Q3 2021 Delta Air Lines Inc Earnings Call
Please standby were about to begin.
Good morning, everyone and welcome to the Delta Airlines September quarter, 2021 financial results Conference call. My name is John and I will be your coordinator.
At this time all participants are in a listen only mode until we conduct a question and answer session. Following the presentation.
As a reminder, today's call is being recorded.
I would now like to turn the conference over to MS. Julie Stewart, Vice President of Investor Relations. Please go ahead.
Thank you John Good morning, everyone and thanks for joining us for our September quarter, 2021 earnings call joining.
Joining us from Atlanta today are CEO, Ed Bastian, our president Glen Hauenstein, our CFO Dan Junkie.
Ed will open the call with an overview of Delta's performance and strategy Glenn will provide an update on the revenue environment and our brand momentum and Dan will discuss cost fleet and our balance sheet.
Similar to last quarter's call. We scheduled today's call for 90 minutes to make sure. We have plenty of time for questions for analysts. We ask you. Please limit yourself to one question and a brief follow up so that we can get to as many analysts as possible. After the analyst Q&A, we will move to a media questions after which Ed will provide a brief closing statement. 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 also discuss non-GAAP financial measures in all of our results exclude special items unless otherwise noted you can find a reconciliation of our non-GAAP measures on the Investor Relations page at IR Dot Delta Dot com and with that I'll turn the call over to Ed.
Thank you Julie and good morning, everyone. Appreciate you joining us this morning.
Timber quarter marked another important milestone in our recovery, we achieved our first quarterly profit since the start of the pandemic with a pre tax result of $216 million and a pre tax margin of nearly 3%. Despite still missing one third of our revenue base compared to the same period in 2019.
We saw a full return of domestic consumer travel to 2019 levels as our customers safely return to the skies and our people delivered industry, leading operational performance through a very busy summer once again showing why they are the best in the business I want to thank every member of the Delta team for your hard work and dedication during the truth.
Historic Summer, where we face the challenges of standing up our operation after such unprecedented disruption.
I'd also like to recognize the Delta teams, who played a central role in transporting 10000, Afghan refugees that were evacuated from harm's way.
Again as Dan over the last couple of months and delivering needed supplies. It was an amazing effort that involved everyone from delta's flight crews to operations control to government affairs to our charter in fleet team.
Our revenue recovery in the September quarter reached 66% of 2019 levels progressing from 51% in the June quarter, and just 25% at the start of this year.
This was led by strong consumer demand growing improvement in business and international travel and reflected the resilience of some of our diverse revenue streams, which are already back to or higher than prepaid pandemic levels, while the recovery in business travel pause in August and early September S case counts increased demand has picked up since then.
Per day last week was our top corporate revenue booking weeks since the start of the pandemic.
With the announcement that the U S borders will open in November bookings from Europe, and Brazil to the U S are rapidly improving.
The third quarter results.
Delta has differentiated position in the industry and the continued focus on executing our customer centric strategy. The strategy is rooted in providing best in class service to our customers.
Strengthening preference for our brand while at the same time, creating a simpler more efficient operation.
The heart of our brand promise is operational reliability.
Restoring our operations safely and reliable reliably with a strong commitment to cleanliness remains our top priority and we're proud to be leading the industry in all key operational metrics through the summer as well as year to date.
One important indicator is what we call brand perfect days those days when we don't experience a single cancellation across our mainline and regional operations.
Happy to report that we have delivered 116 brand perfect days in 2020, one which are on par with pre pandemic levels as our people are delivering outstanding reliability.
We're delivering on our commitment not just to return our service levels to pre pandemic performance, but to exceed those levels by the end of this year a key component as staffing and we have added 8000 people to the Delta team. This year. This new challenge is helping us build the airline of the future, which includes a focus on improving diversity and.
Across all levels of our workforce.
Our cultural excuse me, our culture of putting our people and our customers first this building stronger preference for the Delta brand.
At its core the Delta brand stands for connection creating unique relationships with our customers driving strong engagement higher loyalty and a sustained revenue premium to the industry.
More customers are engaging with delta than ever before driving record downloads of our fly Delta App and record sign ups for our Skymiles loyalty program.
Our Delta American Express co brand program continues to show strong resilience with card acquisitions, nearly 95% restored and card spend 115% recovered to 2019 levels.
As a result remuneration from American Express in the September quarter exceeded 2019 levels totaling just over $1 billion in the quarter demonstrating the durability of our brand preference as we continue to deepen our customer relationships.
Our revenue premium and our customer satisfaction is not just endured but if strengthened through the pandemic with both above 2019 levels. These outcomes are true validation of our customer centric strategy and people first approach.
Same time, we're also building a simpler more efficient airline.
As we scale the operations and refresh our fleet, we will unlock efficiency gains while also improving our product and customer experience Dan will speak more about our fleet strategy and cost outlook shortly.
As we look ahead, it's clear that the recovery will continue to be choppy, but we see a number of encouraging trends.
Storing the remaining one third of our revenue base is dependent on further business and international demand improvement.
In the September quarter domestic corporate volume was 40% recovered up 10.10 points from the June quarter.
With a spike in case counts delaying office reopening we did not see the progression of where you had expected at the start of the quarter, particularly after labor day.
But as the Varian receipts business travel has picked up over the last month with volumes now, reaching the highest level we've seen in the recovery.
In the last week, our domestic business volume was close to 50% restored.
We expect continued improvement as offices reopen at the start of the new year, and we anticipate meaningful acceleration in business travel starting at that point.
We hear regularly from our corporate customers that they're ready to get back to travel see their clients face to face to renew business relationships and develop new ones that sentiment is coming through loud and clear in our most recent corporate surveys more than 90% of our respondents mentioned that they expect travel volumes in the December quarter to either be the same.
<unk> or outpace September quarter, nearly 60% of our accounts are telling us that they've already reopened their offices with an additional 10% expected to open their offices before year end.
We are also seeing improving trends internationally spurred by the decision to lift to 12 F.
This decision marks a critical moment in our road to international recovery, and we think the bite administration and our supporters in Washington for their work to reopen travel to the U S. Thanks.
Thanks to this important policy change many families are going to be reunited this holiday season for the first time in almost two years.
Against this backdrop, we anticipate our revenue momentum to show good progress through the December quarter, finishing the months of November and December combined at 75% recovery is 10 point improvement from current levels is driven by officers reopening international restrictions easing and our.
And that consumer strength continues into the holidays, so putting the year in context, we started at only 25% of our business restored total business for the company and we'll end the year at 75% restored.
Choppy, there's a clear underlying momentum in our company that gives us optimism as we go into 'twenty two.
As those fundamentals improve we also see fuel prices continue to rise, which will pressure our ability to remain profitable in the December quarter.
At present time, we're expecting a modest loss in the fourth quarter with crude prices driving that up nearly 60% year to date and more than 15% just over the last month.
While we operate in a volatile and uncertain environment I have the utmost confidence in our return to sustained profitability as the recovery progresses into the new year.
As we continue to restore our airline our actions are guided by three near term priorities first to deliver for our customers providing the great service excellence. They expect from Delta we've worked hard to get our staffing levels in place, reducing wait times that a reservation centers improved self service options the return of food and beverage options onboard.
Upgraded Wi Fi and in flight Entertainment and the full reopening of our Delta Sky Club network in July of 'twenty 'twenty. One we continued to deliver on the need for flexibility with policy changes and extension of medallion status. The skymiles benefits into 2023 to give our most loyal customers more flexibility.
As travel resumes.
Our next priority is to rescale, our airline efficiently and reliably we're remaining disciplined about how we are rebuilding our network prioritizing operations and matching our supply with demand a measured approach to restoring capacity is critical to delivering for our customers and to managing through an environment of rising fuel prices.
Yeah.
Finally, we are preparing for the future to position Delta for success in the next leg of the recovery and beyond while restoring capacity in a measured way we are growing share in key markets with high value customers, we're making smart investments in our business to elevate the customer experience that includes technology to enable efficiency and improve our <unk>.
Digital capabilities, while accelerating construction projects in key airports like L. A X laguardia and JFK.
On the balance sheet, we're focused on returning to our investment grade metrics, having experienced firsthand just how important it was to have a strong balance sheet as we entered the pandemic for.
We're advancing our fleet renewal and Opportunistically acquiring aircraft, while maintaining flexibility drive engaged in efficiency that we expect will improve our long term cost structure and our carbon footprint.
Our commitment to being a carbon neutral airlines globally differentiates us as we know that customers are choosing brands that they believe in and employers are looking to work for a company that's dedicated to a sustainable future carbon.
Carbon neutrality as a fundamental part of our mission and a meaningful step that we can take right now to protect our world for generations to come.
We've recently announced our commitment to work with the science based targets initiative decided.
Net zero 2050 target and an interim emissions intensity target for our airline operations in line with the Paris agreement.
This quarter Delta also announced a 250 million gallon offtake agreement for sustainable aviation fuel on our road to a 10% S. A F consumption level by 2030, we also announced plans to join several coalitions, including the leaf coalition the world economic Forum's clean skies tomorrow and the U N.
Led race to zero and you'll be hearing more about all of these efforts at our capital markets day on December 16th in New York.
The power of our purpose driven brand our people and our strategy position Delta incredibly well for the future. We're building on a strong foundation to extend delta's leadership position in the years to come and drive long term value for all of our stakeholders our people our customers our owners and our communities where we live.
And Sir.
With that I'll turn the call over to Glenn.
Well, thank you Ed and good morning, everyone.
Generating a profit for the quarter, even with a third of our revenue is still to come is a great achievement and is another important milestone as we continue down the path of recovery.
Through the last 18 months, we have stayed true to our core strengths and our commitment to the customer.
From improving our position in key markets to growing affinity with our high value customers to driving outperformance in premium products and diverse revenue streams, we are extending our competitive advantages.
The September quarter started out strong and consumer demand environment remained robust throughout the quarter.
We had a profitable summer in Europe as vaccinated U S tourists were welcome back to the continent.
With the variant taking hold in early August we saw a temporary pause in demand, especially business travel as many companies delayed office reopening plans.
Despite the variance impact we remained within our initial guidance range with revenues coming in at down 33, 8% versus 2019 or two thirds restored.
This represented a 1.9 billion sequential improvement in total revenue to $11.0 billion.
Total unit revenue improved 17% versus the June quarter on an 11 point improvement in load factor and a 4% improvement in yield.
Since labor day, we've seen improvement in demand with daily cash sales growing each week.
Domestic consumer revenue remains fully recovered to 2019 levels and we are seeing continued improvement in domestic corporate sold revenue, which as Ed mentioned is at the highest level we've seen during the recovery.
We expect continued improvement throughout this quarter.
On the international front, we continue to see positive trends led by laden with passenger revenues, 84% recovered versus 2019, a 20 point sequential improvement driven by leisure traffic to beach markets.
Transatlantic recovery improved by 20 points versus the June quarter to 35% recovered versus the September quarter of 2019 with corporate sales in this entity now nearly 30% restored.
We are also encouraged by the administration's recent decision to lift to 12 F restrictions.
Following the announcement Europe point of sale bookings for November and December are more than six times, what they had been pre this announcement.
As we progressed through the last few months of the year, we expect strong results for Thanksgiving and Christmas.
The month of October is impacted by the lingering impacts of the variant, resulting in an expectation that revenue will be approximately 65% recovered.
But as we move into November and December the Sunset of 212 apps and a higher mix of consumer traffic. We are expected to support revenue recovery of the 75% range to 2019 levels.
With these monthly trends, we expect a percentage of revenue recovery in the low seventies for the December quarter.
Consistent with our disciplined approach of matching capacity to the emergency emerging demand environment, we expect our December quarter capacity to be approximately 80% of 2019 levels.
Balancing the restoration of our capacity with demand remains a strategic priority for Delta and is more important than ever given the uneven recovery and the increase in fuel prices.
While fuel is a near term headwind for our results, we expect to recapture higher fuel in the medium to long run as we returned to a more historical correlation between fuel prices and revenue.
As we look to 'twenty two we plan to progress our network restoration in line with demand we have the ability to achieve 2019 capacity levels by the second half of next year.
In addition to this quarter's financial results. There are several other accomplishments that we are very proud of.
Our premium products continue to outperform during the quarter premium revenue and domestic and short haul laden outperformed the main cabin by approximately 10 points as paid load factors in comfort plus and first class cabins exceeded 2019 levels. This is a great validation of our premium strategy, especially given the higher mix of.
Consumer demand.
Our diverse revenue streams remain resilient other revenue in the quarter was 91% recovered to 2019 levels.
Within that category loyalty revenues are more than 80% restored supported by strong card spending and acquisition trends.
Cargo revenue, which we expect will continue to grow and enhance our future international profitability was nearly 40% higher despite flying less than half of our wide body international flights compared to the same period of 2019.
And MRO revenue was more than 90% recovered on increased engine volume.
Our conservative approach to restoring capacity combined with the strength of our premium products and the resilience of our diversified revenue streams resulted in a unit revenue premium relative to the industry throughout the pandemic.
As we close the books on September quarter, we expect that trend to continue with their unit revenue premium relative to the industry exceeding our highest third quarter on record, even with business and international less than 50% recovered.
This result, validates our basic but powerful premise, putting the customer at the center of everything that we do and pursuing diverse revenue streams translates into a sustained revenue premium.
As consumers return to the skies, we've been focused on increasing stability in trust. We're also reducing friction points by eliminating change fees enhancing self service options and developing our flex product that provides full refund ability for those who value flexibility the most.
We're progressing towards a fleet that is more cost efficient and fuel efficient and one that offers even better onboard experience with a higher mix of premium seats and enhanced Wi Fi and <unk> products.
Enhancing the customer experience doesn't stop on border aircraft. It also extends to the experience on the ground.
We're accelerating investments in our airports and continuing to innovate.
In Atlanta, we're launching digital I D, allowing customers to rely on facial recognition to create a seamless airport experience from chicken dubord. It.
And we're investing in our Sky clubs included including two of our largest clubs in Los Angeles and Laguardia scheduled to open in March and April of 'twenty two.
As Ed mentioned, we are seeing strong consumer engagement and growing brand preference.
More customers are choosing our digital channels, which are highly effective selling and self service platforms.
For example, our fly Delta App downloads reached a record in the September quarter up 25% versus 2019 with monthly downloads now surpassing 1 million for the first time ever.
Higher digital engagement is fueling growth in our Sky miles program, which secured the number one spot against all global Airlines in the U S news ranking of all airline loyalty programs.
Congratulations to our customer engagement and loyalty team on this great accomplishment.
Customers are joining skymiles at a faster rate than the passenger recovery for the quarter, our skymiles acquisitions were more than 100% recovered relative to 2019.
And finally, our co brand program continues to show resilience and drive tremendous value for both our Delta and our partner American Express and importantly to our highest value customers.
We're seeing more demand for our premium co brand credit cards, with both new and existing cardholders as more customers are increasing seeking the value proposition.
Our well defined and proven strategy of focusing on the customer positions Delta well for many years ahead.
Key to our success is the fact that we have the best people in the industry delivering on our brand promise to our customers every single day.
And with that I'll turn the call over to Dan.
Thank you Glenn the team's world class capability and continued commitment to delivering best in class service and reliability certainly sets the foundation for our financial success and this quarter was no exception the delta people continued to execute well through a dynamic environment.
Across our teams we are focused on preparing the operations for the next leg of the recovery taken the steps required to position Delta for the future, where we build upon our industry leadership position in the years ahead.
Let me start with a few highlights for the September quarter.
Even with the pause in the pace of recovery, we achieved our goal of profitability for the quarter with earnings per share of <unk> 30 cents pretax.
Pre tax profit of $216 million and margin nearly 3% on revenue of $11.0 billion.
Total third quarter operating expense was $15.0 billion that was a 12%.
<unk> from second quarter, driven primarily by non fuel cost from the continued restoration of the airline fuel expense $6.0 billion increased 5% sequentially as lower fuel prices, partly offset by a 11% increase in capacity.
Versus second quarter adjusted fuel price per gallon was $95.0 was 8% lower than second quarter, driven by refinery contribution versus a loss in the second quarter, we realized 4% fuel efficiency versus same period in 2019, as we continue to capture benefits of our fleet renewal.
Non fuel cost of $9.0 billion increased 14% sequentially.
That was on revenue growth of 30% driven by higher capacity double digit improvement in load factors, we saw a step up in costs in the quarter to support the operational performance higher revenue passenger volume volumes, while we position for further demand recovery.
The impact of these costs combined with a network that was 30% smaller resulted in September quarter, non fuel CASM, 15% higher than 2019.
Now moving to cash flow and the balance sheet.
Timber quarter operating cash flow was $151 million, we ended September with $22.0 billion of adjusted net debt.
Pause in the pace of the recovery along with seasonality as we transitioned out of the peak summer resulted in a sequential decline in our air traffic liability balance of $562 million to $10.0 billion we.
We expect the air traffic liability will begin to build as we enter 2022 as travel restrictions ease and more customers begin to make plans for the spring and summer season.
Balance sheet management remains a priority as we chart our return to investment grade metrics in the coming years.
During the September quarter, we used excess cash to reduce gross debt and interest expense, while rebuilding unencumbered assets and managing our debt maturity profile.
This includes the execution of a $1 billion tender offer paying cash for the majority of our aircraft and commencing $500 million of incremental debt reduction initiatives.
Over the last 12 months, we've reduced our financial obligations by $12 billion. These actions drive interest savings fund, our pension and smooth our debt maturity profile.
Now turning to capital and fleet, we invested nearly $620 million of Capex in the September quarter that was below our guidance of 800 million due to timing of used aircraft delivery. Our full year 2021 gross capex is unchanged at $5.0 billion.
On the fleet, we continued to build on our progress to transform and up gauge our fleet to be simpler and more efficient being opportunistic while maintaining flexibility to adjust to the shape of the recovery.
As a priority.
In 2020, we accelerated our fleet renewal with the retirement of over 200 aircrafts and elimination of two fleet families. We also deferred deliveries worth more than $5 billion.
Resulting in lower planned capex in 'twenty, and 'twenty and 2021.
To capitalize on the recovery.
And replace retired aircraft in a capital disciplined manner, we converted a total of 55 <unk> hundred 21, neo options to firm orders with delivery scheduled between 2020, two and 'twenty 'twenty seven and Opportunistically entered into agreements to acquire 38 gently used aircrafts at compelling economics.
Two of which we announced today.
Okay.
Our decisions are guided by a fleet strategy focused on simplification.
Scale within our fleet types higher gauge and sustainability.
Efficacious and revitalization of fleet driving part of it change in our cost structure with benefits estimate to be around $400 million in 2020 one around $650 million. In 2022. This is compared to 2019. These savings will continue to scale in future years as we take delivery of next generation aircraft risk.
Store flying volumes and further simplify the fleet.
With these actions we are unlocking efficiency gains while also improving the product and customer experience by next summer nearly half our narrow body seats will be produced by large gauge aircrafts are most profitable fleet category. This is an improvement of 10 points versus 2019.
Our wide body fleet next generation aircraft will make up 25% of our fleet by next summer of 15 point improvement versus 2019 that will drive efficiency gains premium product enhancements and expanded cargo capability.
Now turning to the fourth quarter, we expect a modest loss as the recent rise in fuel prices will pressure our ability to remain profitable in the current quarter.
Adjusted fuel price per gallon is expected to be between $27.0 2040.
This represents an increase of nearly 40 per gallon from the September quarter as market prices have moved up sharply.
Just remind you are five cent movement and feel equates to roughly $40 million of expense.
Full efficiency is expected to be approximately 4% better than the December quarter in 2019.
Non fuel costs are expected to increase 2% to 4% sequentially as we incur people related cost to prepare our operations for the acceleration in demand covered in 2022 non fuel CASM is expected to be six 8% higher than 2019 in the fourth quarter.
When comparing to 2019, our non fuel cost profile is impacted by the cost required to restore our operations and how we're flying our network as we rebuild additional maintenance and training costs are required to prepare our fleet and our crews to fly a larger scheduled next summer. These.
These costs will continue into next year.
Size of the network and the deployment or the fleet are also contributing factors from a scale perspective, our network is 20% smaller in the fourth curve compared to 2019.
Our mix that we're flying is also different we have less long haul international capacity, which is structurally low CASM given long stage like nature of that flying.
Until we are more fully restored we expect non fuel CASM to be above 2019 levels as our operations normalize I'm confident in our ability to drive operating leverage and recognize the benefit from our fleet renewal.
As we look to 2022, we are optimistic about the continued demand recovery and are prioritizing driving margins profitability and restoring our balance sheet.
Look forward to building on this team's strong track record of financial discipline, and balanced capital allocation and sharing more with you on our long term expectations and goals of our capital markets day in December in New York.
In closing as I continue to spend time with the Delta people.
My conviction or future only grow stronger.
During my first 90 days I've been most impressed with the team's resounding commitment to our employees.
And our customers, which comes through in every action I have across our operations.
It's clear to me that Theres something truly special about the Delta family.
To Echo Ed and Glen sediment. Thank all my Delta colleagues for everything that they do to carry out our mission to bring people together and connect the world.
With absolutely the best employees in the business a clear focus on the customer and continued financial discipline.
I'm confident we are positioned to create long term value for all our stakeholders.
Now with that I'll turn the call back over to Julie to begin Q&A.
Thanks, Dan as a reminder, please limit yourself to one question and a brief follow up Jen can you. Please remind analysts how to queue up for questions.
Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to buy your signal to reach our equipment. Once again that star one to ask a question.
For just a moment to allow everyone an opportunity to signal for questions.
Yes.
[laughter].
And we will go first to Jamie Baker with J P. Morgan.
Hey, Good morning, everybody first question goes, but essentially to Glen and Dan. So so pre Covid I had asked Paul about the amount of time that it would typically take delta to recalibrate the higher fuel prices.
Staring at the transcript, but it is estimated the time was four to six months, which was an improvement from a historic levels. So my question I guess for Glenn is whether the booking curve is deep enough right now that you might actually be able to recapture the topline more quickly than that.
That and similarly for Dan whether there's anything we should be thinking on the cost of operation side that could accelerate the process I'm basically just trying to understand whether a four to six months is still the right estimate for us to be using.
Well.
I would just comment I think we're a bit in uncharted territory here as the recovery continues and.
Well I think it might be difficult in the very short run. Despite the fact that the booking curve has moved in a bit.
That I would estimate that that four to six months is about right because we believe that demand and capacity will fall back into a very good equilibrium by next spring, which would put you inside that window.
Okay. So no structural changes that you can identify that would greatly alter it one way or the other then.
No I think.
I think that that would be where we would expect it to manifest itself in a window.
And then second question just as it relates to the international demand that you're seeing from Europe. Since the buyback announcement can you say how skewed the improvement is to the European point of sale I'm I'm just trying to reconcile some data that we have here that largely excludes euro point of sale, just so I'm trying to get.
Feel whether its 70.30, 60, 40, 80, 20, something something like that.
Well that that time of year is actually the winter season is more European sales in the summer season. So we're talking probably about more of a normal split or if that's what you're asking 60% U S origin, 40% European origin.
And the interesting part about this is that we have seen an uptick in both sides.
Not just European sales the assumption there that there are a lot of Europeans and the U S that were worried about getting back so a very nice uptick as we get to November and December beyond the 212, that's being looked at.
Okay very helpful. Thank you Glenn.
We'll go next to Duane <unk>.
With Evercore ISI.
Hey, Thanks for the time thank you.
So in terms of the cost guidance, which is where we're getting.
A bunch of questions. This morning can you just bridge us from.
From the early September commentary that you'd miss being down year over to buy a little.
And today, where you see it up.
Six to eight on a unit basis, what are the main buckets, you know what changed over that you know call. It five to six weeks.
Okay.
What I'd say is first number one capacity as we pulled down the schedule in the fourth quarter.
What's the driver and then also the pace as it relates to the rebuild and preparing for demand.
For 2022 those were the two factors that led to that.
Okay and then on.
Fleet restoration duration.
Would you put some numbers to that perhaps what is that in 2021 and and what do you expect that to be in 2022.
And do you have a sense for when we cross over.
From sort of fleet restoration investment so the benefits we were hearing about you know a while ago from from fleet simplification and thanks for taking the questions.
Yes, the restoration when you think about bringing aircraft into service.
Through 2021 to 'twenty, two we'll bring back into service 160 to 170 aircrafts.
And that's really the element that vast majority of that rebuild is focused on bringing those aircraft back.
And then as we restore to more fully restored capacity levels to 19 that will dissipate and trail off and be transitory in nature from that perspective.
Duane This is Ed if I could add a couple of points on the overall cost outlook.
We are committed to our long term guide and we'll talk more in December at the capital markets day as to where we see costs going over the next couple of years clearly in our business. There's a race to try to capture the available demand and standing our business back up after an unprecedented level of disruption and ensure that we are not.
Experiencing any kind of operational limitation on our ability to get our service levels and customer expectations met so we've put the pedal down to get the staffing in place to get our our service levels back to get the quality of performance that drives the brand premium that this company.
Stands for and it may take us a few extra quarters to get get down to that 19 and below levels, but that's still our goal.
Okay I appreciate the thoughts. Thank you. Thank you.
We will go next to Brandon Glinski with Barclays.
Yeah, Hi, good morning, and thanks for taking the question and Ed you've kind of answered it there, but I guess Dan is it still right to be thinking 2019 costs are the benchmark here.
Especially just given all the wage inflation that we're seeing across the economy.
Yeah, It's certainly a clear marker for us we believe as we restore this airline will be at or better than 2019 cost levels.
And so is that just literally a function of the network getting back to where you were utilizing it pre pandemic, especially with longer haul flying coming back.
Yeah. There is certainly as we transition through this and we restore and get through the rebuilt that will dissipate you bring back the capacity you get that leverage you also get the the balance between the domestic and international and then when you think about the more structural elements the elements related to fleet simplification start to come through and you get those benefits.
Related to that both in fuel and fuel efficiency and also in our operating costs.
Brandon This is Ed I can echo, what Dan, saying, we've taken the opportunity over the last year to rebuild this airline back piece by piece and we're learning a lot more about what we want to keep forward and retain and what parts of the business that we don't need to be retaining some of the cost structure and so theres efficiency, whether it's in catering.
Whether it's in our operational.
Performance literally every part of our G&A every part of our operations hard to see when our capacity is still only at.
80% or more.
Hello, There excuse me at our 2019 levels, but we are very determined to make certain that we retain the value for the period of time, we've just been through and that efficiency will show through just going to take a little bit longer and that's why it would be really important in the capital markets day that we show you show us a pathway to get there.
Thank you.
We'll go next to Catherine O'brien with Goldman Sachs.
Hey, good morning, everyone. Maybe just one last follow up on on the cost outlook. So you know.
Thank you.
You guys have made the point clear that.
We probably need to see more of an ASM recovery not only in total amount of capacity to play but of course on the network allocation as well as azure as far some of the longer haul mm wide body flying but I guess just if.
If we could talk a little bit more about piece like do we need to get to a full restoration for that to occur or like going from 90% to 100% recovery do we suddenly see like a real.
You know acceleration and the leverage youre going to get across the business. There just any any high level comments on how to think about pacing as we approach that.
He will give you certainly more color and put a pin on it as we go to capital markets day give you the outlook and also get more into specifics around 'twenty to 'twenty two guidance when we give you that.
The real thing I think they'll look for is the.
The two elements, it's going to be bringing back bringing down that rebuild cost related to the fleet and when we get that restored and that's going to really paced pretty closely with the return of capacity and then obviously the incremental leverage so I think on that piece, you're going to get it throughout that period of time, but it's really that flip getting that fleet rebuild component down.
And that will happen as we progress through that period.
Okay got it and then maybe just one more international so add on CNBC. This morning, you noted that the company thought tenfold increase in international bookings following the announcement on the U S border as a couple of weeks ago.
Can you just help us frame when we really start to see that momentum build in revenue. It sounds like theres some of that hitting in November December time frame driving you know your more optimistic outlook on those months versus October but are there also any early indications maybe for next spring or summer what would love just to hear when you.
I think we're gonna start to really see that's helping you out to get a bit more thanks.
Sure Katie, Yes, we're going to see it in November and December.
Because we're looking at a 10 point recovery improvements just going from October to November October we're estimating at the 65% restoration level, which is where we've been for the last couple of months and we see a big jump up in.
In November and December International's, a piece of that is not the only driver of that.
Travel is an important piece of that as we see that continuing to improve we see it in our bookings.
I mentioned I think on the on the.
CNBC piece. This morning that just in the last week, our cash sales were up 9% week over week and that's a trend we've been seeing here for for some period of time, Neil steady growth. So I think youre going to see it then I think like we saw here in the summer Ah theres going to be a mad rush to a ticket for those that want to travel that that need to travel.
To get out and travel you may see a see a little bit of a pause as you get into the January February timeframe, but I think spring and summer is going to be another another tick back up at an even higher level.
My view is that youre going to see particularly for Europe, which is the biggest part of our international base.
Spring Summer next year that look very much like the spring summer, we just been through here in the U S.
Okay. Thanks for that.
We will go next to Hunter Keay with Wolfe research.
Hey, good morning.
Glenn These surveys that you say are you asking corporate travel managers these questions whether travelers themselves.
And also how are your contingency planning if you know.
We get into late next fall business travels up only 80% of what it was pre COVID-19 what sort of contingency plans do you guys have in place.
Well first of all answer the first part of the question that is a survey that goes out to travel managers. So that's their reply.
Second and we do we do other surveys they.
They go through our Skymiles program for frequent travelers.
They returned to travel and I would say there those surveys are pretty well in saying clearly consumers feeling much more confidence than business travelers in terms of their what they expect to fly more but more and more we're seeing the business component accelerate so that's pretty exciting for us.
And then on contingency plans I think we are committed to remaining incredibly flexible we know we're not fully out of the woods, yet and we know there's going to be more chop, it's not going to be a straight line out and there'll be twists and turns whether it's fuel whether it's whatever it is that's part of our business here and we're always managing to the sum of all the input.
As it relates to business travel what I'd say, we're super excited about is the fact that we were able to report a profitable quarter. Despite 40, 60% of our business travelers still not traveling and we know that number is greater than 60 for next year. We don't know whether it's 90, we're thinking somewhere between ending next year between <unk> and <unk>.
Great.
What if you look underneath the hood there I think the point that we're trying to point out is that demand for premium products is actually exceeding.
Our our coach products with the business traveler out so I think the big Epiphany for US was there's a much broader demand for this than just business travelers and.
If we have to pivot to demand sets for high end leisure to fill those seats.
Trade is a tradeoff will make and I think one that we can be quite profitable with under any scenario.
Hunter, if I could echo somewhat glenn's comments there.
None of Us know what the what the classic business travel the volume is going to come back and obviously in our industry. We're bowls of we're optimistic that it's going to come back plus but I think it's also safe to say, it's going to come back differently and there's going to be some level of demand erosion. No question about it some some element of a behavioral change.
<unk>.
No question about that but there's also new new opportunities to travel.
Hybrid for one gives you a very different outlook in terms of where people work how they work I've spoken a lot publicly over the last number one month's that video technology not just doesn't force you to stay in your home. It actually allows you to take the office with you. When you were out on the road and stay connected better and many many other reasons. So we're going to talk about that in December because we.
That's a big question.
A lot of People's mind as to what the future of business travelers and I see as many bright.
Bright spots coming out of this recovery as some of the some of the.
The demand destruction elements of video technology, and other things and behavioral change. It has has that rate during this pandemic period.
Okay, and then I've always thought that the lack of unions.
It wasn't so much a cost advantage for delta that a service advantage is there a way that you can maybe get a little bit more creative next year to maybe push that a little bit harder to drive some favorable CASM without sacrificing.
The frontline morale.
Did you follow me.
So I'm not going to comment on the benefits or lack thereof of unions, we have a union we have a great relationship with our pilots and we have a lot of our employees that are non union, we have great relationships and great productivity from them as well.
What I would tell you about our people is that there are incredible. The reason we have the revenue premium we have is not that we're necessarily smarter than anyone else.
We provide the best service the best reliability, the best product in the Sky and it's not a cost game. It's a it's a performance game and it drives better revenues. It also drives more productive cost efficiencies.
Talked a lot over the last few.
A few quarters here about the need to get our staffing levels back.
As mentioned this morning that were bring.
Bringing back 8000 people brought back 8000 people. This year don't forget we had 17000 net retired at this time a year ago. So we are getting significant flexibility and productivity from the team as we are as we get out to the future and.
Our people will continue to lead the way.
Okay. Thank you.
We will go next to Conor Cunningham with Mek and partners.
Hey, everyone. Thanks for the time.
One issue I think people struggled with is just the baseline for capacity given the fluidity in the demand environment.
You mentioned, all the headwinds to revenue and higher fuel I'm not asking for a number of unless you want to give one but but how is the thought process changed towards first half capacity over the past couple of months.
And I also heard that you made that comment about 2019 capacity being being potentially being achieved in the second half is that your expectation right now.
I think we've remained very fluid throughout the entire crisis and that's our commitment to remain very fluid.
Until we get to get back to full restoration, we don't know exactly when that's going to be and we've put the marker out there right now if we wanted to be a bigger than we are quite honestly, we couldn't be we could be a little bit maybe but not much bigger without risking operational performance issues like we've seen at some of our other carriers. So we want to stay where we are confident that we can.
Actually fly the schedules that we put out there.
We think those and we talked about rebuild cost and getting people back and getting planes back we're doing all of that now in the background with the capability of achieving 100% of 2019 sometime in the back half of next year, whether or not as we get closer we actually use that flexibility up or down.
We'll give you more color on what those decision points are at Investor day, but the name of the game for US right now is maintaining flexibility and as Dan alluded to even in the quarter. We're in we're slightly below where we thought we'd be in terms of revenue production just about a eight to 12 weeks ago.
Right Okay.
And then to follow up on Hunter's question. The premium products continued to perform really well and I guess in retrospect. It makes sense with pent up demand and just the consumer being flushed with cash but.
How do you how do you think about the premium cabin as demand starts to normalize do you think the changes are now like structural or is it really just too early to tell and it kind of depends on where the demand environment is later on down the road.
We believe there are structural and we believe that through.
Through the pandemic, we've created kind of a new class of customer, which is the high end consumer that once these products that maybe you didn't have as much access to them because they were given to the business customer earlier in the booking process. So.
That's one of the things we're wrestling through as we had to because our fleet accommodate the higher levels of demand I think these are things, we'll be discussing more with you at Investor day, but we do think that there's a higher level of demand for those products moving forward.
Okay. Thank you.
I don't think its only pent up demand and consumers being flushed with cash.
Consumers are looking at travel differently and they're looking at a lot of things differently.
The post pandemic world and the quality of their provider care in which they are provider takes of them. It doesn't matter, whether you are an airline or hotel.
Restaurant whatever you are is.
And going to drive preference and drive influence at a higher level than ever before and as.
And we consider ourselves.
The premier provider of service in our country, we're going to continue to gain hopefully an outsized part of that share going forward.
I appreciate the thoughts.
We'll go next to Savi <unk> with Raymond James.
Hey, good morning, everyone.
Just a quick follow up on <unk> question to start with as.
As you think about the catastrophe restoration is there a difference between your narrow body and wide body fleet ability just given the fleet changes.
Well you know.
The answer is yes, there's a difference I don't know what the question is on the difference what I would say.
We'll explain this a little bit more as we have our investor day, but where we sit today and the inefficiencies of our wide body fleet.
We are flying a significant number of wide bodies at our stage length that they werent designed to fly. So for example, if you fly between Atlanta, and Salt Lake City today, all of our flights are flat bed all of our flights have premium products and all of our flights are on planes that werent designed to go.
200.1500 miles.
Not only is it driving and what the opportunity of not flying that long haul, but it's driving a higher cost structure than the existing domestic environment, which will normalize as those plans get retrenched now if you ask why they're there they're there because when we were in the earlier parts and we were in the cash, but we wanted to use the planes that didn't have made.
Since requirements that didn't that had available pilots and so now as we work to rebuild these are all part of the rebuild cost and work out with that we've got to identify and explain a little better but this should have a double whammy impact improvement because you get better cost structure in the domestic environment and a heavier weighting to the lower cost international and there.
Really two distinct components that are synergistic with each other.
That's helpful and if I might.
You've announced quite a few getting in Boston.
Markets out of Boston I was just wondering if you could provide a little color on the growth out of Boston.
Are those plans kind of in line with the kind of pre pandemic strategy or is there something different like anywhere or different opportunity that you see at Boston.
I think we were clear about our intentions to be Boston preferred airline pre pandemic. If you go back and listen to the calls then there was something that was our intent and we saw some opportunities in the pandemic.
That availed themselves and.
And we are believing that next summer is gonna be a relatively robust demand set to Europe. So.
Yeah.
Wanted to fill out some of the big demand International markets from Boston and then some of the opportunistic markets.
The pandemic for Boston business, So very happy with our we have a great team in Boston, they're doing a phenomenal job we have a great facility in Boston Best in class up there and I think when you put the suite of our products and services. It really is a winning hand for Boston.
Okay, Alright, thanks, Brian.
We'll go next to Chris Stephanopoulos with Susquehanna International.
Hey, good morning, Thanks for taking my question so.
As we look at the second half of next year and the expectation that you can recover to.
<unk> thousand 19 capacity levels and.
Drive the non fuel CASM Max below 2019 could you just help us and again this might be more of an investor day question, but we think about efficiency. I think you cited about $1 billion of 2019, but if we think about efficiency fuel initiatives and then also the change in the network with some of these law.
Our haul markets that youre, adding.
To come to mind Athens, Intel he's out of Boston, just how we could.
Could kind of.
Put some color around those buckets as we think about your CASM X into.
Second half.
Next year. Thanks.
Chris This is Ed.
It's way premature to be getting into 2022, CASM ex and I. Appreciate the interest level, we're going to give you that in a couple of months in December.
We we need to have a better handle first on how the recovery shapes in 'twenty, two and that's going to drive our plan, but I will confirm that our goal is to get at or below 2019 levels. Once we have our scale back and once we get the the operations.
Restore to where we want it to be.
Okay, and just a follow up what is the timing to restart some of these.
International flights with.
Easing of I think it's inbound from U K EU and a.
A few other areas is it.
A few weeks or is that should we think about that more of a as a first quarter.
Thank you.
Well on the margin, we're adding back.
Some flights into the winter schedule, but as you know winter is never the peak season for Europe travel. So what we're really thinking is given the lifting of these embargoes, it's going to make for a great spring and summer season next year and so a lot of our rebuild costs and a lot of the things we're preparing for to have our European.
Largely intact by summer.
Thank you.
We will go next to Dan Mckenzie with Seaport research.
Oh, Hey, thanks, good morning, guys.
I guess first question is for Dan.
Referencing some of the balance sheet investment grade commentary Big picture I'm, just wondering if you could put a finer point on the timeframe for achieving that in the past Delta has been able to fix its balance sheet over a five year period should we be thinking five years to get to that or could you potentially get there sooner.
Sure.
Yeah, we're going to talk about the multi year outlook as we've talked about at capital markets day, certainly the balance here between investing and restoration of the balance sheet are going to be key priorities that will be multi year and I do think that you know you referenced delta is historical.
<unk> record there they've shown real discipline. If you look at over that period of 10 through 19 of paying down debt, while still building and investing in the airline and those philosophies will be true as we think about this going forward and that will be certainly part of our outlook, how we balanced both added.
Vesting and restoring the balance sheet and the pace of that as part of capital markets day.
Okay understood.
On <unk>, and then I guess Glen on corporate travel being nearly 80% to 100% recovered by year end 2022.
You know looking at where we're at today can you just help us connect the dots on the various buckets of spend so you know in the fourth quarter here how are the small and medium size business is behaving versus say the large corporates and then if you could just help us slice that a little bit differently internationally versus domestically so areas of corporate travel that are lagging the recovery.
Here versus areas or segments that are.
In line are doing a little bit better.
Well certainly on the positive side the unmet.
Unmanaged travel for corporate for business is running between five and 10 points ahead of managed corporate travel.
<unk>.
The smaller hungry or companies out there hitting the road sooner.
And then maybe some of the bigger multinationals.
And.
Of course, it's more heavily weighted for domestic now, but we've seen a huge uptake with the 212 hour restrictions being lifted.
Europe was about 15% restore through second and third quarter for corporates, we've seen that double to 30% just in the last couple of weeks. So.
A nice uptick there.
As well as South deep South America, which was pretty much nonexistent for the long haul South America, starting to show some signs of life and then the laggards of course had been the Pacific which is still you know.
Largely locked down so, but we are expecting those to improve significantly as we move through here.
The vaccination rates simply important places for us like Korea, and Japan are now approaching between 150%. So hopefully we get some good news out of that region of the world starting in the next few months here.
And that's really all the all the color I have at this point.
Sure. Thanks for the time you guys.
Okay.
We will go next to David Vernon with Bernstein.
Hey, good morning, guys. Thanks for taking the time.
I wanted to ask the questions.
Differently.
Our capacity is supposed to be down 80% for <unk>.
Can you give us a sense for where the operating resources are relative to 2019 in the fourth quarter I'm just trying to think about how many pilots.
Pilot and stuff do we have that we're working with a producer between 19 schedule in relation to the capacity being down sort of 20% level is it down in line with that as it down Latam can you help us kind of frame the productivity issue.
Yeah.
The.
I'm not sure I fully understand the essence of the question in regards to are you asking where the workforce is relative.
Yes, so like productive capacity.
100 people in producing a 100% last year and now you are producing <unk> do you have like 85% of the resource from 2018, producing that 80 would like I am trying to get understand the deleveraging that's happened because of the pull down of capacity.
Okay.
I think as we.
The way to think about it is when you think about productivity measures by group.
As you restore youre getting those productivity levels back and moving closer or beyond 2019. So that's whether it's in the airport, whether it's with Ada ring or other types of activities. Those progressed as you bring that back there's also situations, where we're hiring ahead.
To ramp up so those are the unproductive people, that's where you're training them, you're scaling them before you inject them into the operation.
And that I could call out civics associated there with the rebuild.
Yeah, I guess I was just trying to get a sense for if you could help us frame how how.
The negative impact of the productivity loss.
Let me take a stab at this David.
We have a lot of premium pay overtime lack of quote unquote productivity, given where we sit with a rapid rebuild of the airline getting people in position getting people ready for the future as Dan said covering the operation.
And so you have not only just more more people than capacity relative to where we are eventually going to end up once of our businesses restored but on top of that you've got a higher level of added costs going into the current the current funnel to ensure that you're you're delivering great service and building.
For the future at the same time on a reduced base of capacity. So so that's a big part of it.
You also.
Have the restoration costs and maintenance and training and other other elements that are another layer and I. Appreciate you can't see that in the numbers broken out as clearly, but again. These are the things we're going to talk about in.
In December at the capital markets day to show you the trend line.
None of us ever been through something like this as disruptive as this and as it builds back I can appreciate the questions.
But we see we see it maybe a little more clearly over a longer period of time than looking at it in the existing quarter.
That's helpful. Thanks, if I could squeeze one more in there Glenn as you think about.
When we should be getting back to prior period load factors.
Are you expecting the airline to kind of get back to that high a level in 'twenty two 'twenty three if I can how should we think about load factor recovery.
Yeah, I think this summer we were running load factors that we're within a couple of points.
Of 2019 level. So I would expect by next spring and summer that the industry would be back in that zone.
Great. Thanks, Thanks, very much guys.
Thank you.
Yeah.
We'll go next to Mike Lindenberg with Deutsche Bank.
Hey, good morning, everyone.
Dan can you just walk through kind of the.
Primary elements are.
Going from 19 billion to 22 billion.
Since Q end to December quarter, and I guess seasonality.
It's a role there.
Well there's.
When you think about it there's really three components.
Two it one will be worked through right through the elements of free cash flow in the movements right its earnings.
It's ultimately the movement in working capital, which is the air traffic liability.
And then it's ultimately capex.
So you have the guidance framework as it relates to the earnings framework.
We've told you is three two for the year gross Capex were $2 billion year to date, so that implies $1 two in the fourth quarter and then you also have the working capital movement, which is really the air traffic liability and normally in a period of time like this when you think about that that would be that we might move in a more.
Seasonal traditional time in the low teens.
But as we talked about throughout this call we're not necessarily in traditional seasonal periods of time. So we would expect that to be slightly more muted than that as it relates to movement.
From it but those are really the drivers there.
Very helpful. And then just second question for Glen.
Percent of your revenue is actually tied to govern government contracts I mean, I know we have craft.
We have.
The TSA City pair program and then obviously you recently moved the Afghan people and I realize maybe the revenue.
<unk> component I guess, when you think about some of the good press that she's gotten from some of your government services, you sort of have to weigh that as well.
So sort of a multi pronged.
Ask on on that piece of your business. Thank.
Thank you.
Hey, Mike This is Ed I'll take a stab at that.
Asking the same question.
[laughter].
And you've got to look at it at a 2019 level not necessarily at todays level because government travel is way down given where the federal government is largely not open. We can go to D. C. A lot of the offices people arent arent out on the road yet, but it's collectively in the hundreds of millions of dollars for Delta on an annual basis.
When you consider the charters you consider all the all the federal workers that do travel on Delta.
Pretty significant.
Share of those when you consider the U S mail that we carry so it's a pretty large.
Large revenue base.
Gary just now.
We'll now go to our final analyst question.
And we'll go to Ravi Shankar with Morgan Stanley.
Great. Thanks for putting me in a couple of follow ups here.
75% recovered for November and December.
I understand it if that's what the booking curve is telling you now or is that a number that you are extrapolating based on the current rate of improvement I'm, sorry understand kind of if things continue to get better over the next six to eight weeks, if you're going to end up with a better than 75% recovered number for November and December.
But clearly it's both it's what we have on hand, and what we expect to get so it's the combination of those two.
Okay.
Okay got it and just as a follow up on the on the strong mix that youre seeing in the premium cabin you said that that was structural.
Do you see that evidence and in these surveys you're doing with people, both flying and kind of like what's the evidence of that and be one of the one's corporate international fully come back. Let's say this time next year do you expect to be flying more premium seats that in 2019.
Our balance Youre seeing is truly structural.
Yeah, I think both of those were intending on answering at Investor Day is to show you. How we see this evolving and show you all the research behind why we're confident the more premium seats is a direction we want ahead.
Okay. Thank you okay. Thank you.
That will wrap up the analyst portion of the call I'll now turn it over to our Chief marketing and Communications officer to start the media question.
Good morning, everybody. Thank you to each of the members of the media who are gathered here today, we have about 20 minutes to wrap. These if we could just remind you one question and a quick follow up we'll try to cover as many of these.
As we can and Jen if you could remind everyone how to access their question.
Yes. Thank you if you'd like to ask a question. Please signal by pressing star one on your telephone keypad and once again, if you are on speaker phone. Please make sure. Your mute function is turned off to lighter signal to reach our equipment. Once again star one to ask a question.
Yeah.
Okay.
Okay.
Sure.
And we'll go first to Alison Sider with Wall Street Journal.
Hi, Thanks, so much.
I'm just wondering just given the sequel that frustration is coming off and I guess youre, saying early November.
Why do you have to do sort of between now and then you know if anything to spool up the international operation what sorts of preparations that you have underway.
Well, we have a lot of the airplanes are still in the desert. So we're working on getting those already we're also doing a lot of interior work I think one of the exciting things that we want to talk more about next year is by next summer all of our long haul international will have our new premium economy. So that's another thing we're working on.
<unk> and premium economy is really a new class. We started at 19, we didnt get very far with it but by the time, we come out of the pandemic in 'twenty two to most all of Europe will have the new premium economy seats, which is something along the lines of a little bit better than domestic first class in a class that we're really excited about.
Getting that configuration redone.
You know our airports are another key thing we've been working very hard on our airports, whether or not its seattle with the international terminal, whether or not it's Los Angeles, which should be largely complete by next summer. There's a lot of work going back into the re scaling and it really is it's all across the airline.
Ali there's obviously, we have a lot of seats for sale too.
A lot of empty seats as we've been really only carrying close to 50% loads for much of the last year across the Europe. So there's a lot of work going on as Glenn mentioned, but there's also a lot of seats that already exist in the marketplace.
Thanks, but I guess.
Just curious how youre thinking about sort of your pipeline of pilots longer term over the next year, what retirements are looking like sort of what the competitive landscape is for pilot hiring.
Alright.
Well, we're going to be hiring over the next several years I think at the present.
Time, we're looking at hiring a couple of thousand pilots over the next.
18, or so months.
To that to that question at the same time, we had a pretty considerable number retire.
A year ago about 2000 also so we've got.
Got this mapped out.
Pretty effectively we obviously need to forecast where the international demand is going to go to ensure that we're able to supply it in half.
Pilots in the right spot.
Well, we're I think doing pretty good job of keeping our pilots and our staffing availability.
For crews in line with how demand is shaping up.
Thanks.
We'll go next to Matt Leslie Josephs with CNBC.
Hi, good morning, everyone.
Just two quick things on your hiring are you seeing lower average salaries now and do you expect that to continue compared with 2019 as you ramp up and then on the premium paid premium cabin what are those paid load factors and if this is with September a record and where are things trending now.
Well I'll handle the first and Glenn can handle the second question Leslie on overall labor costs, Yes, we're getting a nice June you're already a benefit as we bring in a whole new generation of employees.
Essentially every level of the company, we had oh close to 20000 people retire a year ago. So so the top end of our most experienced many of our most experienced employees at chosen to to retire and that's opening up opportunities for younger people. So there is there is a benefit to that we have not changed our.
Hiring a weight scales in order to bring people in we're able to bring people in at our current scales and not having any issue located in great talent.
And as it relates to the premium seats were selling 10 points higher than we did pre pandemic and we're.
We always run relatively full in terms of sat load factor, but a lot of those are complementary upgrades, but what we're seeing is people are willing to pay us for those seats.
And that's why we want to create more over time I'm not going to give away what we're going to talk about in investor day, but making sure that we have enough to satisfy both demands that people who are willing to pay us for them as well as having an adequate supply of complementary upgrades for our most valuable customers.
Okay. Thanks, and do you have any number on how many people you want to hire in 2022.
We haven't put that number out yet, but we will certainly be hiring pilots will be hiring a flight attendants mechanics, I'd say it would probably be the three three many of those will be hiring next year.
Thanks.
And once again to ask a question that is star one.
We will go next to Ted Reed with the points Guy.
Alright, Thanks for taking my question I wanted to ask first about Boston.
Or your goals there do you have goals beyond the top 10 Atlantic in the top 20 domestic destinations and in line with that.
Are your competitors. If you are growing in Boston don't they need to grow too and wouldn't that be part of their case to the justice department that they also need to grow.
Well, Chad I think you know us well enough to know we're not going to comment on what we think our competitors should or could do.
I think what we see as our product suite, the Boston market quite well being a premium carrier I'm having.
Boston to be a very affluent city.
With a huge component of corporate travel we think that.
We are best suited to deliver the best products and services to the customers in Boston and we're going to.
As I said in previous calls we don't want to be the biggest we just want to be the most loved and the most profitable.
Alright, thank you.
I need to ask about.
Vaccine do you think you can get where you need to get in terms of vaccines without having a mandate at delta.
And that without threatening firing can you get where you need to.
Yeah, well, that's our goal to you know the the goal here is to get people vaccinated.
On a plan to get people vaccinated, because I think.
One of the reasons the order came out.
From the administration was they were uncomfortable that not enough companies had plans to get their people.
Vaccinated.
And we already had a plan and plans are working well we're at 90%.
Present time vaccination, we expect to get to 95%.
We get into November.
There'll be some exemption request so yeah.
Although it will be a small number of people.
We'll we'll not be vaccinated I think it is going to be you know in the 1% to 2% range that is.
A relatively small amount of people and we will have to assess that when the time comes but right now I think we're fully aligned with the intent of the E L.
Alright. Thank you. Thank you.
Yes.
We'll go next to David Cohen with the associated press.
Hi, guys somebody I think it was Leslie already asked about the pay for new hires which are interested in what what are you seeing in terms of how many applicants youre getting per job and how does that compare to pre pandemic because some of your competitors have commented on that.
Hey, Dave we were getting great.
Chris.
New new hires coming to Delta flight attendants.
As an illustration we just.
Just open up 3000, new jobs for flight attendants, we had.
<unk> 35 to 40000 applicants we had to turn off the application portal within a week because we had so many applicants coming in for those opportunities. So we're not having issues in terms of attracting great talent.
I'd say the rate of interest is comparable obviously it depends on where category you know some.
Jobs are more technical and we're having to go deeper into some pools to to locate talent, but broadly speaking, where we're doing a great job, bringing people to the company.
Well, that's what I was also interested in not in it for some of those those deep technical jobs for example, youre not having to raise pay to attract people in this labor market.
We're not we're not.
Okay.
Thank you very much.
Thanks, Dave Gen. We have time for one final question. Please.
Turn it over to Ed for closing comments.
We'll go to Robert Silk with travel weekly.
Yeah, Hi, Thanks for taking my question.
I'm wondering if you all have received any.
Yes.
<unk> for the reopening of Europe, and these other countries, Brazil, and so forth have you got any sort of guidance on that.
They're pretty soon.
Well I think we have a lot of intelligence on that and it varies by country and it varies by region. So we're monitoring that very closely and that's clearly a key component to getting international business travel back, but you know what I would say is that when people are able to travel even with a tighter protocols.
Such as testing and documentation requirements, we are seeing significant uptake in corporate travel and I point to Europe, which is not yet reopened yet our corporate bookings have doubled since the announcement of reopening and we will see exactly how that plays out as Europe does reopened in early November.
How much further recovery, we see there, but very encouraging people want to travel and as soon as they're capable of traveling and they have some certainty around it I think we've seen it doesn't matter, whether it's business or leisure they wanted to get out and travel.
So your served here I think it's we don't we don't have an exact date as to when the 212 F is looked at getting up right. It's early November.
Okay is it important to get that soon.
It's important to get the data absolutely.
We've been asking every day.
[laughter]. Thank you with that we'll turn it over to Ed for final comments, well I want to thank everyone for joining us. This morning, a lot of questions a lot of good questions and we look forward to.
Taking you through our longer term strategy as we get into the capital markets day in December and an outline for you where we're taking this company and this brand and I think it's a very exciting future I also want to thank the people for Delta of Delta for the great work.
In the spirit of service in terms of how you took care of customers and each other over the course of a very very challenging summer. Our team is truly the delta difference and we continue to be inspired by the accomplishments of the entire delta team in this environment. So thanks to everyone for joining US today, we look forward to seeing you in New York at the New York stock.
Exchange on December 16th.
Yeah.
That concludes today's conference. Thank you for your participation today.
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