Delta Air Lines, Inc. (DAL) Q2 2020 Earnings Call Transcript

Delta Air Lines, Inc. (DAL) Q2 2020 earnings call dated July 14, 2020

Corporate Participants:

Jill Greer — Vice President, Investor Relations

Ed Bastian — Chief Executive Officer

Paul Jacobson — Executive Vice President and Chief Financial Officer

Glen Hauenstein — President

Tim Mapes — Senior Vice President and Chief Marketing & Communications Officer

Analysts:

Hunter Keay — Wolfe Research — Analyst

Jamie Baker — J.P. Morgan Chase — Analyst

Duane Pfennigwerth — Evercore Partners — Analyst

Helane Becker — Cowen Securities — Analyst

Joe Caiado — Credit Suisse — Analyst

Mike Linenberg — Deutsche Bank — Analyst

Savanthi Syth — Raymond James — Analyst

Brandon Oglenski — Barclays — Analyst

Joseph DeNardi — Stifel, Nicolaus & Co. — Analyst

Robert Silk — Travel Weekly — Analyst

Mary Schlangenstein — Bloomberg News — Analyst

Dawn Gilbertson — USA Today — Analyst

Tracy Rucinski — Reuters — Analyst

Claire Bushey — Financial Times — Analyst

Leslie Josephs — CNBC — Analyst

David Slotnick — Business Insider — Analyst

Presentation:

Operator

Good morning, everyone and welcome to the Delta Air Lines June Quarter Financial Results Conference Call. My name is Sicilia and I will be your coordinator. [Operator Instructions] As a reminder, today’s call is being recorded.

I would now like to turn the conference over to Jill Greer, Vice President of Investor Relations. Please go ahead.

Jill Greer — Vice President, Investor Relations

Thanks Sicilia. Good morning, everyone and thanks for joining us for our June quarter earnings call. Speaking today on the call will be our CEO, Ed Bastian; and our CFO, Paul Jacobson. We also have our President, Glen Hauenstein and our entire leadership team here with us for the Q&A. [Operator Instructions] 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. We’ll also discuss non-GAAP financial measures. All results exclude special items unless otherwise noted. You can find a reconciliation of our non-GAAP measures on the Investor Relations page at ir.delta.com.

And with that, I’ll turn it over to Ed.

Ed Bastian — Chief Executive Officer

Thanks, Jill. Good morning, everyone. Thank you for joining us today. We are now four months since the pandemic and the nearly $4 billion pre-tax loss that we just posted reflects the severe impact that COVID-19 is having on our company and our industry. The June quarter was remarkable for a confluence of crisis that rocked our nation. In addition to the pandemic and its impact on public health and the economy, the issue of inequality and social injustice for black Americans has been front and center. In this environment, our number one focus is taking care of our people. This includes not only protecting the health and safety of our employees, but also maintaining our commitment to supporting the fight for equality and social justice. We are committed to listening and understanding.

We must be a stronger advocate for justice and equality across our business from our operating procedures to the programs that we offer our people to support for policy change. Our people are the heart and soul of Delta, and I am incredibly proud of their perseverance and resiliency through these trying times and forever grateful for the sacrifices that they are making for our company. Since demand bottomed in mid-April at less than 5% of our normal traffic we’ve seen a small but welcome uptick in passenger volume being driven almost entirely by domestic leisure travelers or those flying for essential reasons.

And while it’s encouraging to see customers start to return, the revenue environment remains challenging. We have thought from the start that the recovery will be choppy and the past few weeks have shown that to be true. We’re expecting our overall revenue for the September quarter will be only 20% to 25% of what we saw last summer and we’ve seen demand growth flatten recently with the rise in COVID-19 cases. We are watching trends closely and have pared back our capacity plans for August. Business travel, which typically provides 50% of our revenue is not yet returned in any meaningful way. With corporate offices slow to reopen, quarantine restrictions in markets like New York and Chicago, and states in the Sun Belt reversing or pausing reopening plans, we remain cautious on the pace of recovery through the balance of the year. In addition, there isn’t a clear timeline when international borders will open for U.S. travelers.

So it’s against that uncertain backdrop that we are taking the industry’s most conservative approach to capacity. For the September quarter, we expect our seats available-for-sale, which accounts for our 60% load factor cap will be 20% to 25% of last year’s level, up from 10% in the June quarter. Given how dynamic the current environment is, we are maintaining our flexibility and we’ll adjust our capacity plans as needed based on changes in demand. Since the crisis began, we have taken decisive actions to protect our people and our customers, increase our liquidity and importantly, preserve our ability to respond in the future. Customer-employee safety remain our top priority and restoring consumer confidence in travel is at the forefront of our recovery plan. We have taken extensive and proactive measures to implement a multi-layer approach to protect customers and employees.

Additionally, all of our aircraft are equipped with HEPA filters, generating high-quality hospital-grade air quality on-board. Restoring consumer confidence to travel on Delta is the driving force behind our Delta Care Standard, which includes requiring customers and employees to wear masks, enhancing cleaning protocols for aircraft, electrostatic spraying before every departure, blocking middle seats and capping load factors at 60% to provide more space on-board. We’re committed to blocking middle seats through September and expect to continue our policy beyond that date as well. We’ve also created a Delta Global Cleanliness organization and are collaborating with two of the world’s best health organizations, the Mayo Clinic and Quest Diagnostics.

The Mayo Clinic is helping to assess our safety protocols, consulting on how to improve safeguards as well as designing COVID-19 testing for our full workforce, both for the active virus and the presence of antibodies. The added layers of protection are having an impact. Since implementing these changes as of the 1st of May, the infection rate among our customer-facing employees, those who spend their days working on-board our aircraft and in our airports is well below the national average providing another solid datapoint on the safety of air travel. In addition, our net promoter scores have never been higher as customers recognize our health and safety efforts on-board and on the ground. Our top financial priority has been to protect our liquidity. Paul and the team moved quickly and decisively to raise capital, ending the quarter with $15.7 billion in liquidity. Entering this crisis with a strong balance sheet allowed us to access nearly $15 billion in new capital on top of the $5.4 billion from the CARES Act without issuing equity.

And while accessing capital is critical, the most important liquidity action we can take is reducing our cash burn. In June, our daily cash burn for the month averaged $27 million a day, a substantial improvement from the $100 million per day that we were experiencing in late March. The major force in that improvement is our cost performance, which has been remarkable as we will take out over 50% of our total operating expenses for both the June and September quarters. That’s due in large part to the more than 40,000 Delta people who have volunteered to take short-term unpaid leaves. Our crews who have seen their hours reduced as flying has been cut back, and the sacrifices made by our hourly and merit ground schedules whose work schedules have been similarly reduced by 25%.

I want to thank all the Delta people who volunteered for an unpaid leave. They are making a real difference in helping us navigate this crisis. We also want to thank all our colleagues who have been serving our customers in the phase of this pandemic. The spirit and teamwork of our people is inspirational and that Delta difference has never shined brighter. With demand growth stalled at present, we expect July’s daily cash burn to be similar to what we saw in June. As we go through the summer and into the fall, we’ll continue to move quickly to balance what we’re seeing in the revenue environment with our ability to get cost out of the business and keep us on the path to achieve our goal of breakeven cash burn by the end of the year. Given the combined effects of the pandemic and associated financial impact on the global economy we continue to believe it could be two years or more before we see a sustainable recovery.

So to succeed in this environment, we are building resilience across the company in creating a new stronger Delta albeit one that will need to be smaller for the next several years. That means accelerating strategies to streamline our company, simplify our fleet and reduce our fixed cost base in ways not possible in the past. We have made the decision to permanently retire more than 100 aircraft this year including the entire MD-88, MD-90, 777 and 737-700 fleets. We have the most flexible fleet in the U.S. and are pulling forward these and additional fleet simplification initiatives, which we believe will provide a lasting benefit to our cost structure. The difficult reality of resizing the airline is that we need a smaller workforce until we see demand return.

We’ll be wrapping up our voluntary departure and early retirement programs this month and as of last night we already had over 17,000 employees voluntarily sign-up to depart the company. We also have thousands more signed up for voluntary unpaid leaves of absence into the fall. We are hopeful that we can accomplish the vast majority of the headcount changes we need through these programs minimizing if not eliminating the need for involuntary furloughs. This will require creativity and collaboration across all of our work groups and I’m hopeful that we can get there. And as we navigate this difficult environment, we’re also working closely with our airline partners around the world who are facing even more significant financial challenges. During the quarter both LATAM and AeroMexico filed for bankruptcy here in the U.S. under Chapter 11.

And Virgin Atlantic is working through an out-of-court recapitalization. While each of these is disappointing, none of our partners’ home countries were prepared to provide governmental financial support similar to what the U.S. Treasury did with the CARES Act, which necessitated their decisions to restructure. We have the most — the utmost confidence in all of our partners and remain firmly committed to our partnerships, which will be important when we rebuild a much more resilient international network in the recovery. In closing, we remain grounded in the strengths that are core to Delta’s business, our people, our brand, our network and our operational reliability.

These strengths and the shared values of the Delta family guide ever decision we make differentiating Delta with our customers and positioning us to succeed when demand returns. I want to thank everyone who is contributing to Delta’s support and recovery efforts through the most challenging time in his storied company’s history, our customers, partners, suppliers, owners, community leaders, government officials. Their support has been overwhelming and a special thank you to the finest group of airline professionals ever assembled our Delta people who are managing this difficult environment with grace and poise determined to return Delta to our position of leadership in our industry and in our world.

And with that, I’ll turn it over to Paul to go through our financials. Paul?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Thank you, Ed, and good morning everybody. These June quarter results we reported this morning illustrate the truly staggering impact of this pandemic on our business. Revenues declined 91% and we reported a $3.9 billion pre-tax loss, one of the largest in Delta’s history. Results exclude several items directly related to the impact from COVID-19 and our response including $2.5 billion in impairment charges from fleet-related decisions, $2.1 billion in write downs related to equity partners, and a $1.3 billion benefit from the CARES Act grant recognized during the quarter. During this quarter, our total operating expenses declined $5.5 billion or 53%. The June quarter cost performance was more than $400 million better than our original expectation, in part due to the incredible contributions of more than 40,000 employees who have elected to take voluntary unpaid leaves.

With substantially reduced flying fuel expense was nearly $2 billion lower compared to the prior year quarter, and we generated over $250 million of savings from parking more than 700 aircraft. We were also able to reduce facilities expense by consolidating concourses and temporarily closing Sky Clubs while eliminating nearly all discretionary spending. In the September quarter we expect to achieve a similar 50% year-over-year reduction in operating expenses despite a sequential increase in capacity. This reflects the increased variability we’ve achieved in our cost structure and what we’ve been discussing since the COVID epidemic. As Ed said, our top financial priority remains to ensure that we have sufficient liquidity to weather whatever comes at us.

To this end, we’ve taken decisive action to bolster our liquidity position ending the quarter with $15.7 billion of liquidity. Daily cash burn also improved sequentially each month during the quarter to average $27 million in the month of June. This outperformed our initial expectation of $50 million cash burn per day during the two months of June — during the month of June, sorry. One-third of that improvement came from better cost performance with two-thirds from an improvement in net sales, which inflected positive in early June and remained there. It’s worth noting that approximately $10 million of our cash burn is attributable to our International business. So our domestic business is only burning $17 million a day, which is a testament to the efficiency of the reduced operation.

As Ed mentioned we are staying agile to balance what we’re seeing in the revenue environment with our ability to get cost out of the business. This approach improves our cash burn trajectory, which helps us to preserve our balance sheet capacity for the future. The strength of our balance sheet has been evident during the pandemic as we have raised $15 billion in new liquidity at a blended average rate of 5.5%. When combined with funds received under the CARES Act Payroll Support Program, we ended the June quarter with this $15.7 billion of liquidity. Even with no improvement in our cash burn rate, this equates to 19 months of liquidity. This is more than sufficient to address our upcoming maturities but if needed we have the ability to continue to raise additional capital through either our own efforts by leveraging our unencumbered assets or electing to participate in the CARES Act Secured Loan Program.

In an effort to ensure compliance and flexibility throughout the recovery we also amended all of our bank credit facilities to permanently replace the fixed charge coverage covenant with a $2 billion minimum liquidity covenant. So in spite of the significant amount of debt we have raised our adjusted net debt has only increased by $3.4 billion since the start of the year to $13.9 billion. Reducing our daily cash burn is critical to keeping the net debt down, and that is why we remain uniquely focused on it. In closing, while we have a long road ahead of us we’ve made tremendous progress in just the last four months. By raising cash early and aggressively managing costs, we are prepared to navigate what will be a volatile revenue period while making decisions that position Delta well for the eventual recovery. Our people have acted quickly and decisively to protect our customers and our company and I’m so proud of what the people of Delta have accomplished with that grace, professionalism, and determination that Ed mentioned. They are the reason I’m confident we will emerge from this crisis as a stronger more resilient Delta as our customers return.

And with that I’ll turn the call back over to Jill to begin the Q&A.

Jill Greer — Vice President, Investor Relations

Thanks, Paul. Sicilia, we are ready for questions from the analysts if you could give them instructions on how to get in the queue.

Questions and Answers:

 

Operator

Thank you. [Operator Instructions] And we’ll go first to Hunter Keay of Wolfe Research.

Hunter Keay — Wolfe Research — Analyst

Hey, good morning everybody. Ed, you mentioned — recently said you expect some amount of business travel. I think you said 20% will turn out to be unproductive in retrospect and suggesting obviously it’s not going to return. So what are some of the specific characteristics of business travelers that do come back, that might be different from the ones who don’t? Like for example, maybe they fly more per year, but to fewer cities or these are the people that use lounges more often, things like that. So what does these people look like and how do you win them or keep them?

Ed Bastian — Chief Executive Officer

Well, first of all, Hunter, I think fundamentally business travel is going to come back and it’s going to come back at scale. I’m not one that thinks that we are in a permanently depressed level of business travel for the foreseeable future. I do think there’s a lot of inefficiency, which we can all appreciate in business travel. The number of trips that the average Road Warrior takes I’m sure is going to come down. In certain cases the international trips that we’ve all been on where we’ve flown over to Europe for a two-hour meeting and flown back that does nothing but beat you up can certainly be much easily better accommodated over a video call.

But it’s going to be trips that are focused on relationship-building, interacting, whether it’s with your customers, conventions, new contacts, reviewing performance on a global scale. Those are going to stay. I just don’t see a — there’s a substitute for that over time. It will take some time to get back. I don’t think we’ll ever get back entirely to where we were in 2019 on the volume of business traffic, but the resiliency of the business traffic that we are going to now bake into our business model going forward I think will be a better way to measure the sustainability of the recovery.

Hunter Keay — Wolfe Research — Analyst

And then another one for you, Ed, when was the last time you talked to Steve Squeri? And what is your single biggest shared commercial concern right now and what is it that he tells you is most important to preserve the relationship and the economics that your companies share?

Ed Bastian — Chief Executive Officer

I talk to Steve all the time. He’s not just a great business partner, he’s a great friend and we share our thoughts and strategies together. We are their biggest and most important business partner and American Express is ours in turn. And we’re navigating this crisis together in a way that you would expect. I mean, they’ve seen some meaningful recovery over the course of the quarter in volumes on the card, which is certainly one of our bright spots in a dark quarter, the revenue recovery we’re seeing on spend. But they provide a great lens into customer behaviors and the types of things that are going to be very important for Delta to maintain the position we have with the company. So I continue, as Steve does to be optimistic of the future. We’re both realistic. We realize the T&E spend is not going to be at the levels we saw in the prior years but we’re going to both do our very best to build a better future for our respective stakeholders.

Hunter Keay — Wolfe Research — Analyst

Thank you.

Operator

And our next question comes from Jamie Baker, J.P. Morgan.

Jamie Baker — J.P. Morgan Chase — Analyst

Hey, good morning everybody. Paul, a question on labor. So as I see it, there are sort of four moving parts here. We’ve got the voluntary unpaid leaves, which have already dropped off the P&L for now, but some level phase back in, in the future. We’ve got the early retirement, which will completely drop out. We’ve got what might happen after October 1st, and then I assume in the event of furloughs, you have some severance expenses. So what I’m trying to reconcile with these various flows is whether the net is that they temporarily give you labor cost relief in the fourth quarter and that’s what gets you to cash breakeven, but then labor costs potentially rise after that. I guess another way of asking is in what quarter do you think your labor expense line will truly be reflective of the cost structure going forward?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Good morning, Jamie. There’s a lot in that question. I think we’re still really assessing the overlap right now between the early retirement and the voluntary leave program. So there is a sense of duplication there, but what it does do at an absolute minimum is it puts a permanence around what were short-term leaves and volatility. So we expect that in addition to the leaves that Ed mentioned, I’m sorry, the separations that Ed mentioned, voluntarily, we also have leaves that will continue on top of that. So we’re going to continue to assess and see where we stand on the salaries and related line. There’s no doubt that that’s been a big driver of how we’ve gotten our cash burn down in quick action.

And as we continue to shape the airline for how we think it’s going to be sized next summer and into the future, we’ve got to be able to manage all of that agility and flexibility and the voluntary leaves are going to be — continue to be an important piece of that puzzle going forward. So as we think about salaries and related, we should get to that kind of trend line I would think in that fourth quarter, first quarter, but then we’ll see as demand shapes back customers are ultimately going to determine how big the airline is.

Jamie Baker — J.P. Morgan Chase — Analyst

Got it.

Ed Bastian — Chief Executive Officer

Hey, Jamie, if I could add a couple of thoughts; for the second quarter and the third quarter, we are reducing our total operating expenses by a bit over 50%, which is enormous. And that will continue to be our goal as we progress through the fourth quarter as well. And while the composition of the savings will be more sustainable given the size of the early out sale, we have 20% of the company will be exiting. And as you can appreciate, it’s the senior most 20% of the company as well, which is going to give us an added benefit on top. There’s a lot of creativity and collaboration with our work groups about reducing work, trying to protect jobs and everyone pitching in to work fewer hours but to save more jobs and that’s across the company.

There is a real spirit of doing that. So whether I guess through the fourth quarter, first quarter at some point the labor savings here are sustainable. But to answer your question more specifically, it’s really going to be on the commercial side of the business that’s going to be much more important to getting us down to that breakeven level as demand hopefully starts to — growth picks up once again, as we look into the late summer and fall and that will be the more important contributor to getting to a breakeven cash flow position.

Jamie Baker — J.P. Morgan Chase — Analyst

Okay, that’s very helpful. Second multipart question, how do we think of loyalty and the remaining unencumbered asset pool? Does Delta have the flexibility to do what United did with loyalty in terms of sort of a quasi-securitization of both third-party sales and the intercompany cash flows or did you pledge SkyMiles as part of the loan?

Paul Jacobson — Executive Vice President and Chief Financial Officer

So, Jamie, we’re a infinitely competitive business but hats off to United for that execution. I thought they did a very good job with that. And it’s one that I think is available to a multitude of carriers. That is not included in the most recent guidance that we’ve given of $6 billion to $7 billion of unencumbered assets and we’re looking at all of our options and we’ll continue to keep them open. We have made — we have advanced the ball with the government by signing the term sheet, which they announced a couple of weeks ago and we continue to move along that process, but we have not decided to take a government loan and we’re assessing really all of our options as well as the environment that we’re in.

Jamie Baker — J.P. Morgan Chase — Analyst

Thanks for indulging my questions. Take care.

Operator

We’ll go next to Duane Pfennigwerth of Evercore ISI.

Duane Pfennigwerth — Evercore Partners — Analyst

Hey, thanks. Totally agree with the perspective that Delta has been careful with capacity and how you brought it back. Just from an industry perspective, it looks like the industry has guessed wrong on July at least so far. So schedules indicate your capacity is up about 90%, 9-0, from June to July yet demand has stalled. So I’m just curious how cash burn can be similar in July versus June? Was it just that we had a good July 4th on the books before demand rolled over or is there something going on with debt payments and capex?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Well, I’ll start with that Duane. First of all, good morning. The trajectory that we’ve been on and what we articulated through June was that we had seen steadily increasing net sales that was coming really from both variable sales were going up and trending higher. While at the same time refunds have been trending down, which put us from a — I think at the beginning we said $20 million to $30 million a day. We were burning in March to turning positive and staying there in June. So while we’ve seen that sales growth level-off in the wake of the latest rise in infections it has remained relatively stable in that area. So as we see the continued trajectory of reducing our operating expenses 50% and keeping those net sales numbers relatively flat, that’s where July comes out flat to June.

Duane Pfennigwerth — Evercore Partners — Analyst

Okay. Thanks, Paul and maybe I’ll stick with you. Just high level, how has your budget for aircraft rent changed for this year as we think about the net impact of sale leaseback activity versus aircraft retirements? The only reason I bring it up is it looked like the op lease liabilities didn’t really change much sequentially. So maybe you can help us understand what’s going on under the covers? Thank you.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Yeah, I think, Duane, we’ll take that offline. And it will be more apparent when the Q comes out later today of just the breakdown between financing leases and operating leases under all the new accounting guidelines. So it’s all there but has a little bit of a different geography to it depending on the transactions.

Duane Pfennigwerth — Evercore Partners — Analyst

Okay. I’ll keep it there. Thank you.

Operator

We’ll go next to Helane Becker of Cowen.

Helane Becker — Cowen Securities — Analyst

Thank you very much, operator. I appreciate the time. Hi. So, I have two questions. One is your comments on International and the 777s that are leaving the fleet and some of the 767s. It would seem like you might have to do more pruning there. So, have you like retired enough aircraft do you think or do we expect to see more during the rest of the year?

Ed Bastian — Chief Executive Officer

Hi, Helane, it’s Ed. International is going to lag domestic. I think we have some time to watch how it recovers. The 777 fleet for us was the sub-fleet that made the most sense to sit down. We certainly have additional international capable aircraft. We have a very large 767 fleet with opportunities to early retire, as we get a better sense for where the recovery is. But some of those decisions we have a little bit of time to take it. As I indicated in my remarks, there’s more to be done. And we’re not investing any money in that fleet, and we can see how international recovery is shaped before we make those final decisions.

Helane Becker — Cowen Securities — Analyst

Okay, that’s very helpful. Thank you. And then my follow-up question really has to do with changes in booking patterns because of increased refunds, or because of more flexibility to people who book and then maybe cancel. So could you just address people booking and then actually showing up for the flights, especially in July? Are you seeing people booking and then canceling at the last instance?

Glen Hauenstein — President

Helane, hi, it’s Glen. How are you doing? We’ve seen the no show rate — good. Hope your summer is going well. We see no show rates grow from about 3% historically to about high-single digits. So most people at day of departure who have reservations are showing up for the flight. But the higher no show rates also makes it a little bit harder to revenue manage with the caps. So we’ve been managing through that. And we hope we can get better and better at that as we move through the fall. But clearly giving people more flexibility is where we need to be as there’s so much uncertainty in the virus right now.

Helane Becker — Cowen Securities — Analyst

Got you. Thanks very much. Since I’m still in paradise prison, my summer is not going as well as I would like. But, thank you for asking.

Ed Bastian — Chief Executive Officer

We’re ready to release you, Helane.

Helane Becker — Cowen Securities — Analyst

Not soon enough. Thank you.

Operator

We’ll go next to Joe Caiado of Credit Suisse.

Joe Caiado — Credit Suisse — Analyst

Hey, thanks. Good morning. My first question relates to your fleet and actually your order book. Any update on your discussions with Airbus regarding your order book there? And can you describe for us maybe what it is that that you’re hoping to achieve there? Do you just want to sort of adjust the timeline for deliveries? Are you looking to restructure sort of the composition of the aircraft in the order book, just any detail there? Thanks.

Ed Bastian — Chief Executive Officer

We are working with Airbus, as you can appreciate, and they’ve been very good partners with us managing the crisis. Clearly, we’re in a situation where we don’t need any aircraft. We have a lot of aircraft on the ground, and doing our best to manage through the next 18 to 24 months to minimize deliveries. We’re not ready to make any announcements yet. I can assure you there will be no cash capex on any aircraft at Delta for some period of time, certainly through the end of this year. And Airbus has been a very good partner.

Joe Caiado — Credit Suisse — Analyst

Got it. That’s very clear on the capex. But I was curious, just especially as it relates to your comments on the expected timelines for recovery of domestic versus international. If you’d also be looking to adjust the actual composition of the aircraft in your order book as opposed to just actually delaying or revising the timeline for the deliveries. And if I could just throw up my second actual follow-up, which is just a quick clarification for Paul. On the stalled demand recovery, did you say the July net bookings are flat with June, so they are positive month-to-date? Can you just describe in a little bit more detail the evolution in those net bookings trend over the last few weeks? Thanks for all the color.

Ed Bastian — Chief Executive Officer

Do you want to start? No, that’s okay, Joe. On your question with Airbus again, we’re not providing any specifics at this point. You can rest assure everything that we’re doing is pushing a lot of the deliveries to the right. And when we’re ready to — we haven’t reached the final plan with Airbus, when we do reach that plan, we’ll be sure to let you know.

Paul Jacobson — Executive Vice President and Chief Financial Officer

And Joe, on the cash burn, so we had seen a pretty steady progression upwards of sales and slight decline in refunds, really kind of from May to early mid-June. And that’s when we started to see it stabilize. So the data that we’ve seen so far in July is pretty consistent with what we saw at the end of June, which is really reflective of what we’ve seen in this latest wave of infections throughout the country. And that’s why we have got the confidence that it’s somewhat stabilized here at these levels. And hopefully, if things start to improve we can see improvements off of those levels as we get later into the quarter.

Joe Caiado — Credit Suisse — Analyst

Thank you very much.

Operator

We’ll go next to Mike Linenberg of Deutsche Bank.

Mike Linenberg — Deutsche Bank — Analyst

Hey, thanks. Good morning, everyone. Hey Paul, just back to how you are thinking about the ATL as we progress through the quarter? I mean normally under a normal year, the seasonal impact is that as we get to the latter part of the quarter, we tend to see it become a drag on cash, and I realize that this is not a normal year. So, are you sort of expecting that as we get into the latter part of the quarter that we will see it become a drag on the ATL or sort of where is your thinking around that right now?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Hi. Good morning, Mike. That’s a bit of a [Indecipherable] of a question, because I think the one thing we all know is that the historical air traffic liability models are broken right now. It’s not behaving in any way that a normalized seasonality pattern would have. As evidence, we’ve actually refunded now over $2 billion of that ATLs since the beginning of year, which the bulk of that has been done in the post-COVID, post-March 1 timeframe. So, we actually think that a lot of that refund activity particularly in the Trans-Atlantic and International destinations which were already booked pre-COVID heading into the summer, we refunded a lot of that activity in it. So a little bit of a — it’s a big contributor to the international cash burn that I gave that composition in my prepared remarks. So, we can actually see things stabilizing and we would expect that refunds will continue to trend down in the status quo. Obviously, it’s going to be choppy, but any new sales data that come in, any new demand should be accretive to the ATL in a way that seasonally you wouldn’t necessarily expect. So, we’re prepared for that. I think the one given is that there is a lot of uncertainty here, which is why we’ve gone the route of really looking to raise as much liquidity as we can.

Mike Linenberg — Deutsche Bank — Analyst

Okay. That’s very helpful. And then just maybe this is an easier one, you talked earlier about upcoming maturities and I’ll throw capex in there as well. As we look to the second part of the year, what is capex? I’m sure it’s probably close to zero now based on everything that you’ve cut back or deferred. And you did allude or mentioned upcoming maturities, what are the big maturities for the second half of 2020? Thanks for taking my questions.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Yeah, sure. So, we didn’t give any formal capex guidance because it’s really the same as we gave immediately after the COVID epidemic, which is we have essentially eliminated all capex. There is some technology spend on projects that are already in process and some small purchases here and there, but it’s not material to the overall story. As far as debt maturities go, the biggest one we have is the $450 million maturity in December. When you combine that with a $600 million unsecured in April of ’21, that’s the unsecured deal that we just took out. So we’ve already successfully refinanced that. And then we have the $3 billion bridge loan that is due in March that has collateral attached to it that we haven’t decided exactly what to do with that. As part of the amendment to the credit facilities, we also extended by one year a $1.3 billion maturity in April of our revolver. So that’s pushed out to 2022. So we’ve actually gotten a very, very good handle on all of the maturities really for the next 18 months.

Mike Linenberg — Deutsche Bank — Analyst

Great. Thanks for that.

Operator

And we’ll go next to Savi Syth of Raymond James.

Savanthi Syth — Raymond James — Analyst

Hey, good morning. Just a couple of follow-up questions on the cash burn. If we don’t get much of an improvement on the commercial side, what do you think you can kind of get the cash burn by the fourth quarter with some of those incremental things that are happening on the cost side?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Hey, good morning, Savi. I think, as we mentioned in our comments, we’re kind of on this trajectory right now as things have stabilized. And we’re continuing to assess what the second-half looks like. So as we continue to monitor capacity and demand that’ll affect what we do on the cost input side as well. But, I think we’re really counting on some continued improvement in demand, however gradual and however choppy that might be. We’re 90 days into this and we already know a lot more about the virus. And that’s giving a little bit more confidence in the longer and intermediate-term demand profile. But we’ve got to continue to be agile. So, I think we’ll kind of be in this mid-20s level, as we continue to assess. And if we need to take further actions, we will.

Ed Bastian — Chief Executive Officer

Hey, Savi. This is Ed. I don’t want anyone to get a sense that we’ve got a gloomy forecast on revenue or demand growth, not at all. This is expected. We said at the start of this pandemic, that this is going to be choppy. It’s going to be unpredictable. It’s going to be driven by factors outside of our control. It’s really advances on the medical front in containing the virus, it’s advances by general public about wearing masks and doing their very best to be cautious and restoring confidence in air travel. I’m optimistic as we get through the late summer and the fall we’re going to see some real improvements here. We need to see improvements.

And I think the sensitivity and the caution you hear in our voice for the current month is the fact that we’re in the south and we’re obviously under — going back into a more of a closed setting in our local economy than opening. But at the same time, that’s for the goal of reopening later this summer and fall to a bit of a better standpoint. So, I do think you’re going to see continued improvement in cash burn. Cost on the margin could improve. But when you get more than 50% of your costs out, it’s hard to see much more coming out. I think it’s going to be the same type of momentum that we saw in June, hopefully reemerging in the latter part of the summer and early fall. That’s going to make another material dent in bringing us down to that flat breakeven level.

Savanthi Syth — Raymond James — Analyst

That makes sense and helpful. And my other follow-up question is just on the business travel commentary. It looks like a lot of probably business travel might not happen until 2021, but just based on your surveys and things like that, is there any level of expectation of what we might see in the fourth quarter here? And kind of tied to that, I mean, there’s kind of the block middle seats get removed when demand is stronger, or when the virus is a little bit more contained? What drives those positions?

Ed Bastian — Chief Executive Officer

We’re talking to our corporates all the time. As you can appreciate, we’re doing a lot of work with them to get them more confident. They are starting to come back. They’re in small numbers, but they’re starting. And what we’ve been doing is taking them out with us on tours and seeing the airport. It’s interesting for travelers that have spent their life as Road Warriors, the first time back in this environment it feels very different. And they need to re-familiarize themselves with what it’s like and the benefits of air travel. And I’d say the most significant observation that they give us is that it is actually not only safe, it’s significantly better than what their view of air travel was pre-pandemic. So, there is confidence that’s returning. I think you’re going to see it improve as businesses start to reopen, I’d say post-Labor Day.

Businesses start to open up as international operations start to slowly open up. You’ll see that will be another driver for business travel. But business travel is going to clearly be at a 12- to 18-month lag, waiting for advances on the medical front, vaccines, therapeutics, reasons to think that it’s safe, that companies can safely put their employees back out in the road. The other thing, and I mentioned this in one of the interviews I did this morning, is that while the corporations may not be traveling, we know the individuals are traveling. And we see it in the SkyMiles data and our frequent flyer information. So people are learning about the new way of travel and they’re telling us it’s actually better than it was previous.

Savanthi Syth — Raymond James — Analyst

And does the block middle seat, is that kind of tied to COVID or is that tied to demand levels that?

Ed Bastian — Chief Executive Officer

I’m sorry, I didn’t hear that Savi.

Savanthi Syth — Raymond James — Analyst

Sorry. You mentioned that the middle seating block probably continues beyond September. Just wondering what drives that decision?

Ed Bastian — Chief Executive Officer

Well, that’s going to be consumer confidence. We’re going to hear from customers as to their comfort in travel. We’ve got a lot of flights that we have to add back yet and opportunities to add flights back before we have to worry about pulling up the middle seats. And, we’ll get there over the course of the end of the year and into early next year. But, right now, I don’t see a push to do that. Customers aren’t pushing us to do it. And we’ve got — I’d rather add more flights back and more seats into the market in a safe way than trying to maximize the number of people you can put on an individual airplane. And I think that would be in consistent with the brand that Delta represents.

Savanthi Syth — Raymond James — Analyst

It makes sense. Alright. Thank you.

Operator

We’ll go next to Brandon Oglenski of Barclays.

Brandon Oglenski — Barclays — Analyst

Hey, good morning everyone, and thanks for taking my question. So, I guess following up on that line of question, if business demand is going to lag here and you have some competitors out there they’re going to come out of this without a lot of an incremental debt. What’s going to be a competitive landscape? And how do you reposition your network to be more leisure-focused, maybe lower costs? And does that impact the kind of strategy you’re really focusing on the branded products and everything onboard?

Ed Bastian — Chief Executive Officer

Brandon, this is Ed. I’m not sure who you’re referring to. Our incremental net debt is $3.5 billion at this point, so I wouldn’t suggest that we have added a tremendous amount of increased debt burden on the company. Obviously, there’s a large amount of money that we raised, but we also have a significant amount of cash that we can use to hopefully retire that, once we get through to the other side. We’re not changing our long-term goal for this company, this brand. We are a business-oriented airline. We are a premium oriented airline.

And there’s nothing that I see from what we’ve been through the last four months that suggest customers aren’t going to value premium, value the quality of the experience, the health of the experience. But we’re going to be more resilient, because there’s a portion of that trouble that will go away and we’ll size our business accordingly. So, I don’t see anything that gives me pause. Of course, there’s going to be a lot of dislocation, disruption that always happens in this industry during times of crisis, but I think we’re pretty well-positioned to come out of this in a relatively stronger competitive position than we were pre-pandemic.

Brandon Oglenski — Barclays — Analyst

Well, I appreciate that response. And I know that looking forward as anyone’s guess here but can you give us any clarity on what and I think maybe Paul alluded to what level of demand you’re expecting to get to cash breakeven by the end of the year? And maybe even more importantly, where you’re seeing the sizing of the network for 2021 as you make any difficult decisions?

Paul Jacobson — Executive Vice President and Chief Financial Officer

So, at a really high level Brandon, if you look at our cash burn in June as well as in July and that $27 million a day number, virtually all of that needs to come through improvement in net cash sales. It’s going to come in two ways, so one, the refund activity will continue to wind down. That will be a contributor in that and that’s probably in the plus or minus $5 million a day improvement by the time we get to the end of the year, and which leaves about $20 million of cash sales improvement. And that’s if you think of a company our size is about a 20% improvement in our overall business volume that will get us there. So, we’ll probably need to see that $25 million come from the commercial side of the business, but that’s still is the roadmap to get to breakeven.

Brandon Oglenski — Barclays — Analyst

Thank you.

Jill Greer — Vice President, Investor Relations

Sicilia, we’re going to have time for one more question from the analysts.

Operator

Thank you. That question will come from Joseph DeNardi of Stifel.

Joseph DeNardi — Stifel, Nicolaus & Co. — Analyst

Thanks. Good morning. Ed, I think over the last few years you and your larger peers have been of the view that the DOJ had kind of put a red light on additional consolidation. I’m wondering if you think that has changed or that it needs the change? And whether the calculus around how much liquidity you think you need takes into account that maybe consolidation is eventually part of the strategy?

Ed Bastian — Chief Executive Officer

Joe, you know we can’t speculate on that. That will be [Indecipherable] but that would be a really, really inappropriate response I’d have to give on that.

Joseph DeNardi — Stifel, Nicolaus & Co. — Analyst

Okay, fair enough. Paul, can you give us where you guys are year-to-date on mileage sales, cash proceeds? I think you did about $4.2 billion last year. Where are you guys year-to-date?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Yeah, we’ve seen Joe about a 50% reduction in the last quarter. I think if you look at some of American Express’s commentary, it’s in line to even slightly better than some of the cards in their portfolio, which I think is encouraging. That means that that people remain attached to the brand and they see value in the miles program. So we’re going to continue to see that, but it obviously has been far more resilient than the demand for tickets and for travel itself, which is what we expected.

Joseph DeNardi — Stifel, Nicolaus & Co. — Analyst

Thank you.

Paul Jacobson — Executive Vice President and Chief Financial Officer

Thank you.

Jill Greer — Vice President, Investor Relations

And that’s going to wrap the analyst portion of the call. I will turn it over to Tim Mapes, our Chief Marketing and Communications Officer for the media portion.

Tim Mapes — Senior Vice President and Chief Marketing & Communications Officer

Good morning, everybody. We have about 10 minutes of questions from members of the media. I’d just remind everyone please, just a question and maybe a brief follow-up. We’ll try to get through as many as we can.

Operator

[Operator Instructions] We’ll go first to Robert Silk of Travel Weekly.

Robert Silk — Travel Weekly — Analyst

Yes, good morning. In the Virgin-Atlantic announcement day, they mentioned for their restructuring plan that they’re doing this with the support of shareholders, Virgin Group and Delta, as well as some new investors. So I was wondering if there’s any color or detail in the matter in which Delta is supporting this effort?

Ed Bastian — Chief Executive Officer

Not other than what’s already been disclosed, which is that we are contributing through deferral of brand fees, as well as certain other joint venture fees that we would typically earn. We were excited to see the recapitalization come about. It’s been an extraordinarily difficult few months holding that together. And all stakeholders have made some meaningful contributions to enable Virgin to fly again. And we’re excited about that.

Robert Silk — Travel Weekly — Analyst

Thanks, Ed.

Operator

We’ll next to Mary Schlangenstein of Bloomberg News.

Mary Schlangenstein — Bloomberg News — Analyst

Hi. Thank you. Good morning. I wanted to see if you could breakdown for us how much of your second quarter revenue and possibly revenue going forward is from newly purchased tickets versus how much is from what rescheduled flying?

Ed Bastian — Chief Executive Officer

Sure. We have about two-thirds of the revenue coming in from newly purchased tickets and about a third coming in from reissues and credits from postponed journey. So, getting a significant number of new journeys coming in, which is a good sign.

Mary Schlangenstein — Bloomberg News — Analyst

And I assume that the new ticket purchasing fell in this recent sort of slump as well as the reschedule. Is that right?

Ed Bastian — Chief Executive Officer

If I could recharacterize it from a slump to really a much slower growth rate is that the industry had an awful lot of capacity going from June into July. And so what we’ve seen is in June, we were growing at about 20% every week, week-over-week. And I think maybe in some ways that capacity is going to take a little bit longer to get absorbed, because the growth rates are — if you take 4th of July out they’re coming in between 5% and 10%, now. So the growth is at a much slower rate. As we look forward, it has slowed but it hasn’t stalled. I mean, it’s very flattish to up slightly, but it’s not a slump.

Mary Schlangenstein — Bloomberg News — Analyst

Okay, thank you.

Operator

We’ll go next to Dawn Gilbertson of USA Today.

Dawn Gilbertson — USA Today — Analyst

Hi, good morning. Ed, I think you mentioned employee coronavirus infections being down, because of all the measures you’ve put in place. Can we talk about passenger infections? We had the case, the recent case was Endeavor on the flight from Atlanta to Albany. How many instances is Delta seeing, hearing back from passengers after a flight about coronavirus infections and can someone put that into perspective for me? Thank you.

Ed Bastian — Chief Executive Officer

Hi, Dawn. It’s really minimal. The flight last week was an Endeavor flight as you mentioned and that was after the fact that those three customers found out. So there’s no question that in the general population, there’s a virus. And when we do find out, we go back and contact trace with anyone that would have been in the immediate vicinity of a customer. But I can tell you those instances are really, really small. And certainly, no instances that we’ve been aware of where there’s been any transmission onboard our planes.

Operator

And did that answer your question, ma’am?

Dawn Gilbertson — USA Today — Analyst

Yes, thank you.

Operator

We’ll go next to Tracy Rucinski of Reuters.

Tracy Rucinski — Reuters — Analyst

Hi, good morning. I wanted to ask about the outlook for the Trainer refinery. Do you have any plans to divest it or stop operations?

Paul Jacobson — Executive Vice President and Chief Financial Officer

Good morning, Tracy. This is Paul. So, the Trainer refinery in the quarter we had about $100 million loss in the quarter, which was almost entirely focused in the month of April. So the refinery is continuing to produce economics at breakeven levels on the current trends. And as with everything in the business we’re looking at everything. But our plans have not changed with respect to the refinery right now.

Operator

And our next question comes from Claire Bushey of Financial Times.

Claire Bushey — Financial Times — Analyst

Hi. I wanted to ask whether federal government needs to pass a law requiring mask on airplanes? Or do your flight crews have enough leverage with passengers since they can be banned from flying with the airline?

Ed Bastian — Chief Executive Officer

Hi Claire, this is Ed. I don’t know that it needs to pass a law. But I certainly see the opportunity to reinforce the work that the airlines are doing to ensure that customers wear their masks both in the airports as well as onboard our planes is helpful. The airlines are I think are doing a very good job of reinforcing that, as well as candidly customers on board planes. If someone’s not wearing a mask, they quickly get pointed out and discussion with our flight attendants occur quickly. So, it’s really important that we as a nation comply with mask policy or an industry that’s got a lot of regulation. I don’t know that we need another regulation around mask wearing, but it’d be helpful — stronger that our federal government can reinforce the need to wear masks, the better. Not just on air travel, but in life, in general.

Claire Bushey — Financial Times — Analyst

Thank you.

Operator

We’ll go next to Leslie Josephs of CNBC.

Leslie Josephs — CNBC — Analyst

Hi, good morning. Do you have any idea of how many pilots need to be retrained on different aircraft, given the retirements and then also potential furloughs and just kind of rejiggering of what they’re going to be flying and what the cost might be of that?

Ed Bastian — Chief Executive Officer

Leslie, it’s really premature. The pilot retirement plan still has almost a week yet to run. So we’ll be in a better position to assess that over the next month. And we’re continuing to work with Alpha to identify ways to mitigate the need to displace pilots and furlough.

Leslie Josephs — CNBC — Analyst

Thank you.

Tim Mapes — Senior Vice President and Chief Marketing & Communications Officer

Sicilia, we have time for one final question, please?

Operator

The final question comes from David Slotnick of Business Insider.

David Slotnick — Business Insider — Analyst

Hi, how are you? I’m wondering about blocking the middle seat. Have you gotten a sense from passengers or from surveys or anything that people are willing to pay a higher fare to fly a less full airplane?

Ed Bastian — Chief Executive Officer

We have received a lot of customer feedback, and in fact, I would say when we survey customers today, about reasons you’re purchasing a ticket on Delta, the space onboard the plane, the block middle seats has gone to the number one reason why customers are choosing Delta. They see it consistent with our brand. Everyone appreciates, it’s not going to last forever. But in the face of a health crisis, that space onboard really matters and customers are telling that. We’re seeing it in our net promoter scores, which have gone up considerably on a year-over-year basis, up 20 points in the month of June over last June, which last year was already a good number. And, we hear it from our corporates, we hear anecdotally from many of our travelers.

David Slotnick — Business Insider — Analyst

And are you looking at charging more of a premium or raising your fares or anything or is this more like a brand and marketing investment for later when things stabilize?

Ed Bastian — Chief Executive Officer

It’s not a brand or marketing investment, and no, we’re not raising our fares to block the middle seat. This is to us a really important safety feature and it’s a health crisis that we’re in our country. By being the most disciplined and in terms of the amount of supply and capacity that we’re offering, that’s benefiting our pricing and yield of course. And that’s helping us to have a better price onboard the overall cabin. So indirectly, that is coming through in price. But this is not — that’s not the objective. The objective here is to make. The objective here is to make certain that we’re restoring consumer confidence in air travel and being true to our brand promises.

David Slotnick — Business Insider — Analyst

Thank you.

Tim Mapes — Senior Vice President and Chief Marketing & Communications Officer

That will complete the June quarter earnings call. Thank you to everyone for your time and your questions today. Have a great day.

Operator

[Operator Closing Remarks]