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

Thanks, Cathy. Good morning everyone, and thanks for joining us for our December quarter and full-year 2020 earnings call. Joining us from Atlanta today are our CEO, Ed Bastian; our President, Glen Hauenstein; and our Interim Co-CFO, Gary Chase. Our entire leadership team is available for the Q&A session. Ed will open the call with an overview of Delta's performance and strategy, Glen will provide an update on the revenue environment, and Gary will discuss cost liquidity in our balance sheet. We have extended our call today to 90 minutes total to make sure we have plenty of time for questions. For analysts, we ask you to please limit yourself to one question and a brief follow-up, so we can get to as many of you as possible. After the analyst's Q&A, we will move to our media questions. After this, Ed will provide some closing remarks. Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements. Some of the factors that may cause such differences are described in Delta's SEC filings. We 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'll turn the call to Ed.

So thanks, Jill. Good morning, everyone. This morning we reported pretax losses of $2.1 billion for the December quarter, and $9 billion for the full-year, capping the toughest year in Delta's history. We've been saying all along that this recovery wouldn't follow a straight line, with demand choppiness as COVID infections rose across the country, and government and public health officials issued travel advisories, our revenues of $3.5 billion for the fourth quarter was just 30% of last year's levels. And although we still have the tough winter ahead of us, we're encouraged by the progress that's been made on the vaccine front, and are confident that Delta is positioned to successfully lead our industry into recovery as the year unfolds. While 2020 was a challenging year, we delivered results for all of our stakeholders. For our employees, we prioritized protecting their health and safety, and preserving our culture. For example, throughout the past year we have offered and continue to offer an extensive employee testing program and paid protection programs for employees diagnosed, exposed, or at high risk of COVID-19. We have had remarkable volunteerism, up to 40,000 employees taking unpaid leaves throughout the summer to protect jobs and preserve cash. And in fact, we still have over 10,000 employees in the month of January out on unpaid leaves. And we have made it through this year without furloughing any employees. Our emphasis on taking care of our people is reflected in Delta's recognition this week by Glassdoor as one of the best places to work for the 5th year in a row, coming in seventh overall on a list of 100 large companies, the highest rank Delta has ever received, all in the face of a pandemic, really incredible work by our team. For our customers, we're keeping them at the center of our recovery. Our health and safety efforts on being the only major U.S. airline that continues to block middle seats, to partnering with leading names, like the Mayo Clinic, Emory Healthcare, Lysol, and Purell in developing the Delta care standard, to launching the industry's first COVID-tested transatlantic flights with no quarantine on arrival, are all targeted at restoring consumer confidence in travel, and reopening borders, which will be an important driver of revenue growth in the future. Our customers recognize the outstanding service our people provide with an all-time high December Net Promoter Score of 71, up 20 points year-over-year, and by Business Travel News naming Delta the top airline for corporate travelers for the 10th year in a row, and once again coming in first place on all 12 metrics that they measure in the survey. That customer preference and loyalty is what underlies our revenue premium, and has never been stronger. And finally, for our shareholders, we secured our liquidity position and rescaled our cost structure. We reduced liquidity risk by raising over $25 billion in capital since the pandemic began. With approximately $17 billion of liquidity, our adjusted net debt however only increased $8 billion year-over-year and we don't expect that net debt will increase going forward. We've swiftly removed cost from the business with three consecutive quarters of operating expenses declining by nearly 50% or more, increasing the variable nature of our cost structure. In fact, in the December quarter, our all-in unit costs were down 4.5% year-over-year despite flown capacity being down 44%. That is a remarkable achievement, and credit to all Delta employees for making that happen. And by keeping our cost under control we've leveraged the modest increase in net sales to reduce our average daily cash burns to $12 million a day for the December quarter, half of what it was in the September quarter, and a decrease of 90% since the early days of the pandemic in late March. Turning to 2021, we expect the March quarter to look similar to the December quarter, with March quarter revenues at 35% to 40% of March quarter 2019 levels, and our cash burn for the quarter holding at $10 million to $15 million per day. We expect that will be followed by an inflection point this spring as vaccine distribution continues, travel restrictions start to ease, and consumer confidence begins to grow, hopefully resulting in cash burn reaching breakeven or better by the second quarter. And as the year progresses, we expect demand will start to accelerate as vaccinations become more widespread and the virus is in a contained state, and customers gain greater confidence to make future travel commitments. This should enable a sustained recovery to begin in the second half of 2021, with a return to profitability this summer. So, as we work through this environment, we're focused on five things. First, as always, we're committed to keeping our culture intact and our employees engaged. The Delta people are our most strategic asset. We have done a tremendous job this year, and together we'll lead our airline through the recovery. Second, we'll continue to prioritize the customer with a focus on health and safety, and the maintenance of the industry's strongest network, thereby increasing loyalty and preference for our brand. Customers have shown they are willing to pay more for the quality of our network, product, and our service. The gains we have achieved in customer satisfaction position us well to drive sustainable revenue growth in the future. Third, we'll maintain our focus on innovation, which will enable our employees to improve the customer experience and drive efficiency through the business. And innovative thinking will power our ability to tackle big challenges in front of us, like our goal of achieving carbon neutrality in the next decade. Fourth, we'll drive a competitive cost structure. Given the changes we've made over the last year, our goal is to sustain our non-fuel unit cost at or below 2019 levels by the December quarter of this year, on roughly 75% of 2019 capacity levels, displaying continued agility in managing our cost. And finally, we are committed to debt reduction and creating long-term shareholder value, including continuing to protect our owners so that they can participate in future upside without dilution, because for investors while the near-term demand path is murky, industry fundamentals remain intact. Following almost a year of subdued travel, customers are beginning to exhibit behavior that is indicative of pent-up demand. Shopping visits across Delta's digital channels are significantly outpacing the passenger volumes we're carrying. In our most recent corporate survey, 40% of respondents expect full recovery by 2022. Our partners at American Express are also seeing encouraging signs, whether it's cardholders holding on to their points in anticipation of redeeming them for air travel, for a recent survey that suggested approximately 70% of respondents expect to take a trip in 2021 after not traveling in 2020. Although it will take time, customers want to travel again when they feel it's safe. They feel they've had a year of their life taken from them, and they're starting to get ready to reclaim. Until then, we're fortunate to have the support of the U.S. government which recognizes the importance of the airline industry, and we thank Congress and the administration for passing the COVID relief bill last month. As a result of that bill, we anticipate receiving approximately $3 billion in additional payroll support funds, largely on terms similar to the initial CARES Act program. These funds have been critical in saving thousands of industry jobs during an unprecedented level of demand decline, and it's why the U.S. airline industry is in the best position to recover from the pandemic over any other international market. So, while 2020 was a difficult year and challenges will continue in 2021, I'm encouraged by some of the data that we're seeing, and I'm proud of the foundation that we built at Delta. This company is well positioned to emerge in a stronger competitive position from this crisis, and we'll continue to lead our industry in the years ahead. And with that, I'll turn the call over to Glen.

Thanks, Ed, and good morning everyone. As Ed mentioned, we started the December quarter seeing encouraging demand trends, but with rising COVID cases and travel advisory we began to see some weakness around Thanksgiving and into December. Despite that softness, the peak periods continue to outperform non-peak periods, and we've seen sequential improvement in total revenues, which recovered from being down 80% in the September quarter to down 70% in the December quarter on salable capacity that was down 62%. On January 3, we had a $15 million ticket revenue day and carried more than 250,000 customers. Both of these were the highest since the onset of the pandemic. And despite having meaningfully less inventory per sale giving our middle seat block, we outperformed on passenger revenue generation in the first nine months of the year. This is a testament to customers' willingness to pay a premium for the Delta difference. Leisure markets and sun destinations are the best performers in our network, with our approach of targeting salable capacity to match demand we are biasing restoring capacity to leisure markets. As a result, roughly one-third of our domestic capacity is currently deployed into leisure destinations. Our coastal hubs, especially New York and Boston, are still some of the weakest areas in our network with demand in those hubs only 20 to 25% recovered. International demand remains weak and is limited to essential travel. That said, we continue to work towards opening additional COVID-tested lanes of travel with no quarantine on arrival similar to our Atlanta and Rome - Atlanta to Rome and Atlanta to Amsterdam flights. This will be important in restoring confidence in long-haul international travel as vaccine rollouts continue. Our premium seat strategy is holding up well. Domestic premium revenues performed in line with main cabin in the quarter. A good outcome considering that we are continuing to operate in a largely leisure-driven environment with a higher proportion of premium seats held back due to our middle seat blocks. As all of you are aware, corporate demand continues to be depressed and was only 10 to 15% restored for the quarter. Corporate revenue was about 3 points higher than the September quarter with small and medium accounts, which make up half of our corporate revenue, recovering five points faster than large corporates. While the passenger revenue environment remains challenging, we are encouraged that efforts to diversify our revenue streams have paid off. Our American Express remuneration in 2020 was nearly $3 billion, down only 30% on a year-over-year basis. In fact, American Express has shared its spending on our co-branded card portfolio has performed in line to slightly better in their overall card portfolio spend in 2020. In the December quarter, MRO revenue was down almost 30% relative to the same period last year while cargo revenue was up 10% on a year-over-year basis. This marks the first quarter of cargo revenue growth since the December 2018 quarter. Our December quarter results reflect the challenges that the pandemic has brought not just to Delta but to the entire airline industry. I am incredibly grateful for the efforts of the entire Delta team in managing through the challenging year that we faced. Now that we think about 2021, we see three distinct phases to the year. And for each phase, we have levers to help us react to the emerging demand environment. In the first phase, we expect demand shopping to continue. The booking curve to remain more compressed and results to be similar to the December quarter. In response, we are focused on making sure that our sellable capacity largely aligns with the emerging demand environment. For example, our January and February domestic schedule seats will be down 3 to 6% versus the non-holiday period in November. That will result in our March quarter sellable capacity being approximately 55% lower relative to the same period in 2019 consistent with the expected 60 to 65% revenue decline. We will also continue to leverage our non-ticket revenue streams like cargo, royalty, and MRO that we believe should continue to outperform passenger revenues. In the second phase, vaccination distribution continues, travel restriction and advisory begin to ease, and customer confidence begins to grow. As that happens, we expect to see an extension of booking curve resulting in a cash-led recovery with revenue recovery to follow. We anticipate this will happen in the spring and will result in us achieving our cash burn breakeven targets. In response to the second phase, our middle seats will be a very powerful tool for us, one we can use to add capacity in a very cost-efficient way generating a meaningful margin tailwind. In the final phase, vaccinations become more widespread and offices begin to reopen. We expect that to occur in the second half of '21. And as a result, we expect to see a sustained improvement in demand with progression in cash generation as the booking curve normalizes. With the recovery initially fueled by leisure demand, Delta's success will be driven by our superior connecting economics through our core hubs domestically and our partner hubs internationally. The 34 new aircraft deliveries this year will also leverage high gauge and more efficient aircraft that produce lower seat cost, more premium seats, and a better customer experience. This will allow us to capitalize on our brand affinity and upsell opportunities, which are enabled by the elimination of change fees for U.S. customers and the redemption of e-credits. It will take longer for corporate demand to return, but we are encouraged by the results over a recent corporate survey. Our corporate accounts are telling us that they largely anticipate returning to their offices and travel in the June and September quarters. They are also telling us by the end of '21, half are expecting to return to 50%, to 100% of pre-COVID domestic travel, and up to 50% of pre-COVID international travel. To our corporate customers, our commitment to you remains unchanged. Delta is ready when you are. We will be ready to serve our corporate customers by leveraging the strongest domestic and international networks, rebuilding focus cities, and point-to-point flying based on customer needs and by capitalizing on our efforts to always put the customer experience at the center of what we do. We're optimistic for the future, having built the right foundation and focusing on what we can control. We are confident in our ability to successfully navigate the post-pandemic recovery. And with that, I'll turn the call over to Gary.

Thanks, Glen, and good morning everyone. Let me touch on the fourth quarter in 2020, and then I'll turn to the outlook for costs in the balance sheet as we head into '21. Our December quarter pre-tax loss of $2.1 billion is about $500 million better than the September quarter, given the revenue improvement Glen just discussed combined with strong cost discipline. We reduced costs by approximately 50% from 2019 levels for the third consecutive quarter. More importantly, our costs were up just 6% from the third quarter on 30% capacity growth. And three quarters of that increase came from higher fuel. Total unit cost including fuel was down 4.5%, compared to 2019 on 44% lower flown capacity. Our average daily cash burn for the December quarter was $12 million, half of the third quarters $24 million. We closed the year with $16.7 billion in liquidity and adjusted net debt of $18.8 billion up about $8 billion versus year-end 2019. Now, as we look into the year ahead, improving demand fundamentals will underpin a transition of our financial focus from protecting our liquidity to positioning the company for a return to profitability and free cash flow. I will explain our approach to costs on our balance sheet as we make this transition. Let's start with costs. We need to stay flexible and maintain our discipline in order to position the company for the return to profitability Ed mentioned, as we expect continued choppiness and demand in the early part of the year. We've already taken structural steps to resize our business. Our two largest cost drivers, fleet and headcount are both 15% to 20% smaller than they were in 2019. Headcount reductions were a difficult, but necessary decision. It was hard to see 18,000 talented and dedicated co-workers leave, but it's a testament to the Delta culture that these reductions were achieved entirely through voluntary means. We accelerated our fleet transformation by retiring aircraft with relatively short remaining lives and simplified our fleet by eliminating two entire families while increasing our gauge, on a run rate basis, these changes will derive more than $400 million in annualized cost benefits. As we add capacity in '21, we will drive higher utilization of our system and we have room to rebuild our network from current levels at low incremental costs, approximately 40% to 50% of our December quarter non-fuel CASM. Our goal is to produce and sustain non-fuel unit costs below 2019 levels by the fourth quarter; that cost focus will be a key driver of profitability later in the year when demand returns. Looking to the March quarter, we're preparing for stronger demand by reactivating aircraft and restoring our people to full hours, driving about $200 million in additional costs versus the December quarter. Our March quarter total operating expense will be 35% to 40% lower than March quarter '19, with a total unit cost including fuel down 5% to 10% on approximately 35% lower flown capacity. Let's move now to capital, the balance sheet and liquidity. As we begin the year, conditions are similar to where we exited 2020; a modest uplift in net sales should offset the cost investments we're making in the quarter. And as a result, we expect average daily cash burn between $10 million and $15 million similar to the December quarter. With further improvements in net sales as customers gain confidence, we expect our cash burn to cease this spring. With that goal in sight, we're turning our focus to how we will balance reinvesting in the business while reducing our debt levels. Given our expectations for cash flow in '21 and proceeds from the PSP extension, we expect our current adjusted net levels to be the high watermark for that important metric. For the full-year, we're expecting $2.5 billion in gross CapEx, significant reduction from the $4 billion to $5 billion that we were spending pre-COVID. We have $1.3 billion of aircraft purchase commitments for 34 new deliveries this year, which we have the option to fully finance, and about $1 billion in non-aircraft CapEx. Including retirements, we expect our fleet count at the end of 2021 will be 15% smaller than at year-end '19, with total fleet declining from about 1,350 to about 1,130. An equal priority is to work on our balance sheet by reducing our liquidity and paying down debt. We have approximately $1.8 billion of debt maturities in '21, and $2.1 billion in '22. Our debt has an average interest rate of 4.6%, which will drive approximately $350 million in quarterly interest expense. However, we will begin reducing those expenses by paying down debt this year. We do not have mandatory pension contributions until 2025 under airline relief, but we expect to make at least $500 million in voluntary contributions this year. In terms of a quarter-end outlook, with about $3 billion in PSP support expected from the government this March quarter, we project ending the period with $18 billion to $19 billion in liquidity and adjusted net debt of approximately $18 billion. Let me close by saying this, the Delta difference has never been more important. And I'd like to thank the Delta team for delivering for each other and for our customers amid the industry's most challenging environment ever. Because of your dedication, we will emerge from the crisis stronger and more resilient than ever. With that, I turn the call back to Jill to begin the Q&A.

Thanks, Gary. Cathy, we're ready for questions from the analysts, if you could give the instructions on how to get in the queue.

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

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

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

We're not going to comment on our competitors or make any predictions. You know us well. We embrace competition, and I believe it helps us improve.

All right. Appreciate it. Thank you.

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

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

And, Jamie, I'd like to add to Glen’s comment. We're still working obviously with the CDC. We endorse and support the testing requirements they've put in place. But a new feature is the inclusion of rapid testing into the mix, so it doesn't necessarily mean it only has to be a PCR test. And with the growth of antigen testing, the quality of antigen testing that's out there and the supplies in place you literally could get some of these tests done within a 10-minute interval shortly before you return.

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

Jamie, I think what I would say is it's obviously less than today. We need some time. We have I think some work in front of us to think through where we ultimately want that to be. But I think the important point is we're getting started, and I think you see some of that. During the quarter, we prepaid our term loan that matured in April, for about $3 billion. We mentioned during the script that we do plan to make a pension contribution which, as you know, we consider part of our financial obligation. So we are getting started. We don't have more specifics, but we are getting started. And we're very focused on that $350 million number that I described, and using the liquidity that we have, where it makes sense to drive that down.

And just a fine point on PSP, a simple yes or no question, have the terms been achieved, and if so are they the same as the first round? Thanks.

Yes, Jamie, it's Peter Carter. The terms are identical to the PSP 1.

Perfect.

We've already signed the agreements with the government.

Thank you, everybody. Take care.

Okay, thanks, Jamie.

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

Yes, Hunter, it's an interesting year. We haven't made a decision beyond the end of March regarding when to unblock the middle seats, but we have time to consider that. I believe it will largely depend on customer demand, their feedback, and their confidence in the seating. However, we are definitely generating a significant premium from that decision.

Hunter, to quickly follow up on that, there are two approaches we discussed last year. One involves adding more premium seats, and the other focuses on maintaining lower load factors. As we progress with our fleet transition and increase the percentage of premium seats, our main strategy to meet the demand from premium customers is to consistently enhance the quality we provide to them.

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

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

Okay. And then just one more quick question since we have 90 minutes. It's a follow-up on Jamie's question. Peter, have you negotiated the new strike prices for those attached to PSP 2?

We have and it's $39 and some change.

Thank you.

Hi, good morning, everyone. Glen, my first question is for you and it might be a bit challenging to answer. I'm curious about how you are approaching the tradeoff between loads and load factor as you navigate through the different phases of recovery that you mentioned. As travel restrictions begin to ease, do you think you can stimulate more demand through pricing, or is there enough pent-up demand in the network now that the load factor is a key driver? I'm interested in your thoughts on this.

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

And certainly helps a bit. Ed, I know Gary provided some details about capital expenditures this year. How do you view those for the upcoming years, particularly considering your plans to reduce leverage? What conditions would you need to see in order to feel more confident about placing new aircraft orders? Thank you.

Well, Andrew, I think we're a little early yet in terms of thinking about the long-term CapEx fixture thinking that we move $5 billion of aircraft CapEx alone over there to Airbus out over the next several years. You know, to a degree to which we want to take positions and new positions coming up, we'll continue to evaluate that based on demand. But right now, I feel pretty comfortable with where we sit.

Great. Good morning, everyone, and thanks for taking the questions. Gary, can you talk about some of the structural things that you've taken out of the cost structure? Can you reach that CASM target by the end of the year? And I think you made a comment about incrementally like 40% to 50% of your fourth quarter CASM there'd be variable event, if I hear it right.

Yes, Brandon, to address your first question, the primary structural costs in our business are headcount and fleet. The fleet significantly influences our infrastructure costs. We anticipate achieving leverage on all asset-related costs, with about a third of our monthly cost structure being fixed. As we grow, we'll benefit from that leverage. We also see opportunities for improved utilization of our overall system. In terms of our efforts, which relates to your second question, there are two main points that we focus on. First, we aim to baseline aggressively, concentrating on the current cost structure and assessing its viability. This is reflected in the 50% reductions we've reported over the past few quarters. Second, we emphasize leveraging the build, which involves being intentional about optimizing the system as we begin to expand. Regarding your second question about incremental costs, our approach is straightforward: it’s the change in cost divided by the change in ASM. We aim to provide guidance on the leverage we expect as we increase our capacity by 40% to 50% in December. Notably, the second half of 2020 performed significantly better, which is why I highlighted scaling the system, especially in the fourth quarter, in my prepared remarks.

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

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

Robin, we're not surprised by that. These are small business owners who need to get out to their customers who have to work hard every single day to keep their sales and their business moving. And we do see a meaningful continued improvement in small business traffic, some that we can measure, others that we can't say, they're not under contracts with us, but we know that consuming important part of overall business travel. But I do want to talk about the overall corporate travel results. As you probably know, we extensively survey our corporate customers, our large corporate customers on a quarterly basis, in addition to just being with them on a weekly basis as to their thoughts on the return of travel. And the most recent survey that we conducted, which just ended a couple of weeks ago, indicated that 40% of our big corporate customers expect they will be fully back to 2019 levels by 2022. And another 11% said that they expect to be fully back by 2023. So that's little over 50% of the customers and these are the people everyone's speculating what's going to happen to business travel, these are the customers who make those decisions, 7% said we'll never be back to 2019 levels, only 7%. And 42% said they weren't sure and needed more time to figure it out. So with all the dialogue and speculation around the depth of business travel, just looking at that survey, it's very interesting. If you take the 51%, that said they'll be fully backed by '23, the majority of which is in '22. And then you consider the second quadrant of 50%, who said they'll never return or they're not sure if their return. And even if you assumed only 50% of their travel returns; that gets you 75% of the way back no later than '23, and I think that's a very pessimistic view on business travel. So what we've been talking about corporate travel, business travel returning, I felt optimistic when I saw those results, we know it's going to be different going forward. As I've said many times, it could be 10% to 20%, lower over a period as it's substituted and complemented, there'll be different types of travelers, different reasons for people traveling. But I think business travel has got a very, very strong opportunity return over the next two years, and we're going to be well positioned to carry.

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

I think that the Delta difference has never been more pronounced than it is right now. And if you look at our share of corporate travel that is traveling, we have experienced the highest levels in our history. So, demand for our products and services is incredibly high for people who want it. And I think that's where our challenge remains is to continue to provide industry-leading products and services that our corporate travelers want and need. And that's been what we've been doing over the past several years. And what we'll continue to do as we get to the end of this pandemic, and I think that's going to be what differentiates us. And clearly, there's always people who would like to take that travel away from you, because it is some of the highest yielding travel in the system. But I think that's our goal. And our mission is to stay ahead of that and provide it to people who want to fly Delta. And as opposed to a push, which is, 'Hey, we can lower fares and triumphs, move to all the sides for the bottom of this.'

Very good. Thank you.

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

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

Maybe just a little bit on our redemptions for the E-credit suites, we're running in the low to mid-teens right now in terms of total revenues, with the E-credits coming back, and we expect that to stay below 20 as we move through this next period here.

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

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

Yes.

Okay, great, understood. And I know you guys have one of the furthest out periods through which people are doing, so that makes sense. Maybe one of the cost structure of course, the pandemic has created a lot of pain for the industry. But I don't want to glaze over that. But, outside of speeding up your fleet simplification, have you found other opportunities to make the operation more efficient, perhaps maybe speeding up some of your automation plans in the customer-facing side, wanted to share about other opportunities maybe born out of crisis? Thank you very much.

We have Katie, I'm not sure we're going to get into some of the specifics. I will say that the fleet simplification has been something actually, that we think is in our run rate. Today, you're seeing some of the benefit in the fourth quarter. But it is something that will have a much bigger impact as we move to rescale the network through '21. When I mentioned the concept of leveraging the build and maybe one of the reasons I'm thinking through it, just as I'm thinking through it is there are a lot of things that we want to think about doing differently. One of the unique opportunities, we always want to make something good out of what has transpired. And it does give us an opportunity to start fresh. One of the reasons I think we're showing the kind of leverage as we rebuild is because we have a clean sheet of paper in some sense to start from.

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

Yes, definitely fantastic staff, they're able to tell it earlier. Well, thank you all for the time.

Thanks, Gary. Cathy, we're going to have time for one more question from the analysts if you can see that.

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

Yes, corporate travel being back.

Got it, okay. Understood, it's helpful. And my second question, just it's clear that you're not seeing any elongation of the booking curve yet at this stage. But what about clicks or looks, stopping short of actual bookings? But is there any data like that, that you're tracking analytics on the Web site, something like that, that provide the basis for your recovery outlook on Q1 and sort of saying that you have a good shot of P&L break even in Q3? Or you just hopeful that that's going to be the case? Are there any analytics that you can share with us, that maybe give you a better indication, thank you for the time.

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