達美航空 (DAL) 2008 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Delta Air Lines fourth quarter and calendar year 2008 financial results conference call.

My name is Cynthia, and I will be your coordinator.

At this time, all participants are in a listen-only mode until we conduct the question-and-answer session, following the presentation.

(Operator Instructions).

I would now like to turn the call over to Jill Greer, Director of Investor Relations for Delta Air Lines.

Thanks, Cynthia and good morning everyone.

Thank you for joining us today to discuss Delta's December 2008 quarter and full year financial results.

Joining us from Atlanta today are Richard Anderson, Chief Executive Officer and a member of the Board of Directors, Ed Bastian, Delta's President and Hank Halter, our Chief Financial Officer.

Also joining us after the call during the Q&A session will be Glen Hauenstein, Executive Vice President of Network and Revenue Management, Mike Campbell, Executive Vice President of HR and Labor Relations, Paul Jacobson, Senior Vice President and Treasurer, and Ned Walker, Senior Vice President and Chief Communications Officer.

Richard will begin the call with a Delta and industry overview of 2008 as well as Delta's flight plan for 2009.

Ed will then address our 2008 financial performance and what the airline anticipates as we go into 2009.

Hank will then conclude the comments with a review of Delta's cost performance and liquidity.

We've allocated 25 minutes for executive comments.

After their comments, we've allocated 25 minutes for questions from the analysts.

We'll then conclude the call with a 10 minute Q&A for the media.

When we get to the Q&A, I'd like to request that you limit yourself for one question and a brief follow-up.

That should allow us to get as many questions in as possible during today's briefing.

Today's discussion contain 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 our SEC filings.

We'll also discuss certain non-GAAP financial measures.

You can find the reconciliation of those non-GAAP measures on our Investor Relations website at Delta.com.

And with that, I'll turn the call over to our Chief Executive Officer.

Thank you, Jill.

Good morning, everybody and thanks for joining us on the call today.

2008 was a successful year for Delta, filled with a number of pretty remarkable achievements in the face of very significant challenges.

Those challenges being high fuel prices earlier in 2008, and of course the difficulties in the worldwide economy that we face today.

Delta completed a historic merger with Northwest and a smooth integration process is well under way.

In 2008, we took quick and decisive action to reduce capacity in response to rising fuel prices.

We grew our top line much better than industry at 8%.

And maintained cost discipline while continuing to invest prudently in our employees and our underlying businesses.

And I think this is the really important part of the call, which is to separate the fuel hedging part of our business from the underlying airline business.

If we were buying fuel at market prices, we would have reported $167 million net profit in 4Q, excluding special charges, and we would have had an operating profit or would project an operating profit in the first quarter of 2009.

That's the key message.

When you separate what's happening in the fuel environment and look at the fundamentals of the core business, we think we're quite well-positioned and this is probably best illustrated by the fact that if you take the combined Delta NW, we had $160 million operating profit in 2008, despite a $4.5 billion run-up in fuel.

So the point is, is to really sort of look at the underlying business separate from the fuel.

As we've said repeatedly on these calls, we're really committed to capacity discipline and given the flexibility that our fleet gives us to idle airplanes, return airplanes and basically do it at no capital cost, it's given us the ability to adapt quickly to changes in fuel and the environment.

We've got a huge benefit coming from fuel prices coming down and we're confident that we'll hit the $500 million merger synergy target that we have given you and that's why we're expecting profitability in 2009 and a growing cash position in 2009.

But all of this wouldn't be possible if it weren't for the employees of Delta.

And they give all of us a lot of confidence that we'll be successful in 2009.

We've built a world class team that's done a really tremendous job and I'd like to recognize all of our folks for their very hard work.

Delta employees worldwide should be very proud of their accomplishments in 2008.

We dealt with significant challenges from volatile fuel prices to a global financial crisis, and in the midst of all of it, completed the merger in record time and all of it's been going quite smoothly.

The team never took their eye off the ball.

Our operation ran well as we built the world's largest airline.

The employees have done a nice job, taking care of our customers and we look forward to a successful 2009 under their continued hard work.

Now, I'd like to take everyone through a bit of our results for the December quarter and full year 2008.

For the December quarter, Delta reported a net loss of $340 million, excluding special charges and the impact of out-of-period fuel hedges.

That includes Northwest's results after the merger closed, so from October 30th through the end of the year.

Obviously, no one could have predicted oil would fall so precipitously from $147 per barrel in the summer, to less than $50 by the end of 2008.

As a result, our fuel hedges turned out to be an expensive insurance policy in the short-term.

But we continue to believe that a systematic fuel hedging program is the most prudent way to mitigate the impact of volatile fuel prices.

For the year, Delta reported a net loss of $503 million, excluding special items and that's despite a $2.3 billion increase in fuel costs from higher prices in the onset of the global recession.

Those results include Northwest from October 30th through December 31st.

Although we faced headwinds from volatile fuel prices in a deteriorating economy, 2008 was a distinguishing year for Delta and some key achievements really set us apart from the pack as the leading airline for employees, investors and customers.

We created the largest and best airline by closing our merger with Northwest on October 29th.

The combination gives us a leading global network, a versatile fleet, a strong financial foundation, and the ability to unlock $2 billion in annual synergies by 2012.

We have a high confidence level in that synergy target.

Our work with our pilots to secure a single pilot agreement and an integrated pilot seniority list paves the way for achieving those synergies.

We have completed seniority integration with our pilots, our aircraft maintenance technicians, our dispatchers, and our meteorologists, all within 90 days of closing.

We completed a new affinity card deal with American Express, giving us an immediate $1 billion liquidity boost and $1 billion in incremental value over the next two years.

That's $2 billion in additional cash over the next two years.

This further strengthens our world class Sky Miles loyalty program as it is the largest in the world and a very valuable asset.

We launched our Transatlantic joint venture with Air France last spring and achieved DOT antitrust immunity for a four way venture with Northwest KL.

This really cements our leadership position across the Atlantic.

We also strengthened our West Coast presence by enhancing our relationship with Alaska Airlines with a long-term internationally focused alliance agreement.

On the balance sheet front, in the quarter, we raised $1.7 billion cash in the quarter, which is really quite remarkable, given where financial markets are, and it really speaks to the power of the combination that we've created.

As I mentioned earlier, we led the industry in right-sizing domestic capacity, first in response to rising fuel prices and then to weakening demand.

And it's not just about taking capacity out.

It's also about having the discipline to eliminate all of the associated costs and the fact that it's probably most illustrative in terms of illustrating that point, DL, Delta on a standalone basis in the fourth quarter had non-fuel CASM decline to $0.0674 which was a reduction of almost one point, and the remarkable thing about that is our raw non-fuel CASM was lower than Southwest at $0.0682.

So what we've been able to do, consistent with our commitment to our investors, as we take aircraft out of our cost structure, we do it with no capital hit because we use airplanes that are being returned on lease or airplanes that are paid for, and then we take out all of the indirect costs.

We did this through voluntary workforce reduction programs which have resulted in a 6% combined reduction in staffing, or about 5,000 FTEs but we did it through voluntary programs which distinguish us from the industry.

So on DL in 4Q, our non-fuel CASM declined almost a point, and we've proven that we can eliminate both the cost when we take capacity out.

Finally, we ran a great airline in 2008 despite Air Traffic Control challenges, congestion and high loads.

Our baggage handling performance continues to improve.

For 2008, Delta and Northwest reduced the number of mishandled bags by 20 and 30% respectively compared to 2007, and our bag systems are operating at nearly a five Sigma level of quality.

So in 2008, we took action and built momentum in the business that we're carrying into 2009.

That's a good thing because we're facing a very different world this year.

As we all know, we're in a global recession and have been in one for some time.

And there is uncertainty about both duration and severity of the downturn.

At our investor conference in early December, we said we were assuming industry revenue would decline 8 to 12% this year.

That would be an unprecedented decline except for 9/11, and Ed will give much more color in terms of where we think RASM will be in the first quarter.

But we're better positioned today as an industry than at any other time to weather a down economic cycle and that's for two reasons.

First, unlike in previous recessions, where carriers were growing capacity, we're seeing a large amount of capacity coming out of the system and particularly from low cost carriers.

Second, Delta has, as I stated earlier, a good track record of staying in front of soft demand with capacity reductions and a corollary reduction in our unit costs to cover all the overhead that must come out when the capacity comes out.

The enormous benefit we'll see from lower fuel prices is another reason we're better positioned as an industry to deal with a recession.

Every $1 decline in crude oil translates to $100 million in expense reduction for Delta.

We paid an average of $100 a barrel in 2008 and we're budgeting for half of that in 2009.

That's $5 billion in savings on a run rate basis.

Combine that with $1 billion in savings from the system capacity reduction and a $500 million in synergy benefits, our revenues would have to decline more than 20% to offset those benefits.

So we're naturally hedged against reductions in revenue by reductions in fuel.

So we think there's more -- there's upside to more than offset the economic hit to revenue and as a result, we expect to be profitable in 2009 and build our cash position.

2009 will be a transition year for the merger.

We'll be focused on executing our integration plan, which has gone very smoothly since the closing.

Unlocking the full value of the merger synergies is dependent on achieving three key milestones.

First is the transition to a single operating certificate.

We need to get to a single operating certificate before we can fully execute the network strategy.

We already have the FAA approval on our plans to implement a single operating certificate, and our target is to have the single operating certificate in place by the end of this year.

Integration of technology is also critical and is an area that can cause significant customer dissatisfaction if it's not done well.

We are combining the strengths of the Delta and Northwest systems, under the leadership of Theresa Wise, our CIO, who came to us from Northwest to put in place a Best-in-Class technology suite.

We'll be integrating systems throughout 2009 and expect to be complete in 2010.

All of the system integration has been on track and we've had no disruptions from customers.

Finally, our employees are the glue that hold it all together and that's why it's so important to work toward completing all of our labor integration matters.

On January 7th, 2009, the National Mediation Board ruled that Delta and Northwest now constitute a single transportation system for representation purposes under the Railway Labor Act.

It is an important milestone in our efforts to align pay, benefits and work rules.

We've got seniority resolved now for 25% of our employees.

We did it in less than 90 days, and we're moving quickly to the finish.

In closing, we're in the midst of a challenging and uncertain economic environment, but the tools we have differentiate Delta from the rest of the industry.

We've got a strong set of globally diverse network assets.

Our flexible cost efficient fleet has allowed us to lead the industry in taking quick, decisive action with capacity reductions.

We will continue to do so as demand warrants.

And we will continue to lead the industry in that regard.

We're running a very good, efficient operation, actually quite proud of the fact that Delta -- on the Delta standalone business, our 4Q non-fuel CASM went down so we've demonstrated our ability to really manage costs well, while making the right investments in our business.

Our financial footing is strong with unit revenue outperformance and Ed will talk about that.

Our Best-in-Class costs and a very strong balance sheet and liquidity position, ending 2008 with 6.1, almost $6.2 billion in liquidity.

And unlike any of our peers, we'll also reap the benefits of consolidation.

So we're clearly well-positioned to navigate through a tough economy in 2009 and want to thank the entire Delta team.

With that I'll turn it over to my good colleague, Ed Bastian.

Thanks, Richard.

Good morning, everyone.

Thank you for joining us today.

Before I get started I want to echo Richard's appreciation to the Delta team for all their hard work and just outstanding effort through a tough 2008, and we're looking forward to a much better 2009.

It was an incredibly challenging year, and everyone stepped up to ensure Delta maintained its leadership position in the industry.

And we thank them all for their efforts.

For the December quarter, excluding special charges and the impact of out-of-period fuel hedges, Delta reported a net loss of $340 million.

The equivalent of $0.50 per share on a base of 682 million fully diluted shares.

These results include standalone Delta for entire quarter, and Northwest results from October 30th, through the end of the year.

Like to point out that these results are in line with the guidance we issued in December.

The negative impact of non-cash purchase accounting, which was not included in our guidance, impacted expense by roughly $80 million, or $0.12 of EPS.

On a GAAP basis, we reported a net loss of $1.4 billion in the December quarter, which included special charges totaling $1 billion.

The special charges included a $904 million non-cash charge for merger-related equity awards that issued or vested in connection with the merger, $65 million in merger related severance charges, and other merger related expenses, an $18 million charge associated with our move out of Concourse C at the Cincinnati airport and a $20 million impairment taken on our auction rate securities.

In addition, our GAAP net loss also included a $91 million impact for out-of-period fuel hedges.

These are contracts that were in the Northwest portfolio that did not qualify for hedge accounting.

If you would exclude the special items and the impact of the out-of-period fuel hedges, Delta reported a net loss for the full year of $503 million or $1.08 per share, on a base of 468 million fully diluted shares.

Again, those figures include Northwest results from October 30th, through the end of the year.

We realized interpreting our financial results may be somewhat difficult and choppy over the next few quarters, since under GAAP, we are required to compare our total Delta and Northwest results for the current period to the standalone Delta results in the prior year.

To better compare our performance, we'll give some non-GAAP results that we've called combined basis, which will have the full quarter's results for both Delta and Northwest in the current and previous quarters.

Any guidance we give today for the first quarter or full year 2009 will be compared to a 2008 period that will also be on a combined basis.

Turning to revenue, our reported total operating revenue was up 43% year-over-year in the December quarter.

On a combined basis, our total operating revenue was essentially flat in the December quarter, even though we had a 4% decline in system capacity.

On a combined basis, Delta's consolidated passenger unit revenue increased this quarter by 3%.

Yield was up two points while traffic was down 3 points on 4% lower capacity.

Domestically, passenger RASM increased 5%.

Domestic yields were under pressure as the economy worsened throughout the quarter.

However, because of our aggressive domestic capacity reductions, loads were up 3 points higher than they were in the prior year.

Our international passenger RASM was flat year-over-year, on a 9% capacity increase.

While total international yield was up slightly, the deepening global recession impacted yields, particularly in the Transatlantic and Pacific regions.

It's important to note that we generate a revenue premium to the industry.

Delta's combined consolidated length of haul adjusted passenger RASM as reported to the ATA was 102% of industry average for the full year 2008, and that includes both the Delta and Northwest full year results.

Now, turning to cargo, our revenue is down 24% year-over-year in the December quarter.

However, 18 points of that 24 point decline was due to proactive reductions of Northwest freighter capacity with a remaining piece due to general weakness in the cargo market.

And also for the December quarter, our other net revenue was up 17% to $826 million on a combined basis, largely driven by baggage fees.

Want to spend a few minutes on the demand environment.

While revenue advanced trends may not be encouraging, they are no worse than we had expected entering the year.

Several carriers who have already announced their fourth quarter earnings have described pressure on demand and yields and we're experiencing that as well.

While the early part of January benefited from holiday travel, we have seen more weakness in the back half of the month.

Domestically, book load factors are down 2 to 4 points for February and March and advanced yields are down 5 to 7 points.

The recession is clearly causing leisure customers to rethink or postpone some of their discretionary travel decisions until they see signs that the economy is starting to show some light.

We're also seeing the booking window narrow, which makes our forecast more difficult to predict.

Geographically, we're seeing the most weakness in Cincinnati and Detroit.

As well as some weakness in demand for the Delta shuttle.

On the corporate side, companies continue to trim travel budgets and as a result business travelers are purchasing their tickets further in advance to take advantage of lower fares and they're flying in the front cabin much less often.

Certain industries like financial services and automotive are significantly weaker while the aerospace and healthcare sectors have held up better.

Corporate travel is one area where we clearly see the benefits from the merger, as the world's largest airline with the power of a diverse global network and the largest frequent flier program, we have a strong value proposition to offer our corporate clients.

Internationally we've also seen a slowdown in demand.

Book load factors are down 7 to 9 points for the February and March periods, with most of the weakness being in the Transatlantic, especially connecting financial centers like JFK to London.

Demand in the Middle East and India has been impacted by the conflicts in those regions and terrorism concerns.

The Pacific entity, however, has been relatively strong, particularly in the resort and beach markets, which is being helped by the strong yen.

International advanced yields have been running slightly behind last year with higher coach yields mitigating some of the pressure we're seeing in premium class bookings.

All of these data points are within our expectations for this environment.

As Richard said earlier, we just don't know where to predict the bottom of the recession is going to hit but we're utilizing all the levers that we can, prudently managing both domestic and international capacity, and running a great operation.

We're still expecting to reduce system capacity by 6 to 8% in 2009, but if demand deteriorates from where we are, we're prepared to take quick action to remove additional capacity.

In terms of revenue guidance, we're expecting consolidated passenger unit revenue to be down 4% for the full year, and that's against a combined 2008 base of $0.1207.

We expect revenue trends in the front half of the year to be soft.

But we expect it to strengthen in the second half as we take out some additional capacity and our merger synergies start to ramp up.

We expect system capacity to be down 5 to 7% year-over-year in the March quarter, with consolidated domestic down 10 to 12% and consolidated international to be flat to up 2%.

For the full year, we expect system capacity to be down 6 to 8%, with consolidated domestic down 8 to 10% and consolidated international capacity to be down 3 to 5%.

For the first quarter, our non-passenger revenue which includes our cargo business, Sky Miles and our MRO, will be approximately $1.1 billion of revenue, which is up 6% on a year-over-year basis.

With that, I'll turn the call over to Hank, who will cover costs and our liquidity position.

Thank you, Ed.

Good morning, everyone.

On the cost side, Delta people across the system met the challenge of improving productivity, to help mitigate the impact of the high fuel costs and slowing economy.

On a combined basis, mainline CASM excluding fuel and special items increased 3% year-over-year to $0.0729.

Purchase accounting impacts related primarily to mark-to-market of Northwest's pension plans assets increased operating expense by $33 million, or $0.008 from mainline non-fuel CASM.

If you exclude that impact and the effect of some prior year credits at Northwest, combined main line non-fuel CASM was essentially flat year-over-year and in line with our expectations.

When you look on a standalone basis as Richard mentioned, Delta's main line non-fuel unit costs were down 1% in the December quarter, while Northwest rose about 6%, excluding purchase accounting, again driven by some prior year credits at Northwest.

Looking at non-operating expenses on a combined basis, non-operating expenses increased $174 million in the December 2008 quarter, due to $77 million of foreign exchange losses, $47 million in higher expenses due to non-cash purchase accounting, and $66 million in lower interest income.

The purchase accounting impacts in non-operating expense were driven primarily by the amortization of a debt discount to reflect Northwest debt at fair market value as required due to the merger.

We will be facing some cost pressures in 2009 from pension expense, and from the timing of taking out costs related to capacity reductions.

Although capacity cuts are immediate and ongoing, it will take two to three quarters to fully remove the related costs from the business just as we saw in 2008.

As a result, we're expecting full year 2009 main line non-fuel unit costs to be up 5 to 7%, and that's on a 2008 combined main line non-fuel CASM base of $0.0719.

We're targeting flat main line non-fuel unit costs excluding pension expense to be flat by the fourth quarter.

For the March quarter 2009, we expect main line non-fuel costs to be up 7 to 9% on a 2008 combined basis of $0.0747 and that includes about 4 points of pension impact.

So again, of that 7 to 9% increase in the March quarter, 4 points of that is due the pension increase.

The additional 3 to 5 points reflects the timing of capacity related savings that will occur in future quarters.

Again, as I previously mentioned, two to three quarters will be the time required to fully remove the capacity related costs from the business and we're targeting year-over-year main line non-fuel unit costs to be flat excluding pension expense by December quarter.

The significant decline in the financial markets in 2008 obviously impacted the value of our pension assets.

As a result, our expense and funding requirements will increase going forward.

It's important to remember that the defined benefit plans for Delta's non-pilot employees and Northwest employees are frozen, so our obligation will not grow due to continued service or rate changes.

Also, the Pension Protection Act allows for funding over the next 15 years so our cash spending requirements this year are very manageable.

We're still finalizing our analysis, but we expect our defined benefit plan expense will increase in the 450 to $500 million range in 2009 on a combined basis.

The cash spending requirements lag the expense by 6 to 12 months, so we're expecting only 120 to $130 million increase in funding requirements in 2009.

With regard to fuel, we've hedged 58% of our fourth quarter 2008 fuel consumption, resulting in a consolidated all in fuel price of $2.90 per gallon, including Northwest, for the period October 30th, through year end.

We terminated some out-of-the money fuel hedges with settlement dates in the December 2008 quarter and throughout 2009.

We'll continue to see hedge losses in the next couple of quarters as out-of-the money hedges settle.

In the first quarter 2009, we expect our consolidated fuel cost per gallon to be approximately $2.34 all in, including the impact of hedges.

Looking at our hedge portfolio as of January 23rd, we've hedged 80% of our anticipated consumption for the March quarter, with about half -- excuse me, about one-third of that added since November after market prices had significantly declined.

As a result in the March quarter, for each $0.10 market fuel price change, we would expect our March quarter fuel price to change by about $0.02 to $0.03 per gallon.

We included a summary of our fuel hedge positions for 2009 in the back of our press release for this morning.

In terms of earnings performance from March quarter 2009, we're expecting an operating margin in the range of negative 5 to negative 7%.

This reflects the weak demand in an already seasonally weak quarter, coupled with the materially higher fuel prices we're locked into paying in the out-of-the market fuel hedges.

We'll also see a hit from the higher pension expense that I mentioned earlier, and it's important to keep in mind that if we were paying market prices for fuel we would post an operating profit for the March quarter, and that's despite a global recession and a typical seasonal weakness the industry experiences every March quarter.

Our fuel hedge losses will go on -- will go down substantially over the next two quarters.

In addition, merger synergies of $500 million this year will ramp up significantly as the year progresses.

We'll also experience a typical stronger seasonal periods of the June and September quarters.

So while we do expect to report a sizable loss for the March quarter, we expect to be profitable for the full year with an operating margin in the range of positive 6 to 8%.

Turning to the liquidity, we'll continue to focus on preserving our cash position.

We ended the year with $6.1 billion in total liquidity and fuel hedge margins posted with counter parties.

What makes up that $6.1 billion is total liquidity of $5 billion including cash, cash equivalents and short-term investments as well as a $500 million undrawn line of credit.

Our net hedge margin posted with counter parties was $1.1 billion at December 31st.

At December 30th, 2008, Delta and Northwest combined had a $6.2 billion total liquidity and hedge margin balance so we kept our liquidity essentially flat during the fourth quarter, $6.2 billion at September 30th to $6.1 billion at December 31.

And before I walk through the components, please note that all these numbers are on a combined Delta plus Northwest basis.

We raised close to $1.9 billion during the quarter, $1 billion of that came from our agreement with American Express, $500 million in a revolving credit facility, $200 million from the sale of shares withheld for taxes from merger equity grants and about $200 million in aircraft financing.

On the cash outflow side we had the seasonal working capital reductions of about $1 billion in the December quarter, due primarily to changes in our air traffic liability.

We also paid roughly $600 million in debt maturities and capital lease obligations and we invested approximately $400 million in CapEx including $330 million in net expenditures for aircraft parts and mods.

During the quarter, Delta took delivery of two Boeing 737-700 aircraft, five CRJ-900s, and six Embraer-175 aircraft during the quarter.

Looking to the March quarter for the end of March quarter, we're targeting $5.3 billion in total liquidity and hedge margin.

We expect to generate about $800 million of operating cash flow in the March quarter, and this will be offset by $800 million reduction in the hedge margin related to settlement of hedge contracts during the quarter.

As fuel hedge contracts settle, we expect our cash collateral requirements will continue to decline and expect them to be less than $100 million at June 30th.

Financing received for aircraft will be approximately $400 million in the quarter.

We expect to make payments on debt and capital lease obligations of about $700 million during March quarter.

And that $700 million represents about half of our total maturities required for debt and capital lease obligations during 2009.

We expect net CapEx for the quarter to be $550 million, with roughly $475 million of that for aircraft parts and mods.

We're planning to take delivery of three 777-LRs, three 737-700s, and three CRJ900 aircraft during the quarter, and for full year 2009, we're targeting over $3 billion in operating cash flow and year-end liquidity of over $7 billion.

In closing, thanks to the great team here at Delta for stepping up to the challenges we faced in 2008.

We have an excellent track record for delivering on our commitments and will continue to do just that in 2009.

We're facing a difficult global economic picture this year, but as you know, we've already taken steps to further reduce domestic capacity and reverse the course on international growth.

And we're prepared to make additional reductions to align our capacity with demand.

We'll take a very disciplined approach to keeping costs in line and prudently investing capital to bolster our strong liquidity balance.

In these tough times, extracting value from our merger with Northwest is more important than ever and we'll be intently focused on running a smooth and successful integration this year.

By building a successful, durable airline, we'll be better positioned to provide opportunities for our employees, a return for our shareholders and a Best-in-Class experience for our customers.

Thank you, Richard, Ed, Hank, we're now ready for questions from the analysts.

Cindy, would you please review the process for asking a question and again, we ask everyone to limit them to one question with a brief follow-up.

Thank you, Ms.

Greer.

Today's question-and-answer session will be conducted electronically.

We will first take questions from analysts and then from the media.

We ask that anyone from the media please hold their questions until that time.

(Operator Instructions).

We'll pause for just a moment to give every analyst an opportunity to signal.

And we'll take our first question today from Michael Linenberg with Merrill Lynch.

Hey, good morning, all.

Actually, two questions.

When I look at your RASM guidance for the year, and I look at that with respect to where your capacity is, I get top line for passenger down in call it the 10 to 12% on a 10 to 12% level and I think back to your Investor Day in December, you had a target of down 8 to 12% for the industry and so the question is, is it your view that you're going to be closer to where the industry is or do you have a marginally lower forecast for the industry baked into your assumptions?

Hi, Mike.

This is Ed.

Hey, Ed.

I wouldn't say that we've radically changed our view from what the industry is doing.

I think what we want to do is plan to be prudent in a volatile market.

The clarity of our view on the demand picture is very muddy.

I don't think you're going to hear a whole lot of clarity this earnings season, and we just want to make certain that with our capacity plan, our cost and our liquidity as we're entering into a rocky year, that we're well prepared to manage it.

So I would not say that we've incrementally changed our view.

Good, and my second question, and maybe this is for Glen, can you just give us what you're seeing out there on pricing initiatives, domestic versus international and I'm just -- I'm curious on the revenue, you know, decline in international, how much of that is fuel surcharge?

Because when we last talked, oil was at $100 now it's down a lot and in some cases it seemed like the fuel surcharge was as much as 50% of the total fare, maybe even more.

Hey, Mike.

Good morning.

Clearly, international is being more impacted than domestic currently and certainly the reduction in capacity domestically has done a good job in offsetting a significant decline in demand.

Internationally, you don't have that same scenario going on.

The international flags are usually late in the process, as they eliminate capacity or reduce capacity, but we have seen some movement from the international carriers lately in reducing capacity so that's an optimistic development.

Yes, the fuel surcharges have gone down.

It depends on the country.

It depends on the region.

They are very sticky so it takes a long time for them to come down but the bias is definitely down.

To the extent we can, we are rolling them into the base fares so this is a developing every day.

We see -- Japan for example, it's a formula based on historic price of fuel so it takes several month lag for those hedges to unwind, and then in the international in general we've seen a lot of strength in some markets, as Ed mentioned the Pacific, with coach yields and exchange rates being quite favorable.

Africa continues to remain very strong.

Latin seems to be holding up quite well.

The laggards are really in the London market, where the financial services and front end cabin has taken a beating here.

We've taken some very aggressive scheduling actions to mitigate that.

In January, we cancelled Seattle to Heathrow, we cancelled Detroit to Gatwick, and we cancelled our second daily Atlanta to Gatwick All in the month of January.

Additionally, in April we time our weakest New York trip on a morning departure in New York to two well-timed evening trips.

That should substantially improve the revenue in JFK-Heathrow, and by summer we will offer all of the US to Heathrow markets.

That should help our front cabin mix as well.

In addition to Heathrow, you also have the conflict in Tel Aviv.

We are a big player in Tel Aviv.

That's impacted us disproportionately.

Given the history of how when those conflicts are resolved, the traffic tends to come back quite quickly.

Post the incident in Bombay, we have seen traffic to India impacted by two factors.

One is lack of business traffic into Bombay.

But secondly, an overcapacity situation in all of India.

So we'll be addressing that over the next few months.

We've already reduced our footprint in India significantly.

Okay.

Very good.

Thanks, Glen.

We'll take our next question from Gary Chase with Barclays Capital.

Good morning, everybody.

Hey, Gary.

You know, just looking at the guidance for the first quarter and trying to back into the revenue assumptions that you're making, depending on what kind of costs you want to assume, looks like you're projecting consolidated RASM down somewhere in the 5 to 7 range.

We know Easter -- the Easter shift out of the first quarter would have had an impact on that, so when I think about that relative to a down 4 full year, I guess the first quarter isn't that surprising to me but it feels more conservative as we move through the back half of the year.

Any thoughts on what's underpinning that?

Do you think it's going to get worse in interim and then recover in the third and fourth or do we just have the 5 to 7 wrong for 1Q?

I wouldn't say you're wrong, Gary.

We didn't give -- we're not giving a specific first quarter RASM guidance but I'm not sure it would be responsible with all the uncertainty in the marketplace in the weakest quarter of the year.

We do expect the sequential quarters to improve.

We've got a number of factors going in our advantage.

Certainly the incremental capacity reductions that -- not just Delta, but the industry will be taking over the course of the year will help.

Certainly the merger benefits as we get further into cross fleeting will help.

Another thing we didn't mention in giving the capacity guidance but recall that embedded in our capacity guidance, we have growth in particularly some international markets that are being driven by the merger.

So our core business is actually down 2 to 3 points on top of the minus 6 to 8.

So as all those initiatives start to kick in over the course of the year, we do expect to see some improvement.

But on balance, we expect 2009 to be a tough year on the revenue front.

But doesn't sound like you've got much in the way of an underlying recovery baked in.

Is that a fair statement?

By the time -- no, we do not expect our fourth quarter '09 RASM necessarily to be better than the fourth quarter of '08.

But we see it improved from where we sit today in the first quarter.

Okay.

And then could you just explain -- could you put a little more color on the CASM variance?

I know the pension went from 3 points to 4 points.

So that's half of the change since the December meeting.

Can you tell us what the other half is?

And also, the $80 million you're pointing out as purchase accounting expense, non-cash purchase accounting in 4Q, should we expect that to continue for all of 2009 or was that some kind of a one-time item?

Hey, Gary.

Related to the purchase accounting, in the fourth quarter 2008 we did have roughly $33 million of purchase accounting hitting the up expense line so that affected our fourth quarter CASM and that's the mark-to-market on those Northwest pension assets required by the merger.

In 2009 and forward, the impact of purchase accounting will all be in the non-operating section of the P&L and you can expect the rate related to the debt discount amortization to be approximately $300 million for the full year.

Again, that will affect only the non-op section for the most part.

That fourth quarter expense was a one-time event as a result of the merger.

Looking at our CASM guidance for the full year, we do expect pension to be up, to drive about 4 points of CASM pressure on that guidance.

So we're up 5 to 7% for the full year, ex pension, that's up about 1 to 3% and then it's just the timing of getting the capacity related costs out.

We are committed and will get the costs out and get them flat by fourth quarter 2009 absent the pension expense.

It's really what you're seeing is the difference of timing of the pacing, getting the costs out.

Thanks.

We'll take our next question from Raymond Neidl with Calyon Securities.

Seems like 2009 is shaping up to be even a worse economic year than we previously thought.

I think that you kind of gave hints to that at least in the early part of the year.

I'm just wondering what's your flexibility about taking down capacity to a much greater degree without compromising the system?

Ray, we don't have any limitations on our ability to put the right capacity into the system so we don't have any contractual obligations to a certain level of flying so we will adjust and you will continue to see us stay in front of a soft economic environment with capacity discipline.

Ray, this is Richard.

We have a low fixed cost fleet and we have plenty of airplanes that are either coming off lease or plenty of airplanes that have no cash capital cost.

And in 2008, we exhibited a really good ability to be able to pull the capacity first and pull it quickly and then be able to get the costs out I'm particularly proud of how we ended up with our non-fuel CASM at main line Delta in 4Q and we have programs under way right now, voluntary programs, to further reduce our staffing.

So we will continue -- I think we've done a good job demonstrating quick action and you can expect us to continue to do that.

Okay.

And also, the cash bleed and it was a little bit greater than we thought.

I think you gave a good explanation of that with the fuel hedges and the pension program but the balance sheet looks like it's a little bit weaker than I was expecting post merger.

Looks like it's a little bit more highly leveraged.

Is that the case and is your goal still to get capitalization down towards around 50, 60%?

Yeah, it is, Ray.

The cash, the collateral from the fuel hedges I think at the end of the year was about $1.1 billion that was the most significant impact that we had on our balance sheet position from what we had let you guys see when we had the investor call or investor conference in early December.

Probably going to take us a couple years, couple three years to get down though that level as a practical matter, but we're looking at 2009 as being operating cash flow positive to the tune of about $3 billion, and we expect to build cash in 2009.

So I know this call has focused a lot on the economic outlook and the revenue environment.

The flip side of that is we expect the fuel expenses to offset any revenue softness by at least two to one in 2009 which is going to be a very positive cash story for us.

This is Richard again.

We ended the quarter with almost $6.2 billion in cash and liquidity on the balance sheet and I think the key fact there was our ability to actually raise a fair amount of cash in the quarter from non-debt sources.

And so you can expect as we move into 2009 that we'll continue to maintain high cash balances and we do, even in the first quarter, expect to generate, because the fuel hedges reverse so we expect to generate cash in the first quarter.

Great.

Thank you.

And we'll take our next question from Jamie Baker at JPMorgan.

Hey, good morning, everybody.

Hank, a clarification on liquidity.

You're at $5 billion right now.

If you exclude the hedge collateral which I think is how most of us model it.

Your guidance is for $7 billion at year end.

Does that $7 billion have any hedge collateral in it or are you implying $2 billion of true liquidity build through the year?

Also, hoping for some more clarity on the revised AmEx relationship principal, what if any cash payments were actually received in the fourth quarter.

Related to the year-end balance of $7 billion, by the time we get to the middle of the year, nearly all of our hedge positions that are requiring the hedge margin to be posted will have settled so that $7 billion at the end of the year is free of margin postings.

Related to the AmEx cash received, we did receive the $1 billion in the fourth quarter when we signed the agreement and then going forward the agreement will provide for additional benefit over the next two years of another $1 billion based on the contract terms and changes in the program.

Okay.

Excellent.

That's a big help.

And just a follow-up, not to beat a dead horse on demand, Glen, but a lot of international markets were turning on this time last year and that probably contributed to some reasonably healthy ramp in Q4.

I'm wondering if you strip that out, if you were able to discuss Q4 RASM or better yet Q1 demand more on a same store sales basis so-to-speak.

Again, not to beat a dead horse, but I think we hit the highlights.

There is actually some core strengths in there.

Surprisingly core strengths even in some of the new markets.

So you have kind of a mixed bag of some really good things and some really awful things and so we're trying to address the really off things and do a little less of them.

You outlined those well.

So thank you very much.

Hey, Jamie, this is Ed.

Just a quick one on your question on the fuel hedge collateral.

The $1 billion, I think you're right, when you look at what the free cash of the unrestricted cash level of the Company at the end of the year of $5 billion is.

What that means is that we have prepaid over $1 billion of next few year's fuel bill which is going to be fairly significant cash flow positive for us in 2009.

That's why when we look at the cash position in aggregate we feel confident around that $7 billion estimate for the end of '09.

Okay.

Got it.

Thanks for the clarity, Ed.

Cindy, we have time for one more question from the analysts.

We'll take our last question from Hunter Keay from Stifel Nicolaus.

Thanks for taking my call.

I was wondering, you guys have described the JV, the Transatlantic JV as 15% plus EBIT margin business, very profitable.

I'm wondering how that sort of stands up given what's going on obviously with the backdrop and maybe how much of that profitability was really pricing versus some cost efficiency you guys were able to leverage.

Do you think that still can be a high teen EBIT margin business given what's going on in that market right now?

How are you doing?

This is Glen Hauenstein.

We're working very hard with Air France right now to conclude the Air France/KLM joint venture agreement.

For those of you who have been following this, I think another important to development is that Air France did -- was the winning candidate in the Al Italia bidoff.

So that really gives us I think an incredible position in Europe point of sale and the balance of the JV is on both sides, on reducing costs from both carriers and I think that's one that we will actually accelerate, given this economic environment.

And then again, selling more on each other and selling more differently on each other.

When you put Air France, KLM, and Al Italia together, by far the largest frequent flier program in Europe and by far the most corporate accounts, and we still have not levered that yet and that's what the joint venture is all about and of course now with the merger of Northwest and Delta, we have the largest corporate accounts on this side of the pond and the two greatest US hubs in JFK and Atlanta and the two greatest European hubs in Amsterdam and in Charles de Gaulle.

So when we put the frequent flier programs together, when we put the corporate sales together, when we put the hubs together and synchronize them, I think it's on both sides of the ledger that's going to drive that unit revenue, both unit revenues and unit costs to get those kind of margins and I think they're fully achievable even in this kind of environment.

Sounds like you guys have no intention really of scaling back on the capacity side of that on the JV if this don't turn out as expected.

If you do change your mind, are you willing, are you able to take a hatchet to the transatlantic capacity if necessary.

We have no levers in the current agreement on capacity levels so I think you're reading -- that is not what I said.

I realize that.

I'm just wondering if --

I think what I said was we're fully confident that we will achieve those margins even in this kind of economic environment and we have no constraints with any of the carriers as far as capacity in this environment.

Let me add a point to that.

If you go back to the guidance that Ed gave, for the full year we expect consolidated international to be down 3 to 5% and Glen highlighted the ongoing efforts that we have to right-size capacity in particular markets and I believe he illustrated the London market, and that's really indicative of what we will continue to do in terms of matching capacity to demand and that's true domestically and it's true internationally, hence our guidance for consolidated international being down 3 to 5%.

The antitrust immunity allows us to jointly plan and schedule the airline across the Transatlantic with both KLM and Air France.

And we've done that and will continue do that.

And just one final note is that in Phase I of the joint venture, Heathrow and London were already included.

And so all of these reductions were actually in the joint venture that already exist, so that demonstrates the flexibility that we have.

Okay.

Great, thank you.

Thanks, and now I'd like to turn the call over to Ned Walker, Delta's Senior Vice President and Chief Communications Officer.

Thanks very much, Jill, and good morning, everyone.

We'll begin the media q-and-a at this point, and Cynthia, if you can review the process for the media to ask a question, and once again, for the press, if we could ask, if you would have one question with a brief follow-up, we'll try to get everybody on with that, so we're ready to begin.

Cynthia?

Thank you.

We will with now take questions from the media.

(Operator Instructions).

We'll pause for just a moment to give everyone an opportunity to signal.

And we'll take our first question from Liz Fedor with Minneapolis Star Tribune.

Good morning.

I would like to follow up on a point Ed made in his opening remarks.

Ed, you said you were seeing the weakest demand in the Cincinnati and the Detroit hubs.

Of the Delta hubs system-wide, I of course am most interested in what's happening in Minneapolis St.

Paul.

Could you give us some more color on what's going on there, since there is a large business community here?

Sure, Liz and Glen can provide some additional color as well.

We're seeing softness throughout the domestic economy.

So it's all relative.

I think the -- if you look at what's going on in the industrial base, in regions such as Detroit, Michigan, Ohio, we're certainly seeing a reduction in the travel and the demand as measured against Minneapolis.

Minneapolis is staying relatively healthy.

All things considered.

I mean, it's down but it's not down nearly to the extent that we're seeing in other parts and I would say the same thing is true for Atlanta.

Atlanta and Salt Lake are also looking better than the mid central part of some of our domestic flights.

Glen, did you have anything to add to that?

I think Ed did a great job in describing what we're seeing.

Just a brief follow-up, Ed.

As the CEO of Northwest, approximately how many people do you think from the Northwest workforce will likely take the voluntary buyout?

I don't know, Liz.

We don't have a specific Northwest target in mind.

We mentioned a week ago that we are looking at a potential of up to 2,000 in terms of expectations across both Delta and Northwest.

We've had some good take rates thus far, and I think it's a good program.

Thank you very much.

And we'll take our next question from Harry Weber at the Associated Press.

Weber.

That's okay.

We knew who it was.

I knew you would.

Hi, Harry.

Hi, how are you?

Good, how are you?

Good.

This is for Ed or Glen.

I was hoping you could provide some color, some more color on what you all are seeing and hearing from travelers as far as the travel decisions they are making and also, based on the continued demand weakness, do you expect to see Delta and other airlines offer fare sales more often for longer periods than usual?

And maybe what other things you all are considering to try to reel in customers and extra revenue.

Could we eventually see fees for carry-on bags and things like that?

It's Glen, how are you?

Good, how are you?

I think what we're seeing is people are hesitant to make investments and they're hesitant to make investments in their future, whether or not they're looking at stock portfolios, washer and dryers or airline tickets.

And if you think about what we're seeing from a shift, we're seeing the demand curve move much closer to the day of departure which actually means that the leisure traveler is paying generally slightly more than he did last year and you have what I think is segregating almost out to the people who are uncertain about their future or unemployed who are not traveling and the people who feel comfortable in their future and who feel secure who are traveling but they're planning a little bit closer in.

So sitting in the airline pricer seat you have to say, okay, if people are either going to travel or not going to travel, does offering a slightly lower fare stimulate more people off and what we're seeing is that the slightly lower fares don't seem to be driving the decision process, so I don't think you'll see fare structures that are significantly lower than last year's level.

Okay.

And as far as fees, do you eventually see perhaps fees for carry-on bags?

There's very little left I suppose that airlines haven't tried as far as fees but that's one thing.

Harry, this is Richard.

No, we do not see fees for carry-on bags and to give a little bit more background to Glen's comments, the real way that we manage the revenue side of our business is by being certain that we put the right capacity in response to consumer demand.

And that's the key thing that we do is -- it's a great thing about an airplane.

You can move an airplane from market to market or in our case, given that we have a lot of airplanes that are paid for or going offlease, we can idle the airplane until we have better times.

So our main lever in making certain that our revenue equation works is to make certain that we match our capacity by market, by time channel, by airplane type, to precisely to the consumer demand.

Thank you.

You're welcome.

And we'll take our next question from Mary Jane Credeur with Bloomberg News.

Hi, gentlemen.

You talked about Cincinnati and Detroit being among the weakest.

Can you give me a sense of how weak that is?

Is that a minus 10?

Is that a minus 15?

And have you made further cutbacks in those areas and if not, why not?

Mary Jane, this is Ed.

No, we're not -- we don't give that level of advanced detail for competitive reasons.

But I will tell you that the demand trends are indicative of what you're seeing across the economic landscape.

Michigan is in a very difficult place with respect to the economy, as is Ohio.

So I think it mirrors up with what we're seeing.

We have taken a fairly significant step to restructure the Cincinnati hub and I expect it's going to pay a pretty good return in terms of the restructuring that we've done.

Detroit on the other hand is not just premised on what's going on in the local Michigan economy, it's a major flow point for us and it's a a great facility so the Detroit facility is doing quite well.

Okay.

To add just one thing to that and that is to the point that Ed made about capacity in Cincinnati.

We've completely retimed the network at Cincinnati to provide far more utility and connectivity through a Omnibank structure and very shortly we're going to be rolling out a new fare structure in Cincinnati and the combination of those things will -- we believe will really respond to the demand environment.

What do you mean by the new fare structure?

We don't have specifics out yet.

But between a combination of both our network strategy and our fare strategy, we expect to see nice improvement in Cincinnati.

And one quick follow-up.

What about the shuttle?

You mentioned that that also has some weakness.

Are you considering idling that or doing away with it?

I mean, how weak is it?

No, we're not.

We are moving some of those flights onto Embraer aircraft off of the main line.

We have no plans to discontinue the shuttle.

The shuttle is an important part of the overall product offering in the New York, Boston and Washington network strategy.

So it continues to be an important part of the strategy.

Just one qualification is these are not normal regional jets when we say Embraers.

These are the E175s which are actually the most comfortable airplanes out there so more comfort with a few fewer seats in the Washington market which is working quite well.

We just started that in January and customers seem to really like it.

Great.

Thank you.

And we'll take our next question from Kelly Yamanouchi with Atlanta Journal.

Hi, there.

I'm wondering, given your reduction in the international capacity and the weakness in international markets is your long-term outlook for international affected at all by that?

And just how important is the Atlanta international terminal to your future?

International continues over the long term to be an important part of the network strategy.

And we've stated a long-term goal to move close to 50% of our capacity devoted to the international market and over the long term, we will continue with that strategy.

2009 will result in some changes, obviously, because of the capacity changes but overall, I believe our mix will actually probably go up a bit and continue to go up in 2009 in terms of international capacity versus domestic.

Second, Atlanta is an important -- very important part of our network, just as our hubs, other domestic hubs are important gateways and we're very hopeful that we can continue to work with the City of Atlanta to successfully complete the new terminal, to support the long-term expansion of our international network.

Any time line on that?

No time line.

But I think the important thing to keep in mind is that Atlanta continues to be a really important part and will always be a very important part of our international network and therefore we look forward to working with the mayor in getting the international terminal built.

Okay.

And a follow-up.

How many non-front line employees have you -- have been laid off so far and how many more do you expect to make?

We haven't had any layoffs of employees.

Okay.

All right.

We'll take our next question from Corey Dade with Wall Street Journal.

Good morning, gentlemen.

Been a while.

Been a while, Corey.

Quick question, if you can walk us through a little bit of the $500 million in synergies you guys are projecting for '09.

And if you see any headwinds or factors that might prevent you all from realizing that amount by the end of '09 considering all the different integration pieces that have to happen.

Hey, Corey, this is Hank.

Related to the integration synergies for 2009, we've targeted $500 million of benefit and we're very confident of achieving that $500 million despite the challenged economy that exists today.

Those synergy benefits should come from across the Company.

There's a portion of them that deal with the network on the revenue side, our frequent flier program, loyalty.

We've got cost benefits due to efficiencies across the Company and all the different divisions.

And also given that Delta is now the world's largest airlines, there's scale efficiencies that we can also benefit from.

Those synergies will ramp during the year but again, as I mentioned, we fully expect to achieve those $500 million despite the challenged recessionary environment that we're experiencing.

We have time for two more quick questions.

We'll take our next question from Mary Masson at Detroit Free Press.

Good morning.

Good morning.

I would like to -- we've talked a little bit about Detroit but I'm wondering if you can give me a little bit more detail about what you're seeing as far as the demand decline, what might be driving that in Detroit and if you can talk about whether or not you plan any cutbacks in flight operations here.

Obviously I think what's driving some of the demand reduction is the state of the automotive industry and certainly as the year wound on, the travel and the discretionary purchasing, not just on a corporate basis with the automotive, our automotive accounts, but also the employees and the individuals who live in Michigan that are employed by the automakers and all the uncertainty that has gone in the region has led to demand reductions.

We are trimming a little bit of Detroit as we are trimming all parts of the network as part of the overall 6 to 8% capacity reduction.

We're also adding some additional flying in Detroit and we are committed to big international launches this year, one being Rome and one being Shanghai out of Detroit in June.

So no, Detroit as a marketplace is -- Michigan's an important economy for us but the Detroit facility serves many more people other than just the local Detroit marketplace.

I would add one other point there, which is when you look at our target at 6 to 8% capacity reduction, it is pretty much at this point ratably across the whole network.

There's not any sort of particular region that's necessarily singled out more than any other region, because it is a network and it's all interwoven.

Well, how crucial is the Detroit market or the Michigan market to that Detroit facility?

Is it -- because you have so much other traffic going through there, is it really that important?

It is important but it doesn't -- the current challenges the automotive industry is experiencing, we're confident that they will get themselves sorted out over the next couple years and we're going to stand by the local Michigan and Detroit marketplace with a wonderful facility.

So no, it doesn't back down our commitment to or investment in that facility.

Cynthia, time for one more question.

And we'll take our last question from Andy Compart with Aviation Daily.

Hi, how are you guys doing?

Good.

Wanted to ask a little bit more about Atlanta airport and what's going on there.

It's been well-publicized.

You talked about still working with the mayor to get the international terminal done.

But of course, the cost estimate on that has doubled.

Concerned about the cost there.

What changes would you like to see to lower the cost of that terminal and what costs do you think are realistic to that and then I have a follow-up.

The efforts that we have under way with the mayor and the Department of Airports have been very constructive and we have a team working together to reduce the cost of the facility and get the financing pieces of the facility correct.

It's an important investment for the airport because it opens up an easterly entrance to the Hartsfield Airport.

Today, the airport is fed principally from the west side in terms of terminal facilities and the head house and so this is important, not only as an international terminal but important in terms of opening the east side of the airport for passenger ingress and egress for domestic and international flights.

So the teams are working closely together to see what we can do to reduce the costs and the mayor has been directly involved and I'm pretty confident that we're going to probably be able to get the costs down significantly from where they are today.

Quick follow-up, Andy?

Uh huh.

Okay.

First of all, making sure who was talking there.

I don't want to assume anything.

That was Richard Anderson.

Okay.

That's what I figured.

Given the level of the concern you've had with some of the costs there that you've expressed, are you confident in the current leadership in the airport to continue doing that or would you like to see some changes in who's running the operation?

No, not at all.

Our management team there, our distinguished airport management, they've been long-time partners and we have every confidence in the City of Atlanta and the partnership that we've had here for 70 years.

Great.

Well, thank you very much, Richard, Ed, Glen, Hank.

Appreciate everyone joining us for the year end and fourth quarter December results.

We'll go ahead and be back with you in April for the first quarter results.

Thank you all very much.

Thank you.

That does conclude today's conference.

We want to thank you again for your participation and you are now free to disconnect.