Delta Air Lines, Inc.

Good morning, everyone, and welcome to the Delta Airlines December quarter and full year 2022 financial results conference call. My name is Matthew, and I'll be your coordinator. At this time, all participants are on a listen-only mode until we conduct a question and answer session following the presentation. As a reminder, today's call is being recorded. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

Thank you, Matthew, and good morning, everyone, and thanks for joining us for our December quarter and full year 2022 earnings call. Joining us from Atlanta today, our CEO, Ed Bastian, our President, Glenn Hauenstein, our CFO, Dan Jenke. Ed will open the call with an overview of Delta's performance and strategy. Glenn will provide an update on the revenue environment, and Dan will discuss costs in our balance sheet. After the prepared remarks, we'll take analyst questions. We ask that you please limit yourself to one question and a follow-up so we can get to you as many as possible. 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'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.

Thank you, Julie. Good morning, everyone. We appreciate you joining us today. Earlier, Delta reported our full year results, including our December quarter earnings per share of $1.48. on record revenue that was 8% above 2019 levels. We generated a 12% operating margin, our third consecutive quarter of double-digit operating margins, pointing to the strength of our recovery. I want to sincerely thank the 90,000 strong Delta team for their outstanding work in delivering these results and serving our customers during a very busy holiday travel season. In my opinion, 2022 was the most difficult operational year in our history, and was capped off by severe winter storms over the holidays. I am grateful to our employees for their great work to recover the operation while keeping our customers and each other safe. They are the reason our brand and customer loyalty is at the top of the industry. Our December quarter earnings per share and margins exceeded guidance, marking a strong close to a year where we made significant progress regarding restoration of our financial foundation. For the full year, we reported earnings of $3.20 per share on $46 billion of revenue. We delivered pre-tax income of $2.7 billion, an improvement of more than $6 billion over 2021. Delta's profitability led the industry, and in our nearly 100-year history, 2022 was our seventh highest result, even with a $1 billion loss in the first quarter. We were pleased to report positive free cash flow for the year, which funded $6 billion of capital invested back into the business, and we were paid close to $5 billion in gross debt. Sharing our success is a longstanding pillar of Delta's culture, and I'm proud to announce that we'll be paying our employees $550 million in well-earned profit sharing come Valentine's Day. 2022 came in ahead of our plan on revenue, earnings, and cash flow, demonstrating strong execution in the first year of the three-year plan we laid out at the 2021 Capital Markets Day. I'm incredibly proud of the team for rebuilding the world's best performing airline. And importantly, we're not just building back, we're continuing to improve and extend our competitive advantages. Delta's brand continued to strengthen in 2022 with record performance from our loyalty and co-brand card programs, and customer satisfaction scores consistently perform above pre-pandemic levels. Through the year, we've hired and trained 25,000 new employees, now representing over a quarter of the total company. Our team showed their operating talent and resilience as we retained our number one position and completion factor in on-time arrivals amongst our peer set, despite having so many new team members. The Delta brand is centered on our safe, reliable, and exceptional service, and our operational excellence was recognized by Cerium last week, which named us yet again the most on-time airline in North America. We fortified our international partnerships in 2022, positioning us for profitable international growth in the years ahead. As detailed last month, expanding our international margins to domestic levels is an important opportunity for Delta in the years to come. We've invested in the customer experience at every stage of the travel journey, from the continued refresh of our fleet with next generation, far more fuel efficient aircraft, to generational airport rebuilds and technology investments that are providing our employees better tools and our customers a more seamless experience. And we continue to attract and partner with leading brands to grow our SkyMiles ecosystem and further enable customers to use their SkyMiles during travel and beyond. Heading into 2023, our momentum continues. At the Consumer Electronics Show in Las Vegas just last week, we unveiled the next phase in our vision to connect the sky. Starting February the 1st, Delta will be the first major U.S. airline to provide fast, free, unlimited Wi-Fi to all through a free SkyMiles account. This will be available on nearly 80% of our U.S. system to start and growing every week. By the end of next year, we expect to deliver this service seamlessly throughout the rest of our international and regional fleets. And we debuted Delta Sync, which will create personalized experiences and engagement opportunities on the free Wi-Fi portal. We're partnering with great brands like T-Mobile and Paramount+, as well as building on our longstanding relationship with American Express to bring to life our vision of a more connected and personalized travel experience. As a trusted consumer brand, Delta continues to differentiate the premium flying experience, building loyalty, and supporting our ambition to transcend the industry. Moving to our outlook, at our investor event last month, we provided full year 2023 guidance for revenue growth of 15 to 20% year over year, earnings of $5 to $6 per share, and free cash flow of over $2 billion. We're affirming that guidance today. in introducing our March quarter outlook, which Glenn and Dan will provide in detail. For the March quarter, we expect to deliver a 4% to 6% operating margin and improve our pre-tax income by more than $1 billion compared to the same period last year. Importantly, we are embedding the assumed impact of all labor cost increases throughout our guidance metrics. We are pleased to have reached an agreement in principle with our pilots But out of respect for the process, we will not be discussing the details of the agreement on today's call. As I outlined last month, I've never seen a more constructive backdrop for the industry. Demand remains strong as passengers return to the skies and industry returns to the long-term trend to GDP, all while supply constraints continue. I believe our industry will see tens of billions of dollars of incremental demand in the next few years coming out of the pandemic. As the industry leader with a proven strategy and strong execution track record, Delta is well positioned to build on our momentum in the new year. We're confident in our ability to deliver significant improvement in earnings and free cash flow in 2023, consistent with a plan we laid out last month, and we are on track to deliver our 2024 targets of more than $7 of earnings per share and $4 billion of free cash flow. As always, we remain mindful of the macroeconomic trends and have demonstrated that we have the tools to effectively manage a changing economic climate. In closing, Delta delivered in 2022 outperforming our plan and leading the industry operationally and financially. We are uniquely positioned to grow earnings and cash flow in 2023, 2024, and beyond. The power of our premium brand continues to grow. And with the very best people in the industry, I couldn't be more excited about what's ahead for Delta and our customers. Thank you again. With that, I'll turn it over to Bud.