Delta Air Lines, Inc.

Good morning, everyone, and welcome to the Delta Airlines March quarter financial results conference call. My name is Lauren, 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 Jill Greer, Vice President of Investor Relations. Please go ahead.

Thanks. Good morning, everyone. Thanks for joining us. We have a small team here in the room today, including our CEO, Ed Bastian, our President, Glenn Hauenstein, and our CFO, Paul Jacobson. The rest of our leadership team is on the line for the Q&A. The call today will focus on our response to COVID-19, with Ed giving an overview of our priorities and Paul giving an expense and liquidity update. To get in as many questions as possible during the Q&A, please limit yourself to one question and a brief follow-up. Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements. Some of the factors that may cause such differences are described in Delta's SEC filings. We'll also discuss non-GAAP financial measures, and 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 over to Ed.

Thanks, Jill. Good morning, everyone. We appreciate you taking time to join us today. The first quarter of 2020 has truly been like no other in our history. The hearts and prayers of the entire Delta family are with the thousands worldwide who have lost loved ones to this pandemic. None of us could possibly have anticipated the speed with which COVID-19 has affected the health of the world's people and slowed economies across the globe. This has led to an unprecedented situation where demand for near-term air travel dropped to almost zero in a matter of weeks. Our response has been focused on three priorities. First, protecting the health and the safety of our employees and our customers. Second, preserving our financial liquidity to work through this crisis. And third, ensuring we're well positioned to recover once the virus is contained and building a plan to accelerate our progress through this period of recovery. Nothing is more important than the health and the safety of our people and our customers. and we have substantially increased our investment in cleanliness across the organization. These include a wide range of safety and cleaning measures on our planes, at the airports, and across our facilities. And these actions won't end when the virus abates. We're taking steps to help our employees and customers practice social distancing. They include blocking middle seats, pausing automatic upgrades, modifying our boarding process, and reducing meal service and other touch points. I've always said we have the best team in the industry, and I want to thank all 90,000 of them for the incredible work that they are doing. Our employees are on the front lines in the fight against the virus, keeping our nation's airways open for essential travel, even as they worry about their own health. Our nation has a lot of heroes in this battle against the virus, and I'm proud of the men and women of Delta serving our nation in this time of need. The cares act payroll support program recognizes the important role our employees play in supporting the U S economy. And we are grateful to the president, members of Congress and the administration, and particularly secretary Mnuchin for their support and their leadership. On Monday, we received $2.7 billion of the 5.4 billion that's expected over the next few months. 3.8 billion of this is direct aid. with $1.6 billion in a low-interest, unsecured 10-year loan. When you combine this relief with our actions in the capital markets and our aggressive cost management, we expect to have at least $10 billion in liquidity at the end of the June quarter. Since early March, we've raised $5.4 billion in new financing and will likely raise several billion more this quarter. a strong indication of the confidence that the capital markets have in Delta. And while this will help ensure we have liquidity to weather the crisis, with a more than 90% expected reduction in revenues this quarter, we needed to quickly address costs to stem cash burn. We have taken actions to reduce our total cost base by over 50% in the June quarter. This amounts to a $5 billion reduction over the prior year which is impressive given the very short timeframe with which we've had to get this done. And it was the great spirit of the Delta people that were a big part of making that happen. Right now, 37,000 employees, more than one-third of our workforce, have elected to take voluntary unpaid leaves ranging from 30 days to one year, a significant personal sacrifice that I will forever be grateful for. This is helping reduce our daily cash burns. which started at $100 million per day in March down to $50 million a day starting next month in May. Paul will go into more detail on these cost reductions and the cash burn trajectory that we are seeing. After taking care of the safety of our customers and our people and protecting the financial liquidity of our enterprise, the third priority we have is starting to build our recovery plan. These are truly unprecedented times and the path to recovery is uncertain and will likely be choppy. And while we all wish we could predict the pace of the recovery, the truth is our recovery will be dictated by our customers feeling safe, both physically and financially, to begin to travel at scale. Given the combined effects of the pandemic and associated financial impact on the global economy, We believe that it could be up to three years before we see a sustainable recovery. And to succeed throughout that environment, we will likely need to resize our business in the near term to protect it in the long term. And while the resizing of our business over the short term is painful, it will also be an opportunity to accelerate strategies to streamline our company, simplify our fleet, and reduce our fixed cost base in ways not possible in the past. It will allow us to advance the timelines of some of our critical airport infrastructure projects as we don't have the same constraints that limited progress and drove higher costs to construct. We'll be focused on what it takes to regain consumer confidence to travel, and we are enlisting the very best medical advisors to help us navigate the journey from testing through to vaccines and helping translate those solutions to our business model. Safety will no longer be limited to flight safety, but personal safety as well. And while we may have more questions than answers about our path forward at present, one thing that is certain, it is that the strengths that are core to Delta's business, our people, our brand, our network, and our operational reliability are enduring. These advantages will continue to differentiate Delta and position us to succeed. In short, We have the same aspirations for our company today that we had a short 60 days ago. And while the path to recovery may take several years, there are many aspects to this crisis that will make us a better, stronger, and more resilient airline. In fact, I believe that the customer of tomorrow will place a higher premium on the quality of service than ever before. And that is our calling card, the strength of our brand, our reliability, and the service excellence of our people redefining personal safety for our customers and serving as the bedrock, not just for our recovery, but our acceleration into the future. So that is how we're navigating this crisis, taking the very best care of our customers and our people, preserving the financial liquidity of the enterprise, and building a plan to not just rescale the business over the recovery period, but to streamline it and accelerate progress on our long-term strategy. I'd like to thank all of our employees, our partners, our community and government leaders, our suppliers, our banks, our owners, everyone who is helping to contribute to protect Delta's long-term success. Our customers continue to send thousands of strong messages of support on a daily basis, which I greatly appreciate. And I also appreciate the great work of our leadership team in navigating a crisis in which we know we will prevail. Thank you all for that. And before I turn the call over to Paul, I have some good news that I hope you have all heard. As you know, Paul had announced his plans to retire on February 28, but we never left the office. And I personally asked him to reconsider, and he's graciously agreed. Paul is an incredibly important part of our team, and we're fortunate that he'll remain as Delta CFO. Paul?