Q2 2025 Delta Air Lines Inc Earnings Call
Good morning, everyone and welcome to the Delta Airlines June quarter, 2025 financial results Conference call.
Name is Matthew and I'll 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.
If you have any questions or comments during the presentation. You May press star one on your phone to enter the question queue at any time.
I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.
Julie Stewart: Thank you Matthew good morning, everyone and thanks for joining us for our June quarter 2025 earnings call joining us from Atlanta today are our CEO, Ed Bastian, our president Glen Hauenstein, and our CFO, Dan Jenkins, Ed will open the call with an overview of adult performance and strategy.
Julie Stewart: We'll provide an update on the revenue environment and Dan will discuss costs in our balance sheet.
Julie Stewart: After the prepared remarks, we will take analyst questions. We ask that you. Please limit yourself to one question and a brief follow ups that we can get to as many of you as possible.
Julie Stewart: After the analyst Q&A, we will move to a media questions.
Julie Stewart: 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 actual results to differ materially from the forward looking statements. So the factors that may cause such differences are described in Delta SEC filings, we'll also discuss non-GAAP financial measures and all results exclude.
Julie Stewart: Special items, unless otherwise noted year over year figures compare against results as reported unless otherwise stated 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.
Ed Bastian: Thank you Julie and good morning, everyone. We do appreciate you joining us today.
Speaker Change: Before we start I'd like to take a moment to acknowledge the devastating events in central Texas, Our Hearts go out to the families and the communities that have been impacted.
Julie Stewart: Delta is supporting the American Red Cross in their relief efforts to aid those affected.
Julie Stewart: Earlier. This morning, we reported June quarter results, posting pretax income of $1 $8 billion or earnings of $2.10 per share on.
Julie Stewart: On record quarterly revenue in line with our April guidance.
Julie Stewart: This performance reflects strong execution in a demand environment that is stabilized and the continued resilience of our diverse high margin revenue streams.
Julie Stewart: We achieved an operating margin of 13, 2% and generated $700 million free cash flow during the quarter, bringing our year to date free cash flow to $2 billion with strong cash generation, we continue to repay debt and announced a 25% increase to our quarterly dividend.
Julie Stewart: I'm proud of the team for delivering strong financial and operational results in the first half of our centennial year.
Julie Stewart: In a dynamic and somewhat unpredictable environment. Our team has stayed focused controlling what we can control and executing with discipline.
Julie Stewart: Operationally Delta once again that network peers across key reliability and customer experience metrics, including on time performance completion factor and net promoter score.
Julie Stewart: This strong performance underscores the resilience of our operation and the exceptional efforts of our teams to take care of our customers despite greater than normal summer storms across our system.
Julie Stewart: Consistent with Delta's long standing commitment to industry, leading total rewards for industry, leading performance, we rewarded our people with a well deserved base pay increase of 4% during the quarter.
Julie Stewart: We're also on track for another industry, leading profit sharing payout next February.
Julie Stewart: Turning to demand the environment has been stable since resetting to a lower growth rate earlier this year.
Julie Stewart: Overall demand for air travel remains similar to last year with softness largely contained to main cabin and particularly during off peak periods diversified revenue streams, which make up nearly 60, 60% of delta's revenue remained resilient.
Julie Stewart: The fundamentals of the U S economy are solid our core consumer is in good shape and continues to prioritize travel and affinity for Delta's brand has never been stronger.
Julie Stewart: This is evidenced by the sustained strength of our premium products and our industry, leading co brand card with consumer spend growth on the Delta American Express card up double digits in the first half of the year.
Julie Stewart: The recent passage of the reconciliation package create certainty around tax policy.
Julie Stewart: And with continued progress on trade negotiations, we expect both consumer and corporate confidence to improve in the second half of the year, creating the environment for travel demand to accelerate.
Julie Stewart: On the supply side, we're encouraged by the industry's actions to align capacity with demand as we move beyond the peak summer period.
Julie Stewart: Importantly seats at the lower end of the market are scheduled to contract as carriers adjust to the environment and work to improve financial performance against this backdrop Delta remains very well positioned.
Julie Stewart: We have also adjusted to a lower growth environment and as discussed in April our focus is managing the levers in our control to generate strong earnings and free cash flow.
Julie Stewart: This includes adjusting our capacity to match demand and aggressively manage our cost base to deliver on our commitments.
Julie Stewart: For the September quarter, the midpoint of our guidance is for earnings per share flat to last year on low single digit revenue growth in it.
Julie Stewart: Double digit operating margin.
Julie Stewart: The upper end of our outlook positions us to deliver earnings for the first nine months of the year that are flat with 2024.
Julie Stewart: While not the growth we are planning for at the start of the year. This would represent solid performance in a very dynamic environment.
Julie Stewart: And highlights the durability of our business model as well as the growing divergence that we're seeing across the industry.
Julie Stewart: Reflecting our confidence in the business, we are restoring financial guidance for the full year, we expect to deliver earnings per share of $5 25 to $6 25, and free cash flow of $3 billion to $4 billion.
Julie Stewart: This free cash flow outlook is within our long term target range and enables us to pay down $3 billion of debt. This year, while also returning cash to shareholders.
Julie Stewart: Looking beyond 2025, I am confident in our ability to deliver financial performance that is consistent with the three to five year framework, we outlined for you last fall.
Julie Stewart: In our 100th year of flight our strategic focus is clear, we're continuing to invest in elevating the world's best airline expanding our global footprint and transforming through technology.
Julie Stewart: Globally, we have strengthened our network through a portfolio of best in class partnerships, providing access to over 90% of global demand Vietnam stop or one stop service.
Julie Stewart: What sets our international strategy apart is how we create value through both our global partnerships.
Julie Stewart: And our equity investments in them.
Julie Stewart: This quarter, we saw meaningful appreciation in our GAAP results and the value of several of our equity stakes with a more than $700 million mark to market gain on just underscoring the strength and health of our portfolio.
Julie Stewart: We also announced two new opportunities further enhancing our long term international growth potential Arista.
Julie Stewart: Our recently announced equity stake and Westjet helps solidify our standing as the carrier of the Americas and our relationship with Indigo is a critical next step to establish connectivity between India, Europe, and North America, with India's largest and fastest growing airlines.
Julie Stewart: We are also continuing to make meaningful investments in technology across the business.
Julie Stewart: Or are customers, we're enhancing the travel experience with Delta <unk>, our virtual personal assistant built into the fly Delta App that is launching later this year.
Julie Stewart: In the operation, we are driving efficiency through predictive intelligence that improved resource availability and optimizes maintenance and commercially we're optimizing revenue through our partnership with venture leveraging AI enhanced pricing solutions. While we are still in the test phase results are encouraging.
Julie Stewart: As has always been the case, our greatest advantage, though is our people and their unmatched skill dedication and commitment to serving our customers.
Julie Stewart: In closing we are focused on leveraging our competitive strengths and our scale advantage, while controlling what we can to deliver for our customers our employees and our owners our centennial year as a powerful opportunity to demonstrate the magnitude of the differentiation that we've created and the growing durability of our financial performance.
Speaker Change: Thank you again for joining us and with that I'll turn it over to Glen and to Dan to cover the details of the quarter.
Speaker Change: Thank you Ed and good morning.
Speaker Change: I want to begin by expressing my appreciation to the entire Delta team for your dedication throughout this busy summer travel season and to our customers for continuing to place their trust in Delta.
Speaker Change: June quarter revenue increased approximately 1% year over year to $15 5 billion in line with our April guidance range.
Speaker Change: During the quarter demand trends stabilized at levels that are flat to last year.
Speaker Change: Our teams did a great job optimizing revenue performance in this environment by leveraging delta structural advantages and engaging customers beyond flight to generate a revenue premium to the rest of the industry.
Speaker Change: Diverse high margin revenue streams continued to show resilience growing mid single digits year over year and driving double digit operating margins.
Speaker Change: Premium revenue grew 5% over the prior year outpacing mean cabinets.
Speaker Change: We are actively rolling out expanded premium cabins in both domestic and international markets and have recently begun booking tickets for travel this fall with our newly refined and further segmented cabin products.
Speaker Change: Early results are positive and we expect this to be a long term driver of margin expansion.
Speaker Change: Royalty revenue grew 8% as customer engagement reached new records with millennial and Gen Z segments, representing nearly 50% of our active member base.
Speaker Change: This positions us well to build long term customer loyalty and capture more share of wallet through our expanding ecosystem.
Speaker Change: Our best in class partnership with American Express continues to grow and lead the broader consumer card industry.
Speaker Change: In the quarter, we saw a record level of spend on our card portfolio highlighting both the strength of our customer and the appeal of our program.
Speaker Change: We're numeration from American Express was $2 billion up 10% over the prior year on double digit spend growth.
Speaker Change: And momentum in new card acquisitions, we remain on track for full year renew moderation of approximately $8 billion, providing durability to both earnings and cash flow.
Speaker Change: We benefit from our highly engaged high spending card member base customers, who are deeply loyal to delta.
Speaker Change: <unk> strong credit profiles.
Speaker Change: Revenue from Delta as travel products portfolio grew 8% with significant growth in cars stays in cruise products as a record percentage of customers added travel products to their plate bookings.
Speaker Change: Cargo revenue grew 7% year over year on higher yields and MRO revenue growth accelerated to 29% over prior year on higher volumes at work scopes.
Speaker Change: Corporate revenue improved modestly year over year and Delta share premium remains at historic highs.
Speaker Change: From a profitability perspective margins are solid in all hubs in geographies with our strongest margins in our domestic core hubs, where we have industry, leading scale and connectivity.
Speaker Change: International margins have structurally improved and become more durable, reflecting the success of our multiyear international transformation through strategic investments in network fleet and our partnerships.
Speaker Change: Main cabin margins remained soft across both domestic and international markets, we expect improvement as industry demand and supply rebalancing and we continue to make progress on our commercial initiatives laid out in Investor day last year.
Speaker Change: Post summer, we have proactively adjusted capacity to address areas of softness and reductions in main cabin in off peak flying beginning in August on a year over year basis.
Speaker Change: While consumer confidence has improved from the lows. We saw earlier this spring, we're monitoring booking trends closely and leveraging delta's strength to optimize revenue in this environment.
Speaker Change: For the September quarter, we expect revenue to be flat to up 4% year over year.
Speaker Change: Our outlook reflects stable demand across both consumer and corporate segments with the mid point similar to second quarter performance, excluding the impact from lapping the crowd strike caused outage.
Speaker Change: Diverse revenue streams remain resilient as the <unk>.
Speaker Change: Industry further rationalize the domestic supply, we expect unit revenue trends to improve through the back half of the year.
Speaker Change: Internationally, while we are seeing some unit revenue pressure through the peak summer months trends are improving as we move into the shoulder season September and beyond.
Speaker Change: This was most pronounced in the trans Atlantic where softness in European outbound travel is impacting July and August at the same time. There is a continued shift from U S point of sale demand into the shoulder periods as consumers look to avoid peak crowds and summer heat.
Speaker Change: Our new markets are performing very well and we look ahead to 2026, we're incorporating these evolving seasonal patterns into our international network planning to align with customer preferences and travel behavior.
Speaker Change: While focused on optimizing revenues and margins in the current environment. We are also making steady progress on our longer term priorities that includes investing in the travel experience expanding customer choice deepening loyalty to the delta brand and engaging customers beyond their flight.
Speaker Change: In the air we continue to invest in expanding premium cabins and elevating the delta one experience with new premium amenities.
Speaker Change: And our rollout of fast free Wi Fi for Skymiles members is nearly complete.
Speaker Change: On the ground, we're expanding our clubs and premium lounge footprint.
Speaker Change: Just a few weeks ago in Seattle, We opened a new Sky club and our fourth Delta one lounge.
With 57 clubs and lounges Delta customers have access to the largest and most awarded large network of any U S airline.
Speaker Change: We are also growing the value of skymiles memberships by expanding ways to earn miles beyond travel, including our newest partnership with Uber, which launched during this quarter.
Speaker Change: In closing our consistent improvement strategy is delivering a sustained unit revenue premium and returns well in excess of our cost of capital.
Speaker Change: Our ability to deliver these strong results, while the broader industry works to reestablish equilibrium underscore as delta is growing differentiation, an enduring leadership position.
Speaker Change: And with that I'll turn it over to Dan to talk about our financials.
Dan Jenkins: Thank you Glenn and good morning, everyone for the June quarter, we delivered pre tax income of $1 8 billion with an operating margin of 13, 2%.
Dan Jenkins: And earnings of $2 10 per share consistent with our April guidance.
Dan Jenkins: Non fuel unit cost growth of two 7% was similar to the March quarter.
Dan Jenkins: Cost execution continues to be an important focus across the enterprise I'd like to thank the teams for delivering strong results in line with our expectations. Despite a challenging operating environment.
Dan Jenkins: Severe weather impacted operations throughout the quarter with a number of irregular operation days more than 50% higher than last year and our historical average.
Dan Jenkins: For the first half of the year operating cash flow was $4 3 billion and after reinvesting $2 3 billion in the business, we generated free cash flow of $2 billion.
Dan Jenkins: Strong cash generation supported debt Paydown of $1 5 billion through the first half with gross leverage ending at two five times.
Dan Jenkins: After reinvesting in the business debt reduction remains our top capital allocation priority.
Dan Jenkins: Delta is investment grade rated at all three major credit agencies has a fully funded pension and significant unencumbered assets and secured debt capacity.
Dan Jenkins: In addition to using cash flow for debt maturities, we are opportunistically prepaying and refinancing high cost debt, where we can drive economic benefit.
Dan Jenkins: During the quarter, we successfully completed a $2 billion unsecured note offering and.
Dan Jenkins: And achieved a blended rate of five 1%.
Dan Jenkins: This transaction creates a marker for the industry and dominate demonstrates the strength of our investment grade balance sheet.
Dan Jenkins: Which has an average cost of debt of four 6%.
Dan Jenkins: At the same time, we are committed to shareholder returns, we recently announced a 25% increase to our quarterly dividend starting in the third quarter, bringing our annual commitment to approximately $500 million and at our current price. This puts our annualized dividend yield at one 5%.
Dan Jenkins: It's ahead of the S&P 500 average.
Dan Jenkins: Now turning to our outlook for the September quarter, we expect earnings of $1 25 to $1 75 per share.
Dan Jenkins: And a 9% to 11% operating margin and that's compared to nine 4% last year.
Speaker Change: As Glenn discussed our outlook for revenue growth is flat to up 4% compared to last year.
Speaker Change: On the cost side, we continue to execute well make progress on driving efficiency.
Speaker Change: We expect third quarter will mark our strongest cost performance of the year with non fuel unit costs flat to down compared to 24.
Speaker Change: We are effectively managing the levers within our control.
Speaker Change: Reducing capacity growth post summer.
Speaker Change: And managing our cost base to deliver on our long term targets of up low single digit non fuel unit cost growth.
Speaker Change: We expect our performance to lead the industry in year over year unit cost growth for the second consecutive year, improving our relative cost position.
Speaker Change: With a stable demand environment.
Speaker Change: A more constructive industry supply backdrop strong cost execution and current fuel prices, we are positioned to deliver full year results that reflect delta's growing differentiation and durability.
Speaker Change: For the full year, we expect to deliver earnings per share of $5 25 to $6 25.
Speaker Change: Free cash flow of $3 billion to $4 billion.
Speaker Change: This free cash out cash.
Speaker Change: Cash flow outlook is within our long term target enables us to pay down $3 billion of debt, while also returning cash to shareholders.
Speaker Change: Looking beyond 2025, we remain confident in our ability to achieve our long term financial targets. We outlined last November delivering on margin expansion durable earnings and cash flow and reducing leverage to the lowest level in company's history.
Speaker Change: This confidence is grounded in delta's enduring competitive advantages positioning us to generate sustained value for our owners.
Speaker Change: In closing I want to extend my sincere thanks to the entire delta team for their dedication to one another and to our customers, especially during this busy summer travel season.
Speaker Change: And with that I'll turn it back to Julie for Q&A. Thank you Dan.
Julie Stewart: Matthew can you please remind the analysts how to enter the question queue.
Matthew: Certainly at this time, we'll be conducting a question and answer session. If you have any questions or comments. Please press star one on your phone at this time.
Matthew: We do ask that while posting a question. Please pickup your handset if you're listening on speaker phone to provide optimum sound quality.
Matthew: We do ask that all Q&A participants please limit to one question and one follow up question and then reenter the queue.
Matthew: Once again, if you have any questions or comments. Please press star one on your phone.
Speaker Change: Thank you. Your first question is coming from Ravi Shanker from Morgan Stanley. Your line is live.
Ravi Shanker: Great. Thanks, good morning, everyone.
Speaker Change: Glenn I think you said in your prepared remarks that you're encouraged by industry supply actions, especially lower end capacity coming out can you elaborate on that a little bit more and give us your thoughts on industry capacity in <unk> and <unk> do you think we are at a point that we were last summer.
Ravi Shanker: Demand and supply came into balance and that was supportive of RASM. Even in April as you can get to that environment.
Speaker Change: Hey, Ravi it's Glenn.
Speaker Change: When you look back I think when you look back into April for domestic for example, we were industry was up around three and as you move forward through the period between May June July August and then into September at.
Speaker Change: It appears as though the industry has taken four points of capacity out and by the time, we hit September domestic industry seats are actually down close to 1%.
Speaker Change: So thats a significant reduction in capacity and its a significant reduction in off peak capacity thats, even greater than that so.
Speaker Change: So I think the industry has done an amazing job and as you know I've been in this business quite a long time and I really never seen that amount of capacity come out in a non recessionary environment and I don't think anybody's predicting that we're in a recession. So I think this is a really good indication that the industry is doing what it needs to do to restore profitability.
Speaker Change: Understood. That's very helpful. Maybe for my follow up Glenn can you just give us a little more color on the cabin segmentation again, how thats being received.
Speaker Change: What that means our premium cabin and also there is speculation that you guys may launch a new ultra premium side. So how do we think about premium cabin economics over the next couple of quarters.
Speaker Change: Well premium has certainly been where our margins have continued to expand and so we're highly focused on continuing to provide improved service to those customers and more segmentation and I think the segmentation that we've done in main cabin is kind of the template that we're going to bring to all of our premium cabins overtime because different people have different needs and.
Speaker Change: The more choices, we can give customer with a more price points that provide value to better I think the answer is going to be for delta and for our customers. So it's all about giving people more choice more pricing options and more products and services and every cabin.
Speaker Change: Very good thank you.
Speaker Change: Thank you. Your next question is coming from Jamie Baker from Jpmorgan. Your line is live.
Jamie Baker: Oh good morning, a question for Glen Thanks to Ravi because it was a good lead in so the spread between premium growth and main cabin contraction, while I didn't too.
Jamie Baker: 10 points from the second quarter.
Speaker Change: That spread has been accelerating for the past several quarters, but it seems that this is a little bit more about main cabin weakness than just premium resilience. So can I ask if premium trends, whether you define that by revenue or maybe I don't know paid load factor.
Speaker Change: Did it match your expectations in the second quarter and is it safe to assume given your earlier commentary that we see at least another quarter of expansion.
Speaker Change: I think there's nothing in any of the forward bookings that would have us indicate that there is a diminishing demand for premium cabins, our services and so as we continue to look.
Speaker Change: Evaluate even though the lopez on the airplanes and put more and more premium we are able to do two things one is sell more of it in to us accommodate more of our heaviest frequent flyers with upgrades, which is something we want to continue to do to provide additional value to them.
Speaker Change: So we're very excited about where we sit today and we're very excited about the possibilities moving forward.
Speaker Change: Okay, and then a follow up for you Glen or maybe this is for Ed one of the post Covid reality is was.
Speaker Change: Mobility flexibility of UBS.
Speaker Change: Bleser.
Speaker Change: I know you're not a fan of that term either MRI, but.
Speaker Change: When I think of the return to office trends.
Speaker Change: And look.
Speaker Change: Mike Company has certainly been vocal on this topic.
Speaker Change: I guess the question is whether your demand forecasts are at all tempered by the fact that at least for some of US we can't escape to Europe with impunity. The way, we might have a year or two ago any thoughts on that.
Speaker Change: And maybe im just projecting.
Speaker Change: I think a little bit you're projecting I think the workpiece under any circumstances has become more flexible than it was pre pandemic and people while they may be required to be in the office a few days a week all the way up to five days a week all of US I think have more flexibility on being places we want to be and we continue to see that embed.
Speaker Change: And the demand strength here.
Sure.
Speaker Change: I don't think.
Speaker Change: The offset of that is as people continue to return to the office. This fall there could be even more upside in the business travel.
Speaker Change: We don't have that in our forecast, but we will see we are optimistic that business has been pretty resilient through this part of the demand set and hopefully it accelerates as we move into the fall.
Speaker Change: Jamie This is Ed I'll tag on to Glenn's comments with one additional thought we shouldnt lose.
Ed Bastian: Sight of the fact that business travel wallet has returned is still very much in line with where it had been versus where the size of the economy is today, particularly the growth rate. So.
Speaker Change: Any on any.
Speaker Change: True comp you have easily another 15 or 20% of business travel that isn't being done that used to be done and I think with all the new tools and flexibility models and being in person is more important than ever and this and this.
Speaker Change: <unk>.
Speaker Change: Turbulent World I think there's going to be a lot more opportunity yet to see business growth.
Speaker Change: Gentlemen, thank you both.
Speaker Change: Thank you. Your next question is coming from David Vernon from Bernstein. Your line is live.
David Vernon: Hey, good morning, guys and thanks for taking the time.
David Vernon: So first question on the capacity outlook as we're looking at the second half of the year I mean, clearly there's no explicit sort of guidance around what the capacity is going to look like I'm kind of wondering how much of the guide.
David Vernon: For improving unit revenue trends is based on kind of what you think you can control your network versus what you are expecting peers to do on the capacity front.
David Vernon: I'm sorry, you were kind of fading out at the end of that question could you.
David Vernon: Yes.
David Vernon: I'm trying to figure out how.
David Vernon: How much of the guide for <unk> is based on what you think you can control in your network versus what you are expecting peers to do on the capacity front right are you are you kind of building the forecast based on what you are expecting the industry to do or based on what you think you can do within your customers in your network.
David Vernon: I think it's a combination of both.
David Vernon: Certainly know what we can control and there are pieces that we don't control, which is the other airlines capacity.
David Vernon: From what we see in the open for sale tapes. When we think it's probably loaded well through September at this point there is probably its more adjustments that need to come in the back half of the year October through December but.
David Vernon: And one other other carriers are saying about their capacity levels. So I feel it's a combination of both certainly we can control what we can control in our customer base, but also we are responding to what the macro environment is for all capacity in the industry.
Speaker Change: Alright, Thanks for that and then maybe a bigger picture question on aircraft deliveries right last time, we spoke.
Speaker Change: The tariff news they just hit and people were kind of trying to figure out what this is going to mean have you.
Speaker Change: Do you have any updated thoughts on on how tariffs are going to impact the order book and what are the discussions that youre, having right now around.
Speaker Change: With the industry or with the government around trying.
Speaker Change: Trying to make sure we don't see disruptions in the order book.
Speaker Change: Well my thoughts David haven't changed we're not planning on paying the tariffs for aircraft deliveries.
Speaker Change: <unk>.
Speaker Change: That's a pretty pretty strong point of view here on the Delta side.
Speaker Change: That said we.
Speaker Change: We're encouraged by the progress that we see happening in the.
Speaker Change: Discussions in Washington.
Speaker Change: We are heartened by the U K U S.
Speaker Change: Acknowledgement in the recent trade agreement that the $19 79.
Speaker Change: Aviation Act, where there would be no tariffs and.
Speaker Change: On a reciprocal basis would.
Speaker Change: It would be honored and we hope that template will continue.
Speaker Change: In future negotiations. This is our industry is one that's maybe unique in our country's economy in which the size of the surplus that we throw off given.
Speaker Change: Given the strength of our industry for aviation and aerospace is the largest in the world and this is not an area, where tariffs will do anything but hurt U S companies and consumers.
Speaker Change: Alright, thank you.
Speaker Change: Thank you. Your next question is coming from Tom Fitzgerald from TD Cowen Your line is live.
Speaker Change: Everyone. Thanks, so much for the time I wanted to touch touching on your comment on <unk>.
Tom Fitzgerald: I think back at the Investor Day, you mentioned that their revenue management solutions were being deployed on about 1% of the network. I was wondering if you could tell us where that number stands today and then just provide a little more details on.
Speaker Change: And what you've learned with another six months of experimenting.
Tom Fitzgerald: Experimenting with AI and revenue management.
Speaker Change: So today, we're about 3% of domestic.
Speaker Change: And Thats our goal is to have about 20% by the end of the year and Thats the goal.
We can report back on what the actual numbers are but you have to train. These models as you might have.
Speaker Change: And you have to give it multiple opportunities to provide different results. So we're in heavy testing phase we like what we see we like it a lot.
Speaker Change: Continuing to roll it out, but we're going to take our time and make sure that the rollout of successful as opposed to trying to rush it and risk that there are unwanted answers in there so.
Speaker Change: The more data it has and the more cases, we give it more it learns and we're really excited about it and we're really excited about partnering with Patrick.
Speaker Change: Okay. That's really helpful. Thank you so much and then just as a follow up.
Speaker Change: Sounded constructive on corporate today I'm just curious what you are hearing from some of your key accounts for the post Labor day environment, and then how you characterize demand across some of the different sectors like financial services Tech.
Speaker Change: <unk>.
Speaker Change: Autos, agriculture et cetera, Thanks again for the time.
Speaker Change: Sure.
Speaker Change: Most most of our survey results indicate that people are going to spend the same or more than they usually do that so we'll see as it materializes, but as far as the sectors go really the favorable sectors or banking consultancies in technology, and the laggards are autos and manufacturing, which is kind of surprising given the way the.
Speaker Change: The government is trying to bring manufacturing back so hopefully those will turn around here in the not too distant future.
Speaker Change: Thank you. Your next question is coming from Andrew <unk> from Bank of America. Your line is live.
Speaker Change: Hi, Good morning, everyone. So Ed you mentioned on TV. This morning that you see the consumer pullback starting to wane here.
Speaker Change: What are the biggest data points that you see driving it today and you can you potentially quantify what you're seeing your booking curves to support that right now.
Ed Bastian: Sure Andrew.
Speaker Change: Talking nuts, specifically as much to the airline industry and consumer data broadly.
Ed Bastian: If you look at any.
Ed Bastian: Measure of consumer confidence certainly took a big dip in <unk>.
Ed Bastian: Early part of the year and then again in April after the independence day for Liberation, New sorry announcements were made.
Ed Bastian: And has been slowly starting to decline back I think the.
Ed Bastian: Our consumer, particularly who I'm also speaking to is a consumer that has not been nearly as impacted by many of the consumers that are pulling down some of the some of those.
Ed Bastian: Surveys that would be the lower income survey our target consumer is a household with $100000 or more of annual earnings which is not by the way an elite definition, that's 40% of all U S households.
Ed Bastian: And that cohort has accumulated a significant amount of wealth.
Ed Bastian: Post Covid era.
Ed Bastian: And we were worried I think an earlier part of the year about the wealth effect.
Ed Bastian: With what's going on in markets and other other financial instruments, that's corrected itself the markets beyond where it was even at the start of the year. So.
Ed Bastian: We look at a lot of data points, we talked to a lot of a lot of businesses a lot of leaders and there is a growing sentiment of confidence moving forward and ready to move our economy forward one other thing.
Ed Bastian: I did get a chance to talk about this morning.
Ed Bastian: The first quarter actual results came in in the economy actually shrank.
Ed Bastian: Just to tag the U S economy.
Ed Bastian: And you know how highly correlated airline revenues are to the overall.
Ed Bastian: Economy. The most recent fed data is expecting in the second quarter.
Ed Bastian: And the full year overall U S economic growth to decline, but still be positive one 5%. So you have a lot of data in there and do try to try to read through that but there seems to be growing optimism, but clearly we still have a long ways to go.
Ed Bastian: And if I could just add thanks factoid I've been hoping we get a question regards we had our highest cash sales day.
Ed Bastian: In the month of July for the month of July and a 100 year history yesterday. So.
Advanced bookings are doing well and people are starting I think at the beginning when people were fearful we saw further out bookings going away, we see those starting to return again and hopefully those trends continue.
Ed Bastian: Got it thank you for those thoughts.
Ed Bastian: Just add yes.
Speaker Change: The $3 billion to $4 billion of free cash flow in this environment I think is pretty powerful I know you've been repaying debt you increase the dividend, but how should we think about the deployment of future cash flow, particularly in respect to a buyback here. Thank you.
Speaker Change: Well as you know Andrew we did file.
Speaker Change: Shelf or <unk>.
Speaker Change: The $1 billion buyback.
Speaker Change: Buyback.
Speaker Change: In this environment, our priority continues to be debt repayment and.
Speaker Change: And the growth, we recently announced around the dividend.
Speaker Change: It's a three year shelf I fully anticipate over the course of the three years, we will exercise that for share repurchases, but in the in the interim period, we're still still heavily focused on debt reduction.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Your next question is coming from Connor Cunningham from Malleus Research Your line is live.
Speaker Change: Hi, everyone. Thank you.
I've had a lot of questions on visibility.
Speaker Change: Today, and so I'm, just I'm, just trying to get a little bit more confidence than I.
Speaker Change: I know youre not guiding for <unk>, but you can back into it obviously and it's your assumptions kind of assume a fairly substantial don't want to substitute a substantial but a pretty meaningful move.
Speaker Change: And unit revenue performance, maybe in an inflection in the fourth quarter. So I'm just trying to understand can you just frame up the confidence there and it just seems like it's much more U S. Domestic focus now than it is internationally, maybe you could talk about the geographies within the context of what Youre seeing in <unk> I know it's early.
Speaker Change: Thank you.
Speaker Change: Sure I think we have the most visibility on long haul international which is inflicting up as you head out of the peak summer into the shoulder season. So thats part of the base of what we see transforming to a better result in the fourth quarter than the third quarter in terms of unit revenue performance.
Speaker Change: And then of course, the domestic is hopefully going to inflect back to positive here and all trends are all forward bookings indicate that it is moving in the right direction.
Speaker Change: And sometime this fall I would believe that we would've been flipped back into positive not predicting the date yet but.
Speaker Change: The indications of the early bookings are a much better base than we had for the peak summer.
Speaker Change: At 60 or 90 days out.
Ed Bastian: And and Connor This is Ed.
Ed Bastian: Add on to that it's also one of the reasons, we gave a pretty wide range in terms of the full year guidance I know everyone focuses on the mid point, we're not that we're not that good in terms of that level of accuracy in and we did have we do have a pretty a pretty wide range still yet given we know theres a lot more to come yet.
Ed Bastian: Okay.
Ed Bastian: And maybe I can go back to Andrew's comments on free cash flow that the $3 billion to $4 billion.
Ed Bastian: Right that we're talking about that again.
Ed Bastian: I'm just trying to understand it seems somewhat counter seasonal in the second half and then I was hoping you could just bridge to how you get there.
Ed Bastian: Driving the incremental $1 $5 billion is there something within the tax code.
Ed Bastian: The changes to the tax bill that that drive up that a little bit and maybe you can give us an assumption around your long term cash taxes, just given the new tax bill that would be helpful. Thank you.
Ed Bastian: Yeah Conor. Thank you maybe a couple of things I'll start with with taxes, just to clear that and then move to the cash flow drivers on cash taxes as we talked about last November and came into the year, we expect it to be a cash taxpayer.
Ed Bastian: And the mid kind of single digit way level this year.
Ed Bastian: With both the change in the demand and profitability environment that won't transpire and now we get the benefit of <unk> close to burn EMC as it relates to depreciation acceleration so that will at least be deferred.
Ed Bastian: Our full year, so potentially a low single digit single digit cash taxpayer next year, and then that would arch up over a longer term period multiple year period at a mid teens.
Ed Bastian: Is how we see it today, but that will just as we are more and look at our growth plans and our fleet plans associated with that and the underlying business as it relates to cash flow I think about where we were are through the half at 2 billion things that as we go into the back half of year. We're currently looking at all of our investments in the pacing of that and Thats one lever that we have.
Ed Bastian: Also the $2 billion in the first half was impacted by.
Ed Bastian: The compression of the booking curve and you think about that where you would have been that was for $500 million associated with that so any type of normalization benefit with that and then third one of our larger levers that we continue to have continues to be the working capital that we built up in our operation as we restored that network.
Ed Bastian: And our operation and the teams are continuing to work on things across our operations, but particularly in maintenance and even with our third party MRO activity, where we've carried a lot of material and we have the opportunity to continue as we reduce turnaround times and other elements to release that capital that we built up through the last few years and relate that back into cash.
Ed Bastian: Flow and that's true both across our operations crew also true with other elements of the business. So we're working all of those levers and.
Ed Bastian: Point feel confident in the $3 billion to $4 billion range.
Speaker Change: Awesome. Thank you.
Speaker Change: Thank you. Your next question is coming from Duane <unk> from Evercore ISI. Your line is live.
Duane: Hey, Thanks, good morning.
Duane: Wanted to ask you a couple of credit card related questions. The data question and a growth question.
Speaker Change: Maybe for Glenn first on the data it just feels like there's a lot more credit card spend data swirling around.
Speaker Change: Many of the firms on this call are saying their clients' data monthly or maybe even weekly.
Speaker Change: What do you think the limitations of this credit card data might be and I'm thinking about maybe different segments of customers or changes in the booking curve.
Speaker Change: What do you think the data might be missing.
Speaker Change: I Havent spent a lot of time thinking about the data that comes out from others I think I watched your comment this morning on somebody talking about credit card spend and that it was much worse at the lower end of the spectrum than it was at the for hire and I think thats. What we are indicating here is we have the higher end.
Speaker Change: The higher end seems to feel more comfortable and is actually growing disposable income and so I think when you look at all those numbers, it's an amalgamation of a lot of subsets that we don't have.
Speaker Change: That's helpful and then on your own co brand I think we understand or appreciate the competitive dynamics.
Speaker Change: Within the airline industry, but how do you think about delta as competitive advantages.
Speaker Change: Outside of the airline industry as we see.
Speaker Change: High end cards, maybe high end clubs, but not attached specifically to an airline brand.
Speaker Change: We spent a lot of time thinking about this and how we can continue to enhance the benefits.
Speaker Change: I'll just give you a satisfaction number of holders of our card has had the highest satisfaction and the history of our card in the last quarter. So continuing to innovate on the product side continuing to provide value that.
Speaker Change: <unk>.
Speaker Change: Okay people outside of our business can't provide whether or not it's club access whether or not.
Speaker Change: Status and I think the totality of what we're offering our consumer is well received and it results in us having.
Speaker Change: High levels of acquisition and continued high levels of spend.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question is coming from Catherine O'brien from Goldman Sachs. Your line is live.
Catherine O'brien: Good morning, everyone. Thanks for the time.
Speaker Change: Despite a tough operational environment in the quarter, especially in Atlanta at the close of the quarter. Your CASM X came in line with plan.
Speaker Change: What else went better in the quarter to maybe offset some of those operational challenges and do you think you can keep that momentum going forward.
Speaker Change: This is.
Speaker Change: Thanks.
Speaker Change: As it relates to operational performance I think this is consistent with what <unk> seen over the last 12 18 24 months from the team just.
Speaker Change: Good line of sight to things, where we can drive efficiency across the operation and those types of things are what offsets normally you have the events that we had in the abnormal irregular operations and losing some of the ASM and you'd have a point impact and our teams are able to execute through that because they're working on whole basket of.
Speaker Change: Efficiency opportunities and for instance, you see it in the line items of the SEC the maintenance down right. So the tech ops team and we've talked about it where we've had their costs at a high point over the last couple of years and last year, hitting it and with volume and with improvement inefficiency in turnaround and other factors are getting more effective.
Speaker Change: Associated with that and you pick up that benefit so those types of things that the teams are working on and working on those basket of opportunities.
Speaker Change: Got it and then maybe MRO revenue saw strong growth. This quarter can you just update us on where we should be thinking MRO revenues and get to over the coming years and are you guys, mostly caught up on some of the delayed maintenance in the Covid era Delta is owned fleet.
Speaker Change: Can you help us think about like how much more volume you can open up to third party over the coming months versus last year. Thanks, So much for the time.
Speaker Change: We're excited about the future of MRO and.
Speaker Change: As we've talked about consistently over the last two or three or four years that the.
Speaker Change: Priorities at that coming true pandemic was the restoration of the Delta network and a delta capabilities, but really proud of the tech ops team and the capabilities that we have there and we're well positioned both on next generation equipment, but also deep competencies on all of those installed legacy engine types.
Speaker Change: We're now getting back to being able to focus on that and drive that growth youre going to see growth for the first time. This year for the total year and this is one that youre going to continue should grow well above the rate of the core airline and.
Speaker Change: I think a good marker of that was just here coming in the.
Speaker Change: The MRO Americas, where we announced the UBS deal again. This isn't next generation. This is right in the heart of what we're really good at on the PW 2000, and its the largest in the history of Delta as it relates to the third party commercial relationship and getting that benefit along with the next generation. So this is something that can go from where it is today to a $1 $2 billion three.
Speaker Change: And continue to grow.
Speaker Change: Thanks, so much.
Michael Lindenberg: Thank you. Your next question is coming from Michael Lindenberg from Deutsche Bank. Your line is live.
Michael Lindenberg: Yeah, Hey, good morning, everyone, Hey, Dan.
Speaker Change: You talked about the fully funded.
Speaker Change: How should we think about that.
Speaker Change: With respect to potential tailwind either on the P&L are on.
Speaker Change: What is your cash flow this year, I mean, I realize that a lot of the plant. The plans are frozen, but there should be some sort of benefit can you size that for us.
Speaker Change: Yes, you see the expense benefit from it as the expense comes down in the other income line, it's a modest benefit this year.
Speaker Change: In that line so it hasnt been material and we've been working it down.
Speaker Change: Down as the surplus has improved and it's really about what rates do and how the asset performance comes in versus a targeted 7% rate and every time, you beat that do better than that 7% and the overall rate do you have an improvement in reducing debt expense that you have.
Speaker Change: That we feel really good.
Speaker Change: Here, where we're close to a $1 billion on a GAAP basis surplus.
Speaker Change: Back to a period of time five six years ago that was that.
Speaker Change: $5 to $6 billion was much greater than that a decade ago and I think it just speaks to the financial strength and wherewithal of Delta. So we're very happy that it's fully funded and it will be less and less of a drag as long as we continue to hit those metrics.
Speaker Change: Great and then just my.
Second.
Speaker Change: Glen.
Speaker Change: With respect to the booking curve, we've been hearing a lot of commentary how it just has gotten a lot closer and I know Dan talk to that.
Speaker Change: Our cash flow.
Speaker Change: As that normalizes that is kind of a relief cash would be beneficial can you talk about how that has shifted and maybe whether youre seeing improvement and as we think about how much you're booked out over the next few months is that shorter booking curve manifesting in say five or 10 points lower on a load factor basis.
Speaker Change: And any color around that would be great. Thanks.
Speaker Change: So yes, the booking curve has shifted in and generally there is a.
Speaker Change: Outside of 120 days toward it hasnt deteriorated that much inside of 120 down to 90. It has actually gone to 60 at <unk>. So there's a piece in there thats move closer in and we tend to build a lot inside the month, which we didn't do last year because a lot of those tickets were already sold.
Speaker Change: Have seen indications that it's starting to move back out again and I think this is very correlated to consumer confidence as confidence returns people will continue to book further out which if that happens would have a very favorable impact to cash flow in the coming months.
Speaker Change: Great. Thanks, Brian Thanks, Dan.
Speaker Change: Thank you. Your next question is coming from Sheila <unk> from Jefferies. Your line is live.
Speaker Change: Good morning, guys, maybe the first one on the main cabin and down 5%.
Speaker Change: Or do we think about that turning positive what are the biggest areas of weakness how do we think about that segment in Q3.
Speaker Change: In Q4.
Speaker Change: Yes, the overall timeline to 10 main cabin positive again.
Speaker Change: Right so.
Speaker Change: Main cabin.
Speaker Change: Has been the weakness as we move through the year and it's been very weak and off peak. So how we've done with that and I think a lot of the industry. If you listen to what they're all doing as we're all taking the weakest strips out which is what you would expect airlines to do and they tend to be on off peak days, So Tuesdays and Wednesdays and they tend to be at off peak times pre <unk>.
Speaker Change: Or post 'twenty 100, departures, so that's really where we've concentrated in trying to eliminate those and consolidate that travel back onto the peak a little bit more and I think youre seeing very favorable results as we move through the or I would expect to see very favorable results remained Kevin as we move through the rest of the year given what the industry.
Speaker Change: He is.
Speaker Change: Reducing too.
Speaker Change: Is there a timeline on it.
Speaker Change: Could it be positive next year or in 'twenty five or.
Speaker Change: It could be positive this year.
Speaker Change: Okay, I'm not writing off that it could not be I think we have a good shot of it becoming positive or at least neutral by the third quarter or fourth quarter of this year.
Speaker Change: And then just maybe on that.
Atlanta commentary, how do you think about U S.
Speaker Change: Non U S point of sale expenditure to the curve what's going on.
Speaker Change: And what are some of the best performing areas of the country firsthand.
Speaker Change: While our performers.
Speaker Change: Well I think.
Speaker Change: There is clearly less travel coming out of Europe, but currency changes have offset a lot of that in terms of the total revenue coming out of Europe, so lower customer accounts, but higher yields given the currency has appreciated more than 10%.
Speaker Change: Over the past few months here and so those kind of balance each other out with just a slight negative and what's really driving us in the <unk>.
Speaker Change: <unk> being a little bit lighter than the shoulders is this change in demands from the peak summer months. When everybody is on vacation prices are really high places or crowd of Europe's hot and two times, where it's a much more pleasurable.
Speaker Change: Experience cooler temperatures lower hotel rates and so I think we've seen this systematic shift and this is not a one year issue. This is multi years that the peak is getting less peaking in the shoulders are getting stronger and that's happened over 345 year periods since back to it coming out of Covid.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question is coming from Stephen Trent from Citi. Your line is live.
Speaker Change: Good morning, everybody and thanks for squeezing me in.
Speaker Change: I wanted to get back just a little bit maybe a follow up on Andrew's question about.
Speaker Change: The strong free cash flow you guys had.
Speaker Change: Wondering if you think about the co branded card renew moderation around working capital flow.
Speaker Change: Sort of a call you guys were sort of looking to a high single digit increase in co branded card recommendation on it perhaps just comment a little bit stronger than that.
Speaker Change: You could elaborate please.
Speaker Change: Yes.
Speaker Change: The both card spend.
Speaker Change: And the cash that we've received from Amex is up 10% in the quarter. So really good continued strong strength there.
Great. Thank you Dan and just a quick follow up here I also recall your international point of sale list, maybe 80, some odd percent U S.
Speaker Change: Does that look.
How does that look on the co branded cards I do actually have a meaningful number of foreign cardholders or assistant just pretty much entirely U S. Cardholders now thank you.
Speaker Change: It's 99% U S cardholders.
Speaker Change: Very helpful and thanks for the time.
Speaker Change: Matthew will now go to our final analyst question Savi site.
Speaker Change: Certainly your last question is coming from Saudi <unk> from Raymond James.
Speaker Change: Your line Hey, good morning, everyone.
Speaker Change: Good morning, everyone.
Speaker Change: I might ask just given the level of uncertainty that was there.
Speaker Change: The last time you had this earnings call. This is how has your kind of view on the post summer capacity plan evolved and if you could talk about on the domestic side as well as the international side.
Speaker Change: How has it evolved well I think we've seen the industry continue to act responsibly and take capacity down, particularly in the off peaks in particularly in domestic main cabin. So those are the areas that have been the weakest.
Speaker Change: I think the industry is doing a very effective job in terms of addressing.
Speaker Change: Supplier offering internationally I'd say, we're in pretty good shape.
Speaker Change: I don't think everybody's winter IATA schedules are loaded yet so we'll keep a close eye on that but theres, probably that's where the.
Speaker Change: Slowdown in growth is not occurred as dramatically as it has domestically yet, but I think as we move through the year, we'll see more and more of that.
Speaker Change: And then does that apply for year thinking Glenn to like nothing really has changed from our approach I think a lot's changed for US we've taken several points of capacity down our European capacity offering as you get to the shoulder is relatively flat I think we're up two 5% in seats, we were up in <unk>.
Speaker Change: Mid to high single digits at the peak of peaks. So I think everybody is doing their fair share in terms of trying to get this back to.
Speaker Change: Capital returns that are in excess of our cost of capital.
Speaker Change: I appreciate that and just a last follow up just to you had a.
Speaker Change: A comment about replicating some of the shoulder season no patterns on the international network is that or is that more of a trans Atlantic comment is that kind of are there Pacific in Latam as well just kind of curious if you could parse that out of all day.
Speaker Change: Latam is actually contra seasonal so its peak is in December and January and the Pacific is less seasonal than Europe. So this is really related to Europe, which is 60% to 65% of our total international.
Speaker Change: I appreciate it thank you.
Speaker Change: That will wrap up the analyst portion of the call today and I'll now turn it over to Tim Mapes to start the media question. Thank you Julie Matthew If you don't mind reiterating for the members of the media the call instructions and the follow up please.
Speaker Change: Certainly at this time, we'll be conducting a Q&A session for media questions. If you have any questions or comments. Please press star then one on your phone.
Speaker Change: Please hold while we poll for questions.
Speaker Change: Thank you. Your next question is coming from Leslie Josephs from CNBC. Your line is live.
Leslie Josephs: Good morning, everyone. Thanks for taking my question just curious on the segmentation at the front of the plane is that something that you plan to rollout in 2025 or 2026.
Speaker Change: Would it look something more like a basic business where are you.
Speaker Change: It doesn't have a seat assignment or something like that or do you plan to have kind of a fancier or more.
Speaker Change: Desirable see within Delta, one or one of the other.
Speaker Change: The first class cabin.
Speaker Change: I think we're going to reserve comment on that until we roll it out I think we're testing it with customers today, and we're doing a lot of surveys and we haven't rolled it out yet because we don't have the technological capability, but we want to make sure that customers understand what we're putting in market and that they find value in it.
Speaker Change: Okay could you tell us what you're testing exactly currently no.
Speaker Change: If we kept.
Speaker Change: But thank you for the question.
Speaker Change: Okay.
Speaker Change: Thank you. Your next question is coming from Mary Lincoln Stein from Bloomberg News Your line is live.
Speaker Change: Hi, good morning.
Speaker Change: The last quarterly report you said you were going to just add an incremental 10 aircraft. This year I'm wondering if that's still the plan or if that's changed and for your capacity reductions later in the year is that going to be mostly.
Speaker Change: You just talked about dropping some of those off peak time flight or will you be parking any planes or anything like that.
Yes from a fleet perspective, we expect deliveries to be around new deliveries to be around 40 aircraft and we expect our retirements to be around 30 slightly more so adding just about 10 aircraft are under that so about 1% of the fleet.
Speaker Change: Okay, and what about how youre going to go about cutting capacity different life.
Speaker Change: I think Glenn talked about it earlier in regard to the focus has been mostly as it relates to where theres demand weakness, so domestic particularly in the off peak and shoulder periods, we've taken the unprofitable or where the weak demand is playing out.
Thank you.
Speaker Change: Thank you. Your next question is coming from Alison Sider from Wall Street Journal Your line is live.
Alison Sider: Hey, thanks, so much.
Alison Sider: Just curious what you guys are seeing now in terms of crowding in the Sky clubs, especially now that you've sort of expanded the delta one network and with some of the changes.
Alison Sider: Visit limits on does it.
Alison Sider: We are continually working to eradicate the lines and crowding at sky clubs, whether or not that's building new and better Sky clubs. We Didnt mentioned for example.
Alison Sider: <unk> Sky club last quarter in Atlanta opened up replacing 8000 square feet with 26000 square feet. So we have a lot of plans to continue to address the places where we are constrained now one of the issues with the constraint is particularly with the weather Thats been in New York This year with <unk>.
Alison Sider: Strong as almost every day with flights being delayed is that you can't build a club big enough for lengthy delays. So I think we're trying to look at alternatives that we can use as overflow in those instances, but I.
Alison Sider: Generally by structurally.
Alison Sider: Non our up days, we should have almost all of our crowding issues solved in the next 18 to 24 months.
Hal: Thanks Hal.
Hal: General competitive landscape for lounges changed over the last couple of years. It just seems like there's so many allows us getting built by so many different providers.
Hal: Yes.
Hal: We're very proud to have an award winning portfolio and the largest portfolio in the United States and it's very interesting to me to see carriers like southwest say that they may be to start building clubs. So I think people have seen the value in the.
Hal: The clubs and the value of a premium.
Speaker Change: <unk> of Delta and I think thats something that a lot of people are trying to emulate but there are many many many years behind us.
Hal: Thanks.
Hal: Thanks, Alec Matthew we are right on time, so that will wrap us up.
Hal: Thank you that concludes today's conference. Thank you for all for your participation today.