Delta Air Lines Q4 2021 Earnings Report

Delta Air Lines EPS Results

• Actual EPS: $0.22
• Consensus EPS: $0.15
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: -$2.53

Delta Air Lines Revenue Results

• Actual Revenue: $9.47 billion
• Expected Revenue: $9.29 billion
• Beat/Miss: Beat by +$181.13 million
• YoY Revenue Growth: +138.40%

Delta Air Lines Announcement Details

• Quarter: Q4 2021
• Date: 1/12/2022
• Time: Before Market Opens
• Conference Call Date: Wednesday, January 12, 2022
• Conference Call Time: 7:00PM ET

Delta Air Lines (NYSE:DAL) is a major U.S.-based global airline that provides scheduled passenger and cargo air transportation, aircraft maintenance and repair services, and related travel products. Its operations include mainline domestic and international passenger services, a branded regional network operating under the Delta Connection name, dedicated air cargo carriage, and in-house maintenance, repair and overhaul through Delta TechOps. Delta offers a range of cabin products for different customer segments, including premium business-class service on long-haul routes and tiered economy offerings on domestic and international flights, and it markets customer loyalty benefits through the SkyMiles frequent-flyer program.

The carrier operates a mixed fleet of narrow- and wide-body aircraft from multiple U.S. hubs, serving a global route network that links cities across the Americas, Europe, Asia and other international markets. Delta is a founding member of the SkyTeam global airline alliance and participates in commercial joint ventures and partnerships that coordinate transatlantic and transpacific services with other major carriers to expand connectivity, scheduling and frequent-flyer reciprocity for customers.

Delta traces its roots to a crop-dusting company founded in 1924 that began passenger service as Delta Air Service in 1929. In the 21st century the airline underwent significant restructuring, including a Chapter 11 reorganization in 2005 and a large-scale consolidation with Northwest Airlines that was completed in 2010, creating one of the world’s largest airlines by network size. The company is headquartered in Atlanta, Georgia, and is led by chief executive officer Edward H. (Ed) Bastian, who has served as CEO since 2016.

Delta Air Lines Q4 2021 Earnings Call Transcript

Key Takeaways

• Delta’s operation was hit by Omicron and extreme winter weather in late December, causing up to 1% of flights to be canceled, but service stabilized to about 20 Omicron-related cancellations per day and management expects cases to peak soon before a rapid decline.
• For full year 2021, Delta reported $27 billion in revenue (a 67% increase vs. 2020), reduced its pretax loss to $3.4 billion (a $5.5 billion improvement) and delivered a second-half profit of around $400 million, including a Q4 pretax profit of $170 million (approximately $250 million excluding Omicron disruptions).
• Delta expects Q1 2022 capacity to be 83–85% restored versus 2019, with pretax losses in January and February followed by a return to profitability in March, and full-year capacity of about 90% to drive a meaningful profit as demand rebounds in spring and summer.
• Employees will receive a special profit sharing payment of $12.50 on February 14 in recognition of Delta’s second-half profitability and frontline efforts during the crisis.
• Delta believes its strengthened competitive advantages—premium product offerings, a growing loyalty ecosystem, diverse revenue streams and ESG commitments (including hiring the industry’s first Chief Sustainability Officer)—position it to lead the travel recovery and exceed 2019 financial performance by 2024.

Presentation

[Operator]

Good morning, everyone, and welcome to the Delta Air Lines December quarter and full year 2021 financial results conference call. My name is Cody, and I'll be your coordinator. At this time, all participants are in a listen-only mode until we conduct a question-and-answer session following the presentation. As a reminder, today's call is being recorded. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

[Julie Stewart, VP of Investor Relations & Corporate Development at Delta Air Lines]

Thank you, Cody. Good morning, everyone, and thanks for joining us for our December quarter and full year 2021 earnings call. Joining us today from Atlanta are CEO Ed Bastian, our President, Glen Hauenstein, our CFO, Dan Janki. Ed will open the call with an overview of Delta's performance and strategy, and Glen will provide an update on revenue, and Dan will discuss costs and our balance sheet.

[Julie Stewart, VP of Investor Relations & Corporate Development at Delta Air Lines]

After the prepared remarks, we'll take analyst questions, and we ask you please limit yourself to one question with 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. 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.

[Julie Stewart, VP of Investor Relations & Corporate Development at Delta Air Lines]

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. With that, I'll turn the call over to Ed.

[Ed Bastian, CEO at Delta Air Lines]

Well, thank you, Julie. Good morning, everyone. I really appreciate you joining us today. Before getting into the December quarter results and outlook, I want to spend a couple minutes discussing the current environment. As everyone's aware, the Omicron variant has significantly impacted our people, our customers, and our operation, as well as most parts of society over the last three weeks.

[Ed Bastian, CEO at Delta Air Lines]

The combination of the rapid spread of the variant at the peak of a strong holiday demand period and in the face of extreme winter condition in parts of the country created some of the most difficult travel conditions that we ever remember experiencing. I'm incredibly appreciative of the great work that our frontline team has done and continue to do to help our customers get to where they need to be as safely and quickly as possible, no matter the circumstances.

[Ed Bastian, CEO at Delta Air Lines]

Our teams have faced these difficulties head-on while also managing the impact of the virus in their own lives, and I want to thank every member of the Delta team for your work during a very challenging period. To our customers who have been affected, we appreciate your patience and your understanding. The good news is that over the past seven days, our operation has stabilized with Omicron-related cancellations impacting only about 1% of our flights.

[Ed Bastian, CEO at Delta Air Lines]

Since Sunday, the number of Omicron-affected cancellations are around 20 a day out of nearly 4,000 daily flights. In fact, yesterday, we only had two Omicron-related mainline cancellations. While the new variant is not done, it appears that the worst may be behind us.

[Ed Bastian, CEO at Delta Air Lines]

Based on how quickly the case counts have risen, our medical team expects cases to peak in the U.S. over the next few days, followed by a steep decline in cases. We're already starting to see that happen amongst our own staff. Given the high transmissibility and lower severity of Omicron, this variant is likely to mark the shift in COVID-19 from being a pandemic to a manageable and ordinary seasonal virus, which should accelerate the path to a normalized environment.

[Ed Bastian, CEO at Delta Air Lines]

When we spoke last month about Omicron as a risk at Capital Markets Day, a lot was unknown. Today, we know a lot more. While the first 60 days of the year will be impacted, we're confident that the pace of travel recovery will resume its December trajectory as we move into President's Day weekend and a strong spring and summer travel season are ahead of us.

[Ed Bastian, CEO at Delta Air Lines]

As we reflect on 2021, it was a year like no other for Delta. While challenging, we made significant progress in our recovery. At Capital Markets Day, we highlighted that our competitive strengths had deepened through the course of the past two years, and I'm extremely proud of our entire team for all their efforts.

[Ed Bastian, CEO at Delta Air Lines]

Full year revenue of $27 billion in 2021 improved nearly $11 billion or 67% from 2020, with the rate of recovery accelerating from only 25% as measured against 2019 at the start of the year to a close of the year of nearly 80% as we exited December. This resulted in a full year 2021 pre-tax loss of $3.4 billion.

[Ed Bastian, CEO at Delta Air Lines]

While we obviously have still much work ahead of us, our pre-tax results improved by $5.5 billion versus 2020 and included a profit of around $400 million for the second half of this year. This performance positions Delta as the only major U.S. airline to achieve second-half profitability and demonstrates that we have significant momentum in the continued restoration of our financial foundation.

[Ed Bastian, CEO at Delta Air Lines]

Sharing our success is one of the pillars of Delta's culture, which is why we are happy to announce this morning a special profit-sharing payment for all global employees. On February 14, the vast majority of our people will receive a payment of $1,250. This is a well-earned recognition for the incredible work they have done over the past year to move our airline through the crisis and position us for recovery.

[Ed Bastian, CEO at Delta Air Lines]

Turning to December quarter highlights and our March outlook. In the fourth quarter, we recorded a pre-tax profit of $170 million. Excluding the impact of Omicron disruptions, we estimate our profitability would have been approximately $250 million in the quarter. This was on revenue that was 74% recovered to 2019 levels, up eight points from the September quarter.

[Ed Bastian, CEO at Delta Air Lines]

We started the quarter with lingering impacts of the prior variant, but encouraged by the significant improvement in demand and pricing that we saw throughout the quarter in each of our passenger segments. Turning to the March outlook, we expect to incur pre-tax losses in the months of January and February before returning to solid profitability in the month of March.

[Ed Bastian, CEO at Delta Air Lines]

The Omicron case surge is impacting business travel and international recovery the most as meetings are canceled, planned office reopenings are postponed, and countries put restrictions back in place. On the consumer side, we're seeing some near-term hesitation in booking behavior given the prominence of COVID in our daily lives.

[Ed Bastian, CEO at Delta Air Lines]

That combined with the operational challenges that the industry is facing, consumers are delaying travel until case counts subside and the industry operational reliability is restored. As a result, we're seeing the rate of recovery step down in the months of January and February to approximately 70% versus 2019 levels from nearly 80% where we were in December. While the downturn in demand has been quick, we expect an equally rapid improvement once U.S. case counts begin to decline.

[Ed Bastian, CEO at Delta Air Lines]

We remain confident in a strong spring and summer travel season with significant pent-up demand for consumer and business travel, both domestically and internationally. We expect the month of March to return to the recovery trajectory that we were on in December, resulting in revenue recovery of 72%-76% for the full quarter.

[Ed Bastian, CEO at Delta Air Lines]

Glen will talk in greater detail about the revenue environment, and Dan will walk through our costs shortly. Based on our current outlook, we expect first quarter to be the only loss-making quarter for the year, and we're confident that we'll generate a meaningful profit for the full year of 2022 as the recovery resumes and accelerates in the spring and the summer. Despite the challenges of the current environment, the multi-year recovery plan that we laid out last month at Capital Markets Day is unchanged.

[Ed Bastian, CEO at Delta Air Lines]

No one is better positioned than Delta to lead the recovery as business travelers return to the skies. Delta is also uniquely prepared to benefit from the reopening of international markets, which we are optimistic we'll start seeing this spring as restrictions lift. Our three core priorities discussed last month remain unchanged.

[Ed Bastian, CEO at Delta Air Lines]

Fortifying our trusted consumer brand, restoring financial performance and foundation, and building a better future for our people and our planet. As part of this, we remain firmly committed to our values and ESG goals, including our commitment to fighting climate change and moving forward towards a future of net zero aviation. We recently announced the hiring of our new Chief Sustainability Officer, Pam Fletcher, the industry's only C-level CSO.

[Ed Bastian, CEO at Delta Air Lines]

Pam established an impressive track record as a senior leader at General Motors and has an extensive history of putting the customer first and developing products that help to enable a world free of emissions. As we move past the final phase of the pandemic, I'm confident that we'll continue our trajectory to not only emerge stronger than before, but to expand our lead in the industry and strengthen our position as the premium airline of choice in the years ahead.

[Ed Bastian, CEO at Delta Air Lines]

Our ambition is to transcend the industry and create significant long-term value for all of our stakeholders. Everything we've done during this long crisis puts us closer to achieving that ambition. Thank you again. With that, I'll turn the call over to Glen.

[Glen Hauenstein, President at Delta Air Lines]

Thank you, Ed, and good morning, everyone. Like Ed, I couldn't be prouder of what the Delta people accomplished during 2021, and I want to congratulate our people on their much-deserved special profit-sharing payout they'll be receiving later next month. During the December quarter, we generated $8.4 billion of revenue. This was above our expectations at the onset of the quarter, driven by strong consumer demand over the holidays.

[Glen Hauenstein, President at Delta Air Lines]

Total RASM was up 6% from the September quarter on a 7% improvement in yield. For the quarter, capacity was 79% restored versus 2019, five points below the industry as we maintain a disciplined approach to restoring our capacity. The strengths we spoke about last month at Capital Markets Day are evident in our December quarter results. First, we saw very strong demand during the holiday period.

[Glen Hauenstein, President at Delta Air Lines]

Domestic results were particularly strong with holiday PRASM finishing up 8% versus 2019 and with passenger revenue more than 90% recovered. Second, long-haul international trends were positive in October and November as borders reopened and restrictions lifted. This momentum stalled in the second half of December as the Omicron variant resulted in more stringent restrictions and impacted our bookings.

[Glen Hauenstein, President at Delta Air Lines]

Third, we saw continued progression of business travel with domestic volumes approaching 60% restored during the December quarter. Fourth, our premium products continued to perform well. Domestic premium revenue was 84% recovered versus December quarter 2019, 9 points better than main cabin. Fifth, our diverse revenue streams remained resilient. Amex remuneration during the quarter was more than 110% restored, and cargo revenue was more than 160% of 2019 levels.

[Glen Hauenstein, President at Delta Air Lines]

We also continued to see very strong consumer engagement with another record quarter for Fly Delta app downloads and sign-ups for our loyalty program. In the December quarter, we added 1.5 million new SkyMiles members, up 5% from 2019 levels. For all of 2021, we added 5.5 million new SkyMiles members. This growing engagement demonstrates strong brand preference and our customers' desire to travel on Delta in 2022.

[Glen Hauenstein, President at Delta Air Lines]

As Ed discussed, the recent rise in COVID cases is having an impact on near-term demand and bookings. Omicron has been different than previous waves. While infections are thankfully less severe in most cases, its high transmissibility is resulting in a swift increase in case counts and impacting short-term demand. With U.S. case counts expected to peak within the next few days, we expect booking levels to rebound quickly.

[Glen Hauenstein, President at Delta Air Lines]

Once case counts begin to decline, we expect revenues to rebound within 30-45 days. Additionally, we expect some of the January and February demand decline to be recaptured in future as customers make up for canceled trips. Consistent with our approach all along, we are remaining nimble and agile in how we fly our network. For the March quarter, we expect our capacity to be between 83%-85% restored, a few points below our initial expectation.

[Glen Hauenstein, President at Delta Air Lines]

This includes a more conservative approach to long-haul international flying that we expect to be 15 points-20 points lower than the industry. We have also actioned our regional capacity to ensure labor constraints at regional providers do not impact our operational integrity. We expect these constraints will ease in the second half of the year.

[Glen Hauenstein, President at Delta Air Lines]

For 2022, we still expect our full-year capacity to be approximately 90% recovered versus 2019, with the progression weighted to the back half of the year, but this will ultimately be determined by demand. As we outlined at Capital Markets Day last month, Delta is well positioned for the next phase of the recovery. The Delta people have proven time and time again why Delta is the global airline of choice.

[Glen Hauenstein, President at Delta Air Lines]

We remain focused on improving our competitive position and extending our commercial advantages by investing in premium products, growing our loyalty ecosystem and increasing our revenue diversification. We are confident that the demand recovery will accelerate as the variant subsides, keeping us on a path to exceed 2019 financial performance by 2024. With that, I'll turn the call over to Dan.

[Dan Janki, EVP and CFO at Delta Air Lines]

Great. Glen, thank you. The Delta team executed well in 2021 in an environment that remains very dynamic. I want to thank our people for their hard work, congratulate them on a well-earned special profit-sharing payment. Let me start with the highlights from the December quarter. We delivered a profitable fourth quarter, reporting earnings of $0.22 per share, representing a pre-tax income of $170 million and a 2% margin on total revenue of $8.4 billion.

[Dan Janki, EVP and CFO at Delta Air Lines]

While it was a strong close to the year, operational disruptions during the last two weeks of the quarter impacted our pre-tax results by $80 million. Total fourth-quarter operating expenses were $8.1 billion, a 3% increase from the third quarter, driven by both fuel and non-fuel costs from the continued restoration of the airline.

[Dan Janki, EVP and CFO at Delta Air Lines]

Fuel expense of $1.6 billion increased 4% sequentially as fuel prices per gallon increased to $2.10. Total fuel expense included a 24-cent per gallon benefit from the refinery. Embedded in fuel cost is a continued benefit from our fleet renewal, which supported a 4.3% improvement in fuel efficiency compared to 2019.

[Dan Janki, EVP and CFO at Delta Air Lines]

Non-fuel CASM was up 8.3% compared to 2019. This included a 1.2 impact, primarily due to lower capacity from cancellations during the last two weeks of the quarter. Now, turning to cash flows and the balance sheet. We generated operating cash flow of $518 million. We invested $948 million into the business, and we repaid $1.1 billion of debt in the December quarter.

[Dan Janki, EVP and CFO at Delta Air Lines]

We ended the year with $14.2 billion of liquidity and adjusted net debt of $20.6 billion. Now, onto the current environment and the March quarter outlook. As Ed and Glen noted, the variant is magnifying normal seasonality in the March quarter, which is our seasonal and weakest of the year. The operational challenges has reduced our capacity outlook, and we now expect first quarter ASMs to be between 83%-85% recovered to 2019.

[Dan Janki, EVP and CFO at Delta Air Lines]

This reduction is a few points from our previously expected capacity recovery. In this environment, we are also paying higher crew premiums, overtime, and COVID-related costs as we work through staffing challenges, mitigation of cancellations, and protect our people. We estimate that this will impact first quarter by $60 million-$70 million.

[Dan Janki, EVP and CFO at Delta Air Lines]

The disruptions are impacting our first quarter non-fuel CASM comparison to 2019 by three points, with the majority of that driven by fewer ASMs. Absent the Omicron disruption, our March quarter non-fuel CASM is 12% higher than 2019, as our network remains 15% smaller.

[Dan Janki, EVP and CFO at Delta Air Lines]

The sequential step-up in non-fuel CASM from December to March quarter is due to maintenance normalizing to 2019 levels. As we talked about last month, when comparing non-fuel CASM to 2019, there was a 7-point benefit related to maintenance in 2021 total year due to depressed flying. This flips to a 1-point headwind in 2022 as flying is restored.

[Dan Janki, EVP and CFO at Delta Air Lines]

Our quarterly progression basis, the maintenance tailwind, was about 5 points, specifically in the fourth quarter of 2021, and there will be no benefit in the first quarter of 2022. Additionally, with the ASM sequentially, essentially flat sequentially, we are not yet benefiting from the scale and efficiency. As the ASM restoration progresses and we exit 2022 close to fully restored, we will realize the scale and efficiency benefit and our comparisons to 2019 will improve.

[Dan Janki, EVP and CFO at Delta Air Lines]

This is consistent with the framework and guidance we laid out last month at Capital Markets Day. Underlying our 7-10 full year cost guidance, we expect non-fuel CASM versus 2019 for the first half of the year to be up in the low to mid-teens, while in the second half of the year, averaging mid-single digits as that scale and efficiency are restored and transition costs subside.

[Dan Janki, EVP and CFO at Delta Air Lines]

While we did not previously expect Omicron-related operational disruptions, there is still a lot of the year to unfold as it equates both to capacity and demand. We remain confident in our non-fuel CASM framework and the guidance we laid out last month. For the March quarter, adjusted fuel price per gallon is expected to be between $2.35-$2.50.

[Dan Janki, EVP and CFO at Delta Air Lines]

Fuel efficiency is estimated to be approximately 6% better than the same period in 2019. When combined with our revenue outlook Glen provided, we expect a loss in January and February months and a return to profitability in the month of March. Now, looking beyond the March quarter. Even with the challenging start of the year, we remain positioned to generate a healthy profit in June, September, and December quarters, resulting in a meaningful profit for 2022.

[Dan Janki, EVP and CFO at Delta Air Lines]

At this point in the year, we are not providing additional full year guidance beyond the metrics given last month at Capital Markets Day. This includes capacity at 90% restored to 2019, non-fuel CASM up 7%-10%, and gross CapEx of $6 billion.

[Dan Janki, EVP and CFO at Delta Air Lines]

The $6 billion compares to $2.9 billion in 2021 and includes $4.7 billion of aircraft CapEx, including delivery of approximately 70 aircraft and $350 million of modification costs. The remainder is related to ground and technology projects. The March quarter will be our largest delivery quarter with 22 deliveries, resulting in March CapEx of $1.6 billion. Reducing debt remains a top financial priority.

[Dan Janki, EVP and CFO at Delta Air Lines]

During 2021, we reduced gross debt by $6 billion, fully funded our pension on a Pension Protection Act basis with a $1.5 billion contribution and a 16% return on our planned assets. In 2022, we have $1.8 billion in debt maturities with $1.2 billion in the current quarter. With a heavier CapEx quarter, we expected adjusted net debt to increase to $22 billion in the first quarter.

[Dan Janki, EVP and CFO at Delta Air Lines]

As we achieve sustained cash generation over the next 12 months-18 months, we will continue to opportunistically manage our balance sheet, reducing debt to return to investment-grade metrics and making progress towards that $15 billion adjusted net debt target by the end of 2024. In closing, at our recent Capital Markets Day, we outlined our financial priorities and our recovery path over the next three years.

[Dan Janki, EVP and CFO at Delta Air Lines]

The power of the brand, the strength of the competitive advantage give us strong conviction in the trajectory and the path to full financial recovery. With that, let me turn it back to Julie for Q&A.

[Julie Stewart, VP of Investor Relations & Corporate Development at Delta Air Lines]

Thanks, Dan. Cody, can you please remind the analysts how to queue up for a question and go to our first question?

[Operator]

Absolutely. Thank you. If you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one if you'd like to ask a question. We'll take our first question from Savanthi Syth with Raymond James. Please go ahead.

[Savanthi Syth, Managing Director at Raymond James]

Hey. Good morning, everyone. You know, maybe this is for Glen, just, you know, early January is a fairly important time for booking into the rest of the year. I was curious if there is an impact on some of the forward-booking trends or if Omicron is just maybe only impacting kind of close-in bookings. Also just, you know, if there's any color on how it's impacting kind of the different, the four different entities here.

[Glen Hauenstein, President at Delta Air Lines]

Sure. I think if we could pick a period of time for an Omicron variant to surge, we would probably pick this time of year because I think it's got two components that are unique to this time of year. One is these five weeks that it's impacting are five of the lightest weeks in terms of business travel. Two, as you indicated, it has really impacted more the close-in demand than the further-out demand.

[Glen Hauenstein, President at Delta Air Lines]

We believe we have plenty of time to recover those deferral of vacation bookings for summer. If they don't come in the third or fourth week of January, it's easy for them to come in sometime in February, March. Really not concerned yet about spring or summer. We feel that we'll have a very, very robust demand profile for spring and summer.

[Glen Hauenstein, President at Delta Air Lines]

While some of the bookings have been slightly delayed, we are still seeing much, the biggest magnitude of the impact impacting the next few weeks here. On a regional perspective, for all intents and purposes, Asia remains very constrained. We expect that to continue, and our restoration of Asia through the summer is very minimal.

[Glen Hauenstein, President at Delta Air Lines]

Europe, we've seen some countries imposing more restrictions, and at the same time, we've seen some countries trying to lift restrictions. Of course, you saw in the U.K., restrictions were added, then they were removed. We're anticipating even further loosening of those restrictions over the next few weeks to the U.K. Ireland's come out with much less restrictions.

[Glen Hauenstein, President at Delta Air Lines]

I think everybody's preparing, at this point for the Omicron to be in the rearview mirror, and the travel will be much more restored for this summer than it was for any of the last two summers, and that will lead to really what we think should be very, very strong and healthy demands for transatlantic leisure travel this summer. Latin America has continued to be a more resilient.

[Glen Hauenstein, President at Delta Air Lines]

Those restrictions have come off in a lot of those countries, and clearly the short-haul Latin markets are performing well, and long haul are continuing to improve. Hopefully that gives you the color you need.

[Savanthi Syth, Managing Director at Raymond James]

No, that's super helpful, Glen. I think you alluded to this as well, that maybe kind of some of the operational issues should ease up heading into the summer. I know you've been hiring a lot of kind of employees and especially pilots and flight attendants since kind of the second half of last year. I was wondering, you know, if you could help provide some color on just how much like slack is being built into with these hirings as you go into the summer, because your capacity levels are also coming up into the summer as well.

[Ed Bastian, CEO at Delta Air Lines]

How much slack? What do you mean by slack, Savi?

[Savanthi Syth, Managing Director at Raymond James]

In the sense that, I guess, I don't know if it's like employee per aircraft or you know, just like you are hiring, but you're also increasing your capacity. Just curious if we come into the summer and if we get another variant or something like that, if we will have a little bit more kind of, I guess, reserve ratios or something like that to handle kind of the next peak period.

[Ed Bastian, CEO at Delta Air Lines]

Yeah. We're getting better positioned on staffing. We did hire a lot of people in 2021 because we had a lot of people leave in 2020. We're looking at hiring several thousand people in 2022. A lot of those are more longer term. Flight attendants, pilots take a while to get in the pipeline and accrue the airline over time. But, you know, I think I'm very comfortable with our staffing levels.

[Ed Bastian, CEO at Delta Air Lines]

You know, you can't plan in advance for something that comes up overnight, like Omicron, where the world, you know, decides to shut down for 60 days. We're gonna get through this really quick, and we're gonna be glad we have the staffing in place because I think it's gonna be in the bookings.

[Ed Bastian, CEO at Delta Air Lines]

Your earlier question, the bookings look very good post President's Day looking forward and really haven't seen a major impact at all relative to 2019 expectations in that. We think it's gonna be a quick rebound.

[Savanthi Syth, Managing Director at Raymond James]

Makes sense. Thank you.

[Operator]

Thank you. We'll take our next question from Andrew Didora with Bank of America.

[Andrew Didora, Managing Director at Bank of America]

Hi. Good morning, everyone. Maybe as a follow-up to Ravi's hiring question, I guess we're beginning to hear a little chatter from the regional airlines that it's becoming a bit more difficult to attract and hire new pilots. I know these airlines often feed pilots into your airline and others, but can you maybe give a little bit of color on, you know, how many pilots you need to hire over, say, the next three years to kind of hit your capacity plans? If regionals start to have a hard time finding new pilots in 2022, when do you think it would start to impact your and, you know, other mainline carriers' ability to hire, if at all?

[Ed Bastian, CEO at Delta Air Lines]

Thanks, Andrew. We're hiring at the mainline, you know, somewhere between 100-200 a month, presently, and we expect that pace to continue for some period of time, certainly through 2022 and into 2023. We don't want to get too far ahead of ourselves, but that's the pace that we're hiring at. Everyone else in the industry is hiring too, so it's not just Delta.

[Ed Bastian, CEO at Delta Air Lines]

We are not having any problem at all at Delta hiring and getting great pools of candidates. It's viewed as the premium airline that employees in general, but particularly pilots, want to come work for, which we're thrilled at. It is having the impact at the regionals, as you mentioned.

[Ed Bastian, CEO at Delta Air Lines]

We are down flying in the first half of the year on some of the regional carriers, given some of the staffing challenges we're facing, primarily because of pilot hiring. The largest regional is our own that we work with, which is Endeavor, so we're working closely with them to help to mitigate some of the disruption and the churn that's going on, you know, through the process.

[Ed Bastian, CEO at Delta Air Lines]

But I think this is a normal, you know, period of time. It's the next order of the crisis that we've all been through is pulling through, and it's actually gonna be good. It's gonna enable us to make sure that we pay good attention to the regional carriers and meet their needs. But at the same time, you know, I'd much rather have the issue down there than at the mainline.

[Andrew Didora, Managing Director at Bank of America]

Understood. Just one other question from me. Just wanted to. You mentioned a little bit, you talked a little bit about this at the Capital Markets Day, but you know, back in December, you did, you know, announce that you were putting about $1 billion of new equity capital into three of your international partners. Just wanted to get your thoughts.

[Andrew Didora, Managing Director at Bank of America]

You know, why is it so important to Delta to have such a, you know, such a large equity investment as opposed to maybe a smaller one or none at all? Why is there such a focus there? Just curious on why you think other airlines don't follow a similar strategy. Thanks.

[Ed Bastian, CEO at Delta Air Lines]

Well, I can't speak for other airlines. You'd have to ask them that question. But I know for us, it's the right strategy. You know, long term, our opportunity is international. When you think about growth, when you think about expansion, when you think about the natural opportunities that Delta has for the future, it's gonna sit in the international arena and working very close to it.

[Ed Bastian, CEO at Delta Air Lines]

International is expensive. International is hard. International, the competitive set is very difficult. It's hard to do it on your own, to go out there and try to advance a U.S. airline in international borders unless you had some really good, strong partners in the international marketplace.

[Ed Bastian, CEO at Delta Air Lines]

We're fortunate we have great partners in the international marketplace, with Virgin and Air France-KLM, and Aeromexico, LATAM, you know, Korean, et cetera. We also know that those airlines, you know, have their own objectives and they have their own desires.

[Ed Bastian, CEO at Delta Air Lines]

We have found over time that it's very difficult through solely, you know, joint ventures or contractual means to try to enhance the customer experience and provide the very best quality of service if you're just trying to do it through a contract, as compared to being in the room, you know, a seat inside the company, if you will, influencing the decision to ensure that we're putting our customer interests, you know, at the center of what, 'cause the growth is gonna be based on customer preference.

[Ed Bastian, CEO at Delta Air Lines]

Just as you've seen everything that we've done here domestically to grow customer preference, big opportunities for us to grow customer preference now sit in the international market. We're thrilled with the investments we're making.

[Ed Bastian, CEO at Delta Air Lines]

We've made certain that each one of those investments pencil out on paper. They're good financial investments as well. We expect to generate significant returns. Candidly, given the fact that we've already made, you know, significant investments in the past, it's gonna actually allow us to recoup some of that past investment easier by staying invested in the companies.

[Andrew Didora, Managing Director at Bank of America]

Great. Thank you for that, Ed.

[Operator]

Thank you. We'll take our next question from David Vernon with Bernstein.

[David Vernon, Senior Analyst at Sanford C. Bernstein & Co.]

Hey, good morning, guys, and thanks for taking the question. Happy New Year. Glen, can you talk a little bit about what you're seeing sort of sequentially in terms of yields on the business and the leisure front as you kind of move through the quarter and into the first quarter? Specifically kind of as you look out past President's Day, you know, how booking activity is shaping up there?

[Glen Hauenstein, President at Delta Air Lines]

We usually don't comment on future yields, but I can say that through the past quarter, while the bottom of the business yield was at about -25, which was in the September timeframe, and then that moved up to being down low single digits. I think we talked about that at our Investor Day, and we were pleased with where the structure was sitting as we move forward. I don't think anything's really changed since then. I think that's the outlook I would give you, is that we think the structure is fine, now we need the traffic back.

[David Vernon, Senior Analyst at Sanford C. Bernstein & Co.]

Okay. Do you have any updates on discussions with business travelers about their plans for budgeting travel for the remainder of the year? Is there anything you can share on that front?

[Glen Hauenstein, President at Delta Air Lines]

Yeah, absolutely. As you know, we pulse our corporate clients very often, and we did it right before Investor Day, and we did it right before this call. What we saw was that the percentage of customers who thought in the first quarter that they would travel the same or more went down slightly, but it was still 80% of the corporate travel survey respondents thought they would travel the same or more in the first quarter than they did in fourth quarter.

[Glen Hauenstein, President at Delta Air Lines]

Office reopenings have been pushed out, as you know, but we are expecting, as Ed indicated, when we get to spring and summer, that we'll see a robust demand for business travel as people get back into the regular routine and feel safe traveling. Really optimistic about those results and optimistic about where we think this is gonna head in the not too distant future.

[Ed Bastian, CEO at Delta Air Lines]

Yeah. You know, David, this is Ed. The business travel, you know, I'd say the best way to characterize it. I read it as kind of a wait and see. You know, they're trying to understand what's going on with Omicron. They're trying to understand when their offices, if they're not back, you know, when they're gonna open. They're all making those decisions here.

[Ed Bastian, CEO at Delta Air Lines]

The good news is that as we're watching the case counts start to crest and peak here in our country and declining in certain early parts of the country that had the variant hit first, that's giving them encouragement to realize that they're gonna be able to get back and get their people in, open their offices sooner than maybe they were thinking when first news of Omicron came. We're in a pretty good place. You know, when you think about the trajectory we saw over the fourth quarter, we saw really nice growth in business, both small business as well as big corporates.

[Ed Bastian, CEO at Delta Air Lines]

Small businesses, as we pointed out at the Investor Day, is something we haven't talked as much about historically, but it's just as big a pool as the corporate space is for us. When those offices open starting in the spring, we think it's going to pick up where we left off in December and grow from there.

[David Vernon, Senior Analyst at Sanford C. Bernstein & Co.]

Great. Thanks, guys.

[Operator]

Thank you. We'll take our next question from Ravi Shanker with Morgan Stanley.

[Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley]

Thanks. Morning, everyone. Just to kind of pick up on that last point, I mean, hopefully, you know, the next few weeks is the last real disruption from the pandemic, especially with kind of availability of boosters and therapeutics and herd immunity and everything else.

[Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley]

If there is, like, genuinely, like, light, like real light at the end of the tunnel, are you having conversations with the regulators on when we can, you know, fly without masks on planes and timeline to, like, full service being restored on the aircraft? Kind of do you hazard a guess on kind of the timing of that?

[Ed Bastian, CEO at Delta Air Lines]

Well, I think it's premature, Ravi, to speculate on masks on planes. Obviously, that's gonna be driven by the medical experts and not by the airlines, and we'll follow their guidance. In terms of restoring service on planes, yes, we're doing that pretty aggressively.

[Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley]

Yeah.

[Ed Bastian, CEO at Delta Air Lines]

Over the course of the next 2 months-3 months, you're gonna see our service patterns, you know, largely restored, you know, from where we

[Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley]

Mm-hmm

[Ed Bastian, CEO at Delta Air Lines]

where we were in 2019 and continue to make good improvements. When I say restored is not the right word. It's gonna be improved.

[Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley]

Yeah

[Ed Bastian, CEO at Delta Air Lines]

... from where we were in 2019. We've taken the opportunity during the pandemic to make substantial changes to the whole catering spec, who's providing it, took ownership positions, you know, in terms of kitchens and really big change that customers are gonna be delighted when they start traveling again back in the springtime, particularly internationally. It's gonna be good.

[Ed Bastian, CEO at Delta Air Lines]

You know, the thing you were mentioning about the rapid move of the variant, I agree with you. I think that there's a real silver lining here, is that since this thing is moving so fast, it's so infectious, so many people are getting it's gonna push us into a normalized environment here sooner than we would've liked.

[Ed Bastian, CEO at Delta Air Lines]

While we were together at Capital Markets Day, we talked about the uncertainty that Omicron presents. Good news is that the uncertainty is gonna be short-lived and the path to normalization, I think we're even more confident in it when we think about our 2022 numbers and travel patterns. You know, it's not all negative, that's for sure.

[Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley]

Understood. Just to follow up, forgive me if I missed this, but is there an update on what premium cabin looks like relative to main cabin in the fourth quarter? I think in the past you've said it was running 10 percentage points ahead. How do you expect that to trend through the year, especially as corporate and international come back? Thank you.

[Glen Hauenstein, President at Delta Air Lines]

Well, yes. We're very excited about the fourth quarter results. I think it was in the comments that it was 9 points ahead of main cabin for the entire fourth quarter, and we see those trends continuing. The headline for us is that premium leisure we believe is here to stay, and that's something that we wanna continue to exploit as we think about how we service our customers moving forward and how we lay out the planes and what products and services we offer.

[Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley]

Great. Thank you.

[Operator]

Thank you. Our next question comes from Mike Linenberg with Deutsche Bank.

[Mike Linenberg, Managing Director and Senior Airline Analyst at Deutsche Bank]

Oh, hey, good morning, everyone. Hey, just one quick one for Dan. On the refinery, the revenue piece for the March quarter, I know normally you don't give guidance there, but it is. It's been a big number. It was $1 billion this last quarter. Should we assume, just given where crack spreads are, that March quarter refinery sales will maybe be of a similar magnitude?

[Dan Janki, EVP and CFO at Delta Air Lines]

Yeah. I think that's the right way to think about it. You know, our jet consumption will be about the same.

[Mike Linenberg, Managing Director and Senior Airline Analyst at Deutsche Bank]

Mm-hmm

[Dan Janki, EVP and CFO at Delta Air Lines]

... and the refinery output. Keep it consistent. Yes.

[Mike Linenberg, Managing Director and Senior Airline Analyst at Deutsche Bank]

Okay. Very good. Second question to Ed here. Ed, you know, I think if you look across the industry right now, I think most airlines, their pilot contracts have now been opened. They're at an amendable point, yours included. I think one of your competitors is trying to do a quick sort of two-year type extension.

[Mike Linenberg, Managing Director and Senior Airline Analyst at Deutsche Bank]

Can you just give us an update of where you are? I guess within the context, I mean, you didn't furlough anybody during the pandemic, so you're sort of maybe approaching this from a different perspective. Thank you.

[Ed Bastian, CEO at Delta Air Lines]

Thanks, Mike. We did not furlough any employee during the pandemic, pilots included. Yes, we're in a similar position, I guess, than some of our large competitors are as well, particularly relative to the pilot contract. You know, during the pandemic, it was very difficult for any of the airlines or the union for that matter to feel confident in projecting the future. I think all talks across the industry are probably put on hold.

[Mike Linenberg, Managing Director and Senior Airline Analyst at Deutsche Bank]

Mm-hmm.

[Ed Bastian, CEO at Delta Air Lines]

We're now getting ready to reengage, and we'll see where that goes. No, we're not trying to do an expedited anything. We're trying to get a real contract with our people.

[Mike Linenberg, Managing Director and Senior Airline Analyst at Deutsche Bank]

Very good. Thank you.

[Operator]

Thank you. We'll take our next question from Jamie Baker with JPMorgan.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Hey, good morning. First question for Glen. Could you expand on your answer to Savi's question that you anticipate transborder testing impediments to ease during the quarter? For example, you know, the move from a one-day back to a three-day testing requirement for U.S. re-entry, is that specifically in your forecast or the guide envision that we get back to November eighth levels of, you know, sort of testing impediments? I'm only asking because as these headlines do improve, we're gonna be asked whether that's incremental to the guide or not.

[Glen Hauenstein, President at Delta Air Lines]

Well, I think what we've seen, and a little more color on that, is we've seen that initially everybody reacted by putting in some pretty onerous testing requirements. Since countries that are further along with us, like the U.K., who's now on the backside of the Omicron, has now started relaxing those restrictions. We've seen other countries like Ireland relax.

[Glen Hauenstein, President at Delta Air Lines]

We've seen Israel relax on the margin. I think that's what we would expect. You know, I don't think for a customer who's traveling that the one-day testing requirement that the U.S. has imposed is that at all onerous. It's pretty easy to take a proctored test with you when you travel overseas. You know, I couldn't speak to whether the U.S. government was gonna go back to the previous policy.

[Glen Hauenstein, President at Delta Air Lines]

In general, I think once governments feel comfortable that they have a handle on the variant, that they have backed off and started easing the restrictions again, I think that would be something that the whole world is looking towards as we move forward here.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Okay. Then for Dan, you know, the flat air traffic liability from third quarter to fourth quarter, that's pretty unusual. Ordinarily, there's about a $700 million sequential decline, even in 2020. We saw a few hundred million of decline. What should we read into that other than strong bookings?

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

I mean, has there been any change in how you are accounting for travel credits and on a side note, you know, having recently bought a Delta ticket and having forgotten to apply some existing credits, you know, I can't believe I'm the only passenger to experience this. You know, I'm just trying to think through any implications of, you know, credit travel breakage and how that might influence the ATL going forward. Any color there?

[Dan Janki, EVP and CFO at Delta Air Lines]

Well, one, no change, right? I think we talked about this a little bit in the third quarter call to remind you that maybe historical seasonalities won't apply as you're restoring travel and the airline, and that proved to be the case in fourth quarter in what we saw. I think you're gonna see a similar dynamic in first quarter. Normally, that air traffic liability will grow.

[Dan Janki, EVP and CFO at Delta Air Lines]

You've got to account for the additional restoration that you see as you progress towards second quarter, that changes those seasonal impacts. Just take that into consideration. I think fourth quarter is a good proof point that you just can't take historical practices, but it's not due to the underlying change in practice. It's really just the dynamic that's going on with the restoration of the airline and the growth.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Okay. Okay, perfect. I appreciate that.

[Ed Bastian, CEO at Delta Air Lines]

Hey, Jamie, this is Ed. Your question.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Hiya.

[Ed Bastian, CEO at Delta Air Lines]

on credit. I don't know if we announced it this week.

[Dan Janki, EVP and CFO at Delta Air Lines]

Yes, we did.

[Ed Bastian, CEO at Delta Air Lines]

... or not. We did. Good news. We extended the expiration date through the end of 2023, so you'll be fine.

[Dan Janki, EVP and CFO at Delta Air Lines]

You can use it, Jamie.

[Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan]

Okay. I wasn't particularly worried about it. Thank you. I appreciate it. Thank you.

[Operator]

Thank you. We'll take our next question from Duane Pfennigwerth with Evercore ISI.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Hey, thanks. Maybe just to continue on Jamie's line of questioning there. Can you tell us what breakage as a % of revenue was in the fourth quarter and kind of how those trends have changed over time?

[Ed Bastian, CEO at Delta Air Lines]

Yeah. The trends haven't changed, and they're consistent, but we don't actually give breakage, report that.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Okay. Just a broader question. As you look back at the business travel recovery you started to see in 4Q, do you think that return to office is as meaningful of a guidepost relative to your initial thinking? Have you seen any decoupling between return to office and business travel recovery? That's not a January thirteenth question. That's the recovery you were seeing in the fourth quarter.

[Ed Bastian, CEO at Delta Air Lines]

Yeah, I think there's a correlation that a lot of business travel is triggered by going to visit companies, and if the companies are closed, it makes it a little more difficult to do that. It's not a one for one. But the fact that particularly the big corporates, the fact that our overall level of corporate demand, the volume return is actually fairly closely correlated, and maybe it's coincidence or not, I don't know, but the numbers are pretty tightly correlated to the amount of reopenings we've seen indicates there's a real cause and effect there, Duane.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Okay. I just wondered if you found travel has a higher utility than going back to an office, but I appreciate the thoughts.

[Ed Bastian, CEO at Delta Air Lines]

Yeah. No, we do have you know office is not the only thing. We have a lot of people traveling that aren't back into office yet. You know, we have a lot of noise probably in the numbers, and there's a lot of choppiness as we navigated the course of it felt like two or three pandemics over the course of 2021 with the various variants.

[Ed Bastian, CEO at Delta Air Lines]

We're continuing to make good progress. The good news is that all of our corporates are saying they just can't wait to get back to be with people and be with their own people, be with their customers, visit new opportunities and invest for the future. I think this is gonna be a strong spring and summer. They're just waiting for the all clear sign that, you know, that you don't have to worry about a variant as you're traveling.

[Duane Pfennigwerth, Senior Managing Director at Evercore ISI]

Makes sense. Thank you.

[Operator]

Thank you. We'll take our next question from Sheila Kahyaoglu with Jefferies.

[Sheila Kahyaoglu, Managing Director of Equity Research at Jefferies]

Good morning, guys. Thank you for the time. You talked about Q1 international capacity being 15 points-20 points lower than the industry. Maybe can you talk about what metrics you'd like to see for that path to ramp capacity back up, how your fleet plays into it, and how you think about international capacity as we progress through the year?

[Glen Hauenstein, President at Delta Air Lines]

Sure. I think we gave a pretty good outline of how we expect international restoration to occur. What I'd say is we haven't changed from where we think we'll be in the summer yet. What we have changed is the lull season, this winter IATA, the remainder of the winter IATA.

[Glen Hauenstein, President at Delta Air Lines]

We had some seasonal services starting up earlier than we would have otherwise done because we thought demand might be back early, and now we're taking that bet off and moving those start dates to later in the year. I think we still remain very, very confident that once, as Ed said, once people feel that it's safe to travel, that they will.

[Glen Hauenstein, President at Delta Air Lines]

As we said in today's comments and in all previous is we will remain agile, and if we don't see that developing, we'll pull it down, and if we see it coming faster, we have the ability to accelerate to a certain extent some growth in international.

[Glen Hauenstein, President at Delta Air Lines]

Really, it's we're still very optimistic about the summer, and we expect to be 85%-90% restored in the transatlantic, probably less than 50% in the Pacific, and largely restored in Latin America, and that's what we outlined previously. We really haven't deviated from that yet.

[Sheila Kahyaoglu, Managing Director of Equity Research at Jefferies]

Okay, maybe just to follow on for that. In the domestic market, you're seeing additional capacity come on with a recent order from a low-cost carrier. You know, how do you think about the risks of supply coming into the U.S. market?

[Ed Bastian, CEO at Delta Air Lines]

You know, we've competed with ULCCs for many, many years, and I think that's really where we came to a couple of different strategies, including our premium strategy. I'd like to say that, you know, some of our highest return markets historically have been straight up against LCCs and ULCCs. I think we're really not afraid to compete in those markets, and we think our products stand on their own, and it is a very different product and very different customer than they are going after.

[Sheila Kahyaoglu, Managing Director of Equity Research at Jefferies]

Great. Thank you.

[Operator]

Thank you. We'll hear next from Conor Cunningham with MKM Partners.

[Conor Cunningham, Analyst at MKM Partners]

Hi, everyone. Thanks for the time. One point from your Capital Markets Day that I found interesting was just the domestic share gains on the corporate side during the pandemic. In the past, those gains have been somewhat minimal year-over-year, but you clearly used the pandemic to your advantage. I was just curious, is there a gaining factor to your growing share from here? If there isn't, what's your expectations over the next couple of years for your share there? Thanks.

[Ed Bastian, CEO at Delta Air Lines]

Connor, this is Ed. Yes, you're right. We did have a meaningful and an outsized share gain, and that's amongst the big corporates as our corporates really focused on premium. They appreciated, you know, the work we did around blocking the middle seats for the entire length of the pandemic while it was quite active.

[Ed Bastian, CEO at Delta Air Lines]

What we find is when companies come to Delta or customers come to Delta, they tend not to leave, which is a good thing. So the share tends to be sticky, and we work really hard to ensure that we maintain that. You know, we've had good share gains in the past, too. Don't get me wrong. We haven't.

[Ed Bastian, CEO at Delta Air Lines]

We kind of had plateaued at a level, you know, pre-pandemic, and we are significantly, you know, higher in share than our natural seat share is in those markets. I think we're gonna work hard to make sure we maintain and if we can grow it, we will. I wouldn't expect you to see additional growth, not at that level, you know, for the next couple years.

[Conor Cunningham, Analyst at MKM Partners]

Okay. Great. Yeah, it was a big move. Then just maybe to take the other side of Ravi's question and assume that there's actually gonna be another wave of cases at some point. You know, each wave has been different, but could you just speak to lessons learned you've during this current wave?

[Conor Cunningham, Analyst at MKM Partners]

The reason why I ask is it just seems like your ability to work directly with your workforce actually benefited your operation, relative to some of your competitors, as you turned around pretty quickly. Thanks again for the time.

[Ed Bastian, CEO at Delta Air Lines]

Thanks, Connor, and I'm proud of our team, and it was a hellacious, you know, three weeks. Yes, there are definitely some learnings in there. But the good news is we recovered quickly. We got the operational integrity of the airline back to where it needs to be.

[Ed Bastian, CEO at Delta Air Lines]

It was not easy to do, but the fact that we have a very direct and strong and flexible workforce that will do whatever they need to do to ensure our customers are being well taken care of and served was important, and that's shown through. You know, one of the things that to me was really interesting about the last few weeks of this Omicron surge is that, you know, demand was really strong.

[Ed Bastian, CEO at Delta Air Lines]

I mean, of course it was booked, you know, prior to that as it was going into the holidays, but we didn't see cancellations. You know, the only cancellations we're taking are because we couldn't staff the planes. But so the resilience of customers and their willingness and interest in getting into travel once things clear, I think it's gonna be that much stronger. And as each successive wave occurs, I think people are getting more used to the fact that we're having this. This is a virus we're gonna have to manage and live with over time, and it's gonna be a seasonal virus.

[Ed Bastian, CEO at Delta Air Lines]

It's not gonna be a pandemic. That's what the doctors all believe, and that's what I think we're going to wind up seeing here. We've got all the tools and the technologies and the capability and the confidence that we can manage just that.

[Conor Cunningham, Analyst at MKM Partners]

Great. Thanks, Ed.

[Operator]

Thank you. Our next question comes from Myles Walton with UBS.

[Myles Walton, Analyst at UBS]

Thanks. Good morning. I was just wondering, maybe Ed, how do you think the zero-COVID case policy in China plays out through the course of the year with respect to your business? I know it's a smaller piece, but just curious what you think can make them move to endemic because clearly zero-COVID case policy would still be in the pandemic mode.

[Ed Bastian, CEO at Delta Air Lines]

Well, that's a question, Myles, is way above my pay grade. National policy in China. You know, it's been interesting as we've watched a lot of the nations around the world, you know, all manage it seemingly somewhat differently. As it relates to us, you're right. China's not a big part of our network. We'd like it to be a bigger part, but it historically hasn't been.

[Ed Bastian, CEO at Delta Air Lines]

It's gonna be a pretty small part of our network at least for the next couple of years, and we'll see beyond that. You know, one of the things we do, and we look at where we put our metal is demand, and there's not strong demand, you know, going up between the U.S. and China now.

[Ed Bastian, CEO at Delta Air Lines]

I don't think it's a situation that's alarming to us. You know, hopefully, you know, Asia, and it's not just Japan, but Japan or China, but it's Japan and other Hong Kong and Singapore. They're all gonna need to figure out how to move to that seasonal, you know, virus that I just talked about.

[Ed Bastian, CEO at Delta Air Lines]

They got the tools and the technologies to manage it. I think it's just gonna be a longer road. We have a very, you know, downward feel as to growth rates in Asia for some time here. We're fortunate we've got a great partner in Korean Air that can do that flying in the meantime for us.

[Myles Walton, Analyst at UBS]

Okay. Just to follow up, Dan, on the other expense, non-operating other expense for 2022, anything to throw out there as placeholder, whether it's interest or pension moving parts?

[Dan Janki, EVP and CFO at Delta Air Lines]

No, I think you know, when you look at the total year for 2021, it was just around $900 when you take the interest expense with the pension. You know, it's gonna be about that level, slightly above actually. You're gonna have a little less pension income, and then that interest expense line will start to really move down in 2023 and 2024, as you see that adjusted net debt coming down to our $15 billion target.

[Myles Walton, Analyst at UBS]

Okay. Thank you.

[Julie Stewart, VP of Investor Relations & Corporate Development at Delta Air Lines]

Cody, we have time for one more analyst question before then moving to media Q&A.

[Operator]

Thank you. We'll take our final question on the analyst side from Hunter Keay with Wolfe Research.

[Hunter Keay, Analyst at Wolfe Research]

Hey, good morning. Thank you. A couple from me. Glen, I think they're both for Glen. I know you had a need, obviously, with Sandeep leaving, but how can Scott Laurence help your team? What is it about him that you like the most when you interviewed him?

[Glen Hauenstein, President at Delta Air Lines]

Listen, we don't comment on individual performance or individual reasons, but I think, you know, Scott is a very well-seasoned industry executive, and I think he's gonna bring us some additional value over time. We'll see when he gets here, starting next week, I believe.

[Hunter Keay, Analyst at Wolfe Research]

Do your capacity planners talk to Dr. Ting when you plan the schedule?

[Ed Bastian, CEO at Delta Air Lines]

Every day.

[Dan Janki, EVP and CFO at Delta Air Lines]

Every hour.

[Hunter Keay, Analyst at Wolfe Research]

Okay.

[Ed Bastian, CEO at Delta Air Lines]

Every schedule is now Ting approved.

[Hunter Keay, Analyst at Wolfe Research]

Got it. Thank you very much.

[Ed Bastian, CEO at Delta Air Lines]

Thank you, Hunter.

[Julie Stewart, VP of Investor Relations & Corporate Development at Delta Air Lines]

That will wrap the analyst portion of the call. I'll now turn it over to Tim Mapes, our Chief Marketing and Communications Officer, to start the media questions.

[Tim Mapes, Chief Marketing & Communications Officer at Delta Air Lines]

Cody, we have about 12 minutes for conversations with members of the media. If you would please just remind everyone the process to get in the queue for that, and I would remind everybody that we're gonna try to keep this moving and do one question with one follow-up and end about 10 minutes after the hour, please.

[Operator]

Absolutely. Once again, as a reminder, if you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure that your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one if you would like to ask a question. We will pause for just a few moments to allow everyone an opportunity to signal. Once again, as a reminder, that is star one. All right, we'll take our first question from Mary Schlangenstein with Bloomberg News, or Bloomberg News, excuse me.

[Mary Schlangenstein, Airlines Reporter at Bloomberg News]

Hi. Good morning. I wanted to see if you could comment on the passengers who had canceled flights during December, how many of those, what percentage of those were able to actually complete that travel, rebook or whatever and complete that travel during the holidays? Can you talk about that percentage?

[Ed Bastian, CEO at Delta Air Lines]

Hi, Mary. This is Ed. I don't have the numbers in front of me, but the vast majority of the customers that had to be rebooked, we had space that we were able to accommodate on other flights to get them to their destination. You know, it's not something that we enjoy doing, but we were able to get people to where they needed to be for the holidays.

[Mary Schlangenstein, Airlines Reporter at Bloomberg News]

Okay. No notable or noteworthy amount of lost revenue through that?

[Ed Bastian, CEO at Delta Air Lines]

Well, there was because there was flying and some customers decided-

[Mary Schlangenstein, Airlines Reporter at Bloomberg News]

Yep.

[Ed Bastian, CEO at Delta Air Lines]

not to travel. We estimated there was a $70 million hit for that. No, there was not a substantial. If customers wanted to travel on Delta, we made sure we got them there.

[Mary Schlangenstein, Airlines Reporter at Bloomberg News]

Okay. Thank you very much.

[Operator]

Thank you. We'll take our next question from Alison Sider with Wall Street Journal.

[Alison Sider, Airlines Reporter at Wall Street Journal]

Hi. Thanks so much. You talked about sort of the pandemic entering this new phase where it's becoming more seasonal, and it doesn't necessarily impact people's willingness to travel all that much. You know, how does that change kind of the way you plan and staff for peak periods, you know, if there's gonna be a future brief but dramatic flare up like we just saw. You know, would you know, have a smaller peak holiday schedule? Or, you know, how does that change kind of your planning process?

[Ed Bastian, CEO at Delta Air Lines]

Well, our goal, Alie, is to ensure that we're meeting customer demand. I don't know that we can change customers' demand and interest in traveling during peak periods or holidays. That's when they go, and we need to make sure we're there to serve them. There are learnings from Omicron, as I mentioned on the analyst call.

[Ed Bastian, CEO at Delta Air Lines]

Probably the most important learning that I saw was that, you know, even with Omicron being the headline throughout the country and the disruption that the airline industry was experiencing from people getting sick from Omicron, travelers were still traveling. They were determined to travel. They were resilient. We didn't see mass cancellations. We didn't see people deciding it didn't feel right.

[Ed Bastian, CEO at Delta Air Lines]

I think that this was another phase that we've passed through. Who knows? You know, is there gonna be another pandemic type virus awaiting us? We don't know what it is, but we're also humbled by the fact we don't know what we don't know yet in this environment.

[Ed Bastian, CEO at Delta Air Lines]

We do really believe that we're gonna enter a nice period of being able to manage and create a set of normalcy around travel behaviors particularly, but hopefully life in general. This virus will become, you know, very similar to what we have with the flu right now and move into a seasonal category with tools and technologies to manage.

[Ed Bastian, CEO at Delta Air Lines]

You know, flu is a you know, pretty significant cause of death historically, you know, in our country. I think we're seeing a lot less of that over the last couple of years because of the new tools and mitigations that we've learned to live with. I think you're gonna see people maybe wearing masks and then doing different things and having technologies and antivirals that they can take to help manage in order to keep themselves moving. We're getting to a point where I think, Allie, you know, we're gonna focus our efforts on you know, the small percent of people that are immunocompromised, that are at most at risk. The general population, you know, is learning and willing, exhibiting an interest to live with this risk.

[Alison Sider, Airlines Reporter at Wall Street Journal]

Thanks.

[Operator]

Thank you. We'll hear next from Leslie Josephs with CNBC.

[Leslie Josephs, Airlines Reporter at CNBC]

Hi. Good morning, everyone. Just a question on hiring. Can you just update us on the number of people that you wanna hire? And is there any detail on perks or increased salaries that you're offering to attract workers? And if there's anywhere that you're having problems attracting workers, either work group or geography, I'd love to hear that. Thanks.

[Ed Bastian, CEO at Delta Air Lines]

Yeah, Leslie, as you know, we hired a substantial number of people in the past year. I think it was around 9,000. We're gonna be hiring less people this year. But this number is still in the say 3,000-5,000 range, depending on how demand, you know, shapes and comes back. We're not having any meaningful impact in terms of difficulty getting people to come work for this company.

[Ed Bastian, CEO at Delta Air Lines]

Regionally, yes, you know, there's some pressure points in some of the higher cost markets, particularly in the Northeast. But no, we're doing a very good job of bringing the team together, and we're not having to put any unusual perks out there in order to attract talent.

[Leslie Josephs, Airlines Reporter at CNBC]

Okay, thanks.

[Ed Bastian, CEO at Delta Air Lines]

The ability to travel free is a great perk. We've always had that at Delta.

[Operator]

Thank you. We'll take our next question from Edward Russell with Skift.

[Edward Russell, Airlines Reporter at Skift]

Hi. Thank you. Following on what Leslie asked, in terms of the regional flying reductions that you're doing in the first half, what is Delta doing to mitigate that?

[Ed Bastian, CEO at Delta Air Lines]

Well, we've taken about 20%-25% of our regional flying down in the first part of the year, and that is it stems really from flow through pilots to the mainline, as well as getting the right people in the right training seat at the regional carriers.

[Ed Bastian, CEO at Delta Air Lines]

I think those are the two things that we are counting on as we get to the back half of the year to resolve themselves. I think one of the things is how many hours do you have in seat? Can you get trained, and can you get moved? We're working through all the details of how those transactions or transitions actually happen.

[Ed Bastian, CEO at Delta Air Lines]

We're really pretty confident now that by the second half of this year, that the pipelines will be more full, and we'll be able to restore a lot of the small and medium-sized communities that we've had to pull down during the shortage in the first half of the year. We are meeting on this really daily and weekly to make sure that this actually can materialize. Right now, we feel very confident that we can catch back up again as we get to the back half of the year.

[Edward Russell, Airlines Reporter at Skift]

Okay, thank you. One follow on. Have you had to park any regional aircraft as a result or exit any markets?

[Ed Bastian, CEO at Delta Air Lines]

We have had to exit a handful of markets. Mostly those are on prorate, they weren't directly scheduled by Delta. As of now, things that Delta had schedule control over, we have not closed any stations, although our partners have. What was the second part of that question?

[Edward Russell, Airlines Reporter at Skift]

Have you had to park any regional aircraft as a result?

[Ed Bastian, CEO at Delta Air Lines]

Oh, there are parked regional airplanes right now, but we expect those to return back into the sky, as I said earlier, in the second half of the year.

[Edward Russell, Airlines Reporter at Skift]

Thank you very much.

[Operator]

Thank you. We'll take our next question from David Slotnick with TPG.

[David Slotnick, Reporter at TPG]

Good morning. Thanks for taking the question. I wanted to talk a little bit more about premium leisure, which you mentioned at the Capital Markets Day and again today. What does that look like in the long-haul market particularly? Is that people who are able to pay for Delta One? Is that more affordable Delta One tickets? Is that more widespread premium economy or, you know, something else?

[Glen Hauenstein, President at Delta Air Lines]

Well, we've got big plans for our long-haul premium leisure sector. This year we will be ubiquitous in introducing a new product, Delta Premium Select, to the transatlantic marketplace, and that is really designed specifically for high-end leisure as well as corporate travelers whose travel policies don't include the flatbed Delta One product.

[Glen Hauenstein, President at Delta Air Lines]

Early returns on that are phenomenal, far above our expectations. As we get to ubiquity, we'll monitor that closely, and we'll report back to you. We're excited about that. We're excited about the enhancements that Ed talked about as we get to spring and summer on the existing premium products in the long haul.

[Glen Hauenstein, President at Delta Air Lines]

We think we have, over the years, developed a great suite of products that fit a lot of needs for customers, whether or not it's just basic transportation and getting there safely and on time, to the more luxury products with the flatbed seats and the luxurious amenities that come with that. A wide spectrum. If you think of where we started, we started with just a flatbed and a coach product. Now we have a full suite of five products that we can offer in the transatlantic marketplace. That will extend to all of our internationals by 2023.

[David Slotnick, Reporter at TPG]

Thank you.

[Glen Hauenstein, President at Delta Air Lines]

Cody, we have time for one final question, please, before we have Ed wrap it up.

[Operator]

Thank you. We'll take our final question from Robert Silk with Travel Weekly.

[Robert Silk, Journalist at Travel Weekly]

Good morning, guys. I think you said you expect. I think Glen said you expect the pilot shortage or I guess the flow-through to sort of resolve itself as the year progresses. Now explain to me how you expect that to happen to get more people, just to get more pilots coming back into the system.

[Glen Hauenstein, President at Delta Air Lines]

Really, there are no shortage of pilots wanting to come to us or really to our regional partners. It's a matter of them getting through the training and getting into the right seat with the right number of hours. That's what we're working through as we look to resolve the current staffing issues there, is how long does that take to really catch up and when we'll be in a position to start growing those regional players again.

[Robert Silk, Journalist at Travel Weekly]

Okay. I guess that answers my question. Thank you.

[Ed Bastian, CEO at Delta Air Lines]

Well, thank you everyone. I want to wrap up here and appreciate your time this morning. Thank you for joining us. I particularly want to thank once again the Delta employees for the amazing work they have done over this course of this last year, congratulate them on this special profit-sharing payment, which we're thrilled to be able to award them with.

[Ed Bastian, CEO at Delta Air Lines]

I realize that we're making really good progress. You know, Omicron has been a challenging period of time, but we've learned from it. There's new findings, and one of the most important findings is that we're going to move through this thing quickly and get to a point of stabilization in our views.

[Ed Bastian, CEO at Delta Air Lines]

With that, being that we are in the state of Georgia, we have to close with a GoDawgs, and congratulations for our boys, the national champions. Thank you all for joining us today.

[Operator]

Thank you. That does conclude today's conference. We do thank you all for your participation, and you may now disconnect.

Participants

Executives

• Dan Janki, EVP and CFO
• Ed Bastian, CEO
• Glen Hauenstein, President
• Julie Stewart, VP of Investor Relations & Corporate Development
• Tim Mapes, Chief Marketing & Communications Officer

Analysts

• Alison Sider, Airlines Reporter at Wall Street Journal
• Andrew Didora, Managing Director at Bank of America
• Conor Cunningham, Analyst at MKM Partners
• David Slotnick, Reporter at TPG
• David Vernon, Senior Analyst at Sanford C. Bernstein & Co.
• Duane Pfennigwerth, Senior Managing Director at Evercore ISI
• Edward Russell, Airlines Reporter at Skift
• Hunter Keay, Analyst at Wolfe Research
• Jamie Baker, Managing Director and Senior Airlines Analyst at JPMorgan
• Leslie Josephs, Airlines Reporter at CNBC
• Mary Schlangenstein, Airlines Reporter at Bloomberg News
• Mike Linenberg, Managing Director and Senior Airline Analyst at Deutsche Bank
• Myles Walton, Analyst at UBS
• Ravi Shanker, Managing Director and Senior Equity Analyst at Morgan Stanley
• Robert Silk, Journalist at Travel Weekly
• Savanthi Syth, Managing Director at Raymond James
• Sheila Kahyaoglu, Managing Director of Equity Research at Jefferies