Delta Air Lines, Inc.

Good morning, everyone, and welcome to the Delta Airlines September Quarter Financial Results Conference Call. My name is Cassidy, 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 Grew, Vice President of Investor Relations. Please go ahead.

Thanks, Cassidy. Good morning, everyone, and thanks for joining us for our September quarter earnings call. Joining us from Atlanta today are our CEO, Ed Bastian, our President, Glenn Hauenstein, and our CFO, Paul Jacobson. 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. Glenn will provide an update on the revenue environment, and Paul will discuss cost liquidity in our balance sheet. We'll then go to our Q&A and ask you to limit yourself to one question and a brief follow-up so we can get to as many analysts as possible. Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements. Some of the factors that may cause such differences are described in Delta's SEC filings. We'll also discuss non-GAAP financial measures, and all results exclude special items unless otherwise noted. You can find a reconciliation of our non-GAAP measures on the investor relations page at ir.delta.com. And with that, I'll turn the call over to Ed.

Well, thanks, Jill. Good morning, everyone. Appreciate you joining us today. This morning, we reported a $2.6 billion adjusted pre-tax loss on a 79% decline in revenues for the September quarter. We ended the quarter with over $21 billion in liquidity, having brought our cash burden down to $18 million per day in the month of September. And while we still have a long road ahead of us when you look through the large toll that the pandemic has taken, we are showing progressive improvement across the business, performing well on factors within our control and ensuring the company is well positioned as demand starts to return. And there are signs that customers are becoming increasingly confident in returning to air travel, with TSA counts growing each week. But we are still running at a fraction of our normal capacity and expect that our December quarter revenues will be 30% to 35% of what we saw a year ago. To put that improvement in context, our revenues bottomed out in the second quarter at only 10% of prior year levels. We're at 21% of prior year levels in the third quarter, and we expect them to be roughly one-third of prior year levels in the fourth quarter. Steady improvement, as Q4 is expected to generate three times the revenue of Q2, but still a long way to go. To see a meaningful step up in demand from here, we'll need business travel to further improve, local quarantines to end, and international restrictions to lift. That will only come with widespread advances by the medical community and offices reopening which many expect will start to happen in the first half of next year. As we all know, the path to revenue recovery is dependent on demand returning at scale. Until then, our focus is on doing a great job at what we can control, taking great care of our people and our customers, protecting our liquidity, and managing our cost performance. For our customers, we continue to emphasize safety and health with the DeltaCare standard, our multi-layered approach that includes intense cleaning protocols, blocking middle seats, and requiring masks on board our planes. According to IATA, with over 1 billion air travelers worldwide in 2020, there have only been 44 documented cases of suspected COVID transmission on board an aircraft, and virtually all of them were in the early months of the pandemic, before masks and revised safety protocols came into existence. We carry at Delta over 1 million people a week and have had no documented transmission on board any of our aircraft. The DeltaCare standard works, and it's keeping our customers and our employees safe. And as a result, customers are increasingly becoming comfortable returning to the air. Our customer-focused approach is producing record net promoter scores, which reached 75 in September, which is up a staggering 22 points over the prior year levels. This is a testament to the Delta people who have continued to shine throughout this historic crisis. By restoring customers' confidence in travel and investing in their long-term loyalty and trust, we're creating a path to sustainable revenue growth in the future. But we do believe it could still be two years or more until we achieve a normalized revenue environment. Until then, we will be smaller in the short term, but also more agile and more efficient. Today, we're already 20% smaller than we were at the start of this year, having reduced our fleet, our headcount, and our overhead. These were difficult but essential decisions that positioned Delta to emerge as a more resilient airline. We have resized our ground and flight attendant workforces by 20%. I'm grateful to all those employees for the sacrifices, from those taking early retirement decisions to the 40,000 staff who took unpaid voluntary leaves throughout the pandemic and thus reducing our labor costs for our non-pilot groups by more than 40% over the past six months. This was the driving factor that allowed us to avoid furloughs and protect their jobs. We are still working with ALPA and hopefully we can achieve that same result with our pilots. But if not, we will be furloughing roughly 1,700 pilots on the 1st of November. We've reduced our fleet by retiring more than 200 aircraft this year and accelerated our fleet simplification to retire nearly 30% of our fleet or 400 aircraft by 2025. Along with our revised Airbus order book, this cuts years off the timeline to achieving a higher gauge fleet with lower seat cost and a better customer experience. By making these structural changes to our cost base in this constrained environment, we will have significant cost and margin tailwind ahead of us as higher yielding business travel does return and our load factor caps begin to ease. And we are seeing early signs of our cost efficiency steps paying off as our fourth quarter all-in chasm is projected to be roughly flat despite a 40% reduction in capacity year over year. It's an incredible result. and creates nice momentum heading into 21. The challenges of this year have reinforced our belief in the importance of an investment grade balance sheet, and our top financial priority will be to regain that as soon as possible. The first step in that process is getting back to break even cash flow. We had initially hoped to be there by the end of this year, but as the virus has had greater impact on our business than expected, that goal has shifted a few months. We expect to average a daily cash burn rate of $10 million per day in the December month with good line of sight to positive cash flow by the spring. Once we achieve that milestone, we'll have a heightened focus on paying down debt. Putting all this good work into perspective, it's been about positioning Delta to accelerate into a post-COVID recovery. Do we know exactly when that recovery will happen or what it will look like? No. But by taking out complexity, simplifying our cost structure, improving our products and service levels now, and maintaining strong employee morale in the face of this challenging time, we do know that we'll be even more customer-focused with a stronger brand and a solid financial foundation. And with that, we will be well-positioned to adapt and to win. Now I'll turn the call over to Glenn.