Delta Air Lines Inc. (DAL) Q4 2020 Earnings Call Transcript

Delta Air Lines Inc. (NYSE: DAL) Q4 2020 earnings call dated Jan. 14, 2021.

Corporate Participants:

Jill Greer — Vice President – Investor Relations

Ed Bastian — Chief Executive Officer

Glen Hauenstein — President

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

Peter Carter — Executive Vice President and Chief Legal Officer and Corporate Secretary

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

Analysts:

Savanthi Syth — Raymond James & Associates — Analyst

Jamie Baker — J.P. Morgan — Analyst

Hunter Keay — Wolfe Research — Analyst

Andrew Didora — Bank of America Merrill Lynch — Analyst

Brandon Oglenski — Barclays — Analyst

Ravi Shanker — Morgan Stanley — Analyst

Catherine O’Brien — Goldman Sachs — Analyst

Duane Pfennigwerth — Evercore ISI — Analyst

Joseph DeNardi — Stifel Financial Corp — Analyst

Greg Konrad — Jefferies & Company, Inc — Analyst

Michael Linenberg — Deutsche Bank — Analyst

David Vernon — Bernstein — Analyst

Jose Caiado — Credit Suisse — Analyst

Alison Sider — The Wall Street Journal — Analyst

Tracy Rucinski — Reuters — Analyst

Claire Bushey — Financial Times — Analyst

Leslie Josephs — CNBC — Analyst

David Koenig — Associated Press — Analyst

Kelly Yamanouchi — Atlanta Journal Constitution — Analyst

Ted Reed — Forbes — Analyst

Dawn Gilbertson — USA Today — Analyst

Edward Russell — — Analyst

Robert Silk — Travel Weekly — Analyst

David Slotnick — Business Insider — Analyst

Presentation:

Operator

Good morning, everyone and welcome to the Delta Air Lines December Quarter and Full Year 2020 Financial Results Conference Call. My name is Kathy, and I will be your coordinator. [Operator Instructions]. And I now would like to turn the conference over to Jill Greer, Vice President of Investor Relations. Please go ahead.

Jill Greer — Vice President – Investor Relations

Thanks, Kathy. Good morning, everyone and thanks for joining us for our December quarter and full year 2020 earnings call. Joining us from Atlanta today are our CEO, Ed Bastian; our President, Glen Hauenstein; and our Interim co-CFO, Gary Chase. Our entire leadership team is available for the Q&A session.

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 cost liquidity in our balance sheet. We’ve extended our call today to 90 minutes total to make sure we have plenty of time for questions. For analysts, we ask you to please limit yourself to one question and a brief follow-up, so we can get to as many of you as possible. After the analyst Q&A, we’ll move to our media questions, after which Ed will provide some closing remarks.

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 and all results exclude special items unless otherwise noted. You can find a reconciliation of our non-GAAP measures on the Investor Relations page at ir.delta.com. And with that, I’ll turn the call to Ed.

Ed Bastian — Chief Executive Officer

Well, thanks Jill. Good morning everyone. This morning we reported pre-tax losses of $2.1 billion for the December quarter and $9 billion for the full year, capping the toughest year in Delta’s history. We’ve been saying all along that this recovery wouldn’t follow a straight line, with demand choppiness as COVID infections rose across the country and government and public health officials issued travel advisories.

Our revenues were $3.5 billion for the fourth quarter which was 30% of last year’s levels. And although, we still have the tough winter ahead of us, we’re encouraged by the progress that’s been made on the vaccine front and are confident that Delta is positioned to successfully lead our industry into recovery as the year unfolds.

While 2020 was a challenging year, we delivered results for all of our stakeholders. For our employees, we prioritize protecting their health and safety and preserving our culture. For example, throughout the past year we have offered and continue to offer an extensive employee testing program and pay protection programs for employees diagnosed, exposed or at high risk of COVID-19.

We have had remarkable volunteerism upto 40,000 employees taking unpaid leaves throughout the summer to protect jobs and preserve cash. And in fact, we still have over 10,000 employees in the month of January out on unpaid leaves. And we have made it through this year without furloughing any employees. Our emphasis on taking care of our people is reflected in Delta’s recognition this week by Glassdoor as one of the best places to work for the fifth year in a row, coming in seventh overall on a list of 100 large companies, the highest rank Delta has ever received; all in the face of a pandemic. Really incredible work by our team.

For our customers, we’re keeping them at the center of our recovery. Our health and safety efforts, from being the only major U.S. airline that continues to block middle seats, to partnering with leading names like the Mayo Clinic, Emory Healthcare, Lysol and Purell in developing the Delta Care standard, to launching the industry’s first COVID-tested Trans-Atlantic flights with no quarantine on arrival, are all targeted at restoring consumer confidence in travel and reopening borders, which will be an important driver of revenue growth in the future.

Our customers recognize the outstanding service our people provide with an all-time high December net promoter score of 71, up 20 points year-over-year and by Business Travel News naming Delta, the top airline for corporate travelers for the tenth year in a row. And once again coming in first place on all 12 metrics that they measure in the survey.

That customer preference and loyalty is what underlies our revenue premium and has never been stronger. And finally for our shareholders, we secured our liquidity position and re-scaled our cost structure. We reduced liquidity risk by raising over $25 billion in capital since the pandemic began. With approximately $17 billion of liquidity, our adjusted net debt however only increased $8 billion year-over-year and we don’t expect that net debt will increase going forward.

We’ve swiftly removed cost from the business with three consecutive quarters of operating expenses declining by nearly 50% or more, increasing the variable nature of our cost structure. In fact, in the December quarter, our all-in unit costs were down 4.5% year-over-year despite flown capacity being down 44%. That is a remarkable achievement and credit to all Delta employees for making that happen.

And by keeping our cost under control, we leveraged the modest increase in net sales to reduce our average daily cash burn to $12 million a day for the December quarter, half of what it was in the September quarter and the decrease of 90% since the early days of the pandemic in late March.

Turning to 2021, we expect the March quarter to look similar to the December quarter with the March quarter revenues at 35% to 40% of March quarter 2019 levels and our cash burn for the quarter holding at $10 million to $15 million per day. We expect that will be followed by an inflection point this spring as vaccine distribution continues. Travel restrictions start to ease and consumer confidence begins to grow, hopefully resulting in cash burn reaching breakeven or better by the second quarter. And as the year progresses, we expect demand will start to accelerate as vaccinations become more widespread and the virus is in a contained state and customers gain greater confidence to make future travel commitments.

This should enable a sustained recovery to begin in the second half of 2021 with the return to profitability this summer. So as we work through this environment, we are focused on five things. First, as always, we are committed to keeping our culture intact and our employees engaged. The Delta people are our most strategic asset. They have done a tremendous job this year and together will lead our airline through to recovery.

Second, we’ll continue to prioritize the customer with a focus on health and safety and the maintenance of Delta — of the industry’s strongest network, thereby increasing loyalty and preference for our brand. Customers have shown they’re willing to pay more for the quality of our network, product and our service. The gains we’ve achieved in customer satisfaction position us well to drive sustainable revenue growth in the future.

Third, we’ll maintain our focus on innovation which will enable our employees improve the customer experience and drive efficiency through the business. And innovative thinking will power our ability to tackle big challenges in front of us, like our goal of achieving carbon neutrality in the next decade.

Fourth, we will drive the competitive cost structure. Given the changes we’ve made over the last year, our goal is to sustain our non-fuel unit cost at or below 2019 levels by the December quarter of this year on roughly 75% of 2019 capacity levels, displaying continued agility in managing our cost.

And finally, we’re committed to debt reduction and creating long-term shareholder value including continuing to protect our owners, so that they can participate in future upside without dilution. Because for investors, while the near-term demand path is murky, industry fundamentals remain intact. Following almost a year of subdued travel, customers are beginning to exhibit behavior that is indicative of pent-up demand. Shopping business across Delta’s digital channels are significantly outpacing the passenger volumes we’re carrying. In our most recent corporate survey, 40% of respondents expect full recovery by 2022.

Our partners at American Express are also seeing encouraging signs, whether it’s cardholders holding on to their points in anticipation of redeeming them for air travel or a recent survey that suggested approximately 70% of respondents expect to take a trip in 2021 after not traveling in 2020. Although it will take time, customers want to travel again when they feel it’s safe. They feel they have had a year of their life taken from them and they’re starting to get ready to reclaim it. Until then, we’re fortunate to have the support of the U.S. government which recognizes the importance of the airline industry and we thank Congress and the administration for passing the COVID relief bill last month.

As a result of that bill, we anticipate receiving approximately $3 billion in addition — in additional payroll support funds largely on terms similar to the initial CARES Act program. These funds have been critical in saving thousands of industry jobs during an unprecedented level of demand decline, and it’s why the U.S. airline industry is in the best position to recover from the pandemic over any other international markets.

So while 2020 was a difficult year and challenges will continue in 2021, I’m encouraged at some of the data that we’re seeing, and I’m proud of the foundation that we’ve built at Delta. This Company is well positioned to emerge in a stronger, competitive position from this crisis and will continue to lead our industry in the years ahead.

And with that, I’ll turn the call over to Glen.

Glen Hauenstein — President

Thanks, Ed and good morning everyone. As Ed mentioned, we started the December quarter seeing encouraging demand trends, but with rising COVID cases and travel advisories, we began to see some weakness around Thanksgiving and into December. Despite that softness, the peak periods continue to outperform non-peak periods, and we’ve seen sequential improvement in total revenues which recovered from being down 80% end of September quarter to down 70% in the December quarter on sellable capacity that was down 62%.

On January 3rd, we had a $50 million ticket revenue date and carried more than 250,000 customers. Both of these were the highest since the onset of the pandemic. And despite having meaningfully less inventory for sale, given our middle seat block, we outperformed on passenger revenue generation in the first nine months of the year. This is a testament to customers’ willingness to pay a premium for the Delta difference [Phonetic].

Leisure markets in some destinations are the best performers in our network. With our approach of targeting sellable capacity to match demand, we are biasing restoring capacity to leisure markets. As a result, roughly one third of our domestic capacity is currently deployed into leisure destinations. Our coastal hubs, especially New York and Boston are still some of the weakest areas in our network with demand in those hubs only 20% to 25% recovered.

International demand remains weak and is limited to essential travel. That said, we continue to work towards opening additional COVID tested lanes of travel with no quarantine on arrival, similar to our Atlanta and Rome — Atlanta to Rome and Atlanta to Amsterdam points. This will be important in restoring confidence in long-haul international travel as vaccine rollouts continue. Our premium seat strategy is holding up well. Domestic premium revenues performed in line with main cabin in the quarter. A good outcome considering that we’re continuing to operate a largely leisure driven environment with a higher proportion of premium seat held back due to our middle seat blocks.

As all of you are aware, corporate demand continues to be depressed and was only 10% to 15% restored for the quarter. Corporate revenue was about three points higher than the September quarter with small and medium accounts which make up half of our corporate revenues recovering five points faster than large corporate [Phonetic].

While the passenger revenue environment remains challenging, we’re encouraged that efforts to diversify our revenue streams have paid off. Our American Express remuneration in 2020 was nearly $3 billion, down only 30% on a year-over-year basis. In fact, American Express has shared its spending on our co-brand card portfolio has performed in line to slightly better than their overall card portfolio spend in 2020. In the December quarter, MRO revenue was down almost 30% relative to the same period last year, while cargo revenue was up 10% on a year-over-year basis. This marks the first quarter of cargo revenue growth since the December 2018 quarter.

Our December quarter results reflect the challenges that the pandemic has brought not just to Delta, but to the entire airline industry. I am incredibly grateful for the efforts of the entire Delta team in managing through the challenging year that we faced. Now that we think about 2021, we see three distinct phases to the year and for each phase we have levers to help us react to the emerging demand environment.

In the first phase, we expect demand in shopping to continue, the booking curve to remain more compressed and the results to be similar to the December quarter. In response, we will focus on making sure that our sellable capacity largely aligns with the emergence — emerging demand environment. For example, our January and February domestic scheduled seats will be down 3% to 6% versus the non-holiday period in November. That will result in our March quarter sellable capacity being approximately 55% lower relative to the same period in 2019, consistent with the expected 60% to 65% revenue decline.

We’ll also continue to leverage our non-ticket revenue streams like cargo, loyalty and MRO that we believe should continue to outperform passenger revenues. In the second phase, vaccination distribution continues, travel restrictions and advisories begin to ease and customer confidence begins to grow. As that happens, we expect to see an extension of the booking curve, resulting in a cash led recovery with revenue recovery to follow. We anticipate this will happen in the spring and will result in us achieving our cash burn breakeven target.

In response to the second phase, our middle seats will be a very powerful tool for us, one we can use to add capacity in a very cost efficient way, generating a meaningful margin tailwind. In the final phase, vaccinations become more widespread and offices begin to reopen. We expect that to occur in the second half of ’21 and as a result — and result in a sustained improvement in demand and yields with progression in cash generation as the booking curve normalizes.

With the recovery initially fueled by leisure demand, Delta’s success will be driven by our superior connecting economics to our core hubs domestically and our partner hubs internationally. With 34 new aircraft deliveries this year, we’ll also leverage higher gauge and more efficient aircraft that produce lower seat cost, more premium seats and a better customer experience. This will allow us to capitalize on our brand affinity and upsell opportunities which are enabled by the elimination of change fees for U.S. customers and the redemption of e-credits. It will take longer for corporate demand to return, but we are encouraged by the results of our recent corporate survey.

Our corporate accounts are telling us that they largely anticipate returning to their offices and travel in the June and September quarters. They are also telling us by the end of ’21, half are expecting to return to 50% to 100% of pre-COVID domestic travel, and up to 50% of pre-COVID international travel.

To our corporate customers, our commitment to you remains unchanged. Delta is ready when you are. We will be ready to serve our corporate customers by leveraging the strongest domestic and international networks, rebuilding focus cities and point to point flying based on customer needs and by capitalizing on our efforts to always put the customer experience at the center of what we do.

We’re optimistic for the future having built the right foundation and focusing on what we can control. We are confident in our ability to successfully navigate the post pandemic recovery. And with that, I’ll turn the call over to Gary.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

Thanks, Glen and good morning everyone. Let me touch on the fourth quarter and 2020 and then I’ll turn to the outlook for costs in the balance sheet as we head into ’21. Our December quarter pre-tax loss of $2.1 billion is about $500 million better than the September quarter given the revenue improvement Glen just discussed combined with strong cost discipline. We reduced cost by approximately 50% from 2019 levels for the third consecutive quarter. More importantly, our costs were up just 6% from the third quarter on 30% capacity growth and three-quarters of that increase came from higher fuel.

Total unit cost including fuel was down 4.5% compared to 2019 on 44% lower flown capacity. Our average daily cash burn for the December quarter was $12 million, half of the third quarter’s $24 million. We closed the year with $16.7 billion in liquidity and adjusted net debt of $18.8 billion, up about $8 billion versus year-end 2019. Now as we look into the year ahead, improving demand fundamentals will underpin a transition of our financial focus from protecting our liquidity to positioning the Company for a return to profitability and free cash flow.

I will explain our approach to costs in our balance sheet as we make this transition. Let’s start with costs. We need to stay flexible and maintain our discipline in order to position the Company for the return to profitability Ed mentioned, as we expect continued choppiness in demand in the early part of the year. We’ve already taken structural steps to resize our business. Our two largest cost drivers, fleet and head count are both 15% to 20% smaller than they were in 2019. Head count reductions were a difficult but necessary decision. It was hard to see 18,000 talented and dedicated coworkers leave, but it’s a testament to the Delta culture that these reductions were achieved entirely through voluntary means.

We accelerated our fleet transformation by retiring aircraft with relatively short remaining lives and simplified our fleet by eliminating two entire families, while increasing our gauge. On a run rate basis, these changes will drive more than $400 million in the annualized cost benefit. As we add capacity in ’21, we will drive higher utilization of our system. And we have room to rebuild our network from current levels at low incremental cost, approximately 40% to 50% of our December quarter non-fuel CASM. Our goal is to produce and sustain non-fuel unit cost below 2019 levels by the fourth quarter. That cost focus will be a key driver of profitability later in the year when demand returns.

Looking to the March quarter, we’re preparing for a stronger demand by reactivating aircraft and restoring our people to full hours, driving about $200 million in additional costs versus the December quarter. Our March quarter total operating expense will be 35% to 40% lower than March quarter 2019, with a total unit cost including fuel down 5% to 10% on approximately 35% lower flown capacity.

Let’s move now to capital, the balance sheet and liquidity. As we begin the year, conditions were similar to where we exited 2020. A modest uplift in net sales should offset the cost investments we’re making in the quarter and as a result, we expect average daily cash burn between $10 million and $15 million similar to the December quarter.

With further improvements in net sales as customers gain confidence, we expect our cash burn to cease this spring. With that goal in sight, we’re turning our focus to how we will balance reinvesting in the business, while reducing our debt levels. Given our expectations for cash flow in ’21 and proceeds from the PSP extension, we expect our current adjusted net debt levels to be the high watermark for that important metric.

For the full year, we’re expecting $2.5 billion in gross capex, a significant reduction from the $4 billion to $5 billion that we’re spending pre-COVID. We have $1.3 billion of aircraft purchase commitments for 34 new deliveries this year, which we have the option to fully finance and about $1 billion in non-aircraft capex. Including retirements, we expect our fleet count at the end of 2021 will be 15% smaller than at year-end 2019 with total fleet declining from about 1,350 to about 1,130. An equal priority is to work on our balance sheet by reducing our liquidity and paying down debt. We have approximately $1.8 billion of debt maturities in ’21 and $2.1 billion in ’22.

Our debt has an average interest rate of 4.6%, which will drive approximately $350 million in quarterly interest expense. However, we will begin reducing those expenses by paying down debt this year. We do not have mandatory pension contributions until 2025 under airline relief, but we expect to make at least $500 million in voluntary contributions this year. In terms of a quarter-end outlook with about $3 billion of PSP support expected from the government in the March quarter, we project ending the period with $18 billion to $19 billion in liquidity and adjusted net debt of approximately $18 billion.

Let me close by saying this. The Delta Difference has never been more important, and I’d like to thank the Delta team for delivering for each other and for our customers amid the industry’s most challenging environment ever. Because of your dedication, we will emerge from the crisis stronger and more resilient than ever.

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

Jill Greer — Vice President – Investor Relations

Thanks, Gary. Kathy, we’re ready for questions from the analysts. If you could give the instructions on how to get in the queue.

Questions and Answers:

Operator

Certainly. [Operator Instructions]. And we’ll go first to Savi Syth with Raymond James.

Savanthi Syth — Raymond James & Associates — Analyst

Hey, good morning everyone. I’m just kind of curious after the kind of the vaccine news, have you seen a change in booking behavior? And also, I know the testing requirement is probably positive longer term for opening up international demand. But are you seeing net travelers perhaps shifting from more — to more domestic sun and sand destinations from international?

Ed Bastian — Chief Executive Officer

Savi, we — the vaccine deployment still is very early and we haven’t really seen much in the form of changed behaviors. We hear a lot anecdotally, but it’s also one of the weakest travel periods of the year in the current month that we’re in. We’ve not seen the booking curve start to expand. We certainly hope to see that as we get through the quarter and vaccines continue to become more prevalent.

Savanthi Syth — Raymond James & Associates — Analyst

Makes sense. And I’d be curious — just a follow up on some of the kind of the changing dynamics here. I was wondering if you have any kind of preliminary thoughts on how maybe the American and JetBlue partnership might impact kind of the Northeast position?

Ed Bastian — Chief Executive Officer

We’re not going to comment on our competitors or speculate. You know us well, you know we love competition and I think competition makes you better.

Savanthi Syth — Raymond James & Associates — Analyst

All right. Appreciate it. Thank you.

Operator

Next we’ll go to Jamie Baker of J.P. Morgan.

Jamie Baker — J.P. Morgan — Analyst

Hey, good morning everybody. First question for Glen. Sort of a follow up on, I suppose on Savi’s question. In normal times what percentage of international revenue is made up of trips that lasts fewer than four or five days? You know, I’m asking because I would think a trip of that duration would be particularly jeopardized by the need to land and almost immediately take a COVID test so that you could come home.

Glen Hauenstein — President

Well, I think that’s dependent on how far customers are traveling, generally the longer they travel, the longer the stay is. So I think what we are seeing is a very good response from closer in Caribbean and Mexico resorts where hotels are now going to be offering that as part of the package. And so, while there may be some choppiness as there has been through this whole environment as we start adopting those testing procedures, we think in pretty short order here that customers will adapt and to the extent that travel does shift from short-haul international back to domestic, we’ll be ready to move the airplanes back too.

Ed Bastian — Chief Executive Officer

Jamie, I’d like to add to Glen’s comments. We’re still working obviously with the CDC. We endorse and support the testing requirements they put in place, but a new feature is the inclusion of rapid testing into the mix. So it doesn’t necessarily mean it only has to be a PCR test. And with the growth of antigen test and the quality of antigen testing that’s out there and the supplies and pricing, you literally could get some of these tests done within a ten-minute interval shortly before you return.

Jamie Baker — J.P. Morgan — Analyst

Excellent. Thank you for that gentlemen. And a question for Gary. How are you thinking about the optimal level of liquidity to carry in the future? Sort of a post-pandemic question and if you haven’t reached that conclusion yet, is that because it’s just not a priority right now or do you simply need to wait and see how the recovery plays out before reaching a decision?

Glen Hauenstein — President

Jamie, I think what I would say is it’s obviously less than today. We need some time. We have, I think some work in front of us to think through where we ultimately want that to be, but I think the important point is we’re getting started, and I think you see some of that. During the quarter we prepaid a — our term loan that was matured in April for about $3 billion. We mentioned during the script that we do plan to make a pension contribution, which as you know, we consider part of our financial obligations.

So we are getting started, we don’t have more specifics, but we are getting started, and we’re very focused on that $350 million number that I described, and using the liquidity that we have where it makes sense to drive that down.

Jamie Baker — J.P. Morgan — Analyst

And just a final point, on PSP — it’s a simple yes or no question, have the terms been achieved, and if so are they the same as the first grant? Thanks.

Peter Carter — Executive Vice President and Chief Legal Officer and Corporate Secretary

Jamie, it’s Peter Carter, the terms are identical to PSP1. We’ve already signed the agreements with the government.

Jamie Baker — J.P. Morgan — Analyst

Thank you, everybody. Take care.

Ed Bastian — Chief Executive Officer

Thanks Jamie.

Operator

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

Hunter Keay — Wolfe Research — Analyst

Good morning. Hey, Ed. About a year ago we talked on this call about intentionally running lower load factors and it’s happening, but in a weird way. But you’re getting paid for it and your NPS scores are as you mentioned are in an all-time high. So unblocking middle seats is obviously a tactical choice, but even when you unblock them, you don’t have to sell them. So I guess the question is longer term, how are you thinking about running less full airplanes as an opportunity to differentiate yourself for that premium traveler?

Ed Bastian — Chief Executive Officer

Yes, Hunter, it’s an interesting year. I’ll say that. We’ve not made a decision beyond the end of March, relative to our — when to unblock the middle seats. We have some time. So let’s continue to look at that. I think it’s going to be very much driven by customer demand, customer input, the confidence customers have in those seats, but no question about it, we are generating a meaningful premium due to that decision.

Glen Hauenstein — President

Hunter, if I could have just a quick follow-up on that, is there, I guess are two ways as we discussed last year to do that. One is by creating more premium seats and the other is by running lower load factors. As we go through this fleet transition, our premium seats as a percent of our total seats continue to rise. And I think that’s our primary way to satisfy the demand for the premium customers is to continue to provide them with higher level of quality.

Hunter Keay — Wolfe Research — Analyst

Got it. Yeah. Thank you, Glen. And then on the 18,000 early outs there — can you achieve 2019 capacity without backfilling any of those positions?

Glen Hauenstein — President

Could you speak louder? We missed you — the question, the start of your question, Hunter.

Hunter Keay — Wolfe Research — Analyst

Sorry, about that, Ed. No, that’s cool. The 18,000 early-outs, the question is like, how much can you achieve 2019 capacity levels without backfilling the majority or the entirety of those positions?

Ed Bastian — Chief Executive Officer

We can’t achieve 2019 levels without less 20% of our people, no question about it. But there is that we don’t need to backfill it entirely either. So there’s a middle ground there.

Hunter Keay — Wolfe Research — Analyst

Okay. And then just one more quick one since we have 90 minutes. It’s a follow up on Jamie’s follow up. Have you — Peter, have you negotiated the new strike prices for the warrants attached to PSP2?

Peter Carter — Executive Vice President and Chief Legal Officer and Corporate Secretary

We have, and it’s $39 and some change.

Hunter Keay — Wolfe Research — Analyst

Thank you.

Operator

And now we will go to Andrew Didora of Bank of America.

Andrew Didora — Bank of America Merrill Lynch — Analyst

Hi, good morning everyone. Glen, my first question is for you probably a little tough to answer, but just curious about how you are thinking about the kind of the trade-off between yield and load factor as you move through kind of different phases of the recovery that you — that you talked to. Has — I think as those travel restriction ease, do you see the need to maybe stimulate more demand with price or do you think there is enough pent-up demand in the network that load factors in the driver. Just curious how you’re thinking about that.

Glen Hauenstein — President

I think we are taking a yield bias as we go into the peak summer hoping that demand exceeds supply, and if that doesn’t materialize, we can make those adjustments later. But we have anticipated that it will be a nice recovery in demand as we get towards the summer and we’ve taken a conservative approach. I hope that answers your question.

Andrew Didora — Bank of America Merrill Lynch — Analyst

And — certainly helps a bit. I guess, and then Ed, I know, Gary gave some information about capex this year, but Ed, how are you thinking about that over the next few years, especially in light with your [Indecipherable] delever here? And what do you need to see in order to feel more comfortable in placing the new aircraft orders? Thank you.

Ed Bastian — Chief Executive Officer

Well, Andrew, I think we’re a little early yet in terms of thinking about the long-term capex picture. I was thinking that we moved $5 billion of aircraft capex alone with the Airbus out over the next several years, the degree to which we want to take physicians, new physicians coming up, we’ll continue to evaluate that based on demand. But right now, I feel pretty comfortable with where we sit.

Andrew Didora — Bank of America Merrill Lynch — Analyst

Great. Thank you.

Operator

And now we’ll go to Brandon Oglenski of Barclays.

Brandon Oglenski — Barclays — Analyst

Hey, good morning everyone and thanks for taking my question. Gary, can you talk about some of the structural things that you’ve taken out of the cost structure? I think retail CASM target by the end of the year. And I think you made a comment about incrementally like 40% to 50% of your fourth quarter CASM would be variable, is that — did I hear it right?

Glen Hauenstein — President

Yeah. So Brandon, let me start with the first question, the structural costs, the two biggest ones in our business are really headcount and fleet as we mentioned. The fleet really determines an awful lot of the infrastructure that we need from a cost standpoint. We expect to get leverage out of all of our costs associated with assets. We look about a third of our cost structure on a monthly basis is fixed. So as we grow, we’ll obviously get leverage there and we have pockets of opportunity — we have pockets of opportunity in terms of better utilization of just the overall system.

When I think about what we’re doing here, and this gets to your second question, there are kind of two big things that I talk about or that we all talk about internally as we think about this effort that we’re embarking on. The first is baseline aggressively, and it’s really have a laser focus on what’s in the cost structure now and what makes sense. You see that in the 50% reductions that we’ve been posting now for several quarters.

The second thing we say is leverage the build, and that’s really where the incremental thought process comes. That’s about being very thoughtful, about better leveraging the system as we start to rebuild. Now, I think in terms of your second question, incremental cost that — it’s pretty simple the way we were thinking about it, it’s just change in cost divided by change in ASMs. And we wanted to give some guidepost that to the leverage that we do expect going forward, before the — excuse me, 40% to 50% of December capacity comes in. I’ll just note, if you take a look at the second half of 2020, it’s quite a bit better than that. And that was why I emphasize that comment in the prepared remarks about how we scale the system, particularly in the fourth quarter.

Brandon Oglenski — Barclays — Analyst

Okay. Thank you. I think those were my few.

Operator

Our next question will come from Ravi Shanker of Morgan Stanley.

Ravi Shanker — Morgan Stanley — Analyst

Thanks. Good morning, everyone. A couple of questions on business travel. You said that small and medium sized corporates are coming back first. Are you surprised by that? And is that good news or bad news for when the bigger guys come back when the world opens up again.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

Ravi, we’re not surprised by that. These are small business owners who need to get out to their customers who have to work hard every single day to keep their sales and their business moving and we do see a meaningful continued improvement in small business traffic. Some of that we can measure, others that we can’t say, because they are not under contracts with us. But we know that’s consuming an important part of overall business travel. But I do want to talk about the overall corporate travel results. As you probably know, we extensively survey our corporate customers, our large corporate customers on a — on a quarterly basis, in addition to just being with them on a weekly basis as to their thoughts on the return of travel.

And the most recent survey that we conducted which just ended a couple of weeks ago indicated that 40% of our big corporate customers expect they will be fully back to 2019 levels by 2022, and another 11% said that they expect to be fully backed by 2023. So that’s a little over 50% of the customers and these are the people, I won’t speculate what’s going to happen to business travel. These are the customers who make those decisions. 7% said we’ll never be back to 2019 levels, only 7%. And 42% said they weren’t sure, they needed more time to figure it out.

So with all the dialog and speculation around the death of business travel, just looking at that survey, it’s very interesting. If you take the 51% that said they’ll be fully back by ’23, the majority of which is in ’22 and then you consider the second quadrant of — the 50% who said they’ll never return or they’re not sure they’ll return — and even if you assumed only 50% of their travel returns, that gets you 75% of the way back, no later than ’23. And I think that’s a very pessimistic view on business travel.

So what we’ve been talking about in corporate travel, business travel returning, I felt optimistic when I saw those results. We know it’s going to be different going forward. I’ve said many times, it could be 10% to 20% lower over a period as it substituted and complemented. There’ll be different types of travelers, different reasons for people traveling. But I think business travel has got a very, very strong opportunity return over the next two years and we’re going to be well positioned to carry it.

Ravi Shanker — Morgan Stanley — Analyst

That is a great color on the demand side of business travel. Thank you for that. If I can just follow-up with the question on the supply side, clearly you guys are leaders from a corporate travel standpoint, but we have seen some of your LCC competitors start to and maybe try and make some inroads as that traffic comes back. So maybe you can kind of — can you give us some more color on kind of how you maintain that leadership and through how you see the competitive environment looking like for business travel when that does come back.

Glen Hauenstein — President

Well, I think that the Delta Difference has never been more pronounced than it is right now. And if you look at our share of corporate travel that is traveling, we have experienced the highest levels in our history. So demand for our products and services is incredibly high for people who want it. And I think that’s where our challenge remains as to continue to provide industry leading products and services that our corporate travelers want and need. And that’s been what we’ve been doing over the past several years and what we’ll continue to do as we get to the end of this pandemic.

And I think that’s going to be what differentiates us. And clearly, there is always people who would like to take that travel away from you, because it is some of the highest yielding travel in the system. But I think that’s our goal and our mission is to stay ahead of that and provide it through a pull, people want to fly Delta and as opposed to a push, which is, hey we can lower fares and try and move [Phonetic] up the sides for the bottom of this.

Ravi Shanker — Morgan Stanley — Analyst

Very good, thank you.

Operator

And now our next question will come from Catherine O’Brien of Goldman Sachs.

Catherine O’Brien — Goldman Sachs — Analyst

Good morning everyone. Thank you so much for the time. So my first question is actually is about your comments earlier about seeing a cash recovery before revenue recovery, and to trying to square that with the 65% of your e-tailer vouchers. As a really early perspective, bookings are coming in for later in the year, are these majority new bookings or maybe there is a higher percentage of those vouchers that are corporate and you expect that early part of it probably be leisure. We just want some color on that comment. Thank you.

Glen Hauenstein — President

Yeah, Katie, some of that came through a little garbled. But let me say this, I think the distinction is really about timing. In the early — in the spring, what we expect and ventured it a few times, we think as confidence starts to build, what you’ll see is that people will start booking for further out in the booking curve. And so are — we will have a build in our Air Traffic liability that helps us cross cash breakeven earlier in the spring. P&L breakeven is something that will take a little bit more. That’s when our revenue is going to be covering our expenses and that is something that we expect will lag a little bit behind the build in bookings and will be there by the summer, as we’ve mentioned.

Ed Bastian — Chief Executive Officer

And maybe just a little bit on our redemptions for the e-credits, we are running in the low to mid-teens right now in terms of total revenues with e-credits coming back and we expect that to stay below 20 as we move towards this next period here.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

And that number has been pretty consistent throughout the entire year. So we have a pretty good sense of what that’s going to look like.

Catherine O’Brien — Goldman Sachs — Analyst

Okay, understood. And can you guys hear me a little bit better now?

Glen Hauenstein — President

Yeah.

Catherine O’Brien — Goldman Sachs — Analyst

Okay. Great, understood. And I know you guys have one of the furthest out periods through which people can redeem, so that makes sense. Maybe one on the cost structure, of course this pandemic has created a lot of pain for the industry, but I don’t want to glaze over that. But outside of speeding up your fleet simplification, have you found other opportunities to make the operations more efficient? Perhaps maybe speeding up some of your automation plans on a customer facing side, wanted to hear about other opportunities maybe been born out of the crisis? Thank you very much.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

We have, Katie, I’m not sure we’re going to get into some of the specifics. I will say that the fleet simplification has been, it’s something actually that we think is in our run rate today. We’re seeing some of the benefit in the fourth quarter. But we — it is something that will have a much bigger impact as we move to re-scale the network through 2021. When I — when I mentioned the concept of leveraging the build and maybe one of the reasons why I’m thinking through, just as I’m thinking through it, there are a lot of things that we want to think about doing differently. One of the unique opportunities of — we always want to make something good out of what has transpired and it does give us an opportunity to start fresh. One of the reasons I think we are showing the kind of leverage as we rebuild this, because we have a clean sheet of paper in some sense to start from.

Ed Bastian — Chief Executive Officer

Yeah, I might add to Gary’s comments, I think it’s remarkable, the work the team has done on the cost side. To get out in the fourth quarter to the point where our all-in unit costs are 4.5% lower quarter-over-quarter despite having over 40% less capacity to work with, speaks to the ingenuity of the team. Re-thinking as we — as we speak what the — not just the current environment but the future environment is. And these are not costs that we’re deferring out into the future. We’re making real changes real time here. And it touches every part of our business. So it’s been one of the — since demand has been low, we’ve been all over cost for the entire year and the team has done really, really good — good working.

Catherine O’Brien — Goldman Sachs — Analyst

Yes, definitely I see impressive stats, you’re able to put out earlier. Well, thank you all for the time.

Ed Bastian — Chief Executive Officer

Thank you.

Operator

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

Duane Pfennigwerth — Evercore ISI — Analyst

Hi, thanks. Good morning. You covered this in pieces in a follow up to a couple of other analysts. But, one of the things that Delta has been talking about during this crisis, which makes a lot of sense is getting to 2019 CASM on a capacity footprint that’s smaller. So I wonder if you’d kind of quantify how much smaller a footprint can Delta still deliver 2019 CASM. And is the thinking or the logic and the focus really more on CASM recovery and margin recovery before necessarily capacity recovery?

Ed Bastian — Chief Executive Officer

Duane, I’ll take that. Listen, they’re all inter-related. You need to put the revenue and the capacity out there, in line of demand, in line of your CASM strategy. And, but they’re certainly connected to the — to the ability to drive costs down. One of the things that we have been a leader for many, many years, really the last decade is on our up gauging strategy, domestically particularly. And that will continue to be important as we move forward. And while we talk about simplifying the fleet, we’ve taken some big steps in that direction. We’re also going to be advancing the up gauging of the domestic fleet at the same time. So that’s a big contributor. We’ll continue to be a contributor with both driving down cost as well as improving the customer experience in revenue including premium revenue opportunities.

We’ve said and I said in my remarks that we — our goal is to get that 2019 unit cost by the end of this year on roughly 75% of 2019 capacity level, that’s a pretty good marker. We hope our capacity level is higher. I’ll be honest with you, that the demand environment is driving that. But that’s going to be driven by demand not by cost.

Duane Pfennigwerth — Evercore ISI — Analyst

That’s very helpful. And then maybe just broad-brush strokes, you gave us the 75% by year end, is that how we should be thinking about your view of exit rate? And how are you thinking, again, it can change, but how are you thinking about the summer as a percent of 2019?

Glen Hauenstein — President

No, we’re not — we’re not using that as a guide for capacity levels. We’re using that for our own internal calculations in terms of where we need to get our cost structure down. It won’t be 75% and maybe higher maybe lower, I don’t know. There is a long way to go between here and there. And we’ll keep you posted as we go.

Duane Pfennigwerth — Evercore ISI — Analyst

Okay. And then just last one, maybe a question from a different era. But, could you walk us through the comps on revenue monthly? Because it seems like your guidance puts well, January, February similar to kind of 4Q levels. But March it seems like there is a wide range of outcomes on March and obviously the comps fall off materially middle of March. So I don’t know if you have the data handy, but how much easier is March and April relative to kind of Jan, Feb?

Glen Hauenstein — President

Duane, we’re not going back to giving monthly revenue guide. So, I’m sorry, I have to pass.

Duane Pfennigwerth — Evercore ISI — Analyst

Fair enough. The comps do get easier. Thanks for taking the questions.

Glen Hauenstein — President

The comps will get easier? [Speech Overlap].

Operator

And now we will go to Joseph DeNardi of Stifel.

Joseph DeNardi — Stifel Financial Corp — Analyst

Hi, thanks. Good morning. Ed, you talked about I guess the corporate travel environment. In a scenario where corporate traffic is impaired 15% to 20%, what does that mean for your earnings power? And why shouldn’t we be concerned that I guess that the fleet strategy is adding more premium seat into a declining premium market?

Ed Bastian — Chief Executive Officer

Joe, I wouldn’t draw the conclusion that corporate travel is impaired at all. In fact, I’ve not said that. I think we may see lower corporate travel, but I also think it will be changed, potentially different mix. So I don’t think we should be or either ringing alarm bells relative to the future of corporate travel. All indications are is corporate travel is ready to start coming back and will come back pretty aggressively, beginning in the second half of this year.

We are a smaller airline with a 200 fewer planes today. We’ve already right-sized the business to be smaller, which will help protect the premium revenue sources in the margins of the business and that’s why we’re — we’ve spent a lot of time on this call talking about our cost performance, that’s going to be the key to make sure that we protect the margins in an environment where corporate travel will be down for the foreseeable future. Maybe it’s firmly down by a little bit of lower amount, but I’m not ready to declare that yet.

Glen Hauenstein — President

Could I add something to that is that, I think when you think about our premium products and services, you also ought to think that these are not only filled by corporate travelers. As a matter of fact, only less than a third of that seats are actually filled by the corporate travelers and two-thirds are filled by non-corporates.

And I think it’s our ability to provide the right products and services for non-corporates as well with the right sell-up opportunity, so that we can match their preferences to our products and services. And I think that’s really been one of the great hallmarks of the transformation as to say. This is really available to everybody at reasonable prices. And that’s been our — one of our key successes I think.

Joseph DeNardi — Stifel Financial Corp — Analyst

Got it. That makes sense. Ed, it’s my understanding that owners of your SkyMiles are getting access to quarterly updated financial disclosures for SkyMiles, similar to those you provided when you marketed the transaction. It’s my understanding that equity investors are not — so my question for you is how is that fair? How do you expect your equity investors to make a fully informed decision on your stock, if they’re not being provided with updated disclosures for what you guys have proven as your most valuable asset? Thank you.

Glen Hauenstein — President

Joe, I’ll let Gary take that because it’s closer to the financial disclosures as well. I would say, well, the royalty [Phonetic] partner is a very important asset, our most important asset are our people. Gary?

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

Yeah. Joe, so we are providing some disclosures to those debt holders as you described. Look, I think we agree with some of the sentiment that you have expressed over time. We see the value there. I think Glen did a good job of articulating how well it is holding up. We’ve been on a path to provide more information there. I think you’ll have to be a little forgiving. We’ve had a lot on our mind and I think you can expect us to continue down that path for the reason — for the very same reason that I think you’ve been asking for — asking about it, because we do see the value there.

Joseph DeNardi — Stifel Financial Corp — Analyst

Thank you.

Operator

And now we will go to Greg Konrad of Jefferies.

Greg Konrad — Jefferies & Company, Inc — Analyst

Good morning and thank you. Just to follow-up on some of the past questions. I mean, I guess in terms of the competitive environment, your yields have held up relatively well, only down 2% or 3% on a relatively short booking curve with reduced corporate travel. I mean, how do you think about that potential trajectory for yield as you — the booking curve normalizes and some of the corporate travel returns? I mean, is there opportunity to kind of be above where you were in 2019?

Ed Bastian — Chief Executive Officer

Well, I think there is always opportunity to be above where we were in 2019. That’s clearly our goal, and any — if it could be a short-term goal, it would be better. I think it’s more a medium to a long-term goal. But I think we are going to come out with a higher preference than we’ve ever had. And that higher preference will drive a higher demand set, which enable us to work on yields as we come out the back end of this. So I think it goes back to how did people react to the pandemic and how did Delta’s brand come through those. And I think from all the research we’ve done and from all the data that we see that our brand has never been stronger and demand for our products and services has never been stronger on a relative basis. And we’re planning on capitalizing on that on the back end of this.

Greg Konrad — Jefferies & Company, Inc — Analyst

Thank you. And then just one quick follow-up, just a cleanup question. I mean, how should we think about a refinery sales for the year or any change versus what you saw in Q4?

Ed Bastian — Chief Executive Officer

Why don’t you — Are you referring to the third party sales, is that what you are asking?

Greg Konrad — Jefferies & Company, Inc — Analyst

Yeah, sorry, third-party.

Ed Bastian — Chief Executive Officer

Yeah. The phenomenon that you’re seeing in the third party sales is anything we produce and do not exchange for jet fuel we sell to third parties. Obviously, with our jet consumption being weighed down, we’ve had a lot more of those sales to third parties. So that is going to likely trend with how we rebuild our network and how much jet fuel we’re consuming. I do think it’s important to point out that those sales have no margin. If you look in some of the reconciliations in the back of the release, you’ll see that those are offset dollar by — a dollar for dollar rather on the cost side.

So they’re all wrapped into the economics of the refinery, but you should expect those to start trending down as our consumption picks back up and we’re exchanging more for our own use.

Greg Konrad — Jefferies & Company, Inc — Analyst

Thank you.

Operator

And next we will go to Mike Linenberg of Deutsche Bank.

Michael Linenberg — Deutsche Bank — Analyst

Hey, good morning everyone. Hey, Ed, I just tried to go back on the mandatory COVID test for international arrivals. Are you aware of any potential carve-outs like for those 24, 48-hour roundtrips? And if you would have a vaccine to be vaccinated, would you be precluded from actually having to provide that test on entry?

Ed Bastian — Chief Executive Officer

Hey, Mike. It’s Ed. We are still working through the guidance from the CDC. While we have mentioned, I’ve personally have had a number of conversations with Dr. Wakefield on this, we’ve mentioned the needs to consider some waivers in unusual circumstances where, for example, COVID testing resources are not available, or if they are having some relatively short term as you mentioned travel. So, we are working through the implementation details. I think it’s absolutely the right thing to do for the long term for our industry. But, it’s going to create some short-term hiccups.

Michael Linenberg — Deutsche Bank — Analyst

Okay, great. And then, just a question to Glen and possibly Peter Carter, I know that you had sort of deferred on JetBlue-American. What I am more interested is that it looks like as part of that transaction, it does look like that there’s going to be a slot divestiture. And that would obviously be at airports that are near and dear to Delta. Are those slots that — from what you know, are those slots that only new entrants can bid on? Or are those slots that all carriers can bid on? And if that’s the case, is that something that would interest Delta? Thank you.

Peter Carter — Executive Vice President and Chief Legal Officer and Corporate Secretary

So, the DOT has not made it clear what the rules are with respect to those slots, but I think it’s suffice it to say that we are deserving a DTA without question because of our market position.

Michael Linenberg — Deutsche Bank — Analyst

Very good. Thank you Peter.

Operator

And now, we will go to David Vernon of Bernstein.

David Vernon — Bernstein — Analyst

Hey, good morning. So, Ed or Gary, could you talk to how as we move through these actual cases, how and when discretionary cost may come back in the system? I am wondering if there is going to be a need to prime the pump a little bit on the cost side to prepare for what should be a pretty steep recovery as vaccinations roll-out.

Ed Bastian — Chief Executive Officer

Well, there will be some, David. We expect, for example to have reactivation expenses around maintenance in aircraft through the remainder of the year. So, we expect that pace to continue. I am not sure I quite heard the non — was it discretionary or non-discretionary expenses that you were asking?

David Vernon — Bernstein — Analyst

I imagine you guys have curtailed a lot of discretionary expense, so there is marketing or actually development or system to work, or training programs what have you. I am just wondering if there is going to be need to step up that spend ahead of recovery here in the intervening months?

Glen Hauenstein — President

Well, I’d prefer to think of it not to pick it up before recovery. But, we will have a need to revisit some of the things that we’ve done. If you take a look, David, at what we are pointing to in terms of incremental cost as we leverage the network, it does look different than what we saw in the second half of 2020. And one of the reasons is, we do expect to have pressure in pockets. We have to be very mindful and balance some of those needs with the realities of the business because we are determined here to turn the profit equation around and to be printing these releases with black ink this year.

Ed Bastian — Chief Executive Officer

Hey, David, this is Ed. Let me expand on that just a bit. We are, whether it’s maintenance expenses, we have got our staffing levels back to where we need to be starting the first of this year. We restored the pay in terms of some of the pay cuts, the voluntary pay cuts that our employees took last year. So, there is a meaningful step up already in the numbers we’ve given you for the cash burn in the first quarter to get ready for the recovery. So, I am very comfortable with where we sit. In fact, if we wanted to continue to run the same cost structure and forego some of those expenses, you could see our cash burn coming down, in a relatively meaningful level in the first quarter as well. But, we have maintained the same level of cash burn to get ready for the spring.

David Vernon — Bernstein — Analyst

That’s helpful. And then maybe just as a follow-up, you noted in the release the amount of capex that’s come out of the budget over the next couple of years. I’m wondering if there’s been a discussion at the Board level about goal posts or guideposts for profitability before we kind of go back to renewing the fleet in earnest?

Ed Bastian — Chief Executive Officer

David, again, I think that question is a little premature. Yes, we talked about that topic with the Board. We also haven’t made any determinations quite yet. The goal we have at the Board is very much what we said to you, is that we get to — our goal is to get through a cash breakeven position for the second quarter and return to profitability starting in the third quarter. [Speech Overlap]. The pace of that recovery over the next couple of years is obviously, we still have some work to do there [Phonetic].

David Vernon — Bernstein — Analyst

Okay, thanks.

Jill Greer — Vice President – Investor Relations

Kathy, we’re going to have time for one more question from the analysts, if you can queue that.

Operator

Certainly, and that question will come from Jose Caiado of Credit Suisse.

Jose Caiado — Credit Suisse — Analyst

Hey, good morning, everyone. Thanks for the time. Ed, Glen just a quick clarification question regarding your annual corporate travel survey. When 40% of respondents say fully recovered by 2022, are they referring to their businesses being fully recovered by 2022, or their corporate travel budgets being fully recovered by then? Or do they see those one and the same?

Ed Bastian — Chief Executive Officer

Their corporate travel being back by that.

Jose Caiado — Credit Suisse — Analyst

Got it, okay. Understood, it’s helpful. And my second question, just — it’s clear that you’re not seeing any elongation of the booking curve yet at this stage. But what about clicks or looks, stopping short of actual bookings, but is there any data like that, that you’re tracking analytics on the website, something like that, that provides a basis for your recovery outlook beyond Q1 and sort of saying that you have a good shot of P&L breakeven in Q3 or you’re just hopeful that that’s going to be the case. Is there — are there any analytics that you can share with us that maybe give you a better indication. Thank you for the time.

Ed Bastian — Chief Executive Officer

Absolutely, corporate looks are actually doing quite well. We’re 40% up quarter-over-quarter where we were last quarter in terms of looks and look to book is very low. So people are looking. They are aspiring to travel and they’re just not ready to commit yet and I think that’s what really gives us that sense that there will be a time in which people feel comfortable again to travel and that look will turn into a click, turn into a booking and so we are monitoring that very, very carefully and we’re looking forward to the opportunity to serve these customers as they come back.

Jose Caiado — Credit Suisse — Analyst

Thanks for that color.

Jill Greer — Vice President – Investor Relations

That’s going to wrap up the analyst portion of this call. I will turn it over to Tim Mapes, our Chief Marketing and Communications Officer.

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

Well, good morning everybody. I want to thank all the members of the media who have gathered on the call today. Your interest in Delta is not only appreciated, it’s never been greater and we’re very pleased today to provide you with an expanded period of time to make sure that we address your questions. I’d also like to thank Ed and Glen and the members of the Delta Leadership Committee, all of whom are on this call for their involvement as we turn the page on 2020 and optimistically look at 2021. So Kathy, if you could please review the instructions and mention to everyone how they go about asking a question.

Operator

Certainly. [Operator Instructions] And we’ll go first to Alison Sider of The Wall Street Journal.

Alison Sider — The Wall Street Journal — Analyst

I was wondering if you could talk a little bit about some of the operational issues we saw around the holidays, Thanksgiving and Christmas, and what looking back you think were kind of the root causes of that and what if any changes you’ve made to prevent the same sort of thing from happening again?

Ed Bastian — Chief Executive Officer

Sure, Ali, we certainly had a much better Christmas holiday than the Thanksgiving break. There were a number of factors going on in the staffing levels of the company with a lot of the changes that we had implemented and you couple that with COVID and some of the exposures which everyone is seeing, the no-fly capability of some of our staffing which came in. We learned from that for Thanksgiving.

We made some pretty aggressive changes in December in terms of getting the schedule fine tuned to anticipate that and we were in really, really good shape and then we got hit with a massive storm in Minneapolis on the 23rd of December, which cost us probably a couple of hundred cancels — incremental cancels over that next couple of day timeframe, which was concerning, but unavoidable unfortunately.

The most important thing in all that is one the Delta people and I know there were some bloggers out there wondering whether the Delta pilots weren’t doing everything, again, the Delta pilots were amazing through the full holiday periods and showing up and getting the flights going and giving up their holidays and their time away with the families to help the company out.

So it had nothing to do with pilot staffing at all. The other thing was the number of customers who may have been canceled which is higher than we’ve been expecting, the vast majority of the people back to their destination within hours of their original certain check-in time. So the team did a very, very good job and that issue was pretty much over with by the 26th, 27th.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

And that really manifest itself in the record net promoter score we had in the December time period. So as Ed mentioned, despite the fact that we had to cancel some flights, our average lateness was not very late versus the original itinerary and our customers over the holiday period were quite satisfied posting record high net promoter scores.

Alison Sider — The Wall Street Journal — Analyst

And just a follow-up. Is there anything you can share about what you’re seeing in terms of crew member infections at this point. I know the pilots have said they saw some big increases in COVID infections in late fall. I’m just wondering if you’re still seeing that or if that’s sort of been brought under control?

Ed Bastian — Chief Executive Officer

Well, we’re a microcosm of the country and as the pandemic has accelerated over the course of the last few months, it accelerated across airline employees as well, but our team is doing a great job. They are not seeing it spread within the company when they are at work. It’s unfortunately, it’s in community is where people are getting sick. So I’d say every work category of the company is experiencing an increase in exposures as we’ve all been seeing over the last couple of months.

Alison Sider — The Wall Street Journal — Analyst

Thank you.

Operator

And now we will go to Tracy Rucinski of Reuters.

Tracy Rucinski — Reuters — Analyst

Hi, good morning. I’m wondering if you think we’ll see COVID-19 testing being required for domestic flights?

Ed Bastian — Chief Executive Officer

Tracy, I don’t think so.

Tracy Rucinski — Reuters — Analyst

Okay and just to follow-up with a separate question, should we expect to see a deal with Boeing this year for a 737 MAX order?

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

We’re not going to speculate on that.

Tracy Rucinski — Reuters — Analyst

Okay, thank you.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

Sorry.

Operator

We’ll now go to Claire Bushey of Financial Times.

Claire Bushey — Financial Times — Analyst

Hi, I know Delta has been growing its own list of people who are not able to fly in the airline that I was wondering if the company had any visibility into whether more names are being added to the federal no-fly list based on last week’s Capitol attacks?

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

Claire, the last part was more garbled. Is your question, are we adding increased numbers to our no-fly list based on federal information?

Claire Bushey — Financial Times — Analyst

I was asking whether Delta knows if names are being added to the federal no-fly list based on the Capitol attacks.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

We certainly know that the TSA is looking very carefully at those that were in the Capitol building, the rioters and we are working closely with them and I do anticipate if the TSA is able to identify individuals, you’ll have people added to the no-fly list, no question about it.

Claire Bushey — Financial Times — Analyst

Thank you.

Operator

And next we have Leslie Josephs of CNBC.

Leslie Josephs — CNBC — Analyst

Hi, good morning everybody. You mentioned that there was a lot of pent-up demand and also this hoarding of points from the frequent flyer program. What happens if a lot of people try to redeem at once. Is that something that you’re expecting based on search data and other things? And then also you mentioned a recovery in second half of the year. Where are you seeing demand? Are those sort of outdoor social distancing destinations showing more strength than others, just where is the demand coming from? Thanks.

Ed Bastian — Chief Executive Officer

Well, clearly, leisure destinations are at the forefront of the recovery right now and I think it doesn’t matter whether or not it’s a beach or a mountain peak, that’s where people are headed at this point in the recovery and then, your second question was —

Leslie Josephs — CNBC — Analyst

[Speech Overlap] So if people are hoarding, yes, what happens if everyone — I know you’re foreseeing that they will or trying to redeem —

Ed Bastian — Chief Executive Officer

We are happy and really are indifferent whether or not people who are booking or using points or whether or not they’re using actual dollars or whether they are using e-credits. What we are anticipating is that all of those will increase and we have plenty of capacity to meet that demand as we head to the second half of ’21. So we’re hoping that all of the above happens.

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

From talking to American Express, good partners there, it’s clear that people place great value on their loyalty points with Delta and like to see the values grow over time and so while they’ve been in the pandemic, we’ve seen redemptions down for points because flying levels are down, but they haven’t stopped the spending on the card. Our co-brand card is as good if not better than almost any other product card Amex has. So it has great appeal and we expect it’s not going to be a run on the bank type situation that you’re referring to.

Leslie Josephs — CNBC — Analyst

Okay, you could just adjust the awards, the availability and things like that too, right if there is —

Gary Chase — Co-Chief Financial Officer, Senior Vice President – Business Development and Financial Planning

Absolutely, we’re looking forward to that day.

Leslie Josephs — CNBC — Analyst

Thank you.

Operator

And now we will go to David Koenig of the Associated Press.

David Koenig — Associated Press — Analyst

Oh hi, real quick question, unless I missed it, I have not heard an update in a while in the number of people you have banned for not wearing face masks? Is there a current figure on that and any changes in cabin policies?

Ed Bastian — Chief Executive Officer

I think that number is north of 800 at this point, David.

David Koenig — Associated Press — Analyst

Okay. Okay, very good. And then how many of those are since last week, do you know?

Ed Bastian — Chief Executive Officer

A number, not a huge number, but a number.

David Koenig — Associated Press — Analyst

Okay.

Operator

And now our question will come from Kelly Yamanouchi of the Atlanta Journal Constitution.

Kelly Yamanouchi — Atlanta Journal Constitution — Analyst

Hi, there. I wanted to ask about profit sharing with no profit sharing next month from 2020 results, I was wondering what impact you think that may have on employees and satisfaction and also wondering if you think there is a possibility of profit sharing a year from now?

Ed Bastian — Chief Executive Officer

Well, I think everyone is aware why there’s not profit sharing in this year and I can tell you employee satisfaction is at a very, very high level. I mentioned during this script, Kelly, that we just were awarded the seventh best employer by Glassdoor. Glassdoor is an entirely employee-driven acknowledgment. The company doesn’t have any input or any insight into that. It’s purely by employees talking about their employers. So if that gives you a sense for the sentiment, the sentiment is very strong. The volunteerism with tens of thousands of people that have taken unpaid leaves of absence over the year indicates that.

We’ve been mindful of the fact that there won’t be a profit sharing payout and we’re providing added services and assistance around financial health and financial well-being and credit counseling and other services to employees that may need it. We’re going to be ramping — we have been ramping it up and talking about it. We’re going to continue to talk about it on an ongoing basis going forward with our people providing that support and relative to the next year’s profit sharing, I certainly hope we’ll be paying it. It’s hard to speculate it now, it’s just only a couple of weeks into the year, but I’m hopeful that we’ll be paying it.

Kelly Yamanouchi — Atlanta Journal Constitution — Analyst

Great. I also heard mentioned during the call so far about the value of connecting economics, but also the importance of point-to-point in focus cities. I was wondering if you expect — how you expect the Atlanta hubs role to be different going forward in terms of size or the role in your network?

Ed Bastian — Chief Executive Officer

Well, clearly, the size of Atlanta is relative to the size of demand in the United States. As the world’s largest hub, it is a microcosm of global airline demand. So we expect it to recover as the airline continues to recover. The two things that I would say is that we’re going to continue to work on average gauge, which I think is something that’s really important and that we’ll be bringing more details about, bigger airplanes with better products and services and so I think you’ll see the departures get back to 2019 levels at some point in the future, but before that you’ll probably see the enplanements [Phonetic] start to rise dramatically and using really the gauge lever as much as the departure level. This is, as you know, our most valuable asset here in Atlanta and we’re very proud to be a part of the Atlanta community and it has led us in rebuild of our network so far.

Kelly Yamanouchi — Atlanta Journal Constitution — Analyst

Great, thank you so much.

Operator

Our next question will come from Ted Reed of Forbes.

Ted Reed — Forbes — Analyst

Thank you for taking the questions. I have two questions for Glen. First one, Glen, when you said earlier, Delta is ready when you are talking about when you come back, were you talking about in terms of capacity or something else?

Glen Hauenstein — President

I think that when customers are wanting to fly on Delta, we’ll be ready for them and I know you for a long time and I know you remember that slogan, so it’s hearkening back to a little bit of history there with Delta.

Ted Reed — Forbes — Analyst

So you’re just saying, you’ll be ready though. You’ll have the capacity suited to what you anticipate customers will want?

Glen Hauenstein — President

Correct.

Ted Reed — Forbes — Analyst

All right. Secondly, we’ve been talking a lot about the middle seats being empty and being up, you said a powerful tool. How are you measuring what the value, how can you tell that these are so valuable to your customers?

Glen Hauenstein — President

Our revenue premiums have never been higher. And so, customers are valuing the Delta difference and I think that’s how we’re looking at that is when you look at our revenue production versus our competitive set, despite having the least amount of sellable capacity, our revenues have kept pace. So I think we’re seeing not only the higher share of corporate demand we’ve ever had although albeit on depressed levels, but a real differentiator when customers are shopping, they want to fly Delta versus some of our competitors.

Ted Reed — Forbes — Analyst

And you think that’s due to middle seats being empty longer than others?

Glen Hauenstein — President

I think it’s an entire Delta difference, clearly that’s a piece of it, but whether or not it’s the Delta care standard, whether or not it’s the Delta people, which are really always at the heart of that, but this is one component of ensuring that Delta is seen as a brand you want to associate with.

Ted Reed — Forbes — Analyst

All right, thank you. I appreciate it.

Operator

And now we’ll go to Dawn Gilbertson of USA Today.

Dawn Gilbertson — USA Today — Analyst

Hi, good morning. I also have questions on your middle seat policy. Ed and Glen, I know you both said, no decision has been made yet but Glen, your comment about in the second phase is the middle seats will be a very powerful tool. It sounds to me at least like you’re certainly moving towards unlocking them. A, is that a fair assumption? B, can you talk to us about the timing of this decision. When will you decide whether they are blocked beyond March 30th? Thanks.

Ed Bastian — Chief Executive Officer

Dawn, this is Ed. No, I would not say that’s a fair assumption. What we’ve said is that when the demand returns, which is that next inflection point, that will inform our decision around what to do with the middle seats. So we’ve not made any decisions to unblock them post March 30th.

Dawn Gilbertson — USA Today — Analyst

Can you give us a sense of when will you make that decision because pretty soon, I know the booking curve is still short, but you’re kind of optimistic about summer. So, will you make that decision in the next month, the next few weeks, a couple of months. Can you give us any sense of that please?

Ed Bastian — Chief Executive Officer

Well, we continue to monitor it on a regular basis, it’s not imminent. We have some bit of time, but it’s going to be informed by customer sentiment, demand. We have in addition to middle seats, we have a lot of other seats still empty on our planes and confidence in travel relative to COVID and vaccine deployment. So it’s not a clear line and there is a lot that has to go into that. We know that it’s been important, not the only, but one of the important reasons why Delta has been able to earn — continue to earn an even higher revenue premium during this past year than we’ve historically had and so we want to be very, very careful as to how we make that decision.

Dawn Gilbertson — USA Today — Analyst

Thank you very much.

Operator

And now we will go to Edward Russell [Phonetic] with [Indecipherable].

Edward Russell — — Analyst

Hi, yes. I was wondering if you could talk a little bit about the changes in the competitive environment. American-JetBlue alliance, the Northeast and then how that — how you intend to respond to that?

Ed Bastian — Chief Executive Officer

No, I think we’re very confident in our products and services and we compete well against both those carriers individually and I’m sure we’ll compete very well against them together. So we have a lot of confidence in our products and services in the Northeast.

Edward Russell — — Analyst

Okay, and then there’s also been some expansion in some of your focus cities, Raleigh-Durham, Austin, does Delta plan to return there and compete there as well?

Ed Bastian — Chief Executive Officer

Focus cities will be an important part of our portfolio moving forward and we continued to work on making sure that we have the right capacity in those cities as demand returns and so we’re looking forward to demand continuing to return in all of our focus cities?

Edward Russell — — Analyst

Thank you.

Operator

And now we will go to Robert Silk with Travel Weekly.

Robert Silk — Travel Weekly — Analyst

Well, thanks for taking my call. Couple of questions. Do you see — has CDC given any indication, I know that A4A had called for, wanted testing the airline — you all wanted testing to be put in place, but in exchange of roll back of travel bans. Any indication if that could be coming?

Ed Bastian — Chief Executive Officer

Your question, I’m sorry was a bit garbled. Could you repeat that? We’re having a hard time with some of our communications this morning?

Robert Silk — Travel Weekly — Analyst

Can you hear me a little better now?

Ed Bastian — Chief Executive Officer

Yeah.

Robert Silk — Travel Weekly — Analyst

Okay, so the question is, any indication or sense from the federal government or CDC that with this blanket testing requirements that there could be a roll back of travel bans which is something that the airlines have called for. And I’ll also follow the other — another question is any sense that vaccines ultimately could be included in the mix if you’re vaccinated, it relieves testing requirements there could be an either/or?

Ed Bastian — Chief Executive Officer

We’re still working with the CDC on the specific testing strategy and deployment. Obviously, it’s something that we — Delta endorse, I know our industry similarly endorses. We would like to see the travel restrictions lifted once the testing protocols are in place and that will be a decision by the new administration is my understanding when they take office, but I think by having the testing protocols in place, it then gives confidence to the regulatory authorities to start to lift the bans, which is why we endorse the testing strategy. Your question relative to vaccines, yes, obviously once vaccines are at scale, we would hope that a vaccination evidence would supplant the need to show a test result, but of course, we’re still working with the authorities on that.

Robert Silk — Travel Weekly — Analyst

Okay, thanks.

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

Kathy, we have time for one final question for the group please.

Operator

Certainly and that will come from David Slotnick of Business Insider.

David Slotnick — Business Insider — Analyst

Hey everyone, how are you? Thanks for the question. I was just wondering about the phasing, of the three phases that Glen outlined earlier. With that timing in mind and with the responses that you’ve gotten from your corporate travelers, is Delta still expecting a recovery to 2019 revenue and travel levels in line with the rest of the industry with the I think it was 2023 or 2024 with IATA and if you’re able previously forecasting or has that moved up at all?

Ed Bastian — Chief Executive Officer

Again, I’m sorry, it’s hard to hear the question. Let me take a shot at it. The information we shared on the call about corporate travel is the sentiment we’re getting from our own customers. As you are aware, we are the largest carrier of corporate travel amongst the U.S. carriers. So I think we have probably some of the best insights as compared to IATA or any other group that I don’t know how they determined what 2023 or 2024 looks like, I wouldn’t place too much confidence in that, but what our corporate travelers — our corporate travel managers are telling us is that 50% expected to be fully back by 2023, the other 50% is largely uncertain, but we expect a meaningful amount of that travel to return as well.

David Slotnick — Business Insider — Analyst

So does Delta have a forecast for when they’ll return to 2019 travel levels?

Ed Bastian — Chief Executive Officer

The numbers we’re comparing are 2019 travel volumes, yes.

David Slotnick — Business Insider — Analyst

Okay, thanks.

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

Thank you, David. With that, we’ll turn it over to Ed to make some final comments. Again, thank you everybody for your time this morning.

Ed Bastian — Chief Executive Officer

Well, thanks, Tim. Just in closing, I think you can all appreciate that 2020 was a difficult year, but we’re on a recovery path. We see the start of it beginning to crystallize here, particularly with the vaccine development. And as you’ve heard earlier from Glen and Gary, I’m confident that we’ve got the foundation in place to return Delta to revenue growth, profitability, and free cash flow generation. We’re committed to keeping our culture intact and our employees engaged. We’ll continue to listen to our customers and put them first in order to further enhance their experience on Delta, increase their loyalty, and drive affinity towards our brand.

We’re very focused on innovation, which is allowing us not only to enhance the customer experience and drive efficiency, but also to tackle the big challenges that still lie ahead for us. We’ll remain very focused on cost performance. We’ve talked a lot about that during the call to ensure that the leisure-led demand environment that emerges, we’ll be able to respond to it. And finally, we’re committed to reducing debt, strengthening our balance sheet, and creating long-term shareholder value and allowing our owners to participate in future upside without dilution. We have the very best employees in the industry and we’re ready to see this strategy through which gives me optimism, confidence in our ability to thrive and emerge as the industry leader. So thanks again for joining us today and we look forward to speaking with you soon.

Operator

[Operator Closing Remarks].