Q3 2024 Delta Air Lines Inc Earnings Call
Matthew: Good morning, everyone, and welcome to the Delta Airlines September quarter 2024 financial results conference call. My name is Matthew and I'll be your coordinator.
Matthew: At this time, all participants run a listen-only mode until we conduct a question and answer session following the presentation.
Matthew: As a reminder, today's call is being recorded. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time. I would now like to turn the conference over to Julie Stewart by President of Investor Relations. Please go ahead.
Julie Stewart: Thank you Matthew and good morning everyone. Thanks for joining us for our September Quarter 2020 for our audience call.
Julie Stewart: Joining us from Atlanta today are our CEO, Ed Bastian, our president, Glen Hauenstein, and our CSO DN Janki. Edward will open the call with an overview of Delta Performance and Strategy, when we'll provide an update on the revenue environment, and Dan will discuss cost and our balance sheet.
Speaker Change: After the prepared remarks, we'll take in with questions. We ask that you please limit yourself to one question in a brief follow-up so that we can get to as many views possible.
Speaker Change: After the endless Q&A, we will move to a media question.
Speaker Change: Today's discussion contains four booking statements that represent our release or expectations about future events. All four booking statements involve risks and uncertainties that could cause the actual results differently from the four booking statements.
Speaker Change: Some of the factors that may cause the differences are described in Delta's FVC filing. We'll also discuss non-gap financial measures and all results that exclude special items unless otherwise noted. You can find a reconciliation of our non-gap measures on investor relations page at ir.deltza.com.
Speaker Change: Please note that H2s that earnings release today outlines the impact of the Crown Strike caused outage on our Q3 profitability and unit metrics consistent with our initial disclosure on on the stage.
Speaker Change: Now I'll turn the call over to Ed.
Ed Bastian: Thank you, Julie. Good morning, everyone. We appreciate you joining us today.
Ed Bastian: Before we begin, I want to provide a quick update on Hurricane Milton.
Ed Bastian: The safety of our people, customers and communities is always paramount and to that end, we wish you to feel waiver and implement a fair caps for those who need to change their travel plans or fly out of the storm's path.
Ed Bastian: We've also added additional flights and upgaged aircraft into Florida this week to accommodate those evacuating the state.
Ed Bastian: Between yesterday and today we have canceled approximately 600 flights in total, but we'll have a better sense of the impact as we learn of how our airports fared overnight. Our hearts are with all those in the south east to have been affected during this storm season.
Ed Bastian: Now turning to our earnings report, earlier this morning, we reported our September quarter results consistent with our latest guidance.
Ed Bastian: On an earnings-per-share basis, our results would have been at the high end of initial guidance, excluding the 45 cent impact from the crowd strike caused outage.
Ed Bastian: Delta continues to lead the industry, operationally and financially, while delivering on our 2024 plan. Your today, our on-time performance is best in the industry and our completion factor leads to network carriers even when including the impact of the outage.
Ed Bastian: Financial, we have delivered double digit operating margins with nearly $3 billion of free cash flow year to date, and following the Fitch upgrade in July, our balance sheet now has two investment grade ratings, and our dividend yield is in line with the S&P 500.
Ed Bastian: Delta's year-to-date profitability is expected to represent 50% of the industry's total profits, but the double-digit return on invested capital that is more than twice the industry average, reflecting the durability of our business model.
Ed Bastian: I'm incredibly proud of the Delta people for delivering these results and want to thank them for their outstanding work during this busy summer period and their dedication to providing best-in-class service for our customers.
Ed Bastian: sharing our financial success with our people as a longstanding pillar of our culture.
Ed Bastian: with this quarter's financial performance. We've accrued nearly $1 billion a year to date towards next February's profit show.
Ed Bastian: We expect this will be among our top profit sharing payments in Delta's history and more than the rest of the industry combined.
Ed Bastian: the combination of our industry leading reliability and best in class service from our people has firmly established Delta. It's the premium airline of choice and powers are brand-momentum.
Ed Bastian: The new Delta 1 Lounge in JFK has been an incredible success with very high customer satisfaction.
Ed Bastian: Building on this momentum, this morning we opened our new Delta One Lounge at LAX and we will be opening our third Delta One Lounge in Boston this December and a fourth in Seattle early next year.
Ed Bastian: By a year end, Delta will have over 700,000 square feet across 55 skyclogs and three Delta-1 lounges, a one-of-a-kind position across many of the largest airports in the country.
Ed Bastian: on board. We are enhancing the customer experience with the rollout of our popular Delta Sync product, more than 330 aircraft, offering sky-miles members a personalized experience that provides a smart TV on the CPAC screen.
Ed Bastian: More than 90% of our domestic mainline network now offers fast-free Wi-Fi. And the summer we begin introducing fast-free Wi-Fi, excuse me, fast-free inflight Wi-Fi on low and high international flights.
Ed Bastian: across the network, Delta's advantages continue to build. Core hubs are nearing full restoration as we close out the year and we are harvesting the investments we've made in coastal gagways to improve margins and support profitable international growth.
Ed Bastian: around the world we're continuing to develop our J.B. partnerships and leveraging our strengths.
Ed Bastian: are recently announced summer 2025 Transit Land Exchange World Build on our strong performance in our largest and most profitable international region.
Ed Bastian: as brand preference continues to grow. We are driving deeper levels of engagement. And our SkyMiles membership is attracting a younger consumer.
Ed Bastian: We have seen a significant evolution in our active member, face post-COVID, with 3 million more active members under 40 years of age, more than doubling the member engagement with non-air partnerships, allowing us to earn a higher share of wallet.
Ed Bastian: Deeper engagement with Delta, device higher customer satisfaction, reinforces loyalty and creates greater lifetime customer value.
Ed Bastian: Turning to our outlook, consumers are continuing to prioritize premium experiences, and our core customer base is in a healthy financial position, with travel remaining a top-spend category. Corporate travel continues to improve, and Delta's well-positioned as the business carrier of choice.
Ed Bastian: and importantly, domestic supply growth continues to rationalize. Across much of the industry, there has been an accelerated pace of change, and we are encouraged by the actions the industry is taking to improve profitability and returns.
Ed Bastian: In the December quarter, the improved revenue trends we saw in the month of September are continuing. And we expect to grow earnings 30% over last year with pre-tax income of $1.4 billion, which would mark one of the best if not the best fourth quarters in our history.
Ed Bastian: With this, our full year, although for earnings, is expected to be around the midpoint of our initial $6-$7 EPS guidance from the start of the year, excluding the 45 cent impact from the crowd strike caused outage.
Ed Bastian: As we approach the end of our three-year plan that we laid out in late 2021, we have delivered consistent financial performance, restoring our financial foundation while navigating ever-changing macro and industry environments from a position of strength.
Ed Bastian: Our performance as a testament to the durability we are creating a delta.
Ed Bastian: built on years of investing in our people and our product while continuing to restore our balance history.
Ed Bastian: Delta has built unmatched competitive advantages and structurally improved our business for the long term.
Ed Bastian: Next month at our investor day, we will introduce an updated long-term financial framework that builds on our durability and reflects the opportunities that we see ahead to create sustainable long-term value for our owners.
Ed Bastian: As we approach our 100 year anniversary next year, I've never been more excited about Delta's position and the opportunity that lies ahead. Thank you again, and with that, let me hand it over to Glen from more details on our commercial performance.
Glen Hauenstein: Thank you, Ed, and good morning. I want to start by thanking all of our employees for their hard work during this busy summer travel season. They are the delta difference.
Glen Hauenstein: Delta delivered September quarter revenue consistent with our latest guidance despite the impact from Hurricane Helene.
Glen Hauenstein: During the quarter, unit revenue improved sequentially in all geographic entities, reflecting the strength and travel demand and improving industry backdrop.
Glen Hauenstein: In the month of September, unit revenue inflicted to positive in both domestic and transatlantic.
Glen Hauenstein: Domestic Industry Seagroats moderated significantly from the peak in June. With the industry now growing seeds and lying with demand.
Glen Hauenstein: Transatlantic benefited from ongoing strength in U.S. point of sale and a rebound in Paris demand as soon as the Olympics ended.
Glen Hauenstein: Corporate travel sales were up 7% during the quarter led by double-digit growth in coastal houses with broad-based strength across sectors.
Speaker Change: Delta is the clear industry leader and offering premium experiences and more choices for our customers with significant investment across the travel experience over the last 15 years.
Speaker Change: Our new Delta One lounges in New York and LA with dedicated check-in and private TSA security truly differentiated Delta's premium offering in the two largest revenue markets in the United States.
Speaker Change: We also introduced Delta Premium Select on TransCan flights between JFK and LA and will expand this offering to all daily frequencies next month.
Speaker Change: Similar to our international rollout, the initial customer reception to Delta Premium Select has far exceeded our expectations.
Speaker Change: Consistently delivering elevated experience that customers' value is driving out performance and premium products across geographies.
Speaker Change: During the quarter, premium revenue growth outperform the main cabin by 9 points.
Speaker Change: At the same time, Delta is growing Sky Null's membership and deepening our customer engagement.
Speaker Change: The success of our strategy is best illustrated by our unit revenue premium relative to the industry. The growing loyalty of our brand and are increasingly diversified revenue base.
Speaker Change: You're today 57% of our revenue has been generated outside of selling main cabin seats. Underpinning Delta's financial leadership and supporting durable performance that significantly outpaces the industry.
Speaker Change: Loyalty revenue was up 6% versus last year, with growth in our SkyMouse membership and strength in our American Express Co-brand portfolio.
Speaker Change: American Express for Numeration for the quarter was 1.8 billion up 6% year over year delivering solid performance in a backdrop of moderating inflation.
Speaker Change: Fargo Revenue was 27% higher than the last year, with double digit growth across all international regions. I am encouraged by the results and the opportunity to better leverage our increasingly cargo capable fleet.
Speaker Change: Looking forward to demand for travel on Delta remains healthy with continued preference for a premium offering.
Speaker Change: Our recent corporate survey indicates a positive outlet for business demand with 85% of respondents indicating they expect their travel spend to grow in 2025.
Speaker Change: For the December quarter, we expect total revenue to increase 2 to 4% over prior year on a 3 to 4% higher capacity level.
Speaker Change: The improved unit revenue trends we saw in the month of September are continuing into the December quarter with healthy bookings for the holidays.
Speaker Change: As we've seen historically, domestic travel demand is impacted in the weeks surrounding the election, resulting in an expected one-point impacted system unit revenue for the quarter.
Speaker Change: With favorable industry capacity dynamics and a strong demand that we are well positioned as we close out the year and head into 2025.
Speaker Change: Our industry leadership and differentiation has never been greater, creating the foundation for us to unlock the value of our trusted customer brand and further diversify our revenue base.
Speaker Change: In closing, I'm excited about our opportunity as ahead and I look forward to sharing more with you at our best for day next month.
Speaker Change: and went that when we turned it over to Dan.
Dan: Thank you, Glen, and good morning to everyone.
Speaker Change: Operation League, our team's delivered three busy summer travel season.
Speaker Change: You're today Delta has achieved 60 days of zero cancellations, nearly twice all of last year.
Dan: Today, we reported another quarter of strong financial performance with $1.3 billion of pre-tax income for this
Dan: A non-fuel unicost performance was in line with our expectation.
Dan: In a cost group, 5.7% including a 3.2 point impact from the CrowdStrike caused outage.
Dan: and a half-point impact from the decision to reward employees. We travel passes for their hard work through the summer.
Dan: Now, fuel prices declined 9% over prior year, averaging $2.53 per gallon for the quarter, including a three-cent loss from the refinery.
Dan: Fuel efficiency improved approximately 1% year over year.
Dan: During the quarter, we took delivery of 9 next-gen Airbus aircraft and retired 6 aircraft.
Dan: We continue to expect our fleet growth to be less than 2% this year with 20 net aircraft additions as half of our new deliveries are replacements.
Dan: Operating cash flow year-to-date was $6.2 billion.
Dan: after reinvesting 3.6 billion back into the business.
Dan: We generated pre-cast flow of 2.7 billion.
Dan: Strong Cassianeration has supported death repayment of 2.4 billion year-to-day, including 900 million of early repayments.
Dan: Gross leverage ended the quarter at 2.9 times.
Dan: For the year, we expect to repay nearly $4 billion a debt, bringing in our cumulative debt pay down to more than $12 billion over the last three years.
Dan: As we retire secured debt and pay cash for our aircraft, our unencumbered asset base is expected to grow at $30 billion by your end.
Dan: Our financial foundation continues to strengthen. We achieved a meaningful milestone during the quarter with our balance sheet receiving an upgrade to investment grade from Fitch.
Dan: Delta's now investment grade rated at Moody's and Fitch and one notch away at S&P with a positive outlook.
Dan: Now moving to guidance for the December quarter, we expect to deliver two points of margin, operating margin expansion, and earnings growth of 30% compared to the prior year.
Dan: Bill prices are expected to be $220 to $240 per gallon.
Dan: More than 20% lower year over year, including a few sent impact from a modest loss at the refinery.
Dan: Unit costs are expected to be up 3% from last year as capacity growth moderates to 3% to 4%.
Dan: Keeping our full year outlook for non-fueled costs in line with our initial guidance of up-low single digit.
Dan: with hiring and training normalizing.
Dan: We are growing into our resources in gaining traction on efficiency and initiatives, helping fund continued investments in our people and brand.
Dan: December quarter earnings are expected to be a dollar sixty to a dollar eighty five per share on third eleven to thirteen percent operating margins.
Dan: We are focused on finishing the year-strong, delivering industry-leading performance with a return to earnings growth and margin expansion positioning us well as we head into 2025.
Dan: Delta's differentiation has never been greater, her brand in financial performance are transcending the industry, and we're generating a return on investing capital as 5.1 ahead of our cost of capital.
Dan: and better than half of the S&P 500.
Dan: Looking forward, we remain focused on delivering durable earnings and cash generation that enable us to further strengthen our balance sheet and create long-term value for our shareholders.
Dan: I look forward to sharing more details with you at our investor day next month.
Dan: In closing, our performance is a result of the hard work of our employees. I want to thank the Delta people for continuing to go above and beyond for our customers.
Speaker Change: and each other every day. Now with that, we'll turn it back to Julie for Q&A. Hey, Stan, Matthew, can you please go to the first analyst question.
Julie Stewart: Certainly, at the time we conducted a question in answer session, once again if you have any questions or comments please press star 1 on your phone at this time.
Speaker Change: Your first question is coming from David Bernan from Bernstein, your line of life.
David Bernan: So Glen, first question for you on the election. Can you just help us get comfortable with how you're separating out that impact from what you're seeing internally and maybe talk to what gives you confidence.
David Bernan: that this isn't just a weakness in the consumer that's showing up in some of the Ford revenue data. Thanks. Absolutely. I think it's, if you were looking at our internal numbers, it's really obvious to see the trend lines where you have markets that are performing incredibly well with positive momentum in October . And then again, as soon as the week after the election is complete and on into December and really all the way into January . Thank you very much.
David Bernan: So, if you took a trend line, you'd see these two weeks just being way off trend. And I think it's, it's, we said in the comments that it's domestic, but it's also short on Latin. It's, you know, it's pretty much across the board that those two weeks are underperforming the trends before and after those weeks.
Speaker Change: Okay, and then maybe just, can you talk to a high level about how Delta's thinking about domestic capacity, kind of going forward, low cost airlines, kind of capacity, you know, does it make you think about share any different leader?
Speaker Change: David, that's a great prelude into next month's investor day, where we'll be giving you our perspective on that We did we did we did we did as you know file our summer schedule last week and Atlanta is is one of the markets where we are finally at a position to be had it's not better than pre-COVID levels in capacity so very excited about that [inaudible]
Speaker Change: Thank you. Your next question is coming from Jamie Baker from JP Morgan. Your line is live.
Jamie Baker: Oh, thanks and good morning, everybody, couple for Glen, so Glen, you know, when I think about the phenomenon of tightening domestic capacity, my assumption has always been that the first routes that are called.
Jamie Baker: Provide the greatest uplift to rise from there, rather than if it's still a crew over time, but you know at sort of a declining rate of improvement. Is that the right way to be thinking about it, that the benefits are front and loaded, or is the reality something different?
Speaker Change: Well, Jamie, I'm trying to understand who's perspective you're looking at that thron. Are you looking at it from the perspective of the people who are cutting the capacity or the people who are the beneficiary of those capacity cuts?
Jamie Baker: The Lotta, the beneficiary, so Delta in this case. I would say if you think about how it is just normal course of business.
Jamie Baker: and this is just hypothetical that if you're cutting capacity, you're cutting your worst roots first. So the upside accrual from that to the remaining capacity is actually the least. And as you move through and go up to better and better capacity cut, that more and more accrues to the remaining capacity.
Jamie Baker: Okay.
Speaker Change: All right, that's very helpful. And then second, you know on corporate demand, I'm curious what sort of recovery you're thinking about for 2025, but you know more importantly does it influence how...
Speaker Change: You think about the network? I mean, hypothetically, you know, I'm not.
Speaker Change: You know, arguing that this would happen, but if we saw a full restoration to where corporate trends would be had COVID not occurred, would you need to rebalance the network monster, but it simply being exercise of potentially allocating less capacity to lower fair buckets. Thanks, and guys. I would suggest it's the latter.
Speaker Change: as we pointed out that premium products are really doing much better.
Speaker Change: Currently.
Speaker Change: and Coach and as we move through the next couple of scheduled changes in a self-lensitting into the tail end of the year, we expect that momentum to pick up as the carriers that have primarily coach products.
Speaker Change: Begin Rationalizing Capacity. So I think we always have room for our business customers on board our network and clearly if certain companies pick up business or start new factories we're always talking to to our clients to see where they might need additional capacity but generally I think we're in a very good spot.
Speaker Change: Daniel, thank you very much.
Speaker Change: Thank you. Your next question is coming from Saudi SIP from Raymond James. Your line is live. Hey, good morning, everyone. Glen, I was wondering if you could give a little bit more color on how you're thinking about the unit revenue projection in the fourth quarter by entity, you know, and it's just within the trends beyond election.
Speaker Change: Hi, yeah, I've got something that's wrong with your phone there, so you're asking about trends after the election by today.
Speaker Change: We're unit revenue.
Speaker Change: but I know what your expectations are. I think we've certainly said that domestic and transatlantic are leading the way and I think that will continue as we head into the back after the year actually.
Speaker Change: on most excited about this winter in the transatlantic where we've done some capacity adjustments and underperforming capacity last year and we see really encouraging signs of where we've allocated that capacity along with robust demand of the offseason.
Speaker Change: really looking forward to the transatlantic results.
Speaker Change: Pacific, we had some additional capacity, as we had out of this year, I think it's, you know, Japan looks strong, the South Pacific looks strong, China is looking stronger as we laps the big and create our lap.
Speaker Change: that big increase in capacity last year. And we're seeing a little weakness in South Korea, but nothing major. And so we'll keep an eye on that. And then Latin is continuing its improvement as we move through the quarter. And hopefully we can inflict that into positive as we move into January and beyond. So I think we're sitting in a pretty good spot with all entities as we head out of this year and into 2025 and very encouraged by the trends when we look beyond the election. [inaudible]
Speaker Change: Very helpful. Thank you. And if I might just follow up on the Hurricane Hill, you know, you called out impact of three cents. I know it's really early days. I'm just kind of curious, you know, if you have kind of an impact of the Hurricane Milson and your guidance and your understanding of how we are thinking about it.
Speaker Change: It's too early to give you that.
Speaker Change: and we have to see what happens if we're...
Speaker Change: If we're fortunate and it's moved out quickly, it'll be modest, but we have really happy to say.
Speaker Change: Thank you.
Speaker Change: Thank you, your next question is coming from Mike Lindenberg from Deutsche Bank.
Speaker Change: Your line is live.
Mike Lindenberg: Oh, yeah, hey, um, two here, Glen, I, I, I don't want to say this was under the last.
Mike Lindenberg: Conference Colour, maybe with a conference where I think you were asked.
Mike Lindenberg: about where organic demand was relative to the fact that we were seeing demand up to 70% in the summer. And I think you had indicated that actually a lot of it was promotion driven by promotions.
Mike Lindenberg: and then organic demand was maybe closer to about 4% domestically.
Speaker Change: When I heard you talk about in the comments in your script, talk about domestic, you know, where it seems like supply and demand are now in sync, and if I look at where domestic supply is right now, it is about 1.5 to 2% Are you sort of indicating that maybe domestic demand organically is around 2% Are we running a little bit better than that? Can you just some additional color on that? Yeah, I think we haven't gotten there yet, so it's really impossible for me to say, but I think we are still in that kind of 4% So we'll see, you know, the capacity is up 1.5 or 2 as we get through these next few months, and we see continued positive momentum and yield.
Speaker Change: That will tell and I think that's what we're encouraged about and that's what we're excited about as we head to the end of this year as we think this balance has been has not been this good and quite some time.
Speaker Change: Great, and then just my second question I think on the distribution front it does look like
Speaker Change: Eve.
Speaker Change: I believe correct me if I'm wrong, you may have recently sort of renewed.
Speaker Change: your agreements with all of the GDSs and I know that you've been moving, you know, more into sort of on the MDC side with respect to distribution. How should we think about that, you know, your cost of distribution, is that going to be maybe a potential talent as we head into 2025?
Speaker Change: Thanks. I think our strategy is really one, we want to meet customers where they want to be and if they're not in use.
Speaker Change: If they want to use OTAs, if they want to use GDS, we want to have the best weight of products in each one of those. And over time, I think you've seen a decrease in distribution costs and will that continue. I don't know, that's what consumers want to do. And I think our job is to make sure that we have best and class products on the shelves that all of our distributors.
Speaker Change: Thanks. Thank you.
Speaker Change: Thank you. Your next question is coming from Connor Cunningham from Melia's Research. Your line is live.
Connor Cunningham: Everyone, thank you. Really outside of you guys in United, the industry continues to try to reinvent itself through product and network changes. You know, when you think about the opportunity that presents to you, just how aggressive do you pretend like thinking or thinking about being just given the turmoil and others like you're already deepening your moat like in real time. I just try to understand how deep it is or how deep you can get it from here. Thanks.
Speaker Change: First, I think we'll have much more to talk about that at an invested edit because that really goes to the strategy of the next three years, but I think our strategy is consistent too.
Speaker Change: Development, three cash flow paid down our debt, and that to be a great note in the long term. So maybe I'll turn it over to Dan to talk about that.
Speaker Change: I think as you kind of as you, we want to build off of our
Speaker Change: The success that we had and if you look at it over the last decade but even over the last 18 months
Speaker Change: that durability of earnings to be double digit when the industry has been down.
Speaker Change: and it does a little bit double digit margins over that period of time, I think continues to speak to the durability of the franchise and the ability to create the profitability, but generate the cash.
Glen Hauenstein: and the Glen picked up on a word there which is consistency. You're just going to consistently see us do it whether it's how we execute commercially, where we put our aircraft, the amount of aircraft that we're taking, the investment back in the business, we're just...
Glen Hauenstein: that consistency of executing the strategies always been core to Delta and will continue to be core.
Speaker Change: Okay, that's awful. And then, you know, we're starting to hear a little bit more or see the products that the domestic leisure carriers are offering. And, you know, when you look at Delta, you know, comfort plus in that offering and compare it to what the industry is announcing, you know, you talked a little bit about delta sinks, but what else is there to kind of the wide net gap to the new products that are out there or that are being announced, I should say, thank you. Thank you.
Speaker Change: I hope you're available in November to come to our invested in speaking to think we'll have a lot of exciting things for you to take a look at.
Ed Bastian: is coming out theme today. Hey, Carter, this is Ed, and Glen is right. We'll be spending a lot of time talking about that next month.
Ed Bastian: but this is a platform we've been on for 15 years, right?
Ed Bastian: So I understand how others are now looking to adapt. It's really hard to change course and to try to catch.
Ed Bastian: and what is a train that's moving at a pretty good speed, I should say a plane really.
Ed Bastian: who being at a pretty good speed here, whether it's the investment in the lounges that you're seeing and...
Speaker Change: Delta 1 experience the free Wi-Fi and I know everybody wants to do free Wi-Fi now and we've we've been out on this for years and so we'll continue on the pace we're on we're not going to change course if anything we're just going to continue accelerating.
Speaker Change: See you in a month, thank you.
Speaker Change: Thank you. Your next question is coming from Jane Fittingworth from Evercore, ISI. Your line is live.
Jane Fittingworth: Hey, thanks for coming. Just on seasonality, obviously there's a lot of noise right now in the baseline with hurricane impacts and with holiday shifts here and October.
Jane Fittingworth: But as we look at volume growth for the industry, it looks like trends are following much more 2019 baseline than they are really last year. And so I wanted to ask you, do you see seasonality changing on the leisure side or on the corporate travel side, and was there anything about this time last year that was an anomaly?
Jane Fittingworth: Well, you mentioned one of us there's...
Jane Fittingworth: She shifted the Jewish holidays into October 1st.
Speaker Change: September, of course the hurricane.
Speaker Change: but I think if you take a broader longer term vision.
Speaker Change: We have seen really...
Speaker Change: Augustin, particularly a butt.
Speaker Change: Louis Slightly Leser Extend July, but come Les Peaky, particularly in Long Hall International and that September and October are becoming prime travel months.
Speaker Change: and...
Speaker Change: I think that's something that will continue as schools continue to go back earlier in a lot of the country.
Speaker Change: and the weather in Europe in August is really hot.
Speaker Change: that people who have choices were...
Speaker Change: when they can take their vacations or moving into...
Speaker Change: Let's call it more temperate months.
Speaker Change: Corporate, we haven't seen much change earlier, but I think it's continuing to shift travel to Europe in particular.
Speaker Change: from a July and August P2, September, October peak.
Speaker Change: That's helpful, and then just thanks, Glen, just for my follow up as you think about warm-out as we grow less training investment, less maintenance investment, maybe there should be a question mark at the end of that one. Go forward. What ining are we in for productivity recovery at Delta and what metric should we be watching on that front? Thank you.
Speaker Change: We are thanks to Wayne. Yes, we're still in the early innings of where we, and we, we're pleased with the progress. If you look at how we ended last year and the last month and you look at this year up.
Speaker Change: Low single digits, expect a 2% for the year, a non-fuel cost.
Speaker Change: You're starting to see that I think that one of the proxies that we've always talked about is that we put the workforce in.
Speaker Change: in a head of the operation and growth, and that you'd see efficiency come off of that. So if I point you to something, look at third quarter workforce year over year, it's up one and a half percent.
Speaker Change: and the network's up over five. So you're starting to grow into those resources and drive that efficiency across your workgroups.
Speaker Change: but as I've talked about different parts of our operation, our different journey.
Speaker Change: and we're just starting as you know this year we made an incremental investment in maintenance that we talked about on the 350 that's having the impact that we want it, maintenance cancels are down 75% here to date, you're over year and so.
Speaker Change: But that part of the productivity will start as we get into next year and the year bond and the year beyond, as we make progress against that, it's same with our crews. And so you're seeing it in operations that have already started airport operations, our customer care operations.
Speaker Change: Making good progress on efficiency and more we'll kick in as we go through next year and we'll get the benefit.
Speaker Change: of the full year of having our core hubs.
Speaker Change: Restored, which are our low cost.
Speaker Change: That will be the full impact next year and we're going to continue to get utilization out of fleet and better utilization out of the regional aircraft.
Speaker Change: will be by next summer 100% restored on those and continue to get better wide body utilization as we get the extended flying season and counter seasonal flying.
Speaker Change: So all those things that you saw started today are things that you're going to hear us talk about at our investor day and you're going to hear us through 25 and 26 just be components that we can build on. And the way in technology also plays a place that we're all in that continued productivity opportunity. As we now have our team fully up at the speed and the development, the experience that where we wanted to be able to leverage those tools a little better going forward.
Speaker Change: Great, appreciate the thoughts.
Speaker Change: Thank you. Your next question is coming from Scott Group from Wolf Research. Your line is live.
Scott Group: Hey, thanks. Good morning. So I know Glen, you don't typically talk much about monthly trends, but just directionally, just so we understand, can you maybe give some color like, is October and your view of December, right if we eliminate November and the elections? October and December positive, I'm on unit revenue.
Glen Hauenstein: We're not going to give that level of detail, but I would say that October and December are significantly better than November.
Speaker Change: Okay, fair enough. And then...
Speaker Change: Dan, can you just maybe talk about some of the puts and takes to be thinking about for Kazum next, I know we'll get probably more of a guide at the announce, but just directly just puts and takes.
Speaker Change: to be thinking about.
Speaker Change: Yeah, I think building off of thanks got building off the previous question and we will share more.
Speaker Change: in Vester Day, but the context is...
Speaker Change: Again, consistency, right? Things that you saw this year, we're going to continue to invest back into our workforce, continue to invest back into our brand.
Speaker Change: and you're going to see those.
Speaker Change: consistently, but at the same time you're going to have the benefits of efficiency growing into that workforce. You've got the elements that I talked about with maintenance. We know we put the incremental investment in and we'll start to get those elements back. The crew, the other components associated with that. And then as Ed mentioned long return technology, you start to get an extra, but that will come for years to come. The industry is built forward and we're built forward. We're built forward and we're built forward.
Speaker Change: All right, thank you guys.
Speaker Change: Thank you, your next question is coming from Brandon Oglinski from Barclays. Your line is live.
Brandon Oglinski: Hey, good morning, and thanks for taking my question. So, Edward Glenn, you guys did volunteer, so maybe I'll try to pry a little bit of a preview of investor day out of here. But you did talk about Atlanta being up in the summer schedule next year. I think you even have a news article out saying flights could be up high single digit levels. Can you maybe specifically speak to that aspect of the strategy as you look forward without maybe giving too much away?
Speaker Change: Well, sure, we have really wanted, as we said earlier, in the coming out of COVID, to solidify our positions in the coastal cities. And I think, as you look at where we are today, clearly the leader in Boston, we have served ourselves as the leader in New York.
Speaker Change: made it incremental improvements in Seattle and...
Speaker Change: at Bliden D'Arlene in Los Angeles. So I put a check mark on those at the to the detriment of the core. Because we just didn't have enough assets to do it all at once.
Speaker Change: and so we'll really focus and we'll talk much more about this next week.
Speaker Change: 2018. The next year is really about some incremental ads, of course, that are key to continuing our journey in the coastal gateways, but a vast majority of that going back into our core hubs as the regional jets come back to full utilization as we can push utilization up. And I think if you take a long-term view of Atlanta, not just last year or the year before, but where we've come it's really about driving efficiency through our core hub, which represents about 30 to 35% of our total unit revenue that flow through here. [inaudible]
Speaker Change: and really driving efficiency through that with larger gauge, with actually fewer frequencies still than we had in 191, but seats that will be above that level. So, another push through gauge through Atlanta, as well as then taking those smaller airplanes and building our feed network back in Detroit and Minneapolis. So, we're really excited about where we're going to go next year. We're going to have much more details about that all next month, but we're...
Speaker Change: We're pumped about where we're headed for 25.
Speaker Change: really appreciate that, Glen. And then, yeah, maybe just as a quick follow-up on that, I mean, does this have broader implications for your airport costs? Because those seem to be, you know, or the inflationary pressure is here on the industry at all, going back to your courthubbs, does that have a positive impact looking at it?
Speaker Change: Yeah, when you look at that airport line, you see it in the SEC filings, right? For the quarter and year to day, it's up over 20% and you know, a third of that is these investments we made that we're making in these generational assets and as Glenn always reminds me, they're always the most expensive on day one and you grow into them over time. So the opportunity in front of us is to grow in and get better utilization out of those assets that we've invested in over this period of time. And you see it throughout the network, it's all the places that Glenn talked about in regards to.
Speaker Change: the New York markets with both large-quality at JFK, LA, Salt Lake City, but also the investment we consistently make year and year out through Atlanta.
Speaker Change: and continue to make that the flagship of Delta.
Speaker Change: Ogan, give us continued leverage. The thing I would add, Brandon, is that the bulk of those investments are behind us. And as we see what's going on in the industry, we know there's other airports not necessarily Delta courthouse that still have work to go. So this is something that we're going to be able to leverage over the next few years, having made the investment and started to drive better efficiency. Thank you.
Speaker Change: and I think it'll be a unique opportunity for us.
Brandon Oglinski: Thank you.
Speaker Change: Thank you. Your next question is coming from Tom Fitzgerald from TD Cowan. Your line is live.
Tom Fitzgerald: Thanks very much for the time. This past summer you nighted launched an advertising network. It's depending on the success of that, is that something you'd look to be a fast faller on?
Speaker Change: This is it. We'll have to see what it is. There's a lot of advertising and promotion being talked about. There's not a lot of doing on that front. We're very comfortable with where we sit in that space with the free Wi-Fi and Delta Sink and the continued investment in personalization. We're not looking to push ads or try to monetize our customers as much as provide greater value to them. I think that's the sustainable strategy over time.
Speaker Change: Thanks very much, and then just by making a quick modeling question, does your school guide include a refinery, or a sum of refinery benefits, or a refinery headwind? Thanks again for the time everyone.
Speaker Change: i
Speaker Change: Thank you. Your next question is coming from Robbie Shanker from Morgan Stanley. Your line is live.
Speaker Change: Great, thanks for everyone. You guys are pretty vocal on the 2Q call that the industry had a take out capacity in 3Q and 4Q. From various cities right now looking at one Q capacity, how do you feel about that? Can you feel like it's in a good spot? Do you think there's more to come out or are going to have to have that evolve?
Speaker Change: You know, I don't think we want to comment about any individual, but in aggregate, I think we're encouraged by where the industry's finishing this year.
Speaker Change: likely that the way things have been loading into the schedule availability tapes that there's probably more to come out of the first quarter, but that's a hypothesis, not a fact.
Speaker Change: and Andrew Stewart. I may be following up for Dan Grazzon, the investment grade here. I was thinking of a big change from the pandemic time. Where does that lead the balance sheet? Kind of going into 25 and how do you think about continued that paid-down versus captured on?
Speaker Change: Yeah, that's another one we'll spend time with in next month, so stay tuned on that, but again, back to consistency, we're going to be continue to be focused on cash generation.
Speaker Change: Consistent reinvestment back into the business.
Speaker Change: and we're the primary focus on death and death pay down continues to strengthen the balance sheet.
Speaker Change: and effectively returning capital that way to investors through the accretion of the equity value of enterprise value.
Speaker Change: Anderson, lots of one back next month with Fortress.
Speaker Change: Thank you. Your next question is coming from Sheila Kyoglu from Jeffrey. Your line is live.
Sheila Kyoglu: Hi, good morning, Ed Glendin. Maybe two questions on premium. So if you look at premium cabin, it's outperformed main cabin by nine points over the past two quarters versus the previous trend of about five points. So first, I guess, can we talk about the spread? How long does that continue? Does premium cabin catch up or does premium have more to go?
Sheila Kyoglu: Ego!
Speaker Change: I'll take a stab at it and down, feel free to add your comments.
Speaker Change: I think it's a little bit of both. I think we've got Maine Cabin underperforming and that was really what drove capacity rationalization, I think, by the industry because if all you have is Maine Cabin, you need to fix supplies so you can get your unit revenues moving in the right direction. So I think we've seen that occurring right now and through the end of the year is that goes incremental cuts, capacity cuts come into play. So I would assume that Maine Cabin, as we exit this year, is starting to...
Speaker Change: and proof on the margin, but we also think there's more to go on the premium products. And I think, you know, not to keep harping in on saying, come next month and join us for our investor day. But I think we'll be able to unveil why and how we think those can continue to improve over the medium and long term.
Speaker Change: Green Boat and...
Speaker Change: Maybe there's a second question on that same topic. How do we think about the margin implications that benefit in the main tab and catch up, which is clearly underperforming? Does it have a lesser impact on margins that we headed to 25, or do you see premium and main continuing to grow at the same rate? I think that's hard to say that we parse that out at this point in time, but I think what we're seeing is a much more constructive backdrop in both.
Speaker Change: Whether or not it's the continued increase in business travel, as well as better distribution of our products and services in the premium cabins, or whether or not it's the very supply demand balancing coach.
Speaker Change: But I think all those are coming into play as we head towards the end of this year. Yes.
Speaker Change: i
Speaker Change: Thank you, your next question is coming from Andrew Dador from Bank of America. Your line is live.
Andrew Dador: Hey, good morning, everyone. Most of my questions have already been asked, but I know I've kind of asked this on some past calls, but as we prepare for investor day next month and we think about the long-term free cash flow generation potential at Delta, can you just give us a sense of when you become a cash taxpayer? And I think when you are a cash taxpayer pre-pandemic, your cash tax rate was below the mid teens, does that still hold any any any color around that would be helpful. Thank you.
Speaker Change: Certainly, I'm happy to talk about cash taxes. It's a pleasure to actually be in a position where in a planner horizon, we will be a cash tax payer. We expect to start paying some cash taxes next year, as we've burned through the deferred tax assets positions that we've had, and we'll step into that over the next three years. And as you think about it... [inaudible]
Speaker Change: The stabilized cash tax rate. It really depends also on where tax policy goes, legislation goes, but think of it as it will progress to the high teams. Maybe the low 20s, but we still have many years in front of us related to that.
Speaker Change: That's helpful. Maybe it's just a sick one for Glen. Just from, you know, transatlantic commentaries seems very positive. Seems like competitive capacity there looks pretty constructive, you know, from what we can see in schedules. How would you rank the potential for transatlantic revenue generation amongst all of your entities as we head into 2025? Thank you.
Speaker Change: Yeah, I think domestic is going to be quite strong given the capacity levels that we're exiting the year from and I think transit lag will follow right behind. We have a lot of lapsing and Pacific in terms of capacity that we've added but this year that I think will be better next year so we have some uplift there and then you know there's been again we haven't talked about it much on this call but there's been a significant amount of capacity rationalization in the leisure markets in Latin America, which I think should serve as well. So hopefully you know we're looking at all of them turning into positives sometime next year but I'd say you know probably domestic and transatlantic being the strongest of the two.
Speaker Change: That's great. Thank you. I'm the boy. I'm sorry.
Speaker Change: and Matthew will now get our final analyst question.
Operator: Certainly, your next question is coming from Stephen Trent from City. Your line is live.
Speaker Change: Certainly, your next question is coming from Stephen Trent from City, your line is live.
Stephen Trent: Good morning, everyone, and thanks for taking my question. Just wanted to dig in a little more. You mentioned your technology investments. I think I recall seeing Delta TechOps is using drones to help with, you know, sort of broadly thinking how you may deploy innovative solutions across your business.
Stephen Trent: Good morning everyone and thanks very much for taking my question. Just wanted to dig in a little more you mentioned your technology investments. I think I recall seeing Delta Techops is using drones to help with, you know, a quickman inspections and could you mention maybe, you know, sort of broadly thinking how you may deploy innovative solutions across your business. Thank you.
Unnamed Speaker: Sure, Stephen. Again, we'll talk a little bit about this next month. But we have, I think, great opportunities with the technology foundation that we've built. We are in the very early stages of understanding the potential of AI for our business. And there's no question that there are some really interesting applications to drive better predictive modeling and opportunities, whether it's on the revenue front or on the efficiency in the cost front.
Speaker Change: Sure, Stephen. Again, we'll talk a little bit about this next month, but we have, I think, great opportunities with the technology foundation that we've built. We are in the very early stages of understanding the potential of AI for our business, and there's no question that there are some really interesting applications to drive better predictive modeling and opportunities, whether it's on the revenue front or on the efficiency and the cost of our product.
Unnamed Speaker: And, you know, the thing with AI is that you need to, especially as you scale it. That's what we've been working on doing. So big opportunity to come and stay tuned.
Speaker Change: and the thing with AI is that you need to, especially as you scale it, you need to make sure that your foundation is clean and reliable, and that's what we've been working on doing. So, big opportunity to come and stay tuned.
Stephen Trent: Super well, I'm looking forward to November, and thank you very much for the time.
Stephen Trent: Super well, I'm looking forward to November and thank you very much for the time.
Operator: That will wrap the analyst portion of the call.
Operator: I'll now turn it over to 10 makes for the media questions.
Speaker Change: and Edward Rapp, the analyst portion of the call, I'll now turn it over to Tim Make to start the media question.
Operator: Thank you, Julie.
Operator: Matthew, if you don't mind, while we transition from the analyst to members of the media, if we could repeat the instructions for the call, please. Certainly, at this time we conducted a Q&A session for media questions. If you have any questions or comments, please press star, then one on your phone. Please hold while we pull for questions.
Speaker Change: Thank you, Julie Matthew, if you don't mind while we transition from the analyst to members of the media if we could repeat the instructions and for the call, Q, please.
Leslie Josephs: Your first question is coming from Leslie Joseph from CNBC. Your line is live.
Speaker Change: Thank you. Your first question is coming from Leslie Joseph from CNBC. Your line is live.
Leslie Joseph: Morning, everyone. Thanks for taking my question. Just curious on the shoulder season. You mentioned Glenn is one of the clarify. You said that September and October are more like the previous July and August because of the weather changes.
Leslie Joseph: Good morning, everyone. Thanks for taking my question. Just curious on the shoulder season, you mentioned Glen, it just wanted to clarify you said that September and October are more like the previous July and August because of the weather changes. And then also wanted to ask about your premium product offerings. You've been investing a lot, obviously, the LA in New York, Delta One lounges and just lounges in general. What are you thinking about for hard products specifically Delta One and what are some of the features that customers are asking for that maybe you're not offering now or what are some of the areas that you'd like to improve there in the cabin. Thanks.
Unnamed Speaker: And then also wanted to ask about your premium product offerings. You've been investing a lot, obviously, the LA and New York Delta One lounges and just lounges in general. What are you thinking about for hard products? Specifically Delta One and what are some of the features that customers are asking for that maybe you're not offering now? What are some of the areas that you'd like to improve there in the cabin? Thanks.
Unnamed Speaker: Well, I think what I said was October and December are the better months, and November is the one that's off trend because of the election. So, I think that's what I said on the earlier call on September 2, and October looked a lot like September.
Speaker Change: Hello, I think what I said was October and December.
Glen Hauenstein: are the better months in November, so the one that's off-cran because of the election.
Glen Hauenstein: So, uh...
Glen Hauenstein: I think that's what I said on the earlier call on.
Glen Hauenstein: and September 2. I've told her and looked a lot like September.
Unnamed Speaker: Okay, so are you basically about the heat in Europe? I was a sure if that's the case. Oh, no, that was a tremendous challenge.
Speaker Change: Okay, so you've been talking about the heat in Europe, I was a sure person. Oh, no, that was a tremendous challenge. The trend of landing demand profile is switching from July and August being super-peaked to more of a...
Unnamed Speaker: The trend of landing demand profile is switching from July and August being super peak to more of us.
Speaker Change: Not having as big a peak in July and August to moving that travel.
Speaker Change: and we're not sober.
Speaker Change: So it's an interesting change.
Speaker Change: It is hot. And then on the hard product, what's your thinking there, especially for the hard of the cat? I have a whole investor day next month that we want to talk about it, so I don't think we want to unveil it here on this call.
Speaker Change: but hopefully you have time to join us and we'll talk a lot about where we want to take premium products in.
Speaker Change: and the next four to five years at that time.
Speaker Change: Beating. Okay, thanks.
Speaker Change: Thank you. Your next question is coming from Allison Cedar from Wall Street Journal. Your line is live.
Allison Cedar: Hey, thanks so much. Curious how an air traffic control airspace question? Curious what you're seeing in New York, if the shift to Philadelphia is, you know, kind of how that's working out for your other New York operations? You know, if you're seeing the hope for benefits or if you've had any problems there.
Allison Cedar: Hey, Ali, it's Peter Carter, so we were with the FAA about a week ago talking about all of this.
Peter Carter: You know what I would say is that you know the N90's shift seems to have gone well, but we still have the same constraints in the New York airspace that we've had for the last couple.
Peter Carter: years. As we all know, there's a shortage of air traffic controllers. And, you know, I think the FAA is obviously engaged and trying to solve that, but it's going to take some time.
Speaker Change #100: and his New York kind of stills a major, not airspace kind of like the major bottleneck in the system, like how much is that ripple out to the rest of the country? It's New York, you know, border we're seeing some constraints as well.
Speaker Change #100: Thank you.
Speaker Change #101: Thanks, Ali Matthew. We have time for one final question, please.
Speaker Change #102: Certainly, your next question is coming from Mary Schlangenstein from Bloomberg News. Your line is live. Thank you. Earlier when you were talking about the rebuilding the core hubs and you made a reference to getting all of your regional feedback up, can you give just sort of an overview of what happened with your regional feed since the pandemic and how that, like maybe what level it dropped to and how it's rebuilt? Thank you very much.
Speaker Change #103: Certainly, and as you know, pilot constraints as the majors were hiring in the recovery period, put a lot of strain off.
Speaker Change #103: and availability of pilot crews for the regional carriers, all of them.
Speaker Change #103: and we've been working very closely with them, and now that the industry growth or patterns are back to more normalized requirements, or next year we think the industry will generate about 5,000 new pilot jobs, which is about what it did in 2019, so returning to more normalized pilot hiring across the industry, that the dearth of capacity in terms of [inaudible]
Speaker Change #103: Pilots available for regional is dissipating very quickly.
Speaker Change #103: and so in the beginning we probably had only 35 to 40 percent of our capacity available. Most recently this past year it's been more like 65 to 70 percent and by next summer we think that'll be back to 100 percent of the capacity that we had available in 2019.
Unnamed Speaker: Thank you, Mary.
Operator: Matthew, that will wrap us up on the media questions, please. Certainly.
Operator: Thank you for joining the call today, and we'll look forward to talking to you again in January and seeing many of you next month at our ambassador. Thank you very much.
Operator: That concludes today's conference. Thank you for your participation.