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 will be your coordinator. At this time, all participants are in a listen-only mode until we conduct a question-and-answer session following the presentation. As a reminder, today’s call is being recorded. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

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 cost and our balance sheet. After the prepared remarks, we will take analyst questions and we ask you to please limit yourself to one question with a brief follow-up so we can get to as many of you as possible. And after the analyst Q&A, we will 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. Some of the factors that may cause such differences are described in Delta’s SEC filings. We will 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 will turn the call over to Ed.

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 of minutes discussing the current environment. As everyone is 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. 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 conditions in parts of the country, created some of the most difficult travel conditions that we have ever remembered experiencing. I am incredibly appreciative of the great work that our frontline team has done and continues to do to help our customers get to where they need to be as safely and quickly as possible, no matter the circumstances. 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. 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. So, while the new variant is not done, it appears that the worst may be behind us. 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 are 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. 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 are 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 is ahead of us. Reflecting 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 have deepened through the course of the past two years and I am extremely proud of our entire team for all their efforts. 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. 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. 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. 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 8 points from the September quarter. We started the quarter with lingering impacts to the prior variant but were 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. 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 are seeing some near-term hesitation and booking behavior given the prominence of COVID in our daily lives. That, combined with operational challenges that the industry is facing, consumers are delaying travel until case counts subside and industry operational reliability is restored. As a result, we are seeing the rate of recovery step down in the months of January and February to approximately 70% versus ‘19 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. 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% to 76% for the full quarter. 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 the first quarter to be the only loss-making quarter for the year. We are confident that we will generate a meaningful profit for the full year of 2022 as the recovery resumes and accelerates in the spring and 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. 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 will start seeing this spring as restrictions lift. Our three core priorities discussed last month remain unchanged: 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 the 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. 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. Moving past the final phase of the pandemic, I am confident that we will 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. Our ambition is to transcend the industry and create significant long-term value for all our stakeholders. Everything we have done during this long crisis puts us closer to achieving that ambition. Thank you again. And with that, I will turn the call over to Glen.

Thank you, Ed, and good morning, everyone. Like Ed, I couldn’t be prouder of what the Delta people accomplished during 2021. I want to congratulate our people on their much-deserved special profit-sharing payout they will 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. Total RASM was up 6% from the September quarter on a 7% improvement in yield. For the quarter, capacity was 79% restored versus 2019, 5 points below the industry as we maintained a disciplined approach to restoring our capacity. The strengths we have talked about last month at Capital Markets Day are evident in our December quarter results. First, we saw very strong demand during the holiday period. Domestic results were particularly strong, with holiday PRASM finishing up 8% versus 2019 and 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. 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 ‘19, 9 points better than Main Cabin. Fifth, our diverse revenue streams remain resilient. Amex remuneration during the quarter was more than 110% restored and cargo revenue was more than 160% of 2019 levels. 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 ‘21, 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. 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. Once case counts begin to decline, we expect revenues to rebound within 30 to 45 days. Additionally, we expect some of the January and February demand decline to be recaptured in the 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 between 83% and 85% restored, a few points below our initial expectation. This includes a more conservative approach to long-haul international flying that we expect to be 15 to 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. 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. 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 will turn the call over to Dan.

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 and 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. 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. Fuel expense of $1.6 billion increased 4% sequentially as fuel prices per gallon increased to $2.10. Total fuel expense included a $0.24 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. 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. We ended the year with $14.2 billion of liquidity and adjusted net debt of $20.6 billion. Now, on to 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 seasonally weakest of the year. The operational challenges have reduced our capacity outlook, and we now expect first quarter ASMs to be between 83% and 85% recovered to 2019. This reduction is a few points from our previously expected capacity recovery. In this environment, we are also paying higher crew premiums over time and COVID-related costs as we work through staffing challenges, mitigation of cancellations and protect our people. We estimate that this will impact the first quarter by $60 million to $70 million. The disruptions are impacting our first quarter non-fuel CASM comparison to 2019 by 3 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. 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 inflects to a 1-point headwind in 2022 as flying is restored. On a 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, 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. This is consistent with the framework and guidance we laid out last month at Capital Markets Day. Underlying our 7% to 10% full-year cost guidance, we expect non-fuel CASM versus ‘19 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. While we did not previously expect Omicron-related operational disruptions, there is still a lot of the year to unfold as it equates to both the 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 to $2.50. 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. 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. 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% to 10%, and gross CapEx of $6 billion. 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. 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 expect adjusted net debt to increase to $22 billion in the first quarter. As we achieve sustained cash generation over the next 12 to 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. The power of the brand and the strength of our 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.

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

Absolutely. Thank you. We’ll take our first question from Savi Syth with Raymond James. Please go ahead.

Hey, good morning, everyone. Maybe it is for Glen just early January is a fairly important time for booking into the rest of the year. I was curious if there is an – the impact on some of the forward-looking trends, Omicron is just maybe only impacting kind of close-in bookings. And also, just if there is any color on how it’s impacting kind of the different – the four different entities here?

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 the year. One is these five weeks that it’s impacting are five of the lightest weeks in terms of business travel. And two, as you indicated, it has really impacted more the close-in demand than the further-out demand. 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, so really not concerned yet about spring or summer. We feel that we will have a very, very robust demand profile for spring and summer. And while some of the bookings have been slightly delayed, we are still seeing the biggest magnitude of the impact affecting the next few weeks here. From a regional perspective, for all intents and purposes, Asia remains very constrained. We expect that to continue. Our restoration of Asia through the summer is very minimal. Europe, we’ve seen some countries imposing more restrictions. And at the same time, we’ve seen some countries trying to lift restrictions. You saw that in the UK, where restrictions were added and then removed. We’re anticipating even further loosening of those restrictions over the next few weeks in the UK. Ireland has come out with much less restrictions. So, I think everybody is preparing at this point for Omicron to be in the rearview mirror, and that travel will be much more restored for the summer than it was during any of the last two summers, which will lead to what we think should be very, very strong and healthy demand for transatlantic leisure travel this summer. And then Latin America has continued to be more resilient. Those restrictions have come off in many of those countries, and clearly, the short-haul Latin markets are performing well and long haul are continuing to improve. So hopefully, that gives you the color you need.

That’s super helpful, Glen. And I think you alluded to this as well that maybe 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 just wondering if you could help provide some color on just how much 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.

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

In the sense that, I guess, I don’t know if it’s like employee per aircraft or just like – you are hiring, but you’re also increasing your capacity. So 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.

We’re getting better positioned on staffing. We did hire a lot of people in ‘21 because we had a lot of people leave in ‘20. We’re looking at hiring several thousand people in ‘22. A lot of those are more longer-term flight attendants. Pilots take a while to get in the pipeline and complete the training. But I think I’m very comfortable with our staffing levels. Yes, there is a challenge; you can’t plan in advance for something that comes up overnight like Omicron, where the world decides to shut down for 60 days. And we’re going to get through this really quickly. I think we will be glad we have the staffing in place because I think it’s going to be in the bookings. Your earlier question, the bookings look very good post President’s Day looking forward and really haven’t seen a major impact at all compared to ‘19 expectations in that. We think it’s going to be a quick rebound.

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

Hi, good morning, everyone. Maybe as a follow-up to Savi’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 how many pilots you need to hire over, say, the next three years to kind of hit your capacity plans? And if regionals start to have a hard time finding new pilots in 2022, when do you think it would start to impact your and your other mainline carriers' ability to hire, if at all?

Thanks, Andrew. We’re hiring at the mainline somewhere between 100 to 200 a month presently. We expect that pace to continue for some period of time, certainly through ‘22 and into ‘23. 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. We are not experiencing any problems at all at Delta hiring and getting great pools of candidates. Delta is viewed as the premium airline that employees in general, but particularly pilots want to come work for, which we’re thrilled about. It is having an impact at the regionals, as you mentioned. We are seeing reduced flying in the first half of the year on some of the regional carriers due to staffing challenges mainly from pilot hiring. The largest regional partner is our own, which is Endeavor. We’re working closely with them to help mitigate some of the disruption and the churn that’s going on through the process. Interestingly, this is a normal period of time. It’s the next order of the crisis that we’ve all been through pulling through, and it’s actually going to be good. This is going to allow us to make sure that we pay good attention to the regional carriers and meet their needs. But at the same time, I’d much rather have the issue down there than at the mainline.

Understood. And then just one other question for me, I just wanted to – you mentioned a little bit, you talked a little bit about this at the Capital Markets Day. But back in December, you did announce that you were putting about $1 billion of new equity capital into three of your international partners. Just wanted to get your thoughts: why is it so important to Delta to have 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.

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. Long-term, our opportunity is international. When you think about growth and expansion, when you think about the natural opportunities that Delta has for the future, it’s going to sit in the international arena and working closely within it. International is complicated and competitive. It’s hard to advance a U.S. airline in international borders unless you have really good, strong partners. We’re fortunate to have great partners in the international marketplace: Virgin Atlantic, Air France, KLM, AeroMexico, LATAM, Korean Air, etc. But they have their own objectives and desires. We found over time that it’s very, very difficult through solely joint ventures or contractual means to enhance the customer experience and provide the very best quality of service if you’re just trying to do it through a contract rather than being in the room, influencing decisions to ensure that we’re putting our customer interest first. The growth will be based on customer preference. From everything we’ve done here domestically to grow brand preference, big opportunities for us now sit in the international market. We’re thrilled with the investments we’re making. Each of those investments has been documented thoroughly on paper. They’re good financial investments as well. We expect to generate significant returns and given the fact that we’ve already made notable investments in the past, it will allow us to recoup some of those past investments more easily by staying invested in the companies.

Great. Thank you for that, Ed.

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

Hi, 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 in the leisure front as you kind of moved through the quarter and into the first quarter? And then specifically, kind of you look out past Presidents’ Day, how booking activities shaping up there?

We usually don’t comment on future yields, but I can say that through the past quarter, the bottom of the business yield was about minus 25, which was in the September time frame, and 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, and I don’t think anything has really changed since then. So I think that’s the outlook I would give you, is that we think the structure is in good shape now. We need the traffic back.

Okay. And then 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?

Yes, absolutely. As you know, we check the pulse of our corporate clients very often. 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. 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 the fourth quarter. Office reopenings have been pushed out, as you know. But we expect, as Ed indicated, when we get to spring and summer, we will see a robust demand for business travel as people get back into their regular routines and feel safe traveling. So, we are really optimistic about those results and where we think this is going to head in the not-too-distant future.

David, this is Ed. The business travel, I’d say the best way to characterize it is kind of a wait-and-see. They are trying to understand what’s going on with Omicron and when their offices – if they are not back, when they are going to open. They are all making those decisions here. The good news is that, as we’re watching the case counts start to crest and peak here in our country and decline in certain early parts of the country that had the variant hit first, that’s giving them encouragement that they can get back and get their people in, open their offices sooner than maybe they were thinking when the first news of Omicron came. We’re in a pretty good place. When you think about the trajectory we saw over the fourth quarter, we saw a really nice growth in business, both small business as well as big corporates. Small businesses, as we pointed out at the Investor Day, is something we haven’t talked as much about historically, but it's a significant 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.

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

Thanks. Good morning, everyone. To kind of pick up on that last point, I mean, hopefully, the next few weeks is the last real disruption from the pandemic, especially with boosters, therapeutics and herd immunity and everything else. So if there’s genuinely light at the end of the tunnel, are you having conversations with the regulators on when we can fly without masks on planes and timeline, like full service being restored in the aircraft? Do you have a – has a big guess on kind of the timing of that?

I think it’s premature, Ravi, to speculate on masks on planes. Obviously, that’s going to be driven by the medical experts and not the airlines. We will follow their guidance. In terms of restoring service on planes, yes, we’re doing that pretty aggressively. Over the course of the next 2 to 3 months, you’re going to see our service patterns largely restored from where we were in 2019 and continue to make improvements. When I say restored, restored is not the right word; it’s going to be improved from where we were in ‘19. We’ve taken the opportunity during the pandemic to make substantial changes to the catering spec, who’s providing it. Took ownership positions in terms of kitchens; it’s going to be a big change that customers will be delighted about when they start traveling again back in the springtime, particularly internationally. The thing you were mentioning about the rapid move of the variant, I agree with you. There is a real silver lining here; the fact that this thing is moving so fast, it’s so infectious, so many people are getting it; it’s going to push the pandemic into a normalized environment here sooner than we would have liked. We talked about the uncertainty that Omicron presents. The good news is that the uncertainty is going to be short-lived. The path to normalization is something we’re even more confident in when we think about our ‘22 numbers and travel patterns. So it’s not all negative.

Understood. And just a follow-up, forgive me if I missed this, but is there an update on what premium cabin would look 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 COVID and the national come back? Thanks.

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. That’s something we want to continue to exploit as we think about how we service our customers moving forward and how we lay out the plans and what products and services we offer.

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

Hey, good morning, everyone. Two quick questions: one quick one for Glen. On the refinery, the revenue piece for the March quarter. I know normally you don’t give guidance there, but it has 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?

Yes, I think that’s the right way to think about it. Our jet consumption will be about the same in the refinery output. So keep it consistent, yes.

Very good. And then second question to Ed here. Ed, I think if you look across the industry right now, I think most airlines, their pilot contracts have now been opened. They are at an amendable point. Yours included. I think one of your competitors is trying to do a quick sort of 2-year extension. Can you just give us an update of where you are? 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.

Thanks, Mike. We did not furlough any employee during the pandemic, pilots included. Yes, we’re in a similar position, I guess, and some of our large competitors are as well, particularly relative to the pilot contract. 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 have probably put on hold. But we’re now getting ready to reengage, and we will see where that goes. But no, we’re not trying to do an expedited anything. We’re trying to secure a real contract with our people.

Thank you. We will take our next question from Jamie Baker with 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, as a move from a 1-day back to a 3-day testing requirement for U.S. reentering, is that specifically in your forecast? Is the guidance assuming that we get back to November 8 levels of sort of testing impediments? I’m only asking because as these headlines do improve, we’re going to be asked whether that’s incremental to the guide or not?

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 UK, who’s now on the backside of the Omicron, has now started to relax those restrictions, and we’ve seen other countries like Ireland relax as well. We’ve seen Israel relax on the margin. I think that’s what we would expect. I don’t think for a customer who’s traveling that the 1-day testing requirement that the U.S. has imposed is that all onerous. It’s pretty easy to take a proctored test with you when you travel overseas. I can’t speak to whether the U.S. government will revert to the previous policy. In general, once governments feel comfortable that they’re managing the variant, they have backed off restrictions; I think that’s what we’ll see in the future.

Okay. And then for Dan, the flat air traffic liability from third quarter to fourth quarter; that’s pretty unusual. Ordinarily, there is 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? I mean has there been any change in how you are accounting for travel credits? Also, having recently bought a Delta ticket and having forgotten to apply some existing credits, I can’t believe I’m the only passenger to experience this. I’m just trying to think through any implications of credit travel breakage and how that might influence the ATL going forward? Any color there?

No change, right? But I think we talked about this a little bit in the third quarter call that the reminder is that maybe historical seasonalities won’t apply as you’re restoring travel in the airline. That proved to be the case in the fourth quarter, and what we saw. You’re going to see a similar dynamic in the first quarter. Normally, that air traffic liability would grow; you have to account for the additional restoration as you progress towards the second quarter, that would change seasonal impacts. Just take that into consideration. The fourth quarter is a good proof point that you just can’t take historical practices into account, 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.

Okay, okay, it’s perfect.

To your question on credit. I don’t know if we announced it this week or not. We did. Good news. So we extended the expiration date through the end of ‘23. So you’ll be fine.

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

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

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

Yes. The trends haven’t changed and they are consistent, but we don’t actually give breakage as a percent of revenue.

Okay. And then just a broader question, as you look back at the business travel recovery that 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? It’s not a January 13 question; that’s the recovery you were seeing in the fourth quarter.

Yes. I think there is a correlation. A lot of business travel is triggered by visiting companies. When the companies are closed, it makes it more difficult to do that. It’s not a one-for-one. But the fact that particularly the big corporates, the overall level of corporate demand, volume return is actually correlated closely. Maybe it’s coincidence or not, but the numbers are pretty tightly aligned with the open offices we’ve seen.

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

Yes. Office is not the only thing. We have a lot of people traveling that aren’t back into the office yet. We have a lot of noise probably in the numbers, and there is a lot of choppiness. As you navigated the course, it felt like two or three pandemics over the course of 2021 with the various variants. We are 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 see their people, be with their customers, visit new opportunities and invest for the future. I think this is going to be a strong spring and summer. They are just waiting for the all-clear sign that you don’t have to worry about a variant while traveling.

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

Good morning, guys. Thank you for your time. So, you talked about Q1 international capacity being 15 points to 20 points lower than the industry. Maybe can you talk about what metrics you would 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?

Sure. I think we gave a pretty good outline of how we expect international restoration to occur, and I would say we haven’t changed from where we think we will be in the summer yet. What we have changed is the low season; the remainder of the winter IATA. We had some seasonal services starting up earlier than we would have otherwise done because we thought demand might return early. Now we are taking that down and moving those start dates to later in the year. We still remain very confident that once people feel it’s safe to travel, they will. As Ed said, once case counts decline, we expect demand to ramp up significantly. We will maintain our agility to adjust capacity. We expect to be 85% to 90% restored in the transatlantic market, probably less than 50% in the Pacific and largely restored in Latin America. We haven’t deviated from that yet.

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

We’ve competed with ULCCs for many years. Some of our highest return markets historically have been straight up against LCCs and ULCCs. We’re really not afraid to compete in those markets. We think our products stand on their own, and it’s a very different product and a different customer than they are going after.

Thank you. We will hear next from Conor Cunningham with 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 utilized the pandemic advantage. I was curious, is there a gating factor to you growing share from here? And if there isn’t, what are your expectations over the next couple of years for your share there? Thanks.

Conor, this is Ed. Yes, you are right. We did achieve meaningful and outsized share gain amongst the big corporates as they focused on premium. They appreciated the work we did around blocking the middle seats for the entire length of the pandemic while it was quite active. When companies come to Delta, they tend not to leave, which is a positive sign. The share tends to be sticky, and we work hard to ensure we maintain that. We have had good share gains in the past. Don’t get me wrong. We have it; we had plateaued at a pre-pandemic level. I would expect us to work hard to maintain that and, if we can grow it, we will. But I wouldn’t expect to see additional growth at that level for the next couple of years.

Okay. Great. That was a big move. And just maybe to take the other side of Ravi’s question, I assume there is going to be another wave of cases at some point. Each wave has been different, but could you just speak to lessons learned during this current wave? The reason why I ask is it 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.

I am proud of our team; it was a hellacious three weeks. Yes, there are learnings there, but the good news is we recovered quickly and restored operational integrity. It was not easy, but the fact that we have a strong, flexible workforce that does whatever it takes to ensure customers are well taken care of was important, and that showed through. One interesting aspect of the last few weeks of the Omicron surge was that demand was really strong. We didn’t see cancellations; cancellations were due to staffing issues. The resilience of customers wanting to travel is significant. As successive waves occur, people are getting more used to this as a virus we have to manage and live with over time—it’s going to be a seasonal virus. Doctors believe this, and I think we will see this. We have all the tools and technologies, and the capability and confidence to manage just that.

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

That’s a question, Myles, is way above my pay grade, national policy in China. It’s been interesting to watch many nations around the world manage it differently. As it relates to us, you’re correct. China is not a significant part of our network; we’d like it to be larger, but historically it hasn’t been. It’s going to be a pretty small part of our network at least for the next couple of years, and we’ll see beyond that. We look at where we put our metal according to demand. There isn't a strong demand for travel between the U.S. and China at this time, so I don’t see any alarming issues. However, once China and Asia begin to figure out how to transition to a seasonal virus, we will watch closely. We expect a gradual recovery momentum in Asia.

Okay. And just follow-up, Dan, on the other expense, non-operating other expenses for 2022. Anything to throw out there in terms of whether it’s interest or pension moving parts?

No. When you look at the total year for 2021, it was just around $900 million when you take the interest expense with the pension. It’s going to be about that level, slightly above actually. You are going to have a little less pension income. That interest expense line will start to really move down in ‘23 and ‘24 as you see adjusted net debt decreasing towards our $15 billion target.

Okay. Thank you.

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

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

Hey. Good morning. Thank you. A couple for me. Glen, I think it 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?

I think Scott is a very well-seasoned industry executive. He is positioned to add value over time. We will see when he gets here starting next week.

Okay. And then do your capacity planners talk to Dr. Tang when you plan the schedule?

Every day. Every schedule is now Tang approved. Thank you, Hunter.

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

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

I will take our first question from Mary Schlangenstein with 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 their travel, rebook or whatever and complete that travel during the holidays? Can you talk about that percentage?

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 destinations. It’s not something we enjoy doing, but we were able to get people to where they need to be for the holidays.

Okay. So, no notable or noteworthy amount of lost revenue through that?

Well, there was flying, and some customers decided not to travel. So, we estimated there was a $70 million hit for that. There isn't a substantial amount. If customers wanted to travel on Delta, we ensured we got them there.

Thank you. We will take our next question from Alison Sider with 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. How does that change the way you plan and staff for peak periods? If there is going to be a future brief, but dramatic flare-up like we just saw, would you have a smaller peak holiday schedule, or how does that change your planning process?

Our goal, Ali, is to ensure we meet customer demand. We cannot change customers’ demand and interest in traveling during peak periods. That’s when they want to go, and we need to be there to serve them. There are learnings from Omicron, as I mentioned on the analyst call. But probably the most important learning is that travelers are determined to travel, and they are resilient. We didn’t see mass cancellations. We didn’t see people deciding not to travel. This is another phase we have passed through. We don’t know if another pandemic-related virus will emerge, but we are now more prepared to manage travel behaviors in a normalized environment, which we are confident we can achieve.

Thanks.

Thank you. We will hear next from Leslie Josephs with CNBC.

Hi, good morning everyone. Just a question on hiring, can you update us on the number of people that you want to hire? And is there any detail on perks or increased salaries that you are offering to attract workers? If there is anywhere that you are having problems attracting workers, either work group or geography, I would love to hear that. Thanks.

Yes, Leslie. As you know, we hired a substantial number of people in the past year. I think it was around 9,000. We are going to be hiring fewer people this year. The number is still in the range of 3,000 to 5,000 depending on how demand shapes up. We’re not experiencing any notable issues in attracting people for this company. Regionally, there are some pressures in some higher-cost markets, particularly in the Northeast. However, we are having a very successful time bringing the team together without needing to offer unusual perks.

Thanks.

The ability to travel free is a great perk, and we have always had that at Delta.

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

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

We have taken about 20% to 25% of our regional flying down in the first part of the year. This stems from pilots flowing through to the mainline as well as ensuring proper training seats at the regional carriers. We expect the pipelines to be more full by the second half of the year, enabling us to restore many of the small and medium-sized communities that we’ve had to pull down due to staffing shortages early in the year. We are monitoring this daily and weekly to ensure we can manage it effectively.

Okay. Thank you. And one follow-on. Have you had to park any regional aircraft as a result or exit any markets?

We have had to exit a handful of markets. Most of those are on a per-seat basis, so they weren’t directly scheduled by Delta. Things within Delta's scheduled control haven’t closed any stations, although our partners have. We have parked regional airplanes right now, but we expect those to return to service, as I said earlier, in the second half of the year.

Thank you. We will take our next question from David Slotnick with 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 take? Is that a more widespread premium economy or something else?

We have 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, which is designed for higher-end leisure as well as corporate travelers whose travel policies don’t include the flatbed Delta One product. Early returns on that are phenomenal, far above our expectations. As we grow this product, we will monitor it closely, and we will report back. We are excited about enhancements Ed talked about as we get to spring and summer on existing premium products on the long haul. We have developed a suite of products that fits a lot of customer needs, ranging from basic transportation to quite luxury products, with flatbed seats and luxurious amenities. A wide spectrum. Starting from just flatbed and coach products to a full suite of five products that we will be offering in the transatlantic marketplace by 2023.

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

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

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

There are no shortages of pilots wanting to come to us or to our regional partners. It’s a matter of them getting through the training and fulfilling the right seat requirements. We’re working through those details to ensure transitions happen efficiently. The confidence is we hope to be back on track by the second half of the year.

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

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 are thrilled to be able to award them with, and realize that we are making really good progress. Omicron has been a challenging period of time, but we have learned from it. There is new information and one of the most important findings is that we are going to move through this quickly and get to a point of stabilization in our views. So with that, being that we are in the State of Georgia, we have to close with a Go Dogs and congratulate our employees on being national champions. Thank you all for joining us today.

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