Q2 2021 Delta Air Lines Inc Earnings Call
In international demand recovery heading into the fall.
Through the crisis, we've earned an unprecedented level of brand loyalty interest. Thanks to the World class service operational reliability and innovation that drives the delta difference and our commitment to safety cleanliness and wellness is as strong as ever.
The people.
Our our strongest competitive advantage powering our resurgence and running the best operation in the industry.
It is because of our People's incredible work that Delta was honored as the number 1 airline from 2021 by J D power.
On to thank every member of the Delta family for the professionalism spirit of service and warm few show to our customers every single day.
I would also like to thank our crews and operations teams for continuing to put our customers and their safety first as we restore our business. We are now in active recovery of our business and the challenges of getting our airlines fully back to the service level, our customers expect and deserve as daunting in light of the huge surge in demand that we are.
Experiencing but we're taking all the right steps primarily through increased staffing levels at both Delta and our contract service providers to service this demand without compromising on the standard of care and cleanliness that our customers have become accustomed to on delta throughout the pandemic and even with these challenges our team.
Continues to run the very best airline in the industry, leading on all key operating metrics for the month of June and year to date.
For the June quarter, we narrowed our pre tax loss to $881 million. This.
This was meaningfully better than initial expectations driven by demand strength importantly, we achieved significant financial milestones during the quarter.
These include returning to profitability in the month of June with a pre tax margin in the high single digits. Despite still missing 40% of our prior revenue from June of 2019.
Generating $1.5 billion of free cash flow and nearly $200 million of adjusted free cash flow in the June quarter.
<unk> solid profitability and generating meaningful free cash flow a little over a year from the start of the worst crisis. In this industry's history is an impressive statement about the resilience of our business and the great work of our people.
Showcasing the value of the commercial partnerships that we've developed leveraging the Delta brand, we have created almost $1 billion in investment value. This year through our partnerships with wheels up and clear and I want to point out that $1 billion is against a zero cost base on it.
Give a big shout out to Kenny Victor on the wheels up team as their listing on the New York stock exchange gross lie today.
We're proud to be <unk> exclusive commercial airline partner and largest shareholder interest.
<unk> valued at over $500 million.
Also congratulations to Karen <unk> Becker and the clear team on their successful IPO our investment in clear is worth approximately $340 million.
And finally, I want to congratulate Sir Richard Branson, and our team at Virgin Galactic for making history last weekend and completing their first fully crewed space flight. It was exciting to watch Richard break new barriers. Once again this time commercial space travel.
I take the time to mentioned these relationships because of the much larger ecosystem that delta operates and attracts and these opportunities to create value. We will continue to be nurtured as we extend our brand beyond traditional airline boundaries.
At June profitability on the books were now on the restoration phase of recovery and focused on harnessing the power of our differentiated brand and our resilient competitive advantages to drive sustainable profitability in the second half of 2021 and enable long term value creation, specifically for the September quarter, we expect.
A mid single digit pretax margin as demand continues to improve with the return of corporate travel and gradual reopening of international markets.
We're starting to see signs of a resurgence of business in international travel both of which are supporting the next leg of the revenue recovery.
And we are well positioned to take advantage of both with leading domestic corporate share and a strong global network.
Around the country more and more offices are opening and people are reconnecting to their businesses and to each other with 72% of our employees vaccinated, we officially reopened our own offices last month and Jim.
And as I interact with other Ceos I'm.
I am encouraged to hear about their own plans to accelerate their return to office that sentiment is coming through loud and clear on our most recent corporate survey with almost 95% of our accounts, indicating they will be returning to their offices by the end of this year.
Domestic corporate volume grew from 20% base in March of this year. The March month that is 240% recovered in the June month, and we expect it to be close to 60% recovered by September based largely on these re openings I'm also encouraged by the strength that we're seeing in.
While we know international demand recovery will be very choppy and uneven we're seeing strong bookings to Europe when countries open their borders.
From our experience in the U S. We're seeing the impact of widespread vaccinations have on reopening the economy. We know the same will be true for the rest of the world over time, but are mindful of the risks that new variants posed to the pace of recovery and our team will stay very disciplined in restoring international capacity.
As the recovery builds team, we are making the required investments, including hiring frontline and reservations employees and investing ahead of the full recovery of the airline in places like maintenance and training. This will allow us to continue to provide industry, leading service levels and prepare the airline for success and are stronger than <unk>.
Obviously expected demand environment.
These investments are key to the execution of our strategy to win which is defined by providing best in class service to our customers and leveraging the brand, while creating a simpler more efficient airline.
The power of our brand has come through the crisis stronger than ever and we're seeing evidence of this across the business. The resilience of our American Express co brand credit card program is a great Testament to the increasing brand affinity that we have card spend on the Delta American Express portfolio in the month of June was.
115% recovered.
2019 levels for the same month, despite travel purchases still being off by 25% in that same period.
We're continuing to renew and simplify our fleet and yesterday, we announced that we are opportunistically, adding 7 Airbus 300, Fifty's and $29.737, 900, <unk> that will enter service over the next 12 to 24 months.
These are current vintage to the aircraft that we operate in our existing fleet and we're adding these pre owned aircraft for substantially less than the cost of new planes.
These aircraft aligned with our fleet strategy Thats focused on simplification scale size and sustainability and create optionality for future growth or replacement in a capital disciplined manner.
These transactions accelerate our recovery plans, which also began with the exercise of 25 Airbus 321 Neo options in April.
<unk> hundred 21 deals, which will start to deliver in 2020 to offer the lowest seat cost in our fleet and will strengthen deltas gauge advantage relative to our competitors.
Our recent actions on fleet enhance efficiency throughout the cost structure.
Larry will talk more about this shortly and will highlight the progress that we're making on our balance sheet and journey back to investment grade metrics.
As our recovery path becomes clearer so does our future as a carbon neutral airlines in 2020, we committed to our airlines carbon neutrality and we're taking actions today that are critical to our future. This includes the reduction in emissions that were achieving with our fleet renewal investments and sustainable aviation fuel to gas.
Other with many corporate partners and the evaluation of long term investments in carbon reduction and removal technologies. During the quarter. We released our inaugural 2020, ESG report, which expands on the corporate responsibility report that we have issued in the past you'll.
You'll be able to hear more about our ESG commitments as well.
<unk> as our multi year financial targets and vision moving forward at Delta as capital markets day, which we will be holding in person in New York on December 16.
This event will give everyone an opportunity to hear from our management team, which over the past year, we've strengthened by bringing in outside perspectives and promoting our deep bench that includes Allison Osborne, who during the quarter.
Im.
I'm pleased to announce was named our executive Vice President and Chief customer experience officer.
In addition, John Lauder, who I'm also pleased we announced as our new executive President and Chief of operations, Alison and John are Delta veterans, who bring deep experience and unmatched expertise to their roles.
In addition, our incoming CFO, Dan Janky brings extensive business and financial skills to his role as well as a broad global perspective, and operational experience that will service well in the recovery and be on Dan's background makes him the ideal leader to advance our efforts to restore delta to our pre pandemic financial position you'll hear.
From him briefly before Gary delivers the financial update.
With this great team of serving leaders. We're building an airline that is positioned to drive long term value for all our stakeholders on people with customers our owners and our communities, where we live work and serve I could not be more excited about our future and now I'd like to turn it over to Glen.
Thanks, Ed and good morning, everyone.
16 months after the start of the pandemic I'm encouraged by the pace of the recovery and excited about our future sales.
<unk> is well positioned with a powerful brand strong competitive advantages in a differentiated customer experience all of which are increasingly driving deeper customer engagement.
During the quarter, we saw consumer demand for travel return in an accelerated rate as pent up demand drove an increase per air travel as.
As customers return to the skies Delta is their airline of choice given our industry leading service that's provided by the best employees in the industry.
This resulted in a more than $2.7 billion improvement in revenue from the March quarter.
Compared to 2019 revenues were 49% lower beating our initial guide on 39% less available capacity.
Bookings in domestic and short haul Latin leisure markets recovered to nearly 90% of 2019 levels and during the quarter, we began experiencing strength in demand to select European countries as they reopened.
Domestic business travel is on an improving trajectory with corporate volumes, 40% recovered in the month of June doubling from the 20% recovery rate in March.
Paul and medium size enterprise volumes continued to outperform corporates by 10 points and are now 50% recovered.
I'll talk more about the encouraging trends, we see in corporate in a few minutes.
From April to June passenger unit revenues improved by 25 points with both load factor and yield strengthening through the quarter.
This is a great accomplishment considering that we had the middle seat block in place for the month of April which when lifted on May 1 resulted in a 45% increase in sellable capacity with minimal incremental costs.
So kudos to the Delta team for managing through this transition period and driving these outstanding results.
I also want to congratulate our cargo team for an outstanding quarter with cargo revenues up 35% compared to the June 2019 quarter, despite running a much smaller operation.
We are also seeing momentum in daily bookings and net cash sales. Our average net cash came in 20% higher than forecast doubling relative to the March quarter importantly in the month of June our average net cash sales are 70% restored to corresponding 2019 levels. That's running about 10 points ahead of revenue recovery as customers are.
Making travel plans out into the future.
As Ed mentioned, we're exiting June with a demand environment, that's much stronger than just 3 months ago. Since the start of the year, we've seen a sequential revenue improvement from 35% recovery versus 2019 on first quarter to 51% in the second quarter.
On that trajectory is continuing and we expect our September quarter total revenue to be 65% to 70% recovery on capacity that 70% to 72% recovered when compared to the same quarter in 2019.
This positions us for another significant sequential improvement in unit revenues.
At the midpoint of our guidance. This represents another $2 billion sequential increase in revenue on approximately 10% higher capacity.
Sure.
We expect strong leisure demand to continue through the fall and winter and we're starting to see the next leg of the recovery take hold with improving trends in business and international travel.
Delta is well positioned to take advantage of both with leading domestic corporate share and a strong global network.
Corporate travel volumes accelerated in May and June with almost 95% of our accounts booking travel in the month of June.
We're also beginning to see a return of consulting and sales related travel and higher volumes in traditionally business heavy markets like New York City and Boston.
Our recent corporate survey result results showed that over 90% of our corporate accounts anticipate travel volumes to increase in the September quarter up from just 33% in the March quarter.
In addition to the survey results our close engagement with customers gives us increased confidence of the acceleration of business travel, especially as we move towards the post labor day period as schools and offices continue to reopen.
We expect domestic corporate volumes will recover between 55 and 60% to up 2019 levels by the end of the September quarter up from 40% at the end of the June quarter.
Despite volatility in global Covid recovery trends International travel is accelerating with capacity on load factors, increasing as we head into the fall.
When we spoke last quarter only 2 European countries had reopened for U S citizens.
Day more than 15, Europe European countries are open and we're seeing strong bookings follow as border closings lift.
We are also helpful that $2.12 F restrictions prohibiting inbound travel to the U S will be significantly reduced in the September quarter.
The recovery in short haul laden exceeded 2019 levels, but in long haul Latin demand remains muted as many countries are still closed.
Specific demand remains low and will likely be the last region to recover.
Delta has a strong platform internationally due to the structural changes in the landscape, but more importantly, because of elements unique to delta.
First we will have the number 1 joint ventures in each entity and our international partners will emerge from their restructuring efforts more competitive than before.
We look forward to continuing our valuable strategic relationships with all of our global partners as they navigate through the COVID-19 crisis.
And as they position themselves to emerge from their restructuring processes. We are confident these strategic relationships will accelerate our international recovery in the years to come.
Second our hubs are powerful offering extensive and efficient global coverage the strength of our global hubs resemble those of our core domestic hubs, namely strong presence and local share and the ability to connect traffic efficiently.
Third our widebody fleet renewal will be instrumental in our recovery on path to higher margins.
Adding the 700 <unk> hundred Fifty's announced yesterday builds on our long term fleet plan efforts.
Our wide body fleet renewal program improves our product offering enhances our cargo capability reduces our unit costs and is more efficient fuel efficient contributing to a more sustainable future.
As we rebuild the airline we are optimizing the network for the return of business in international travel and are building on the strength of our core and coastal hubs, where we have been able to improve our local share by 3 points from pre pandemic levels.
We also continue to put the customer at the center of everything we do creating an enhanced premium experience.
This was successfully <unk> air travel on Delta, providing customers with the products and flexibility that they value most.
Premium products are demonstrating resilience, where demand is strongest with domestic and short haul Latin premium revenues outpacing main cabin by 5 to 10 points we.
We believe this will be reflected at the system level as premium revenue and other entities improves with a return of business in international travel at scale.
We're also seeing increases in customer engagement and brand momentum. This is evident in skymiles acquisitions, which set an all time record in the month of June outpacing the prior record achieved in July of 2019.
These acquisitions allow us to bring new customers into the Delta ecosystem.
Engagement is also coming through the performance of our co brand credit card program as customers are increasingly seeing the value proposition and continue to aspire for travel status and premium experience.
For the quarter co brand spend was 110% recover to 2019 levels driven by improving <unk> spend indicating customers' desire to explore the world and reconnect with friends and family.
We exited the quarter with co brand spend around 115% recovered for the month of June.
New co brand account acquisitions, and improved more than 75% sequentially and we're around 90% recovered to 2019 levels for the quarter.
In addition, we're seeing more customers moving into premium co branded cards, given the value proposition for those products.
The improving trajectory resulted in cash renew Mauritian from American Express in the month of June exceeding 2019 levels.
We expect <unk> will continue to remain at or above 2019 levels into the second half with significant growth opportunities in the years ahead.
In closing the foundational building blocks for our long term success are in place.
With the industry's best domestic and global network renewed and efficient fleet, a day commoditized product and are highly valued brand and the industry's best employees, we continue to extend our commercial and financial lead.
Combining that with our efficient cost structure puts us on a path to improve on our pre pandemic margins and generate sustainable free cash flows, allowing us to reinvest in the business and restore our balance sheet strength.
Delta future is incredibly bright.
And with that I'd like to take this opportunity to welcome our incoming CFO to Delta that I'm looking forward to working with you and now I'll turn the call over to you for a few minutes.
Thank you Ed and Glen for the warm welcome certainly pleased to be here and begin working closely with Ed Glen and the entire executive leadership team to ensure that we continue to establish clear priorities deliver on our commitment and build a more resilient valuable delta.
There is no doubt it is an interesting time to join.
What really drove drew me to this opportunity at Delta is a unique culture.
Industry leadership, and growing brand strength with customers. It's a combination like no other in the industry.
It's really clear that there's a great deal of talent in the finance organization.
Humbled and honored to lead this organization forward through this pivotal time.
A key guiding principle for me will be open and transparent communication with the financial community I look forward to speaking all of you on getting to know the key stakeholders in the coming weeks and months, including many of you on the call now I'll turn it over to Gary for the financial update.
Thank you Dan and on behalf of the entire finance team welcomed to Delta.
Good morning, everyone on the call and thanks for joining us.
Delta people shined and carried our brand to new heights during the crisis those efforts combined with the strong demand recovery Glen described and the benefits of operating a simpler more efficient fleet are enabling us to cross a number of key milestones on our journey to return to and exceed 2019 performance let.
Let me quickly review the second quarter, then provide color on our second half cost outlook I'll wrap with a discussion of our capital outlook and balance sheet.
Starting with highlights from the quarter, we reported an adjusted pre tax loss of $881 million on more than $2 billion sequential improvement and generated.
A solid June month profit despite revenues for the month of June still 40% below 2019.
Non fuel cost rose, 6% sequentially on 21% higher capacity as the teams continue to rebuild our network efficiently non fuel CASM was 9% higher than 2019.
We realized savings from tax credits from third party rate reductions that were offset by rebuild expenses and maintenance and pilot training and a noncash expense for employee flight passes awarded to our employees in recognition of winning the JD Power Award.
Adjusted fuel price per gallon of $2.12 was 11% higher than the first quarter, including a 20 <unk> per gallon impact from refinery losses, we realized a 7.1% fuel efficiency gain versus the June quarter of 19 with the majority driven by fleet renewal.
<unk> momentum fueled cash sales across the booking curve driving a 1 billion $5 of growth in our air traffic liability to nearly $7 billion now $300 million higher than the same period in 2019.
With the strength, we see on the demand environment, we expect our air traffic liability to remain above 2019 levels into next year.
Daily cash generation was substantially positive for the full quarter more importantly, we generated nearly $200 million of free cash flow, excluding our $1.5 billion pension contribution and $2.5 billion in PSP Grant proceeds.
We are transitioning now away from daily metrics to focus on regular free cash flow the best measure of value creation as we turned the corner on profitability and look to restore our financial strength.
As we head into the second half we're excited to shift our focus to return on our profitability generating cash and.
And restoring and exceeding our pre COVID-19 results and financial position with continued recovery in limited cost growth, we expect to be profitable in both the September and December quarters at current fuel prices.
Regarding the cost outlook I am very happy with the team's performance in the first half as we continue to rebuild the network a fifth efficiently.
We remain on a path to achieve non fuel CASM below 2019 levels by the fourth quarter, though the strength of demand recovery is creating some welcome cost pressure on the form of higher rebuild and selling related expense.
We have also experienced inflationary pressure from vendors and our operating teams have accelerated hiring of frontline employees to ensure we maintain excellence in operations and service levels as we risk scale.
Despite these pressures we will see continued leverage in key areas. For example, we expect an approximate 8% head count growth through the end of the year on a nearly 15% increase in ASM production.
We will see our fleet utilization rise from <unk> levels, approximately 15% below 2019 to approximately 5% in the fourth quarter.
Our airports will also see better utilization, particularly our coastal hubs as they move from 70% to more than 90% restore.
As we accelerate maintenance from training to meet higher potential capacity in 'twenty..2 rebuild expenses are stepping up in both the third and fourth quarters to 5 to 6 point cost headwind versus 3% to 4 points in the first half.
September quarter will see non fuel cost growth sequentially at roughly the same rate as capacity due to the higher rebuild and revenue related expenses I mentioned.
With these factor September quarter, non fuel CASM is expected to be 11% to 14% higher than 2019.
We expect to close the gap to 2019 non fuel CASM in the fourth quarter through continued volume leverage as capacity remains essentially flat from the third to fourth quarters.
Net of the more normal seasonal decline of approximately 15%.
Adjusted fuel price per gallon for the third quarter as expected at 205 to $2.15.
Fuel efficiency for the quarter is expected to remain better than the September COVID-19 period by approximately 5%.
On the capital outlook, we now expect gross capex of approximately $3.2 billion in 'twenty, 1 up from our original guidance of $2.5 billion driven by our re buy our aircraft announcements hats off to our fleet and technical supply chain teams for landing these compelling opportunities that meet 3 key.
Citerior vs.
These transition transactions are opportunistic and take advantage of attractive economics in the used market.
These aircraft types are currently active in our fleet and entirely consistent with our fleet simplification strategy. In addition, these aircraft along with the 321 Neo options. We exercised in April will support the potential for up to 7 points of additional capacity restoration at compelling marginal economics by 2023.
We have a lot of additional optionality on our fleet plan to flex capacity up or down at low cost depending on the shape of the recovery are 71, 7% and 767 fleets our largest levers we're still flying these fleets at scale today and could retire additional units or reactivate parked aircraft to meet higher demand scenarios.
Let me now move to the balance sheet with improving financial performance on a strong liquidity position, we are using cash to reduce leverage and non operating expense, while rebuilding unencumbered assets and managing our debt maturity profile.
During the quarter, we prepaid $450 million and aircraft related debt. In addition to normal amortization of $875 million and contributed 1 billion and a half to the pension plans. Additionally, we paid cash for all but 3 aircraft deliveries since.
Since October our debt reduction initiatives have totaled $11 billion and freed up $6 billion in collateral.
With the additional funding this quarter, we do not foresee the need to make any material pension contributions in the future by year end, we expect the plans to be fully funded on the pension protection Act basis, and 90% funded on a GAAP basis with this level of funding and the plans frozen to new participants.
We're now reducing the investment risk of the portfolio to protect our funded status.
The great work of our pension and treasury teams over the last decade and funding this obligation free.
Roughly $1 billion in annual free cash flow that can be used in the future to further delever or otherwise create value.
Adjusted net debt is expected to be approximately $19 billion at the end of the September quarter modestly increasing from where we ended June as we pay cash for aircraft deliveries.
As we turned the corner on profitability and look to the future. We're excited to shift our focus to restoring our business and delivering long term value for our owners restoring our financial foundation remains a top priority as we position for the future and we look forward to sharing more of our long term vision with you in December let.
Let me conclude by congratulating the 75000 people.
To make the Delta difference a reality every day.
These excellent results are your scorecard and a reflection of all you do to delight our customers.
That turn the call back over to Julie to begin the Q&A.
Can you please remind the analysts how to queue up for questions.
Thank you if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad, if youre using a speakerphone. Please make sure you're on mute function is turned off to allow your signal to reach our equipment again. Please press star 1 to ask a question, we'll pause for just a moment to allow everyone the opportunity to signal for <unk>.
<unk>.
Yes.
Thank you our first question will come from Helane Becker with Cowen.
Thanks, very much operator, hi, everybody and thanks for your time welcome Dan.
So here's my questions. My first question is I was wondering if you could.
Talk about maybe Glen this is for you.
Do you expect the non U S recovery to luck by the different regions over the next say 6 to 12 months.
If you can and then my other question is I think Glen you might have talked a little bit about this in the <unk> line.
Are you seeing that people are booked.
Looking further out and I don't know if you can talk to like after labor day bookings.
Or even holiday bookings, how they're comping 10 per.
Previous levels. Thank you.
Okay.
So helane first about the entities a little bit we're seeing a U S based demand recovery to the open countries in the Trans Atlantic and we expect our loans to move to.
To be close to historical levels running probably in the low to mid <unk> by the August September October period.
Again, you know that 212 F restricts.
Europeans from coming to this country. So I think we focused on those countries that generally have high U S outbound demand.
And as we move forward, we will be adding.
A little bit of capacity, but essentially keeping our levels flat, where we would normally pull down in the September October timeframe, and focusing on our European hubs and distributing traffic through them. So I'm pretty optimistic about how the results could play out in the Trans Atlantic and Thats really we have.
35% to 40% of our travel still missing with the European origin piece.
Opened for sale and with business really not recovering at the same level as leisure so.
Pretty optimistic about where we can get to on this leg, but theres a lot more to comment on the trans Atlantic and Latin It's really the tale of 2 markets..1 is the close in U S point of origin leisure market as well as Mexico business. Both of these are actually exceeding 2019 levels.
Short haul Latin is doing quite well and we continue to expect that to be very very strong as we move into the more traditional leisure season in the late fall.
And then the Pacific, which I think it has talked in the past we expect this to be the laggard due to low vaccination rates.
And continuing outbreaks over and restrictions in the Pacific and we really don't see any impetus for that to.
To be lifted net.
Now I think we're looking at a 2022 at the earliest probably significant recovery in the Pacific So.
Atlanta, clearly the furthest along and Thats, great for us because 65 per cent of our international.
Revenues are in the Trans Atlantic So.
We're excited about what we see in terms of U S demand there.
Domestically post labor day.
This is every month that we look from August to September and October clearly as you move out you have fewer and fewer bookings, but we have about a third of our September bookings on the books now and we have.
As it sits today and we expect to give some of this back but we have positive yield in every 1 of the entities.
The sequential improvements in RASM. So I think we're seeing very strong indications of demand through the through the post labor day period of course those are initial indications we are a long way to go as we move closer and closer to those departure dates.
Got you that's very helpful. Thank you.
Thank you. Our next question comes from Sheila <unk> with Jefferies.
Good morning, everyone and thank you for the time.
Maybe just on cost related questions on CASM, but I expect it to remain fairly elevated in Q3, how do you think about the delta and driving higher volume from 11% to 14% in Q3.2019 levels to flatten.
In Q4, I get about half of that as the build costs, but maybe what's the bridge on the moving pieces and then more broadly how do you think about cost headwinds and inflationary pressures.
Okay.
While sales.
We talked about the major drivers the key is really leveraging the continued build of the network.
And as I was describing in prepared remarks generally when we move from the third into the fourth quarter, we have a pretty big reduction in our activity levels. This year, we expect that to be relatively flat that gives us the opportunity to leverage the things that I was describing to get.
Some good incremental leverage on on our people some good incremental leverage on our asset utilization.
And it's just a natural outcome of the way the capacity progression is moving.
In terms of how we see the bigger pieces. They don't change that much between the third it's the <unk>.
In the fourth quarter, we expect that rebuild expenses will still be at elevated levels in that 5% to 6 point range in both quarters.
On 1 of the things I mentioned on the last call from a mix point of view.
Both the second and third quarters, we've got about a 5 point drag from not having anywhere near as much of our long haul international flying which is just structurally very low CASM long stage length flying as we move into the fourth quarter. It is still a headwind it's not quite as much. It's about 3 point. So that's the key.
That debt I would add.
Okay.
Thank you. Our next question comes from Conor Cunningham with MK and partners.
Hello, everyone. Thank you.
It's great to hear that corporate continues to improve.
As people return to the office.
I will I do have to ask like your competitors are now pushing to replicate some of your success you've had with large corporate so I was curious if you could talk to the.
Most that you've built around that franchise and how you how you anticipate strength in that segment in the face of potential competition.
Well, thanks, Conor, it's a very important segment for us and.
We have 1.
Business travel news airline of the year for 10 straight years, and we expect to hopefully win it again this fall as well our team does a magnificent job of of servicing the accounts, providing the technology. The access the insights to make their job that travel on Delta as is <unk>.
Z as possible and thats supplemented by the great product and service that our people put forward every single day, we're the leading operational airline in the industry. So when you you marry up the investments we've been making particularly in the premium product sector, which are corporates are our main consumer of with <unk>.
Service, our sales and commercial team provide in the product and operational integrity of the business. It's a very very strong mode.
We have gained share over the pandemic a meaningful amount of share that we have gained and the 1 thing that we've seen is when customers come to delta They don't leave.
So we're going to continue to expand upon that.
Great. Thank you.
Thank you. Our next question comes from Hunter Keay with Wolfe Research.
Hey, Thanks, Good morning, 2 questions for you. The first 1 is for you Ed.
How do you feel about deleveraging the balance sheet, if it hurts your ability to maintain market share.
Good morning.
To ask you first of all you are sitting on a rock and share estimate or no.
Actually I am.
Okay.
On the sale.
Rock back in my chair as I answered to I really am.
That's good that's good.
Deleveraging is important to us.
It's <unk>.
Something that is first of all we are the same team that's been here for over the last 15 years.
We believe in.
Derisking.
Our balance sheet and other than paying down debt and we also know that we can do that while also driving a premium product and service offering in the markets that we.
We see as being critical to Delta, we were able to do the bolt do both of those things over the last decade and will continue.
To do that the level of debt that we took on over the pandemic candidly.
It's a meaningful amount, but its not an overwhelming amount. It was about $8 billion of net debt that we took on during the pandemic and when you think about as Gary mentioned, we're basically done funding our pension plan with no more pension contributions required.
I think you'll also know that.
We've been averaging over the last <unk>.
Several years close to $3 billion $2 billion to $3 billion, a year in stock repurchases, which clearly we won't be doing in the next from the.
Next 2 to 3 years until we get our investment grade metrics back and another $1 billion on top of that of dividend distributions that we've been making theres a substantial amount of free cash debt is available to us as we as we reclaim.
Investment grade for Delta and we'll be sharing our longer term metrics at the Investor day in December and showing you the path forward, but we can do all this and have plenty of headroom to compete hard and effectively in the marketplace.
Okay. That's super helpful. Thank you and then.
Gary If you would just clarify I think you said.
Something about 7% capacity or are you, saying that the current plan for 'twenty 3 system capacity has to be 7% above 2019, but you can take that higher or lower if you need to my interpreting that correctly.
No Hunter, that's not what I was saying what I was saying is that the fleet actions, we've taken give us the potential to add 7 points.
Our capacity profile by 'twenty 3 but.
But I was also noting the flexibility that we continue to have with some of the some of the flex fleets to go up or down.
And I think the teams have positioned us really well to react to what comes at us in terms of the demand environment.
I see okay. Thank you Gary Thank you Ed.
Thank you. Our next question comes from Jamie Baker with J P. Morgan.
Hey, good morning, everybody.
Apologies off the bat that my colleague Mark isn't joining us but he is on 1 of your aircraft on the Jpmorgan sponsored business trips. So I guess, we're all better off.
Glen is there a way to tell what portion of some of our domestic revenue is driven by reallocated International demand. For example, could you look at Sky model behavior. This summer and identify what portion of those travelers would have historically been in Europe or Asia instead.
Yes, I think domestically we see.
A redistribution towards domestic from Internet long haul international.
And that's a natural occurrence I think people are ready to get out.
The exact quantification I think it would be difficult, but we do see debt.
If those leisure destinations are open there is significant demand for that and that includes the trans Atlantic where it is opened and if you think about running load factors in the mid to high <unk> in the.
Shoulder season, as we head to the end of the summer here.
Just on U S origin travel.
Pretty strong demand trends overseas.
So.
People want to get there.
Yes definitely thank you.
Gary.
Just to follow up on the ATL and I Havent historically obsessed about the air traffic liability until we all sort of had to.
Ordinarily the second to third quarter sequential decline for Delta would be somewhere around $750.800 million. If we continued to get international reopening, particularly for inbound U S could we model for something closer to a flat outcome next quarter, so staying in the 6 and a half.
On a range of that sort of thing or would that just be too ambitious. So I know you said it would be above last year's levels, but that still leaves.
A lot of room.
Yes, Jamie obviously, theres still a lot of uncertainty around that our thinking right now and that's embedded in how we're thinking about net debt is for a slight decline in that but we don't we don't expect that youre going to see the normal seasonal pattern as we move through the remainder of this year for all the reasons you just highlighted.
Okay perfect. Thank you everybody I appreciate it.
Thanks, Jamie.
Thank you. Our next question comes from Stephen Trent with Citi.
Okay.
Hello, everybody and thanks very much for taking my question.
Just a quick 1 from me when we think about it.
Certain pockets in the United States that we are seeing some difficulty with new variants.
And low vaccination rates.
Do you see any scenario in which.
Delta could.
Jim capacity today is some of these regions or reinstate on some routes.
On a blocking of middle seat.
Good morning, Steve I don't.
We've.
<unk> been monitoring our bookings and clearly we're mindful of the risks around COVID-19 and the new variants in the.
The continued <unk>.
Information that the CDC provides us with.
We have not seen any.
Reduction or drop in demand.
Looking out over the next 60 to 90 days, which is about as far as our Crystal ball can go right now.
We know our customers are larger vaccinated or people are larger vaccinated, we have over 72% of delta.
<unk> are vaccinated in the vaccines work.
And they are giving people the ability to get back to their lives.
I anticipate any changes at this time.
Okay I appreciate that and thank you on looking forward to seeing you guys on December 15th I believe you said and thanks again.
December 16th 16, 16 excuse me thank you.
And slide down in CSF <unk> lines.
Thank you. Our next question comes from Myles Walton with UBS.
Thanks, Good morning.
And I think at the beginning you mentioned commercial partnerships and creating a $1 billion.
Our value from wheels up and unclear from Euro cost base I'm curious of your view on the <unk> market given the new supply.
American as well as United on that from where that kicks in your portfolio of investments and operations over the medium term.
Thanks miles as you can appreciate every 1 of the proposed manufacturers has been after delta we've heard from from many of them.
We're studying this space and we will continue to get get smart in this space I think it's at a very very early stage right now and I think a lot of the plans that we've seen are a bit premature candidly, but.
It's not anything that.
That we are unaware of and.
I guarantee every 1 of those manufacturers would love to have Delta colors on there on there.
So planes, so hard to predict timing, but we're in the marketplace, having having lots of conversations.
Okay.
And then maybe Gary just a clarification the CASM ex quest.
Question I'm, just looking in absolute dollars it looks like sequentially <unk> looking for that same unit costs ex in fourth quarter the same.
The improvement or is it really just about comps in 2019 is that right and then.
For 2022, how much of these rebuilding costs go away and we get the tailwind of those 6 thanks.
Yes, I'm not sure I would characterize it exactly that way, but it is about having more scale relative to 2019, so sequentially I think that what you outlined is roughly accurate.
And that is what we expect as we go into 'twenty..2 your question was about the sustainability of the rebuild.
Yes, what goes away from what Youre doing.
Yes, we definitely expect those to moderate a lot of that is going to depend candidly on how the demand environment develops.
<unk> develops what I would say is.
What we've articulated is driving to levels below 19, we're not excluding rebuild expenses this year they happen to be.
Particularly high as we get into 'twenty, 2 we expect those to be more normal.
And it's part of the thought process on what we've got to accomplish.
Miles if I could if I could speak to that for a second.
At Delta are number 1 to ask us to safely get our business stood back up with the service levels that our customers deserve and expect a delta and given the huge surge in demand that we've seen over the last 90 days the Inc.
Tire industry is challenged with that that's not that's not a unique delta.
Position and we're going to do everything we can to get ahead of it and that includes staffing levels.
Providing whatever support we need to to the service providers to service contractors training maintenance because we realize that this is about protecting our brand and our long term.
Customer base, rather than trying to manage costs for an individual quarter.
We'll hit the cost targets that we that we mentioned to you on 1 of the things that we learned a lot about delta over the pandemic is our ability to manage down labor cost is really unique in this industry and we have a whole lot more.
Many more tools and flexibility I think than we ever really appreciated and so we shouldnt think about labor, which is the biggest part of big part of the of the rebuild cost as a fixed cost. So it's not going to stay so the productivity the efficiency.
The ability to work closely with our people will be in really good shape.
On the cost front next year and well protected our customers experience at the same time on the revenue base, which is the most important.
Thanks.
Thank you. Our next question comes from Savi <unk> with Raymond James.
Hey, good morning.
We're not competing on product disconnect good for the consumer on the industry.
1 of your competitors it plans to grow like first class. Thanks, Larry.
<unk>, yes about 10% a year through 2020, and just kind of curious is that level of growth is something we will see a delta because it's part of some kind of ask trust.
Structural trend or is that.
That has any implications from delta premium revenue leadership, or yes, how delta set up to kind of compete against that.
Sure.
First I'd like to say, we're proud that we.
We started the day commoditization process. Many many years back and we are well along and I think were.
Objectively may be the furthest along in terms of <unk>.
Exploiting that opportunity there is probably more space out there for other carriers given the.
Given the appetite we've seen for these products that have been sustained through the pandemic. So I'm not going to articulate on anybody else's plans, but we think that there is continued growth in our fleet evolution as we continue to up gauge the airline over the next several years on a percentage of seats that are in the premium cabins continues to increase and we think.
Given the fact that we are still in the early stages of being able to distribute those products and services to all of our customers through all of our channels that there is plenty of opportunity for us to continue to grow that space in the next years next several years.
That makes sense, thanks, Glen and maybe a quick follow up for you Glen as well just I appreciate the color on the domestic corporate America I know thats around volume says that our PK and I'm curious what that looks in terms of revenue I'm guessing volumes have to recover first and then revenue comes back but I was just wondering if is it similar.
If there is a disconnect Paul.
Yes, those are passengers and yields on on domestic leisure are up yields on domestic corporate are down, but we see trajectory in domestic corporate and we expect that as you say to continue as we move forward.
Makes sense. Thank you.
Thank you. Our next question comes from Mike Lindenberg with Deutsche Bank.
Yes.
Good morning, I guess 2.
<unk> projection related questions for Glen on Amex over the last year, you sort of had back peddled on when you would get to the $7 billion of contribution obviously because of the pandemic.
Fact that I guess the month of June or the June quarter were 110% on 115% in the month of June Glen can you update us or are we now not on just track, but maybe at a pace that will get to that amex bogey prior than the previous forecast.
Well I think that's something youll have to come towards December.
December Investor Day.
We're ready to disclose the exact date, yet, but it suffices to say that we're feeling much better about making up some ground that we lost during the pandemic today than 6 or 9 months ago.
Mike This is Ed if I, if I could chime in.
I would say that we are thrilled with the relationship with American Express our team their team.
I was with.
Steve Squarely last Friday, and I think we have the best performing card in their entire portfolio Delta.
Delta, even though we're the highest.
<unk> that we create I think were also the best performing on top of that so in terms of growth. So it's really been a great great relationship.
And thats still without a lot of travel.
Then that's missing.
International and business yet from the from the card so <unk>.
We're excited.
Great and then just sort of a second projection question Glen I mean to watch you go from 20% of.
Volumes to 40, and 60 and yet <unk>.
Even recently I think we had a survey from USA U S travel and even the GBT a talking about U S. Corporate travel getting back to I don't know, 70% to 85% by 2024. It just feels very conservative I mean, it seems like we're running well ahead of that is.
Is that the case.
Or is there just something different that delta.
You guys are outpacing the industry.
<unk>, let me, let me chime in on that 1 too because I've got the numbers right here in front of me we've done our own survey.
Welcome to our clients the biggest the biggest companies in the world and that was a very large number of them and.
I Couldnt make heads or tails out of what the <unk> was speaking to either.
Let me give you the most recent survey and this is as of last week updated.
30, 36% of our big corporates expect theyre going to return.
<unk> to pre Covid levels, no later than next year $2022.36.
Another 21% says fully back no later than 2023.
Interestingly only 5% of our of our big corporates to say that will never return to pre COVID-19 levels, 5% that had been 8% in previous surveys is now down to 5%, while 38% indicate it's still unclear as to what their levels not that theyre not getting back is just the level of <unk>.
Flying on the timing is still is still somewhat uncertain, which is understandable. So if you take the 2022.2023, that's 57% no later than 2003, and you assume say, 75% of those unknowns of 43%.
Yes, you actually did 90% back.
Over the course of the next couple of years, and frankly, I think it's going to be even better than that so this is 1 of the things that as we have seen.
Theres enormous pent up energy and demand for travel also in that survey, 93% of our customers said they are going to increased travel in Q3 over Q2, and many of those by meaningful amount. So I think the surge is coming and just as we've seen it on the consumer side.
Ready for it on the business side and once you open businesses offices and you get international markets opened I think it's going to be it's really going to be a very good run over the next 12 months to 24 months.
Great Great insight gentlemen, thank you.
Thank you. Our next question comes from Duane <unk>.
Didn't work with Evercore ISI.
Hey, Thanks, good morning.
Ed you have a good board in my opinion lots of experience driving real value.
Consumer industries, maybe arguably easier consumer industries.
Can you give us some insight into debate at the board level regarding balance sheet improvement is a priority right here and now versus investment are there differing opinions.
On investment rate versus balance sheet improvement.
And I guess longer term is investing half of your operating cash flow, how we should be thinking about 2022 and beyond or how we kind of moved away from that.
Well, thanks, Duane we do have a great, Florida I agree with that and there is a lot of good.
Insight that we have.
We garnered from that board. This is largely the same board that's been with us over the last decade.
It was the board was involved in and how we do levered.
Coming out of the.
Financial crisis in 2009.
We manage the.
To lead the industry in getting back to investment grade metrics over 5 years ago.
While delivering a premium product and service level and expanding internationally.
At a rate probably faster than any 1, particularly with the investments that we've made so.
The board knows the strategy that we're on we we've talked a lot at the board level about needing to get.
Our debt down.
On the balance sheet to get those investment grade metrics back we'll give you some very specific.
Guidepost on that when we have our capital markets day in December So you know what.
We expect from us.
And at the same time, we're also investing meaningfully into the business with on.
To this day purchase of Airbus 300, <unk> and 737.9 hundreds that are current vintage.
There'll still plug and play and we will continue to be able to grow the business. Accordingly, so that the strategy actually is not that different from where we've been and I think it's going to we're going to stay stay very focused to getting the investment grade back and growing the business at the center.
Okay appreciate the thoughts.
Thank you. Our next question comes from Joseph de Nardi with Stifel.
Thanks, Ed good morning.
And in response to Mike's question, you said I think based on your time with Steve that the Delta card is amex is highest value like what do you mean by that are you trying to say that it's a very profitable card for amex as well or their most profitable card.
So I don't know if it's the most profitable I hope we are.
To ask Dave that but what I can tell you is it creates the highest overall level of spend and growth.
In the portfolio and it's been that way for some time and it continues and we both continue to invest to keep it that way.
Okay. Okay, and then Gary you said the fleet actions would allow you to add 7 points to ASM by 2023, so what level of ASM production are you on track.
You kind of achieve in 'twenty, 3 I know theres a lot of flexibility but.
Does the current fleet support 100% of 2019 capacity in 2305 like where are you now with that thank you.
Yes, Joe Joe will talk more about that and what our long term capital needs will be in.
In December with you what I was pointing out was the portfolio decisions that we've made gives us 7 points of additional capacity that we can bring in that timeframe.
And just continue to point out that the team has positioned us with a tremendous amount of flexibility to go either up or down.
Depending on how we see the demand environment, but we'll have more color on that.
With with with a bigger picture about how some of the other components play into it as well.
Okay. Thank you.
Thank you. Our next question comes from Chris <unk> with Susquehanna International.
Good morning, Thanks for taking my question so.
Your marginal cost per mile and <unk> was just under 4.
It's it's.
Picking up sequentially significantly and I realize that as.
As you said, you're spooling up capacity here, but.
I was wondering at what point, whether it's an ASM is on revenue where.
The where we expect to see this operating leverage or the.
On the costs that you've taken out over the last year or so more clearly show up in.
And results.
Yes.
Normalizing for the change in your marginal cost per mile from the second to the third quarter as you spool up here.
On a more accurate run rate looks like and that would also.
Assuming.
Corporate does.
Return as you expect by the end of the year.
Well, Chris on on underlying basis, we still have and are experiencing a lot of leverage even as we move into the third quarter.
That will be the case for a good bit here the guidance, we have in the third quarter, we're still operating 28% to 30% below where we were in 2019. So there are parts of the system, where we were under pressure as Ed described on we're absolutely.
Meeting the needs there, but there are also lots of opportunities for us to drive that leverage some of what youre seeing in terms of the moving pieces are.
I think unrelated to that.
A big cost pressure as we've moved from the second to the third quarter at least a couple of points as just selling related expense, we're obviously thrilled to be seen.
And it's just a function of the demand recovery that we're experiencing.
Normally when when we're in a typical year, we work very hard to not be maintaining aircraft. During the peak summer months for obvious reasons, we want them flying in generating contributions this year we've got.
Maintenance step up as we move from the from the second to the third quarter.
In fact, I think when you look at third quarter maintenance it will be comparable to if not even slightly ahead of where we were in <unk>.
2019, instead of the down 30% that you've been seeing over the last few quarters. So.
It's a year with a lot of unique features in terms of how they play out on the cost side, but the fundamental leverage that we've been describing is there.
And now we'll go to our final analyst question.
Thank you. Our next question comes from Andrew <unk> with Bank of America.
Great Good morning, everyone.
I wanted to go back to chip costs, obviously, the labor market is very tight right now and I think youre less base pay increase was in October of 2019. So.
Gary is there anything on your <unk> or Q CASM expectation for wage increase and I guess, Ed how are you thinking about the need from 1 right now.
Thanks.
Andrew were we don't pre announce what we're doing on on.
On our labor strategy and cost and obviously, our people are working really hard and.
Delivering great value.
Still losing money, we need to get the company stay.
Stabilized first before we start talking about wage increases.
Okay.
And then last 1 for Ed I'm not sure if youre going to have any comment on this but.
On the less under the last week, the President issued an executive quarter and you just called out slots administration is 1 other objectives.
What do you think this means just given your position in a pretty stark constrained market here in New York just love to hear if you have any comments on that thanks.
I really don't.
We will study we will talk to the administration.
Apartment or transportation and Secretary <unk> and many many individuals about it we have a long history of driving great value for our customers, it's expensive to drive great value and we're making the investments to drive great value. There is no question. When you think about the level of service quality of service to reliability.
Affordability everything is moving in the right direction. So.
We're thrilled to be able to show them. The actual results of what we're doing.
Okay.
That will wrap up the analyst portion of our call I'll now turn it over to Tim Mapes, our chief marketing and Communications officer to start the media question well good morning to other members of the media. Thank you for your time. This morning, we're grateful for that and Katie If you wouldn't mind reiterating for the members of the media the rules of asking a question with 1 follow up please.
Thank you if you would like to ask a question. Please signal by pressing star 1 on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again. Please press star 1 to ask a question, we'll pause for just a moment to allow everyone the opportunity to signal for questions.
Thank you our first question will come from Mary Slaton steam with Bloomberg News.
So we're planning for the rest of the year. If you can talk about.
The numbers versus the percentage.
Increase that that will be and then also if youll comment on whether you're having any trouble finding enough people to hire.
Mary This is Ed we missed the first part of your question could you repeat that.
Yeah. So I wondered if you could say how many employees you are going to add the number versus the percentage increase.
Over the course of this year, we're in the process of hiring between 4 and 5000.
And are you, having any trouble finding applicants for those jobs.
We are not.
On the Delta brand has a very strong hiring brand.
We're having great success the challenge as I mentioned on the call.
Is.
The training the time it takes to get people in position, whether it's on the phones and reservations are in the airports.
It takes it takes a few months on the demand has come back at such a fast clip.
It's taken us all a little bit of time to catch our breath.
But we will be fully back over the next couple of months and providing we've been providing great service, but the service levels, our customers should expect and deserve.
We'll be getting back from Delta over the next couple of months.
Okay.
Okay and heavier flight operations has been affected at all in terms of.
Lack of flight crews.
Not at all not at all we have been.
Managing the best.
Completion factor in the industry and it's not even close.
Our team is doing a good job we've been we've been at this for over a year managing the training on.
On the training pipeline and our pilots in our current our maintenance team are doing great.
Great. Thank you very much.
Okay.
Thank you. Our next question comes from Tracy Rucinski with Reuters.
Hi, good morning.
I was wondering if you have any update on your plans for the trainer refinery and particularly on the outstanding liability on the biofuel credit.
Tracy we don't have any anything any news in that regard we continue to operate trainer. The team does a very nice job. There. We've said in the past that there are opportunities to Paul another strategic partner and we'd be open to that realm.
Relative to the question around returns were fully accrued so I know there's been some discussion in the press about whether we pulled away from from acquiring Rins. We just know the pricing on Rins is not a market based price at the present time, and we're not going to spend good cash chasing chasing.
Fairly.
Our marketplace that debt is in transparent so we've accrued the cost.
But we have time to decide as as we settle those obligations over the next couple of years.
Okay. Thank you.
Okay.
Thank you. Our next question comes from David Koenig with the associated press.
Oh, Hi, Mary Mary ask my question, but if I could kind of a follow up I know Ed you said that it's too early to raise wages.
But what about starting pay are you having to raise starting pay to attract people or do anything else.
Out of the ordinary day.
Find those 4 to 5000 folks.
It's interesting Dave we've we've looked at.
Potentially hiring bonuses and other incentives and largely we haven't we haven't needed to resort to the people.
Look at the Delta brand as a place they want to be long term and they see this as an opportunity to get inside Delta. So no. We haven't we haven't had to make any changes to scale. We always watch it we're very competitive in the market we pay well.
Our people, we take great care of them, but no we haven't had to adjust our salary scales in any in any meaningful way.
Okay. Thanks.
Thank you. Our next question comes from Dawn Gilbertson with USA today.
Hi, Good morning, my questions are about.
Our customer service wait times.
They still are as long as 6 hours at least as recently as yesterday. So I'm wondering from a traveler perspective is there any end in sight I also noticed that you guys have temporarily suspended helps.
<unk> through Twitter, Dms, which on a frequent recommendation I and other travel reported so is there any end in sight and what's your best advice from people to reaching Delta, especially with last minute travel questions.
Thank you Paul. Thanks. Thanks, Tom This is Ed we are hiring a couple of thousand people into reservations, we've already hired at least half that number we've got more to go every single week with more and more people are getting on the phones, we've reached out to many of the.
People had reservations, who has retired as we had separation packages and voluntary departure pads packages over the last year. We have a fair number then that return they are on the phones, we have people working from home.
It's not a question of not providing the staffing we are doing everything we can to volumes are beyond anything we've ever seen there beyond the high point of 2019, and the handling times are substantially longer as people have more questions as travel. That's changed is the first time back so we're incredibly sensitive to it.
The number you mentioned is not the average number at all yes. There are still a rare occurrences of that we have the callback features in place we manage every 1 of the Qs whether it's the general Skymiles.
Qs the premium Qs the non member queues and we're all day all at the longest the average.
We are seeing is in the 1 hour timeframe.
But by the way way, which is by the way way too long and by September we expect to get that back down to normal levels.
Could somebody comment I'll get back to me on Twitter DM, because you guys appear to be the only 1 of the major airlines that temporarily not responding.
Okay.
I am not sure about that we'll get back to you.
Thank you.
And by the way people email me every every day every hour and Thats a good way. It's somebody itself just sent me a note.
We will take care of it.
Okay.
Thank you. Our next question comes from Leslie Josephs with CNBC.
Hi, Good morning, Thanks for taking my question on.
For the employees that are coming in now that you are hiring are they on average lower wages.
From other people that left with a lot of senior people such retirement and then also for the 28% of employees that are not vaccinated or are there certain work groups that.
Net concentrated in <unk> are you doing anything to increase that close rates on top of the company.
Your first question Leslie Yes, starting rates of people joined the company are clearly lower than the than the rates that people retire debt as a.
Let the company. After 25.30 40 years of service. So we are getting a January.
Benefit in the in this scale.
We're giving a lot of people a lot of our particularly our young managers are having opportunities to take on more responsibility and grow in their careers and that's all very very healthy.
Your question around vaccinations that 28% could you repeat that.
What are you doing to increase that vaccination right across the company and is that do you see that its concentrated in any 1 work group or <unk>.
Geography.
Access information on lifting.
72% and candidly we're proud of it.
And the national average by a meaningful amount.
We do have pockets within the company.
On certain regions and certain demographics.
Our debt or at the low 72% and we are we are doing everything we can to continue to encourage and incent.
We provided $1 million.
Last month in <unk>.
In total awards to vaccinated employees through drawings, we had 40 different drawings of $25000 a piece I think we have 1 more drawing.
Today.
Debt, we have of anyone that's just the newly vaccinated within the last month to $125000, we've given away free.
Free travel.
2 employees.
Through drawings that could that could get vaccinated and we continue to describe the risks.
2.2 individuals if theyre not vaccinated from the variant so I don't know a company is doing more to get its team vaccinated than delta.
Thank you.
Thank you. Our next question comes from Alison Sider with Wall Street Journal.
Hi, Thank you so much just curious what you are hearing about the mask mandate.
It will be lifted in September and I guess, how you feel about that you are hoping it will be lifted earlier or if you'd like to get extended.
Hi, Ali I don't know whats going to happen, it's up to the FAA, it's not not really up to the airlines to make that decision will be in conversations clearly with the FAA I think it's important that that medical.
Experts to make those decisions not airline professionals as we've learned.
Sort of the pandemic there are the ones that have all the insight and the information in keeping people safe.
Sure.
Yes.
Appreciate people not wanting to wear the mask I don't like wearing a mask on him on board either.
But it's something that we need to do to keep each other safe and I think of the your question about what's going to happen in September it really depends on where we are in the recovery phase.
Is the variance on a continuing I think people are going to be a little more careful about about lifting the masks.
If international borders are not yet opened I am not sure lifting the Max is going to help opening up those borders. So there is a lot that goes into that and I think as many pros to taking them ask required lump as there are to keeping it on at the present time.
Thanks.
Thank you. Our next question comes from Matthew Uni Rich non with gift airline weekly.
Oh.
Hi, Good morning, Thanks for taking my call on my question. My other question about the federal payroll support and weather.
Based on the arguments Delta management made last year.
We still believe that the support was.
Facilitated.
Faster recovery protecting jobs and the second part of my question is what happens after October 1st and weather.
And what.
From burning off I think exploration of support will mean for for Delta as earnings.
Well the I think it's without debate that the federal support was it was critical to keeping our industry a flow keeping.
Keeping our employees employed.
And being in position for the recovery as we've talked on this call 1 of the biggest challenges. We're having now is getting everything fully stood up even though we've kept all of our employees. So you can imagine if we had 222.
Actually let many many people go and abandon.
Those individuals to challenges we'd be facing in our country of getting travel moving again, so I think it's been an incredible success.
1 can debate the length of the debt.
<unk>, 2 and PSP III.
No.
Interest and go on beyond what we have at the present time with PSP III and we expect to be profitable in Q3.
And beyond without any PSP support yes.
Thank you.
Katy we have time for 1 final question. Please.
Thank you our final question comes from David Slotnick with TPG.
Hi, good morning, Thanks for taking my question.
Wondering if you could talk a little bit about what you've seen in the last few weeks with unruly passenger has there been any upward or downward trending in incidence of that.
And do you have any thoughts on just what's been causing the sort of surge this spring and early summer.
David.
We haven't seen any any meaningful.
Shifts it's been something we've been dealing with over the course of the pandemic.
Some people want to relate it to having to wear masks I'm sure. That's a piece of it I don't know Thats. The main piece I think the bigger challenges that we've got a lot of a lot of individuals that have been impacted.
Excuse me there.
Their emotional well being have been impacted during the pandemic and as people are coming back out into society Youll see challenges in all walks of life not just in our.
Our industry you see it happening in other other places as well on society. So.
Obviously, social media amplifies that and puts it on a stage that's not our that's not our experience that's not our normal experienced by any means.
They're rare our crews are trained and they are incredibly professional in managing the conditions when we when we have someone.
Who doesn't want to follow instructions of the crew.
Unfortunately, something we've become good at.
And I look forward to the return of.
Our business in the patterns of normalcy. So that we can we can start to manage manage our business without having to worry about these effects.
Patterns of normalcy is a good way to put it. Thank you.
Thank you for the question David and thank you to other members of the media for your time. This morning, as we wrap up we'll turn it over to Ed for final comments.
Thank you all for joining us it's been an hour and a half we spent a fair bit of time with you, but hopefully you.
You've learned a lot as to why we're encouraged and as we power on.
Our plan for the post pandemic future why that I am and our team is as optimistic as ever for the journey that we're on U S. Travelers are returning and it's really a tribute to the incredible work of our scientific community in developing effective vaccines and that's going to be key to opening the world our return to profitability.
<unk> in the month of June is a major milestone a solid profitability close to 10% speaks to the strength of our brand and the great work of our team worldwide as we move past this inflection point from crisis into restoration. The people of Delta will be front and center, serving our customers and our communities our mission of care.
<unk> the people of the globe is a noble 1 it's an important 1 its got great purpose and the social good that's generated by travel will be essential in the months and years ahead as our royalty deal. So I. Thank you all for your time today for Joy.
Joining us.
1 more time on us pay a special thanks to all of the Delta people worldwide for their great work over the course of this last 16 months and getting our business to a point, where we're looking to bright skies ahead. So thank you all.
This concludes today's conference. Thank you for your participation.
[music].