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Delta Air Lines (NYSE:DAL)
Q4 2017 Earnings Conference Call
Jan. 11, 2018 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone, and welcome to the Delta Air Lines' December Quarter and Full-Year Financial Results Conference. My name is Ebony and I will be your coordinator today. 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, ma'am.

Jill Greer -- Vice President of Investor Relations

Thanks, Ebony. Good morning, everyone, and thanks for joining us for our December quarter and full-year earnings call. Joining us from Atlanta today are our CEO, Ed Bastian; our president, Glen Hauenstein; and our CFO, Paul Jacobson. Our entire leadership team is here in the room for the Q&A session.

Ed will open the call and give an overview of Delta's financial performance. Glen will then address the revenue environment and Paul will conclude with a review of our cost performance and cash flow. 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 will also discuss non-GAAP financial measures. All results exclude special items unless noted otherwise.

We are also providing cost comparisons on a normalized basis, as this better matches the retroactive expense we incurred in the fourth quarter of 2016 from our pilot contract to the appropriate quarters of 2016. You can find a reconciliation of our non-GAAP measures on the IR page at ir.delta.com. And with that, I'll turn the call over to Ed.

Ed Bastian -- Chief Executive Officer

Well, thanks, Jill. Good morning, everyone. I appreciate you joining the call this morning. Earlier today Delta reported December-quarter and full-year results, including a December-quarter pre-tax profit of $1 billion and an EPS of $0.96 ahead of consensus, which sat at $0.88.

This rounds out the year with a $5.5 billion pre-tax profit and a 14.4% operating margin. Operationally, the month of December presented us with several unique challenges, a significant southeastern snowstorm and the Atlanta airport power outage. Together, these events drove a $60 million impact and roughly 2,900 cancellations. And thus far in January, our teams have persevered through the storm that hit the East Coast earlier in the month and a water main break at JFK this past weekend.

I want to thank the Delta people for their incredible work in taking care of our customers while recovering from these difficult events. Once again, they demonstrated that our people and our culture are Delta's strongest competitive advantage, but it also reflects the importance of the significant airport infrastructure investments that we are making to enhance the tools available to our employees to improve our customer's experience. For their outstanding work, we're pleased to recognize the Delta team with over $1 billion in profit sharing this year, which will be the fourth consecutive year of paying $1 billion. With our culture at the foundation, we are focused on the ways to improve our operational performance.

We're running the best operation in the industry and ended 2017 with 242 days of no mainline cancellations including a 50-day streak without a single mainline cancellation, while keeping domestic mainline on-time arrivals at 85.4%. We also had 90 days in 2017 with no system cancellations on the entire Delta platform, or brand-perfect days, as we call them, over 10% more than last year. The extraordinary work by our entire operations team resulted in Delta being named 2017's most on-time global airline by Flight Global, the first time a U.S. airline has earned this distinction.

And in today's paper, we're pleased to see Delta named as the top airline of 2017 as determined by a thorough analysis conducted by The Wall Street Journal. Running a great operation not only drives customer satisfaction but also cost efficiency. Our operating performance, combined with the investments we've made in our people, our fleet, products, and facilities have driven a 2-point improvement in our net promoter score this year including reaching an all-time high of 46.9% for the month of November. So, while 2017 certainly had its challenges, it was a very successful year.

Customer and employee satisfaction remains strong and we produced solid financial results, enabling significant investment in Delta's future. And as we laid out in Investor Day last month, we're entering 2018 with solid momentum. However, we are mindful of rising jet fuel prices. Our fuel expense rose by nearly $350 million in the December quarter and current market jet fuel prices are 30% higher than last year.

While higher fuel prices helped create greater stability for the industry over the long run, in the short term it does take time for our business to recalibrate and recover those costs through our revenues. But with a solid demand environment and economic backdrop combined with the flexibility that we've built into our business, we feel well-positioned to address this higher fuel environment. Glen and Paul will take you through the details, but I'd like to spend a couple of minutes on our path, the strength in our company, and growth earnings in 2018. First, we have to keep our top line growing.

We're targeting a 4% to 6% revenue increase while maintaining prudent 2% to 3% system-capacity growth. We're currently seeing the best revenue momentum we've had in five years, and the December quarter was the first time all entities were positive since early 2013. We're gaining ground with our commercial initiatives and demand remains very strong. In fact, we set a new No.

1 system and domestic revenue record on the Sunday after Thanksgiving. Second, we will leverage our international opportunities by our own growth as well as through our partner relationships. After several years of shrinking our international capacity in response to economic weakness and a strong dollar, we're in good position to benefit from the improved global outlook. Our portfolio of investments is essentially complete, and we have built a $2 billion asset that includes some of the leading airline brands around the globe.

We will drive enhanced value over the coming years through deeper integration of the Air France, KLM, and Virgin Atlantic joint ventures, and we will be building out our JVs with Aeromexico, Korean, and WestJet. Third, we must change the trajectory on unit cost and deliver on our 0% to 2% non-fuel CASM growth guide for the year. It is the top priority for our finance team. Our decisions to invest in the business and restrain capacity in 2017 were the right ones, but they also contributed to unit cost growing over 4% for the year.

This is not sustainable. With 60 new aircrafts to be delivered this year, our up-gauging strategy is set to produce some of the greatest efficiency gains in Delta's history and will play a key role in returning our cost to a better level. And finally, we are focused on making technology an improving source of competitive advantage. We are in the midst of a significant digital transformation which will enhance our customer interactions and deliver more personalized service, further strengthening our brand and revenue premium.

With the pipeline of initiatives that we laid out at Investor Day supporting these things, we have a path for growth earnings this year and now expect to produce $6.35 to $6.70 per share in 2018, an improvement from our earlier guidance based on the additional benefits from tax reform. And as we think about the business long term, we will continue to build upon and leverage our key economic moats, those competitive differentiators that will ensure our future success: our culture, our industry-leading operational reliability, our unrivaled domestic network, our customer loyalty and brand, and our investment-grade balance sheet. Put together, these are Delta's unique advantages that provide the foundation to not only sustain our performance but also improve upon our results. It's a powerful combination.

It's why I have confidence and optimism for the year ahead.With that, I'll turn the call over to Glen.

Glen Hauenstein -- President

Thank you, Ed, and good morning, everyone. With the momentum we've built throughout 2017, we're starting 2018 with a better revenue backdrop than we've seen in many years. Revenues in the quarter increased 8%, driven by modest capacity growth, broad-based revenue improvement, and strong ancillary contribution. These results included a $45 million impact from winter storm Benji and the Atlanta power outage.

My thanks go out to the entire team for everything they have done this year to take incredible care of our customers. Especially during the operational challenges, it's truly our people who make the difference. For the quarter, passenger revenues increased $527 million or 7%, driven by strong demand and improving business yields. Our investments aimed at corporate travelers continued to gain traction, as Delta was named best airline in the Business Travel News survey for an unprecedented seventh consecutive year.

Our fourth-quarter corporate revenue growth was our highest since 2014, with both passenger-volume and average-fare improvements. Going forward, we expect corporate momentum to continue. Our last survey of corporate travel managers showed more than 88% project their spend will be maintained or increased in 2018. This is a 3-point improvement from last year's numbers and is the most positive outlook we've seen in three years.

We also have continued strength in cargo and other revenues, with cargo contributing a third consecutive quarter of double-digit improvement, up 14% in the December quarter. This caps off our first year of increases in the cargo revenue in six years. Our partnership with American Express produced an incremental $90 million of value in the quarter. In 2017 we enrolled over 1 million new Sky Miles Credit Card accounts, a record for annual enrollment.

Co-brand spend was up 12% versus the prior year, outpacing the industry growth as reported through the third quarter. We expect another solid year of growth, with an incremental $300 million from our American Express agreement in 2018. Turning to unit revenues, 4Q system PRASM was up 4.2%, with all entities closing the year in positive territory as we saw underlying improvements throughout the quarter. These results include about a half a point from a one-time revenue adjustment.

The domestic entity delivered its third consecutive quarter of positive year-over-year PRASM, with solid demand for both business and leisure, and for the quarter all hubs produced positive unit-revenue results. We continued to see improvements in business markets, with now 81 of the top 100 business markets in positive-yield territory up from 50% at the end of 3Q. Our domestic revenue premium stands at 117% of industry average and we expect to maintain this performance while absorbing the industry's highest increase in stage length and gauge. Internationally, we saw improving trends, with unit revenues again outperforming the domestic entity for the quarter.

Foreign exchange was a 0.2-point tailwind to the system PRASM. After three years of currency weighing on our international revenue performance, we are positioned to benefit from a tailwind from foreign exchange in 2018. In the trans-Atlantic, unit revenue has increased 7.4% on strong business class bookings and foreign-exchange tailwind. Our branded fare products led the industry providing customers a tailored travel experience, with basic economy now selling in over 50% of European routes.

We look forward to introducing our premium and select product in the trans-Atlantic market in March. Our Latin entity unit revenues grew 4%, the sixth consecutive quarter of positive unit revenue. In spite of lingering impact from a particularly destructive hurricane season, we saw strong demand trends across the portfolio and we are already making progress on our alliance integration with Aeromexico as we enter the first full year of the joint venture, and we are excited about upside opportunities. The Pacific entity returned a positive PRASM for the first time in 4 1/2 years.

This is especially encouraging, as these results included a 7% year-over-year increase in our trans-Pacific stage length. We achieved several important milestones in the multi-year transformation of the region, including approval by the USDOT for a joint venture with Korean Airlines and the final retirement of 747s with deliveries of six A350s within the quarter. The launch of the A350 has been very successful, with strong demand in yields for both the award-winning Delta One Suite and Delta Premium select products. In the first quarter of 2018, the A350 will also be introduced on additional routes including Detroit-Beijing and Atlanta-Seoul.

Our four core hubs have the best connecting structure to drive volume.Looking forward, the global economy remains encouraging. Demand remains strong and we expect all four geographic entities to continue momentum in the first quarter. With market fuel prices up 30% year over year, we must ensure that we recapture fuel through higher revenues. Based on the industry's historical recapture trends, we're confident that we will be able to cover this increase in the medium to long term and our focus is to accelerate this process.

March-quarter PRASM is expected to increase 2.5% to 4.5% on a 3% capacity growth, which includes a 1-point increase in stage length and a 2-point increase in gauge. We expect a solid demand environment combined with benefits from our initiatives will produce quarterly TRASM at roughly this level through the year despite increasingly tougher comps. As shared at Investor Day, the outlook for 2018 is really exciting, as we think about three platforms that will drive Delta's revenue and earnings growth. The first one is continuing to build a more efficient and global airline.

Our four domestic core hubs have the best connecting structure to drive volume, lower costs for employment, and enable continued up-gauging. This is the foundation of our domestic margin expansion for the future. The pipeline of opportunity continues into the next decade, as the A321neos that begin delivery in 2020 are 40% more fuel-efficient than the current MD88. We will have over 45% of our domestic fleet departures in the most efficient, large-gauge, narrow-body aircraft type by 2023.

The globalization efforts that we've been working on are coming into focus and fruition. In 2018 we are positioned to further leverage the partnerships we have in place, driving an expected $100 million in value with even greater upside to come. Second, we will strengthen our brand and improve the customer experience. Over the next decade we have more than $12 billion in airport facility projects planned in Atlanta, La Guardia, Los Angeles, Salt Lake City, and Seattle.

We are anticipating future travel trends and technology to build airport of the future as we strive to continue improving the Delta experience. And finally, we will continue to enable customer choice as our fleet evolution continues to support our segmentation initiatives. Branded fares generated an incremental $200 million in the quarter. First class up-sell Comfort Plus revenues grew 25% to 30% for the quarter and post-purchase capability drove $80 million of revenue in 2017 following its midyear launch.

In 2018 we expect $350 million in incremental branded fare contribution, up to $2.2 billion annually, driven by a 5% growth in premiums seats for new aircraft deliveries and expanding basic economy. With a favorable macroeconomic environment, international tailwinds, and benefits from our commercial initiatives, combined with the great service of the Delta people, we have laid a path for solid top-line growth in 2018 and beyond.And with what, I'd like to turn the call over to my good friend. Paul Jacobson.

Paul Jacobson -- Chief Financial Officer

Thanks, Glen. Good morning, everyone, and thank you for joining us. I'd like to start by echoing Ed and Glen and thanking the Delta team for all they've done to take care of our customers and each other through some pretty unprecedented challenges in the last year.For the December quarter, total operating expenses increased $1 billion driven by higher fuel and continued investments in our business. Non-fuel unit costs were up 5.6% for the December quarter and up 4.3% for the full year.

This includes $85 million of accelerated depreciation, which hit in the back half of the year and pressured our full-year CASM by about three-tenths of a point. The investments we've made in our product, operation, fleet, and our people were important and are already driving benefits, but, as we mentioned before, we cannot sustain unit-cost growth at this elevated level over time. We expect the March quarter to be our peak cost growth of the year, with unit costs up 2% to 4%. The majority of our non-fuel expense growth should happen in the front half of the year, and we're on a path to achieve 0% to 2% non-fuel CASM growth for the full year.

In order to get there, first, we'll add costs we began incurring last year with a 6% April employee pay increase. Second, depreciation expense will trail off markedly in the back half of the year as we annualize the accelerated depreciation on our fleet and facilities. To give some perspective on this, depreciation for 2018 is expected to be up $250 million with $200 million of that increase in the first half of the year alone. Finally, our maintenance expense has been weighted toward the front half of the year as we gear up for summer flying and some aircraft extensions that have been required as a result of the delays in deliveries of the C-series.

To meet our remaining cost targets, we will look primarily to our up-gauging and efficiency initiatives. As Ed said, the delivery a 60 aircrafts in 2018 will drive some of the greatest efficiency gains in Delta's history with over $100 million in expected non-fuel savings this year alone. Then, as I detailed at Investor Day, we have launched an enterprise-level project to drive efficiencies across the organization and leverage our scale. We'll be looking at things differently and changing the rules on how we manage the business.

On a cost base of $27 billion, we believe $200 million of savings this year is definitely achievable. For example, we're optimizing how we manage fleet complexity in our network. In January, markets with four or more equipment types have been reduced by 60% year over year. We will also have all MD88s based in Atlanta by this summer, driving approximately $25 million in staffing and maintenance efficiencies alone.

Additionally, we've identified other opportunities in network scheduling, hotel spend, and transportation. These are just some examples of the opportunities we have ahead of us and we feel good about where we are at this stage in the process.Turning to fuel, our total fuel expense increased $349 million in the quarter, as market prices were 10% higher than the third quarter and 23% higher than prior-year. Some of that pressure was offset by the refinery, which contributed $24 million in the quarter and $110 million for the full year. Importantly, the fourth quarter marks the last quarter of the legacy hedge losses.

So we're really going to be able to see the benefit that's being generated by our fuel team. Furthermore, our new aircraft deliveries will drive 2% in fuel-efficiency gains in 2018. For the March quarter, we expect our all-in fuel price to be $2.05 to $2.10, which includes the recent run-up in fuel prices.Now, turning to EPS, for 2018, our improved non-fuel cost trajectory along with the top-line growth highlighted by Glen will allow us to deliver solid earnings growth this year with further improvement from the benefits of a significantly lower corporate tax rate as we discussed at Investor Day. This takes our full-year forecasted EPS to $6.35 to $6.70, up 20% to 30% versus 2017.

However, the March quarter will see both the peak of our non-fuel CASM growth and the recent run-up in the fuel prices, which will impact our ability to grow earnings during the quarter. We therefore expect EPS in the range of $0.60 to $0.80 per share. This equates to a pre-tax margin of 6% to 8%. And finally, our strong cash generation and investment-grade balance sheet allowed Delta to execute on our investment opportunities.

We generated $1.7 billion of operating cash flow for the quarter, which allowed for reinvestment in the business through $1 billion in CAPEX related to aircraft, technology, and ground. We also invested $450 million to purchase a 10% stake in Air France KLM.Looking at the full year, we expect capital spending in 2018 of roughly $4 billion and continue to target CAPEX of 50% of our operating cash flow. During the quarter we generated $435 million of free cash flow used toward the repurchase of $325 million of our own shares and to pay $216 million in dividends. We remain strongly committed to shareholder capital returns and returned a total of $2.4 billion in 2017, the third consecutive year we returned at least 70% of our free cash flow to our owners and we continue to target that level going forward.We also ended the year with $8.8 billion in adjusted net debt, and our unfunded pension liability was $7 billion, down $3.6 billion year over year.

With our pension funded status at 68%, that's our highest level since 2001. We're well on the path to achieving our pension funding target as we continue to strengthen our balance sheet, and remain committed to maintaining our investment-grade rating that we worked so hard to achieve. Looking back on 2017, we had a tremendous year for our people, for our customers, for our shareholders and the communities that we serve. We're poised to build on that success in 2018.And with that, I'll turn the call back over to Jill so we can begin the Q&A.

Jill Greer -- Vice President of Investor Relations

Ebony, we're now ready for questions from the analysts. If you could give them instructions.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, to ask a question, please signal by pressing *1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, press *1 to ask the question.

And we'll take our first question from Andrew Didora with Bank of America. Please go ahead.

Andrew Didora -- Bank of America -- Analyst

Hi. Good morning, everyone, and thank you for taking my questions. First, Glen, you have previously talked about how your corporate-contracted business had fares, I think, roughly 20% below where they were in 2014. Can you give us an update on where they stand now and how much of the benefit is in your 1Q PRASM guide for a return of business-travel demand stemming from the tax cuts?

Glen Hauenstein -- President

Well, we're very excited about the potential for increased business demand with the tax cuts. We haven't seen that materialize yet, but we expect that to materialize in the first quarter and our guide does not have that because we can't see it yet. The fare levels have stabilized and started to improve, but fare levels are only a few percentage points higher than they were in the trough, so I think there's a lot of opportunity moving forward as demand continues to improve.

Andrew Didora -- Bank of America -- Analyst

Great. And then second question just for Paul on the cost side. What is your Brent assumption in your new EPS guidance and did that change from Investor Day? And then, secondly, just the timing of maintenance costs? Why is 1Q different from other first quarters in terms of maintenance spend ahead of the busy summer period or are you just expecting to run the network harder or is there something else I'm missing there? Thanks.

Paul Jacobson -- Chief Financial Officer

Sure. Good morning, Andrew. Thanks for those questions. On the maintenance question, I would say it's a little bit higher than traditional first quarters.

As you know, with the mitigation of the C-series delays that we've seen, we've got a little bit more work to do on the existing fleet versus expecting that the new aircraft we're going to deliver for the summer schedule. So, I would say it's a little bit disproportionately weighted from that perspective. And if you wouldn't mind, repeat your first question. Sorry.

Andrew Didora -- Bank of America -- Analyst

No, I'm a bit curious what your assumption for Brent was in your full-year guide and did it change since your Investor Fay. Thanks.

Paul Jacobson -- Chief Financial Officer

Yea. Sorry about that. We haven't changed the full-year guide. It's obviously very early in the year.

I would say we're slightly ahead of what our expectations were for 2018 in terms of the rapid pace of the price appreciation, but we have a long way to go and we know that that is volatile but we did a assume the forward curve as we always do, but we feel OK about where it is right now but we're obviously watching it closely.

Andrew Didora -- Bank of America -- Analyst

Great. Thank you.

Operator

Our next question will come from Michael Linenberg with Deutsche Bank. Please go ahead.

Michael Linenberg -- Deutsche Bank -- Analyst

Yea. Hey, just a question to Glen. You talked about FX showing up in the international unit revenue having a positive impact. What about the return of fuel surcharges? It looks like that they're now coming back into the Pacific.

Are you seeing that? Have they increased recently? Can you just give us some update on that?

Glen Hauenstein -- President

Yes. Clearly internationally, we've seen fuel-surcharge increases due to the higher level of fuel and we expect that to continue as fuel stabilizes at this or a higher level.

Michael Linenberg -- Deutsche Bank -- Analyst

OK. Just a question to Paul. As I recall from the Republic bankruptcy, I believe you own a piece of that. What is the percent and is that being accounted for under the equity method?

Paul Jacobson -- Chief Financial Officer

No. All the changes in value there flow through equity. So, the ownership itself doesn't have an impact on the P&L.

Michael Linenberg -- Deutsche Bank -- Analyst

OK, but you own, what, 25% that, I believe?

Paul Jacobson -- Chief Financial Officer

Yeah it's in the 20ish% range.

Michael Linenberg -- Deutsche Bank -- Analyst

OK, OK and that's just being run through the non-op. OK, great. Thanks, Paul.

Glen Hauenstein -- President

Sorry, operator. Mike, just to clarify that, it runs through the balance sheet. It does not run through non-op because it's not publicly traded.

Michael Linenberg -- Deutsche Bank -- Analyst

OK, OK. No, thanks. I appreciate that. That's helpful.

Operator

Our next question will come from Jamie Baker with JP Morgan. Please go ahead.

Jamie Baker -- JP Morgan -- Analyst

Hey, good morning, everybody. First, Paul, I know your trailing view on hedging but, as you're obviously aware, the market has returned to [Inaudible] now for the first time in, I don't know, 2 1/2 years, if memory serves. Just wondering if it might influence your thinking on this topic, the hedging topic.

Paul Jacobson -- Chief Financial Officer

No, Jamie. Thanks for the question. There's no change. As I've said, I'm relieved to be able to say legacy losses are behind us and we feel good about where we are competitively, especially the work that we put into the supply side of it, both harvesting the benefits of the refinery but also looking across self-supply at multiple stations, and feel good about where our position is and I think the industry is at a parity level on fuel input costs it hasn't seen in quite some time.

Jamie Baker -- JP Morgan -- Analyst

OK. And second for Glen. I thought Mike's question on fuel surcharges was a good one. They're not permitted domestically.

I think it was Allegiant that took a stab a couple of years back unsuccessfully at that, to potentially revise that. It does make me wonder and thanks, Mike, I only began to wonder this in the last 90 seconds, given the current political and regulatory climate, perhaps you would have a more receptive year in Washington on the topic of domestic fuel surcharges. Is that anything we should be thinking about?

Glen Hauenstein -- President

No, I think I'm going to toss that to Peter Carter, our general counsel.

Jamie Baker -- JP Morgan -- Analyst

Yea, perfect.

Peter Carter -- General Counsel

Hi. Good morning. I would say we haven't given that particular issue much thought, but there's no question that the Trump administration has been very open to the airline industry in general and I think, frankly, business. So, interesting question and I appreciate it.

Jamie Baker -- JP Morgan -- Analyst

OK, fair enough. Thanks, gentlemen. Take care.

Operator

We will take our next question from Duane Pfennigwerth with Evercore ISI. Please go ahead.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hey, thanks. Good morning. Glen, can you expand a little bit on your comment about keeping unit revenue growth rates at the level of your March guidance despite tougher comps? How do you see that playing out? And I wonder, and sorry if I missed it, would you be willing to rank the geographies in terms of unit revenue growth rate you expect in the March quarter?

Glen Hauenstein -- President

Let me start with the second one first because I think it's the easiest. I think we would expect the trans-Atlantic to be No. 1, Latin to be No. 2, domestic to be No.

3, and Pacific to be No. 4. So, that's a pretty easy question. And the second question was what again? I'm sorry.

Duane Pfennigwerth -- Evercore ISI -- Analyst

I think you made a comment in the prepared [Inaudible].

Glen Hauenstein -- President

So, our business plan is predicated on 6.5% to 7% total revenue growth or passenger growth and that equates to a 2% to 3% capacity increase and around the 3.8%, right around 4% unit revenue. So, we're kind of treading at the rate that we need to get to generate that revenue throughout the year. So we feel pretty good about where we sit today versus what we need to achieve to get to the business plan, which is very different than where we were last year when we started the plan because, if you remember, we were in negative territory last year when we had the same call, the fourth-quarter call and we had to move back to positive momentum. So, that was a much heavier lift than really just playing out what we have as you go through the year than just keeping that baseline moving.

So, I think we feel a little bit better. Not that it's not challenging, not that there won't be a lot of things we don't expect between now and December of next year and we know that but we feel a little bit better about the line of sight to getting from where we are to where we need to be versus where we were last year and turning from a negative unit revenue growth to positive.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Thanks, Glen, and if I could sneak one more on Paul, your operating cash flow was up materially year over year in the fourth quarter. It looks like you had about $700 million working capital benefit. Can you talk about what drove that? Thanks for taking the questions.

Paul Jacobson -- Chief Financial Officer

Well, it was a number of things but I think it also bears mentioning that as a result of our investment-grade balance sheet, we have done an initiative with the supply chain to go out and work proactively with our vendors to extend some of our payment terms and do other things to drive working capital in the business. So, we were focusing on that very consciously.

Duane Pfennigwerth -- Evercore ISI -- Analyst

Thank you.

Operator

Our next question will come from Hunter Keay with Wolfe Research. Please go ahead.

Hunter Keay -- Wolfe Research -- Analyst

Are you expecting a headwind from the changing frequent flyer revenue recognition around the [Inaudible] to the prevailing market rate or whatever it's called? I think I'd heard about $100 million. Is that factored in the EPS guide or is that a static number? Can it change? How are you thinking about that?

Paul Jacobson -- Chief Financial Officer

Hey, Hunter, this is Paul. So, as we talked about at Investor Day, we don't expect material year-over-year changes from revenue recognition on the full-year basis.

Hunter Keay -- Wolfe Research -- Analyst

OK, thank you. And then on the 2018 earnings guide, if you find yourself drifting out of the low end of the range for whatever reason, where do you think you have the most incremental opportunity to get back in it? Is it non-fuel cost, is it revenue or is it something else?

Paul Jacobson -- Chief Financial Officer

I mean, it's really premature to be speculating how 2018 is going to be rolling out. We feel optimistic given the guide and our commitment to getting our non-fuel cost back to flat. We feel we'll be able to do, you've heard me say before, my expectation is closer to 0 and 2. And the demand environment is the healthiest we've seen in years.

So, I think fuel is a little bit of a wild card there. We'll see how that plays out. It seems like the market has gotten overheated over the last few months. We will see where that settles out but we feel pretty confident that it's roughly a 20% to 30% bump year over year on EPS is our best look.

I wouldn't get into how you manage some of the levers. It's way too early.

Hunter Keay -- Wolfe Research -- Analyst

OK, thanks.

Operator

Our next question will come from Darryl Genovesi with UBS. Please go ahead.

Darryl Genovesi -- UBS -- Analyst

Hi, guys. Thanks for the time. At your Investor Day are you had suggested that perhaps, if tax reform were to be passed, that there would be some incremental pension contributions. Is that something you're looking at for 2018 or would that basically be on hold until 2019 when the cash tax savings kind of starts to appear?

Glen Hauenstein -- President

That's right, Darryl. Obviously you're not going to see any cash savings in 2018 from tax reform since we weren't anticipating paying any taxes and we still don't anticipate paying taxes in 2018, but as we become a taxpayer between 2019 and 2020, the reduced level of taxes that we ordinarily would pay, one of the sources for those proceeds would be to continue to fund and hopefully get as close to fully funded status in pension over the next several years as possible. So, that to me would be at the higher end of priority list.

Darryl Genovesi -- UBS -- Analyst

OK, thanks for that. And then I wanted to ask you a little bit about aerospace manufacturing and [Inaudible] consolidation. It would appear that the proposed Airbus deal with Bombardier would benefit you in some way but now you've got media speculation that Boeing and Embraer are talking and you've already seen some suppliers get consolidated away over the last couple of years like [Inaudible] Aerospace and others. Would you anticipate this as being a problem for you in terms of how you manage your fleet cost over the next few years?

Glen Hauenstein -- President

We don't anticipate that being a significant issue. As you mentioned the Airbus-Bombardier deal we're supportive of and we think that will enhance the ability for the C-series to come to market. With respect to further supplier consolidation within the OEMs, we have conversations with all those OEMs and we are certain that we set expectations around performance for them and ensure that Delta is not harmed from any of that and we've received their commitment that this is actually only going to enhance their service levels to Delta, not put us in a competitive disadvantage.

Darryl Genovesi -- UBS -- Analyst

Right. Thanks very much.

Operator

Our next question will come from Brandon Oglenski with Barclays. Please go ahead.

Brandon Oglenski -- Barclays -- Analyst

Good morning, everyone, and thanks for taking my question. So, Ed, I wanted to come back to one of your prepared remarks, talking about how fuel can drive greater stability in the long run for the industry. I think you were saying higher fuel prices but then Glen also talked about accelerating revenue recapture that the industry historically has done. So, I guess it's not the same as Hunter's question but we do know fuel costs are higher here.

So, what are some of the things that Delta can do specifically to help drive that revenue recapture and really push down fuel volatility for your investors?

Ed Bastian -- Chief Executive Officer

Well, our ability to push down fuel volatility is, I think, that's well outside our control. We do our best to manage the fuel environment that's in front of us. I think the biggest thing we have going in our favor in 2018 is a strong economy with a lot of optimism. We've got a significant list of commercial initiatives that are coming to fruition.

We have a strong international environment which we haven't seen in a number of years. So, that's the main focus in terms of being able to recover and recapture fuel. Historically the industry has always managed spikes in fuel by offsetting, reductions in capacity. I think it's premature and early yet to start to adjust to our 2018 capacity plans, but we will look as the next few months unfold.

If these fuel prices continue on this tear, it certainly will have an impact and we will be prepared to deal with that going forward. We know how to do that well but I think the economy is the biggest benefit and I think that's the level we will be using to manage the fuel environment.

Brandon Oglenski -- Barclays -- Analyst

OK, appreciate. And, Glen, it might just be my phone, not too good here either but you were talking about three platforms for revenue expansion. I think what I heard was up-gauging and airport investments but maybe I'm simplifying that. So, can you come back to some of the longer-term revenue initiatives and really focus us in on what are the keys there?

Glen Hauenstein -- President

Sure. I think the key for us domestically is the continued up-gauge strategy, and one of the benefits that that provides is a higher level of the premium products and services that have been so successful in the marketplace. If you think about where we started many years ago with selling first class and then introducing the enhanced economy products domestically, we've come a long way since then and every year we think those products, how do we continue to mature. Well, in some ways they're very established now, they're still very young products.

They've only been in the marketplace three, four, five years and some of the things we have on the horizon which we think are really exciting are different ways to be able to buy those products and services. So, for example, if your company's travel plan doesn't allow you to sit in premium economy or in first, this year we allowed you to buy that in a post-purchase and we sold almost $100 million of that in the first six months of that being available to sale. By this summer we're anticipating being able to now also offer that post-purchase in miles. And if you think about how that opens the aperture to control your travel experience for people who want to buy those premium products and services, we think that's going to be key to our ability to drive revenues moving forward.

And the fleet itself, just in 2018 alone, provides for 5% greater seat availability by the end of this year in those premium products and services. So, not only do we have the base but we now have the premium products and services and different ways to buy them at different points in the purchase path and as we continue to work on our digital evolution, we could see expanding that so that we can actually market to you. And those are things that we have coming in the pipeline in the next months and years that we're really excited about is not driving to the bottom end of the commodity once-a-year flyer but to really the people who are discerning and who want to buy premiums and products and services and I think we've been at the forefront of that for years. We have a very good view of how that's going to play out over the next couple of years and that's really the cornerstone of our ability to continue to drive premium revenues at Delta.Is that too long?

Brandon Oglenski -- Barclays -- Analyst

Thank you.

Operator

Our next question will come from Joseph DeNardi with Stifel. Please go ahead.

Joseph DeNardi -- Stifel -- Analyst

Yea, thank you very much. Glen, you talked about the strength of the Amex partnership and record card acquisitions. I think you guys gave that $4 billion by 2021 target a couple of years ago. Is there upside to that at this point just based on how strong the trends have been recently?

Glen Hauenstein -- President

I think there's potential upside to it. I'd say again we got close to $1 billion to go to get there yet and we're having good success and we've got a great partner in Amex, who's fully committed to that trajectory as well. So, we'll see how the next several years go but it's safe to say from when we did the deal a couple of years ago we're running ahead of expectations.

Joseph DeNardi -- Stifel -- Analyst

Got it, OK. And then, Paul, just on the guidance for the year, is there anything explicitly in the EPS guidance related to mark to market adjustments for your equity investments?

Paul Jacobson -- Chief Financial Officer

No. That's all timing and out of period. So, we wouldn't be putting that in.

Joseph DeNardi -- Stifel -- Analyst

OK, thank you.

Operator

Our next question will come from Jack Atkins with Stephens. Please go ahead.

Jack Atkins -- Stephens -- Analyst

Good morning, everyone. Thanks for taking my questions. Ed, if I could ask you sort of a conceptual question about tax reform, I guess the question I've been getting a good bit from investors is around potential for this to get competed away over time. So, when you think about the P&L savings from a lower book-tax rate related to the corporate tax reform, how do you think about the airline industry potentially competing that away over the next several years.

And I would have thought given that most U.S. airlines are not cash taxpayers that perhaps it would take some more time to do that, but we're already seeing some of the airlines, not Delta but others, who are not cash taxpayers giving cash bonuses. So, I'm just curious to get your thoughts on the potential for this book-tax savings to get competed away over the next couple of years.

Ed Bastian -- Chief Executive Officer

Well, Jack, we have no intent to compete away the tax savings. We will certainly use the tax savings to reinvest in the business, to strengthen the balance sheet. As mentioned, pension is one of the things that we're focused on but the core of your question is right. There's very little cash tax being paid by the U.S.

airline industry at this moment. So, it's hard to compete away something you don't have. I won't comment on the other airlines giving away cash bonuses to the employees. That's great for the employees and I'm glad to see that.

We have a sustainable profit-sharing plan over the long term that has been far superior to any cash bonuses that any of the others have given out, and that's how we pay our employees. So, I understand the question, I understand the concern but it's pretty hard to compete what you don't have.

Jack Atkins -- Stephens -- Analyst

Yea that's definitely fair. One other high- level question. Would a U.S. withdrawal from NAFTA impact your partnerships with either WestJet or Aeromexico?

Ed Bastian -- Chief Executive Officer

I'm not going to get into speculation. I don't know.

Jack Atkins -- Stephens -- Analyst

OK, thank you for the time.

Operator

We will take our next question from Savi Syth with Raymond James. Please go ahead.

Savi Syth -- Raymond James -- Analyst

Hey, good morning. Just on the entity, I was kind of curious if you could share 1) the capacity growth expectations by entity for the year and then 2) with the JVs that have kind of been strengthened, when should we see that kind of start to flow through and drive more of the revenue upside?

Glen Hauenstein -- President

Savi, good morning. We don't get into the capacity by region on that detailed level but on the JV benefits, we're seeing some of that building in now. You see it coming through both on the revenue lines with the sharing but also inherent in the Delta P&L with the synergies that we get from the network. There's a ramp-up period obviously as we work through those issues, but I think the international team has done a terrific job and we will start seeing some of those benefits in 2018.

Savi Syth -- Raymond James -- Analyst

Got it. And, Paul, if I may, just a quick question on the refinery. What's your expectations there for 2018?

Paul Jacobson -- Chief Financial Officer

So, on the refinery, 2018 is a turnaround year. We're currently expecting to have a similar year but obviously it's still very early in the year but we'll have some down period especially toward the back end of 2018 but we expect a small contribution from it this quarter based on where cracks are and continue to provide that kind of $0.02 to $0.03 benefit quarter by quarter when it's running.

Savi Syth -- Raymond James -- Analyst

Got it. All right, thank you.

Operator

We will move next to Helane Becker with Cowen and Co. Please go ahead.

Helane Becker -- Cowen and Co. -- Analyst

Hi, team. Thanks very much for taking the time. First, just two questions. One is when you talk about up-gauging, is that 100% mainline aircraft that you're talking about or is there a percentage that's mainline and a percentage that's regional?

Glen Hauenstein -- President

It's mostly mainline at this point, Helane. As you know, we've been shrinking the fleet at the regionals, which has also contributed to that. If you think about the mix of where our fleet evolution, we had, I believe, almost 800 regional jets at one point in time and we're down less than half of that now. So, it's not only growing the gauge at the main line but reducing the reliance on the regional fleet.

The big up-gauge that we've got here in the next couple of years is the retirement of the MD80s. We still have over 100 of those that we're flying. We will be retiring them by 2020 and bring those old up to the 321s and 739s as well some MD90s as well. So, that's where the bulk of up-gauge sits.

Helane Becker -- Cowen and Co. -- Analyst

OK, perfect. Yea, I think at one point you guys were the largest operator of RJs in the world. And then my second question is with respect to air traffic control delays in the Northeast, and maybe, Ed, this is a question for you. As you plan for the summer months, because I feel like that was the biggest problem last year here in our New York market, are you thinking about adjusting capacity in these New York and maybe Boston corridor to allow for those delays that we get, what are they, ground stops, on a daily basis?

Glen Hauenstein -- President

We do, Helane. As you know, we take our operational integrity incredibly important. It's at the core of what we deliver to our customers as well as to our employees. And to the extent the Northeast Corridor continues to be problematic with respect to delays, we take that into account.

It's hard to predict at some level when the storms occur but we work very closely with air traffic control and with all of our partners out there to ensure that we're getting the very best intel, transparency, and throughput as we can but it's a challenging environment, it will stay challenging for everybody up there for a period of time.

Helane Becker -- Cowen and Co. -- Analyst

OK, thank you very much for your help. I appreciate it.

Glen Hauenstein -- President

Sorry, I can't be more optimistic.

Operator

Our next question will come from Rajeev Lalwani with Morgan Stanley. Please go ahead.

Rajeev Lalwani -- Morgan Stanley -- Analyst

Hi. Good morning. Thanks for your time. Glen, a couple of questions for you on the international side.

What gives you confidence that we're not at some sort of peak? And I think we're going to put on about plus 5 on PRASM. And just relating to that, what do you have more confidence in, more on the demand side or the supply side?

Glen Hauenstein -- President

Well, I think when you read all the headlines about the synchronized global economic expansion, that's kind of what we're seeing manifesting itself. So, we've seen not only an uptick in the average realized fare of business travel in the international entities but we've also seen an increase in core demand there as well. So, I think that when you think about how the U.S. is probably still growing and still accelerating growth and when you think about Europe and you think about the economies in the Pacific, it gives you a lot of confidence that as we move through the year, this is going to continue to improve and advances would substantiate that.

So, we have a little bit more visibility on international because it books earlier than domestic generally. So, those two combinations give us a pretty good confidence level that it's accelerating rather than decelerating.

Rajeev Lalwani -- Morgan Stanley -- Analyst

And do you expect the tax reform benefit to start to come through from a demand perspective and is it fair to say that the domestic side should do a bit better or do you think international would be able to keep up as well?

Glen Hauenstein -- President

I'm bullish about international for this year, not the least of, which I didn't mention in the earlier answer that foreign exchange becomes a tailwind this year and we've been fighting two or three years of a rising dollar. So now having that also, running in our favor is also another great tailwind for the international.

Paul Jacobson -- Chief Financial Officer

I think it's also fair to say, Rajeev, that the domestic business should certainly receive a benefit as consumers start see lower paycheck deductions in terms of lower tax rates as corporations start to invest further to take advantage of the benefits, U.S. corporations, that the tax reform facilitates. I think it's fair to say that domestic should receive at least as much a benefit as international.

Rajeev Lalwani -- Morgan Stanley -- Analyst

Very helpful. Thank you.

Jill Greer -- Vice President of Investor Relations

Ebony, we've got time for one more question from the analysts.

Operator

Thank you. Our next question will come from Dan McKenzie with Buckingham research. Please go ahead.

Dan McKenzie -- Buckingham Research -- Analyst

Hey, good morning. Thanks guys for squeezing me in here. Glen, just a couple of questions and this is kind of tied to some of the earlier questions but I would have expected Delta to trim its full-year outlook and of course that wasn't the case. So, if I can probe just a little bit more on what if anything has changed versus the Investor Day and, I guess, what I'm wondering is that fuel surcharges and then also going back to your observation about global synchronous growth driving international demand, has there been an improvement in the outlook of your JV partners since the Investor Day?

Glen Hauenstein -- President

I'm going to turn that over to Paul because he is more in tune with the complete level of the guidance. So, Paul?

Paul Jacobson -- Chief Financial Officer

Yea. Well, I think we expect some good year-over-year performance from our partners going forward, not just from the synergies but from their own appreciation. We've spoken a lot about the improvement in economic environment in Latin America, in particular as it relates to Gol and to Aeromexico. So, there are contributing pieces to it but I think overall, as we look at the year going forward, as Ed mentioned, it's too early to hit the panic button on fuel prices.

The revenue environment has a lot of momentum headed in the right direction. We feel good about where we can hit from the cost side. So, it's a driver but I think at the end of the day it really comes down to our ability to execute on the plan and continue to watch those external variables.

Ed Bastian -- Chief Executive Officer 

Dan, this is Ed. If I could weight in for a moment, we as an industry have demonstrated our ability to cover higher fuel price. Don't forget we were profitable with fuel well over $100 a barrel and I think over the medium term, if the new level is that $70, the industry will adjust reasonably quickly to that level. I don't know if that's three months or six months or nine months, but over time we don't adjust our capacity or start making short-term decisions based on where the fuel numbers sit on a week-over-week basis.

So, we're optimistic, we're confident, we've got all the levers within our control, the most important of which are the best employees and the best customer service in the business that going to really cover fuel forever for us.

Dan McKenzie -- Buckingham Research -- Analyst

That's great. Thanks for that, Ed. And then, I guess, just my second question here just ties to the basic economy part of the business here. We seemed to start the quarter out pretty clunky on this and sentiment in November was pretty bad, Of course, that all changed pretty dramatically in December.

And so, as we look at the uptick in demand that occurred throughout the quarter, is it really as simple as increased consumer confidence around the tax cut or did the industry perhaps get a little smarter about how to market basic economy throughout the quarter?

Glen Hauenstein -- President

We don't think basic economy, as we've stated in the past, is a huge driver or the ancillary products. As a matter fact, of the three that we track, it is the smallest contributor to the incremental revenue base, but we do see, as we continue to roll it out internationally, that there are significant benefits, and as we move into selling, from selling into flying in the trans-Atlantic, our lowest fares will now have baggage fees attached to them, and that's really a first for U.S. carrier in the trans-Atlantic market. So, we're looking for that to drive some incremental revenues and really to be very competitive, similar to how we are competitive with the ULCCs domestically, a great tool for us to be more competitive in terms of the fare itself with the ULCCs in the trans-Atlantic and we're very optimistic about how that will play out in a consumer segment that we need to be in, although that's not where we're making our big investments.

Dan McKenzie -- Buckingham Research -- Analyst

That's terrific. Thanks, guys.

Jill Greer -- Vice President of Investor Relations

That's going to wrap up the analyst portion of the call and now I'm going to turn it over to Ned Walker, our chief communications officer.

Ned Walker -- Chief Communications Officer

Hey, thanks, Jill. Ebony, we're ready for the media Q&A. Would you please review the process for the media to go ahead and ask a question? Also for the media, we'd request that you limit yourself to one question or a quick follow-up. That way we should be able to accommodate most of your questions.

Go ahead, Ebony, please.

Operator

Thank you, sir. Ladies and gentlemen, once again, it is *1 to ask a question. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, please *1 at this time.

We'll pause just a moment to allow everyone an opportunity to signal.We will take our first question from David Koenig with AP. Please go ahead.

David Koenig -- Associated Press -- Reporter

Hi. To clarify something that Glen said on the analyst portion about the tax law, so even though you think it's going to increase business travel, that is not in your revised full-year EPS guide? And can you say anything more about how the law is going to help you since you don't pay cash taxes?

Ed Bastian -- Chief Executive Officer

David, this is Ed. What Glen was talking about is that we haven't yet seen the evidence that there's going to be stimulated travel demand given that it's so early with the law just coming out over the last couple of weeks, but we, at the same time, are optimistic that the law will help us deliver on our revenue guide and we do anticipate and we do have factored in our revenue expectations for the year seeing improvements from tax reform. The second part to your question that was around competing away the tax benefits, I believe, or not seeing the cash [Inaudible].

David Koenig -- Associated Press -- Reporter

No, it's more just anything else in the law that's going to help you, you were talking about the faster expensing or maybe something else, other provisions in the law.

Ed Bastian -- Chief Executive Officer 

The law, in addition to providing a stronger economic outlook for our consumers, it's going to provide a much stronger economic outlook for Delta. We expect the benefit will probably be about $800 million a year at our current earnings level. We're not a cash taxpayer today but we will be a cash taxpayer in the next couple of years. So, you'll see that value ramp as we work off the last remaining NOLs that we have.

So, it'll be a significant benefit for Delta and our owners.

David Koenig -- Associated Press -- Reporter

OK, thanks.

Operator

Our next question will come from Michael Sasso with Bloomberg News. Please go ahead.

Michael Sasso -- Bloomberg -- Reporter

Yea, good morning. Maybe this is for Ed. I know there's some wiggle room and when you expect to take the C-series but whatever assumptions you're making for your own operations, can you tell me what the latest thinking is, when you actually will take the C-series? And the second part is, what are all the impacts that you're doing, ways you're trying to cope with not having that, are you having to delay or roll back certain routes that you had anticipated? I think Paul mentioned boosting maintenance costs. Just what are some of impacts of having this delay?

Ed Bastian -- Chief Executive Officer 

Well, we're waiting to hear the results of the International Trade Council that is scheduled to rule before the end of January. So, I'd say I can't generally respond fully to your question, Michael, until we hear the results in which Boeing was expected to be able to prove harm. So, I don't know what the actual tariff will be if there is any at all. And once we know what that is, then we will set our plans accordingly.

With respect to incremental impacts that we already experiencing, yes, we do know that we will not be taking the C-series according to the current schedule, which would be taking delivery this spring, and to that end we've had to invest in maintaining some aircrafts, particularly MD88s to keep them around a little bit longer than we were otherwise anticipating.

Michael Sasso -- Bloomberg -- Reporter

And have you had to delay certain routes, just changing how you're flying that you had anticipated in the next year or two?

Ed Bastian -- Chief Executive Officer 

We will make those decisions once we know what the rules are.

Operator

Our next question will come from Susan Carey with Wall Street Journal. Please go ahead.

Susan Carey -- Wall Street Journal -- Reporter

Good morning, everybody. Two little questions. Is it still true that your full-year '18 EPS includes $1 for the tax cut? And second question, there was some speculation that Delta was going to go after Georgia Power or the airport/City of Atlanta for the power outage. Is there any kind of new thinking on that?

Glen Hauenstein -- President

To your first question, Susan, yes $1 is the current ballpark estimate on the benefit of the tax reform that we've rolled into the EPS. With respect to your second question, we are having very productive conversations with Georgia Power as well as with the airport authority here in Atlanta and the City of Atlanta about No. 1, making certain that we learn from the experience we all persevered in December and ensure that it never happens again and putting in the right design and structure both in the short and long term to protect our power source. With respect to any compensation, it cost us around $40 million, and we'll have the conversations at the appropriate time with those parties.

Susan Carey -- Wall Street Journal -- Reporter

Thank you.

Glen Hauenstein -- President

Ebony, we'll have time for two more questions.

Operator

Thank you. Our next question will come from Alana Wise with Reuters. Please go ahead.

Alana Wise -- Reuters -- Reporter

Hi. Good morning, everybody. Thanks so much for taking my question. So, quickly, I just wanted to revisit the question of the C-series.

At this point doesn't seem unlikely that the ITC won't recommend duties of some sort. I know you've said in the past that you're not willing to foot the bill but with tax reform having passed, I'm curious would Delta be willing to use some of its tax savings to foot some or all of the bill? And secondly, previously Delta's said that tax savings would not be used for share buybacks and I was just curious if that was still the case. Thanks so much.

Glen Hauenstein -- President

The answer to your first question is no, we are not using tax reform to pay tariff subsidies. We have no intent to pay any tariffs on the C-series. And the second question is, again, given that we are not seeing a cash benefit in the next couple of years from tax reform, given that we have NOLs, there's no cash to go buy incremental shares with.

Alana Wise -- Reuters -- Reporter

Thanks so much.

Glen Hauenstein -- President

Final question, please, Ebony.

Operator

Yes, sir. Our final question will come from Edward Russell with Flight Global. Please go ahead.

Edward Russell -- Flight Global -- Reporter

I was wondering if you could update us on the status of the Korean Air joint venture -- have you sought regulatory approvals in Korea yet and are you still on track for implementation this year perhaps?

Glen Hauenstein -- President

Yea, we receive the approval from DOT to move forward and we're currently working with Korean authorities together with Korean Air. We anticipate receiving authority sometime hopefully in the first half of this year. This is what our Korean counsel told us.

Edward Russell -- Flight Global -- Reporter

OK. And then implementation before the end of the year?

Glen Hauenstein -- President

As soon as we get approval, we'll move to implementation rapidly.

Edward Russell -- Flight Global -- Reporter

Great. Thank you.

Glen Hauenstein -- President

And actually, Ebony, we're going to take a question from one more and that's from our local hometown newspaper, Kelly Yamanouchi.

Operator

Perfect. Kelly Yamanouchi with the Atlanta Journal-Constitution, please go ahead.

Kelly Yamanouchi -- Atlanta Journal-Constitution -- Reporter

Thank you so much for squeezing me in. I just wanted to check on the impact from the airport outage and winter storm Benji, of the $60 million, so $45 million of that was revenue impact and would it be $15 million in cost impact?

Glen Hauenstein -- President

Kelly, $40 million was the rough impact of the outage and $20 million was the rough impact from the winter storm.

Kelly Yamanouchi -- Atlanta Journal-Constitution -- Reporter

Oh, I see. OK. And was most of the winter storm impact on the Atlanta hub?

Glen Hauenstein -- President

No, it was in the Southeast, as you recall, but Atlanta hub obviously took the biggest impact. I think we had 1,200 cancellations, most of which were in Atlanta that day.

Kelly Yamanouchi -- Atlanta Journal-Constitution -- Reporter

Great. Thank you so much.

Ned Walker -- Chief Communications Officer

Hey, thanks, Ed, Glen, Paul and Peter. That concludes the December-quarter 2017 earnings call. We'll talk again in April. Thanks, everyone.

We appreciate it.

Duration: 69 minutes

Call Participants:

Jill Greer -- Vice President of Investor Relations

Ed Bastian -- Chief Executive Officer

Glen Hauenstein -- President

Paul Jacobson -- Chief Financial Officer

Andrew Didora -- Bank of America -- Analyst

Michael Linenberg -- Deutsche Bank -- Analyst

Jamie Baker -- JP Morgan -- Analyst

Peter Carter -- General Counsel

Duane Pfennigwerth -- Evercore ISI -- Analyst

Hunter Keay -- Wolfe Research -- Analyst

Darryl Genovesi -- UBS -- Analyst

Brandon Oglenski -- Barclays -- Analyst

Joseph DeNardi -- Stifel -- Analyst

Jack Atkins -- Stephens -- Analyst

Savi Syth -- Raymond James -- Analyst

Helane Becker -- Cowen and Co. -- Analyst

Rajeev Lalwani -- Morgan Stanley -- Analyst

Dan McKenzie -- Buckingham Research -- Analyst

Ned Walker -- Chief Communications Officer

David Koenig -- Associated Press -- Reporter

Michael Sasso -- Bloomberg -- Reporter

Susan Carey -- Wall Street Journal -- Reporter

Alana Wise -- Reuters -- Reporter

Edward Russell -- Flight Global -- Reporter

Kelly Yamanouchi -- Atlanta Journal-Constitution -- Reporter

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