short staffed today relative to any of your work groups or is it really just a pilot training exercise.
Hi, Duane.
You know 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, but I know the hotels the rental car providers that you say are having a difficult time.
Getting staff back you know given the level of unemployment and other stimulus that's been provided into the general economy.
We're not we're not experiencing that issue at all here at Delta all our people have been at work throughout the entire the entire time I'd say the biggest bottleneck to bottlenecks that we face, which I feel very good about where we're at is clearly getting our pilot training and our pilots into the right categories and ready to fly.
And secondly, a maintenance, making certain that we got our aircraft and our our engines and all the work ready for a pretty quick rebound.
Hey.
We had we had some cancellations on Easter Sunday and a couple of weeks ago about 100 in the business and we've noticed.
That's been a trend on some of the holiday weekends, but for the last few holidays, certainly Presidents' day, and Easter not nearly to 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 cost out and saved and people.
<unk>.
On whether it's voluntary.
Leave or 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 and summer. We spent an awful lot of time understanding that.
You also need to appreciate that in certain parts of the country. The virus is growing at a faster rate than others.
We had vaccinations.
Moving and that's impacted a little bit on the on the pilot availability because pilots need to sit for a couple of days when say every time, they get a shot but all in I think our team is well positioned and ready for the rebound that we see coming this summer.
Thanks, Thanks for that and then just for a follow up.
And and I think Gary touched on it but how do you think about the range of outcomes.
On June you know, what whether its capacity or revenue.
What ability do you have here into Q.
To flex up if demand plays out better than what your guidance assumes thanks for taking the questions.
Well the biggest flex lever we have is the middle seat, which comes available made the first and youre going to see a significant capacity bump from April to may because of the the seats. So we're not anticipating a significant amount of schedule additional schedule requirements are probably the biggest question Mark.
We have as the international space and we're working closely with the international authorities to be ready to fly when there they are enable travel and.
And particularly in the Trans Atlantic markets, but I'm, not I'm not contemplating us having a big challenge getting getting seats in the market for June.
Thank you.
Yeah.
Our next question comes from Brandon, who Glinski Barclays.
Yeah. 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 at Q2 that is with about 19 to 19 5 billion and net debt I guess could you just talk to you 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 air and then maybe a longer term goal around the <unk>.
Alex sheet.
Yeah.
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.
Think about it simplistically, our net debt is up about $885 billion. Since the end of 2019. So one easy way to think about what we need to do is get that back down to the to the $10 billion range.
In terms of near term priorities you noted one we did make beyond the quarter on April 1st we made a 1 billion dollar contribution to the plan we've discussed in here.
You know the potential for up to another $1 billion to achieve that fully funded P. P. A status.
The other things that you should expect to see from us would be we're going to continue to pay.
Pay cash for our aircraft, which not only prevents us from incurring debt, but it obviously.
<unk> are unencumbered.
Collateral base and then we have ongoing a debt maturity. So in this quarter loan in fact on Monday with because we will pay a $600 million unsecured maturity.
Over the course of the rest of the quarter, we'll have another roughly 250 million of regularly scheduled amortization.
And another $400 million of that across the second half. So youll continue to see those debt levels work down for all of those reasons.
I appreciate that and you know it.
Has the pandemic made you rethink your minimum liquidity threshold that youre 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 sketched out about a $10 billion to $12 billion interim floor.
For liquidity that we that we want to see I think it's important to note, though that we don't we don't have that thought process in isolation and I'll just repeat one or 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 base. So that we've got the flexibility.
I appreciate it.
Our next question comes from Jamie Baker Jpmorgan.
Hey, good morning, everybody.
First question for Ed or where or maybe for Glenn I. Appreciate the endorsement of our you know the third.
Third 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 two improved from down 82 down 60 that you know that sort of thing.
Hi, Jamie obviously, theres still a ways to go between here and there to get to the third quarter.
Clearly the number one dependency is the vaccination rate and getting to herd immunity.
In our country and all the experts, we talked to including our own doctors tell us that early summer 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 third quarter, hopefully is the U S. U K travel corridor, 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 get that done and hopefully early summer that will see the corridor open which will then bring some pressure I'm sure on other other markets too.
To follow similar a 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 its going to be a big add on there. So when you think about all of 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 per cent underutilize.
As we're operating at today.
These are the types of things, we look at to give us.
Some real optimism that there's a pathway to get into the profitability of the summer.
Okay. That's helpful second question for Gerry and I suppose this builds a little bit on Brandon's question, but you know you cited the building the a T L and the release and the prepared remarks that was helpful. Thank you.
<unk> 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 you're thinking and how it ties back to how you manage liquidity going forward going forward.
Hi, Jamie there 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's it's it's it wrapped into the analysis I was describing that you know has us kind of landing in that $10 million to $12 million zone got.
Okay I appreciate it. Thank you gentlemen, I look forward to seeing you next month, if we get back to in person.
Forward to Jamie.
Our next question comes from Helane Becker Cowen.
Yeah.
Oh, thanks, very much operator, hi, everybody and thank you very much from your time.
And just a question to Ed you referenced and you and I talked about this last month to you Russ are you.
The inability in the things that you're doing with respect to carbon sequestration and and I think you mentioned.
Other changes in our fleet and I'm, just kind of wondering you know how.
Shall we think about getting to net carbon zero by 2040 and the costs involved in that and if you think that that helps your corporate market share calling for.
Sorry.
Your line.
As I mentioned in my opening comments, our sustainability as.
A real issue for us for our business and it's a problem now they can't wait till later to be addressed.
Doing as we've committed to investing 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 efficacy and 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 a clear impact and we can't wait for those longer term investments to start.
Paying off to 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 billion over this decade towards investments along these lines and as you see this become a 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 critical we don't have as an industry a clear roadmap to net carbon zero by 2040 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 them and a better future for all.
That's 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 that Delta Tech ops and the maintenance operation and so on and I'm. Just wondering how you guys are thinking about that business going forward given.
The huge reduction in older aircraft that exist out there in the world now.
And you know 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 share.
Sure Helane, we're excited about the MRO.
And its future and you're right in 'twenty 'twenty, there was a dip in volumes as airlines pulled back not just flying levels, but required.
On a global basis some of the older 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 our team is doing a great job over there first and foremost taking care of the Delta fleet, but looking for opportunities to expand.
And going forward and I think as the earlier question that Duane answered or asked around the pipeline.
Line blockages or obstacles to getting getting our business is back.
MRO is going to be key for us not just helping delta, but also helping some other airlines around the world get their businesses back up and running as quickly as they can.
Great. Thank you very much.
Our next question comes from Hunter Keay Wolfe Research.
Thank you and good morning, everybody.
With so much liquidity in domain and trading has been.
Zero percent probability yet do not participate in PSP three.
I'm, sorry, you said with the liquidity, let me rephrase it with liquidity, we have will we be participating in PSP threes that your fundamental question.
I guess I'm just wondering if there's a chance that you turned down PSP three if things continue to improve like this.
Not to participate in it.
We don't we don't anticipate turning that down though.
Okay. Thank you and then Glen as you as you talk to the corporates.
I know, it's early but do you think about 2022 spending are you starting these conversations from from 2019 standard and working it down or are you starting at zero and sort of building it up.
Yeah, I think we're looking at what we have today and building it back up again and you know 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 scripted as day.
Vaccination rates continued to improve.
And offices continue to return that we will see an acceleration as we head into the fall.
I think you know still unknown, where we'll wind up this year and wearable windup in summer of 'twenty, two and that's I think where we're going to work on the flexibility of our fleet to flex up or down depending on what we see in the market at different points in time.
To tactical end points, we did update the corporate survey that we we commented upon last quarter and the numbers continue to look favorable a 36% of this is many of our large corporations participate at 36% expect to be fully back travel to pre COVID-19.
Levels by 'twenty, two and another 16% by 'twenty three so 52% say they are anticipating to get back to full levels only 8% of the corporations that we survey say that we'll never get back to pre COVID-19 levels, and there's 40% that are unclear as to what level of additional flying that we are that they anticipate.
So if you take a fairly conservative view on the 40% of uncertain into eight per cent that never get fully back and say that only 50% of that returns then we're looking at $75 70.
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 in getting back out into the sky to to get that business volume back to where it was.
Thank you both.
Yeah.
Our next question comes from Ravi Shanker Morgan Stanley.
Okay.
Good morning, everyone. Two questions from me, one near term and one long there from and the New York, Tom How would you characterize the current competitive environment out there obviously early days, yet and Oh, I know everyone's trying to obviously add capacity do 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 opened up more.
I think there's really two things that we would talk about it and there are different scenarios. One is internationally coming out of the pandemic I think we see a vastly improved competitive scenarios 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 pre pandemic and while we are back at 85 per cent of demand that 85.
Per cent is going different places than it was pre pandemic. So you'll see a lot more capacity from the industry in places that people are interested basically the west the wide open spaces are.
The Florida markets, the Latin leisure markets and so we've.
<unk> put our capacity where people want to fly and I think that's where we'll continue to focus 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 at the longer term I don't know how much of your time has been thinking about 'twenty 'twenty, two and even 2023 at this point, but look everyone's looking at 2019 as a base line, but given the.
Huge pent up demand and the huge amount of excess savings with the consumer.
Do you think there's a likelihood that you know, we we significantly surpassed our 2019 levels off travel and you know 'twenty two 'twenty three and beyond and if so do you have the ability to service that without bringing on significantly more resources.
Ravi I wish I had a crystal ball that that was that clear to know with some degree of confidence.
Certainly there is an enormous pent up demand consumers.
Had built up a lot of wealth over the pandemic people will have.
Really lost the connection that they look to re create and get back together, whether that's for leisure purpose.
Or 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 categories as well as different borders looking out into the next couple of years does that mean will be beyond 2019, I think it's possible.
We have a we have flex in our fleet and our order book to address that we're not going to be limited.
Demand out there, we're going to be positioned to be able to service.
Great. Thank you.
Our next question comes from Savi <unk>.
Raymond James.
Yeah.
Hey, good morning. This is actually not on per sub me. Thanks for the time.
Couple of quick ones from me.
Being that we were just on the international topic.
In terms of leveraging your international partners.
Do you plan on positioning your domestic network.
Are there any changes necessary your 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 as you know international has taken much more of a reshaped and domestic given the fact that a lot of international carriers didn't receive government support through the pandemic and our.
I'm going to either be much smaller or not be there as the pandemic.
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 international has come.
Out of this than we had going in but.
Well, we'll deal with that as it occurs as opposed to anticipating it.
Thanks Glen.
And one quick one on the fleet.
He has an impressive simply that's taking hold well, but do you expect that level to hold.
When you're back to full utilization. Thanks again for your time.
Yeah well.
As we said about half of the 12% improvement that you saw in the quarter versus 19.
He'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 second quarter.
We expect at least a 10% improvement on where we were for the same metric in 2019.
We do expect continued fuel efficiency certainly through the June quarter of significance.
Alright, thanks for the clarification there.
Next question comes from Andrew Dora Bank of America.
Hi, Good morning, everyone Glen just curious on your bookings.
Booking curve commentary in terms of how it continues to Linkedin is there are there any data points. You can you can put around this maybe how much of your QQ budgeted revenues are already on the books versus how that typically compares to normal times and anything you can help us quantify that for us.
Well you know through the pandemic the booking curve had compressed and starting about a 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 there.
In that category in 19, so hopefully I can give you some context that people are feeling much more comfortable booking further out in the curve and I think we're looking at several things. One is I think in the U S. They are feeling much more comfortable in domestic flying knowing they will get their shots, knowing there'll be able to travel.
Still waiting for more and more events to open in places to open up.
One of the things that continues to.
Accelerate the domestic demand and doesn't really waiting for the internationals to reopen in earnest I think people are now looking at the fall in making some speculative bookings that Europe will be opened in the fall there not a great number of those out there yet but.
Certainly there's interest out there and I do believe that in the next month or two we'll see at least some of the European countries are 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.
My second question here just for Ed you know I guess more bigger picture here.
I mean coming out of coming out of the pandemic after past downturns, although meaningfully affected the industry there have been some pretty big changes out there right but.
But this time around we really haven't seen that theres plenty of liquidity Airlines survive no consolidation yeah. No hub closures has any of this surprised you and why do you think a lot of these have not happened this time around.
Oh sure Andrew No. It doesn't surprise me at all and it's primarily because of the government support that day.
The us airlines have received in terms of PSP.
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 that you see you use that money to try to get your business back up which was what they were intended to do.
Certainly on an international level Youre 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 extent of that it's going to take some time yet to play out.
I think that'll 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.
So we'll see we'll see how that plays out.
Great. Thank you.
Our next question comes from Mike Lindenberg of Deutsche Bank.
Hey, good morning, everyone, Hey, just two here the first one to Glen Glen 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 were probably spilling traffic.
Oh, 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 whereas the traffic continued to rise that got to be here.
And confidence returned it got to be a more expensive proposition. So for the month of March It was probably between 101 hundred $50 million 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.
We had we had the choice to do it over again, we would do it in a heartbeat because I think it's something that really sets delta apart through this pandemic is putting.
<unk> confidence and the confidence in health and safety first.
It was a very important part of how 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 that was also one of our big accused to say it is time to let it.
Go away.
Thanks for the color there and then just my second question to Gary on the dollar 85 to $1 95 fuel guide.
Is there any embedded refinery loss in there what is it if there is on a per gallon basis and share it on a sort of a part two to that as I recall I believe the voluntary participation in the course of your program.
Was supposed to commence I believe in 2021. In fact is that is that true and where is that going to show up on the Delta P&L. If in fact that does kick in this year. Thank you.
Yeah.
Yeah.
Good morning, It's Peter Carter, So from a core perspective. This is the year, where we benchmark. So this is the year, where our use will be determined for future.
For future years.
Okay and it is completely voluntary.
Okay participating.
Yeah, Mike on the on the first part of your question the $1 85 to $1 95, It does contemplate a law.
Loss at the refinery, it's not as substantial as what we experienced in the first quarter.
Hum.
You know the fuel curve that we're using is generally what you see out there crude in the low sixty's and cracks in the five to $6 range.
Very helpful. Thanks, Thanks, Paul Thanks, everyone.
Yeah.
Our next question comes from David Vernon Bernstein.
Hey, good morning, guys. A couple of questions for you on the contours of the revenue environment, If we look at kind.
And average fares are sort of trending based on some of the Arcadia and other solutions out there.
It looks like the average share levels 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 E. Leisure yield would look like today versus 2019.
Maybe I'll take a stab at that is.
To give you a little bit of a forward look is.
We have a.
Clearly in the month of May we're calling me a transition month, because we are putting the middle seats back in which gives us a substantial increase in our capacity levels.
We're expecting may will come in and with an absolute load factor at <unk> 75 per cent.
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 seventy's into the mid eighties 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 in 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 of themselves are not for leisure travelers paying significantly less than they did in 19.
I hope I answered your question.
It does I guess.
And then maybe just as a follow up as you think about getting the yield management sort of levers to work in the room.
Optimization systems.
How how long do you think from a domestic standpoint like when do you think you'll actually be at a level where were you you're you're not just starting that process, but you're kind of more of a run rate of getting that full benefit of managing up yields.
Well remember that the.
The way the yield curve works is we're always saving for the last minute business traveler who's there are not that many of them out there this year or there are substantially less than they were for 2019. So you won't see I think the full impact of yield management.
Yeah.
Flow into the revenue equation until a little bit later, probably early fall. So summer is going to be about managing leisure demand and theres, 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 gonna 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 from the time.
So a little bit of a shorter term take on Robin's question earlier.
Regarding your plans to get to 75 per cent of 2019 capacity in the fourth quarter is that the structural maximum based on your fleet and crew requirements and and if we do see that way from pent up demand you discussed in 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 plan, that's really in line with your views on the pieces of our Cutbank day couple.
Couple of questions. Thank you.
Thanks, Katie we certainly have in the very near term for this coming summer limitations to how much demand. We can we can serve and it's it's you know these decisions that are taken.
Six to 12 months in advance in terms of getting getting pilots into the rate three categories that said with a significant amount of capacity, we're adding through the middle seats 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.
We announced that question from that the company can achieve 2019 CASM line I'm, just 75% of 2019.
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 they typically do see medical inflation. Thank you.
Hi, Katy that's a number that we expect to hit this year and I would say I'm really pleased with where we are I mean, we are on the trajectory there.
6% to 9% as I mentioned that we're achieving in the second quarter I mentioned the four points of rebuild that are included in there, but you heard Glen talk about some.
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 haul International network, yet if you look like for like and what Youre seeing in the second quarter. That's also about a five point headwind.
No.
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 ASM 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 hit the fourth quarter.
Great. Thank you.
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 were going to have the capacity and the seats in the market to fill it we're flying more scheduled service because we were blocking so many of the seats on the.
Individual airplanes as we open that inventory up we're gonna be right with anybody in terms of being able to provide a service and strength into some of our key hubs in markets domestically. So we're not we're not concerned in the short term that we're going to be short.
Aircraft or are short staff.
Okay, great. Thanks for additional color Ed.
Our next question comes from Sheila <unk>.
Jefferies.
Good morning, everyone and thank you.
I guess.
Hello, It related to the last question how are you thinking about international markets coming back up care gave relatively upbeat guidance on net 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 on the reopening of international borders I think theres still more many more questions that our answers.
We have focused on trying to get the U S. U K travel quarter opened I think that's the most logical as the greatest value.
To us and I think those are the markets, where we will start to see demand growth 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 where may.
Some progress in that regard.
When you think about.
Other parts of Europe, there may be some occasional market's open this summer based on southern Mediterranean.
Leisure traffic that people will be interested in but I don't I don't think youre going to see Continental Europe opened in any meaningful way until later in the year, we'll probably unfortunately missed much of the summer for most of Continental Europe on the other 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 backup 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 as Korea with our partner at Caribbean 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 virus under containment in there and there are countries, which we all know right now is a very difficult spot that they sit in.
So that's.
Thats, probably late this year into the winter when Youll start to see South America open up.
Thank you for that color and then how should we think about progression of yelp, 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 yet.
I think we're really focused on the unit revenues and I think we outlined the progression of course, there's a yield traffic tradeoff that we're always monitoring, but when you think about getting 20 to 25 points from unit revenue sequentially between the end of March and June that's.
A huge improvement.
One that I think is indicative of what we'd be looking at for summer travel and I outlined earlier, we think that the.
The traffic will be in the mid eighties for peak summer domestic.
That presents opportunity to to manage yield.
Thank you.
Our next question comes from Joseph de Nardi stifle.
Oh good morning, Thanks for squeezing me in.
Maybe add or Gerry just looking at the fleet pre Covid you guys had talked about MMA as an option for 757 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.
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 Ted as you probably have seen or read the MMA is not being actively discussed at Boeing at the present time, but they certainly do have alternatives and new designs that they were thinking about and we're engaged with those conversations nothing nothing imminent or on the short horizon.
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.
It seems very bullish to me can you talk about the longer term target and your ability to get to the 7 billion that you had talked about pre COVID-19 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.
Clearly the co branded cards are.
An array of purpose, including a lot of small and medium size enterprises, where we're seeing a lot of success with the cards right now.
So I think we feel very very confident that we can get to the $7 billion and have clearly the crisis has put a little delay on that and we're sizing up how 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.
The card performed at or above our expectations of how it would do in a scenario of a recessionary scenario and so we think a very bright future for that card.
Thank you.
Now we will go to our final analyst question.
Our next question comes from Myles Walton from UBS.
Yes.
Great. Thanks.
Maybe maybe a reflective question given the level of government support and assistance for 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.
Almost a turning of the tables as they look at us and air.
And the level of support we've gotten in.
In the U S.
That's an interesting question Myles and certainly we've dependent upon the support.
From our government here to be able to sustain.
Sustain an essential service for our economy.
I don't know what that means in terms of long term.
Clearly 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 of the <unk>.
Intervention not just in the U S, but around the world that we've seen over the last year is of a very different character and we will see on the other end of this where where the international markets land and the level of subsidies that 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 Glen the the shape of the quarter in June.
Obviously <unk> was January February versus March is is may.
April May June more linear in the recovery profile.
Well clearly the big step up is from April to May is 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.
As the story of the second quarter clearly in the first few weeks of data.
It will people have to leave to come back so there'll be some imbalances and so we see the first two weeks of May being a little bit later and then the second two weeks.
You get into Memorial day, and the 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 Mapes, our chief marketing and Communications officer to start the media question.
The drivers if we could just repeat the instructions as the members of the media line up in the queue and just as a reminder, one question and one brief follow up and we'll try to get to as many of those as we can.
Yes, Sir if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow you signaled to reach our equipment.
Thats Star one to ask a question.
Paul It's just for a moment to allow everyone an opportunity to signal for questions.
Yes.
Our first question comes from Wesley.
Joseph.
C N B C.
On the pilot training issues, how much of that is contributing to your cough and same question for the maintenance issues you discussed before the kind of the ramping up.
Do you expect to hire pilots at all this year.
I think Leslie we mentioned that in the cost guidance for the second quarter of the rebuilds and maintenance as well as from training is.
The 3% to four point range of the 6% to 9%.
The growth that we're seeing over 2019 levels.
So it's.
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.
Hiring but.
But I do anticipate if we see the recovery continue to gain strength that before the end of the year, we could very well be in the market for both pilot and flight attendant hiring again.
Thank you.
Our next question comes from Alison Sider.
Wall Street Journal.
Hi, Thanks, so much.
Wondering if you could talk a little bit of at 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 are looking at or that you've been talking to you or are they are any of those airport 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.
I guess im curious if youre thinking about or.
Planning to do any.
Yeah more point to point flying flights that over by some of your hubs and some of your competitors has is that something that youre looking at ramping up for the summer.
We have a very very strong performance from our core hubs in our coastal gateways. So we're going to stay focused on them.
Thank you.
Okay.
Our next question comes from Mary <unk> Bloomberg News.
Thank you very much.
Southwest yesterday increased the number of rapid reward points.
To take to redeem an award they increased 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 day down the road here.
No we're not considering that in.
And we're very excited about the value, we're bringing to customers through our programming.
Actually to use the program to stimulate a lot of demand would 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.
Can you talk about how.
You've seen the buildup points I mean.
Very few people are traveling especially internationally as we all know.
But what did you say keep up your level.
Point being built with net credit card you said that surpassed.
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 about the story.
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.
Between what points have been accrued 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.
Okay.
Our next question comes from David Slotnick TBD.
TBD.
Good morning, everyone. Thanks for the call up for questions.
I want to go back to what we were talking about before as you pointed out the likelihood of the U K U S tunnel.
Seemingly growing.
I'm just curious if you can shed some light on what kind of demand you're expecting there.
Yeah, how you would plan to capture that demand, especially if it.
Last minute reopening kind of thing.
The GAAP being.
Yes, 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 or the Aladdin. We have said that there's more than 100 per cent of the demand restore to those places so we're over index.
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 where to open we'd be able to satisfy as many seats as people needed to.
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 as Americans want to travel and they want to travel abroad.
Our next question comes from Robert Silk travel weekly.
Yeah, Hi.
We're as Delta as.
As far as digital health passport development and also.
You will see how much impact do you see digital health passports with being able to have particularly when you're talking about on a global scale interoperability across nations versus simply.
The vaccine from the end of the pandemic being really what brings back international demand.
So we are 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 which gains a lot of negativity calling in passports.
The challenge we face is every government around the world is looking at their questions.
And equally we need to start looking collectively add answers so that'll be important for example, as we.
We reopened the U S U K border as to what technology will be available to actually evidence vaccination. If indeed, the regulators even require a vaccination, it's not clear that that's been a that's even going to be a requirement. So we're we're working to try to keep as open a framework as possible working with health providers.
<unk>.
Providers are.
And our customers to ensure that when they need to show.
They've been vaccinated or had been tested they can do it in as efficient a manner as possible.
Okay. Thanks.
Our next question comes from John Biers AFP.
Okay.
Hello, John Your line is <unk> if your phone is on mute please UN mute.
Thank you Hi, John Deere said trumps price I wanted to ask.
There was the whole conch.
Controversy about the Georgia election law and there was a briefly there was the boycott delta.
Hashtag, the tiro and so forth and you came out strongly against the law.
For the past I wondered if you had seen any impact on.
From customers either positive or negative in and just curious if you could discuss whether you think you think there'll be any lasting impact on your brand.
With the public.
Yeah.
No we haven't seen any significant impact from the different.
Discussions that have been going on in the in Georgia.
With that Travis we have time for one final question before we turn it back over to Ed for his closing comments. Please sir.
Sir our next question comes from Elliot Blackburn Argus media.
Hi, good morning, Thanks for making the time for me I, just hope you could talk a little bit about especially in light of Delta is de carbonization goals, how does the trainer refinery sit 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 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 to that there are too.
But the first primary driver is just the fact that jet cracks right now are very low.
I mentioned they were in the five to $6 range, we've seen them historically.
15 to $20 range.
The other the other contributor to the near term performance has just been a huge escalation in the cost of rents.
Which have gone towards the end of the fourth quarter.
We're in the 60 to 70 range and they are well north of a $1 now that's a market dislocation that we we just don't see as sustainable.
Given that I mean, especially with the RIN uncertainty and also with your interest in.
I mean are you guys looking at possibly converting that refinery to renewables or would you change operations at that refinery going forward.
So again I think it's safe to say, we're always evaluating all our options what we what we're not going to do though is let some of these short term dislocations guide. Our actions. 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.
Got a world class team, they're operating at their operating safely they're operating it efficiently they're operating at 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. So thank you everybody for your participation today, so I'd like to thank you all for your participation and joining us this morning.
As we are.
Some of 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 was a lot of runway ahead of us as we open our middle seats to booking and corporate and international begin to recover in earnest once the recovery of those segments are underway, we expect they'll prove to be a powerful cash and profitability lever to get our business back to where we needed to be the.
The strength of our balance sheet has been critical and I'm excited that we're shifting 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 think all of the people at Delta for your tremendous job, particularly over these last 12 months and positioning us for success and we look forward to welcome all of you back aboard our place in the days and months to come. Thank you all.
Thank you ladies and gentlemen. This concludes today's teleconference. You may now disconnect.
Okay.