DAL - Earnings call transcript Q3 2018

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Operator

Good morning, everyone, and welcome to the Delta Air Lines September Quarter 2018 Financial Results Conference Call. My name is Lisa, and I will be your coordinator. At this time, all participants are in a listen-only mode until we conduct a question-and-answer session following the presentation.

As a reminder, today's call is being recorded. I would now like to turn the conference over to Jill Greer, Vice President of Investor Relations. ahead. go Please

Jill Greer

morning, our Good thanks joining for Thanks, quarter everyone, call. on September us Lisa. and

performance with Joining Paul cash Atlanta Paul that performance, Delta's All questions President, represent that room question the discussion Glen the Q&A, leadership us call statements forward-looking Bastian; address cause is yourself Glen for cost Hauenstein; and in will Today's could Ed flow. from as statements. team and actual results our events. environment, a an the statements one as please Ed materially our revenue and will today involve To the are risks many and Q&A review then our to beliefs to will and get follow-up. forward-looking differ the in give of a financial CFO, or brief here possible expectations from Jacobson. forward-looking conclude session. entire CEO, uncertainties The during contains and the our open future limit our the of overview about

can unless such noted page of SEC call the at All are that that, turn items to factors with exclude may I'll differences the Relations a find measures. the our over We'll of non-GAAP cause financial measures special also described filings. in you discuss Some and reconciliation Investor non-GAAP results Delta's otherwise on ir.delta.com. And Ed.

Edward Bastian

for Earlier, of which Good joining $X.XX, earnings Well, reported initial today. the share and and the $X.X you at high-end us profit per thanks, Jill. was in billion quarter guidance. September morning, thank everyone, a we our pretax of

reform and been the product by share X% up strong a was XX% never year count. EPS over Demand revenue momentum, has driven tax benefits, Our for greater. Delta lower last

full-year. for and growth the the Our billion, X% we record achieve to topline nearly $XX now for Company X% expect to level a revenues grew

cost of of $XXX We in and million offset have XX% increases fuel addressing for success cost the roughly the seen continued quarter. impact fuel

challenging fully costs Our us these and these without impact. a to Michael. already airline and with Mainline exceeding single We've fuel like XXXX the bar. the incredible as people recapture now margins XXX done I'd running continuing levels cancellation been XX system, has and once with Hurricane more. full-year had start the we costs the recovering for the and into they've in best I'd Delta Delta never thank record two XXXX's thank the of better Delta Delta over at had for operation also the and gives our like both minimal job across We've conditions entire grow less head days. to speed days to than can days confidence financial of team raise difficult the Connection, last that XXX cancellations to we

operator of to to stations last the stations today. Coast these the out the Gulf return are and we’re We first carrier

scores to Our from put customers' customers reliability our that customer depend great new our of interests difference. That's heights. unprecedented team is and satisfaction with combined level on Delta Delta the we first. our service This driving needs and

industry. a performance, XXth up our we'll is effective promoter This is premium the we've our next $XXX communities celebrate our with was which attendants. Later Northwest, net owners, campaign led addition and for which payout. was base our record anniversary recognition Delta sustainable. and an years, that in for at domestic unprecedented the In customers revenue In world the reason serve. the in this the three year, the we've to ground those of outstanding transformation X% at Our airline month, February's best and we toward sharing October averaged levels employees' awarding employees, which profit added score is why per million the this employees increase, of another to and XX% This over year. flight the is prior and very of has merger X, our beginning XX become points

withstand cycles never able industry before. like We are financially and stronger to

reach at above Despite share leading than speed industry deliver a the which an fuel time, to of billion and rating profits fuel achieved shared to to through and significant success our XX We deficit changing nearly oil increased our we've have hovering premium. our and the people that react we are through a have higher moves our satisfaction economic we the strategy $X commercial global all, to expect an billion countries $XX expansion carrier revenue mid-teens $XX it expense, $X with billion that repurchases. year, ownership investment-grade our returned confident dividends we from And upward more customer with Through our equity barrel, the our in billion. business of over year and includes in still pretax consecutive per efforts, with demonstrates model we fourth partners. Delta resiliency this and are sustainable now revenue innovative taken able the with in over margin and This conditions. to Even with of momentum have three a to airline to return driving we of to $X to owners NPS that same XXXX.

satisfied. never are We

set sustain improve the throughout We ambitious profitability. and cycle. business business margins, goals cash the profits, our to solid We flows expand Delta continue that and believe to will

leverage flying range, for growth the building planning at joint length. offset GDP as Korean represents greater about which is capacity X% we expect growth next decelerate will X%, stages we the plan While by least still for a in output below system seat we At additional are partially which domestic point year in a a point, expected of from growth our next XXXX, venture. year a by and level, stage long-haul

expansion. top that points is and is imperative. year a our assumption, and our growth. our if be ready XXXX ensure financial to act of see current track higher billion fuel a uncertainty similar or We'll recapture very billion strong is year, closing, priority prices ability to to is remain business this last a sustained we to profit these margin While which $X return we'll In very fuel we margin year's deliver our A be XXXX. monitoring to increase. cost a covering results $X higher That on is fuel economic to despite price impacting

been never has the team brand our never Our healthier service from and greater.

Investor drive XXXX outlook XXXX, forward to on details Paul as I'd look long-term and sharing look lay we And in prudent of ability forward we through for like As for details capital. deployment we growth, foundation December value go another our margin the I fine to topline our more our confident owners over at our of are the to decade of upcoming and Day turn our the to plan the success. quarter. strategic through and to expansion, to in call Glen business with that,

Glen Hauenstein

the and our last Ed, chose to The had revenues numbers nearly everyone. I'd for record yield of busiest and strong customers Delta environment our and environment. and with over ever billion as Thanks, solid delivering year. demand good This a of is quarter, reliability. leisure start morning, generated record both the revenue in thanking by in service $XX quarter. like summer for industry-leading record X% up We Delta revenue another team healthy business

the of RASM one-half approximately grew drive of result, unit Storms point X.X% revenues by Hurricane benefit foreign are because flight ASM as exchange a impact offset cancellations by reductions. accretive was As Florence. normally

to in-house able avoid meteorology great flight limit However, Atlanta were our job did for OCC our path storm's team and our customers. we would and a predicting the cancellations

revenue unit our mid-single are and on We more year-over-year revenue despite maintaining much momentum a digit basis comps. growth delivering year-over-two-year challenging a consistent

and record in of XXX% services industry. the revenue recapture the of This the or Importantly, stage rate sequentially strength industry to and the improved we gauge sustaining are higher Delta has to premium fuel the as our increases significantly in quarter. length quality quarter our speaks and this both the outpaced of brand of each year the

first of price travel Cargo, were the for quarter. is margins faster a momentum. We This MRO cost with momentum among digits up Delta Corporate more performance which part third expand combined growing is and program, ticket revenue, the and revenue more profitable continue proportion the the to double a loyalty this prices. at stable major consecutive pace fuel to than despite to the in be of revenue significant increases. better positions industry grow

XX% the on strongest month quarter; have XXXX revenues for the fares strength now acceleration are in yield with close-in evidence XXXX improvements. this quarter we above grew for consecutive the in September sixth since back month-over-month total business improvements as now corporate decline finished month booking was of seeing driven giving that year spend we recovery with X% Domestic and growth, XXXX. on positive and the picked of corporate Our pace survey, recent XX% increase most higher the environment. our September improved that levels. growth of fare expect continued XX% us fare nearly fare maintain improvement quarter best The X% this optimism domestic since up travel of August revenues third quarter travel corporate And XXXX or continue. the September and will grew of their to driving in revenues unit the our of managers yields. into PRASM by momentum recovered

and headwind Hurricane Minneapolis, in revenue more Southeast growth than as Detroit from Atlanta, unit point the avoidance despite of sequentially hubs travel core approached. performances. improved the among Domestic Our one by delivered the strongest Florence

saw improving growth in momentum see led robust trends close-in on strong premium revenues than up yields and we demand we in X% the by forward, with in in Looking our X% products. Internationally, continued a entity. the unit revenues increase more revenue

performance the June quarter. strong consecutive X% driven a drove become expect revenue, by instability. to benefit. political and currency point after PRASM revenues In was of benefit Our above synergies X% we stepped the as it driven demand strong increased Latin, FX strengthened quarters beyond down in down venture unit premium foreign and Joint the point roughly environment. and improvement eighth Transatlantic and dollar headwinds yield and X.X exchange by from X.X quarter seat positive fourth a improvements headwind unit

expectations to In performance to an and increased superior growth X% RASM unit and X%. XX% Korea, given unmatched capacities by topline are X% in X% XX% revenues making increase drove reliability of adjustments that drives changes return RASM in our network on routes increase the unit X% our China year. both Pacific, to our by Japan early delivered our a capacity. on quarter produced We is revenue X% growth necessary and for unit stage in growth Delta's and increase revenue and offset improvement double-digit in headwinds weak length. impressive This December markets de-emphasizing the in revenue capacity. serviced next growth an

we've growth seen Delta to full-year the our and our in using brand best The departures, the X% needed and We growth ASMs has at and strong commercial we fuel fully never slightly length stage our expansion. we our believe result stronger. While of below prices GDP expected guidance. in brand be X.X% factor segmentation expected environment momentum margin full-year levels. customer network, ahead to completion experience, on at our and flight seat are current seeing are years been to is to revenue and are initiatives drive the revenue offset Longer-term

we domestic and on our First global are footprint our capabilities. network, leveraging expanding

This evolution the on to getting on is right products customer us will allow the fleet structure. improve focused Our benefiting our routes. grow premium while also cost aircraft the experience, right

to the Over will in XXXX in our XXX much most and over the XX%. our in alliances. the Tokyo efficient next and fleet opportunity laid aircraft Pacific domestic we our to next years. departures from expect rationalized X share as our place network. transforming then, gateways five the to category No has AXXXs, change out carrier a Narita, Pacific, narrowbody benefit with efficient significant taking seat our vision years, as more years Transpacific Internationally, of we the developed of have the to we upgauging replaced In Delta XX grow footprint most Pacific. is Since enhanced U.S.

our in With now now performance we Premium aircraft cabins. place, encouraged the the has suites we profitability. Delta With building new improvements XX are expected deployed by Pacific, the the Premium Select has in product blocks cabin and trends One AXXX improved. in revenue are strengthened in seeing our as

the progressing Korean traffic and in with building doubled Connecting is more has the Pacific. are well. Korea venture complex beyond best than as joint we Our to connecting

will our in leverage region with next this the growth We year.

service, our Second of Delta reliability and network our customer strengthening experience. brand quality and The improving operational customer of loyalty strengthens the higher with drives product, our is breadth the brand. combined and

our industry. is us allowed acquisitions high card the resulted than promoter reflected customer has to seeing quality affinity commercial which U.S. This co-brand improvement record is American Our in in outpacing a the spend This XX differentiated has a more innovation merger. in domestic customer deliver point score increases of experience. increasing card, net since double-digit; Express

Our loyalty SkyMiles as increasing ever finally, enabling segmentation more we And initiatives. the value using merger Express choice revenue than are tripled since customers our has through card. program their see American nearly from customer

offering choices to grew want product We be increasingly all more how are product in they We all want, X% purchase are to products in where customers to when and that source continues channels. our our best-in-class a across to customers able they buy easier XX% as seats they increase Delta revenues premium want. want, upsell Premium strength. of on be a revenue of

to to post allow upgrades purchase excited additional later functionality are this We rollout mileage year.

years closing, Everyday, been XX branded make Delta and functionality fares merger. selling our Delta deliver think premium in enhancing we at improve confidence generation. it's that to In branded better. will how products, growing we contribution incredibly the seats, an us success Our eventful sustained future since gives revenue can

giving are improving a quality and and through experience we innovation will commercial to successes. on high a for, that continue and service our premium expand our value and We they customers that pay differentiate

like over to I'd it turn Now, to Paul.

Paul Jacobson

Glen, us. am joining that for I non-fuel you, and point inflection marked in Thank the trajectory. an important our morning, say quarter to September cost you Thank everyone. good pleased

unit full-year to costs improvement on for slightly than non-fuel X% quarter keeps the to growth. from is on non-fuel first While of X% of were expected, flat we in the were This a the unit and non-fuel cost quarter. point the three September us track costs year half June our deliver guidance higher

to CASM team better outlined December the we slightly expect work been thank to the Investor get the I unit this Delta Day be we taken has in our last here. getting December, quarter, check a it's Company and non-fuel huge X%. costs our focus at for down at As In for back to our year flat the all want to entire

seen such our of our half from XXXX anticipated, as and initiatives. As to productivity moderate begun overhead have and fleet changes pressures Delta we've depreciation second the in benefits One

will mid-XXXXs. still transformation continue and into is fleet Our in innings middle the the

also entry XXXX, AXXX Glen As our product in Airbus XX% in for are quarter much from Delta journey cost fleet has to improvement than through to technology XXXX, providing deliveries replacing the regional next mentioned, we Boeing greater in efficiencies this fleet a the jets, the with over narrowbodies classics. the engine preferred nearly high we Then better opportunity our a with MD-XX beginning our no into start our and aircraft AXXX while XX seat customers. even upgauging resulting much cost, larger with XX-seat benefit the replace XXX-XXXs in start service replacing five early carrier the primarily older new as upgauging customers. years. XXXX, least phase as AXXXs next as by in

many large has better Our mindset efficiency. is embrace of see initiative It that cost One exciting gain our Delta initiatives the drives this on founded as organization the to idea cross-company steam. better been collaboration

more our substantial our long-term opportunities network optimization initiative. is of One

opened Center Schedule run provide while to and providing in approach scheduling savings. Coordination a annual employees holistic to customers a quarter, benefits cross-divisional more rate our to $XXX driving This we million

fuel. next volatility even to confidence in disciplined and along non-fuel expansion business achieved and efficiency and helping Our discipline pressure important us point keep are That executing non-fuel recent prior below give cost units re-fleeting Remaining the in facility Delta to lower versus offset nearly incremental our to from One unit year margin given of well our fleet our cost costs CASM unit year gains overhead with more from and X% ability the investments. a with beyond. is

fuel One new fuel improved from offset of initiative XX%. prices. portion Our usage We by increased APU reduced on XX% efficiency our expense fuel $XXX and million higher through our a fleet this September market by quarter that Delta

through pause new run While prices market fuel testing up since been prices highs. then a a there's with took four-year mid-August,

partners, currently to over is share gallon. refinery $X.XX turnaround, For approximately earnings from our keeps earnings well on of the a earnings in quarter in December earnings year's to is Virgin margin of XX%, December despite in per last expense. full-year the progressing our pretax is pace share, guidance quarter headwind XX% mid-November. to which the per X.X%. and This our fuel. the as us equates well continued the despite Remember all-in year Atlantic, airline schedule Aeromexico $X.XX this achieve of increase fuel maintenance pressure own to last due our restart expect through December We a quarter, fuel which increase price recognize on to X% to to latest forecast scheduled with costs which to range of result $X.XX $X.XX of includes the per to consistent $X.XX This from we on XX% we and higher non-operating as

belief $X fourth been pretax has to business the $X earnings challenged XXXX higher of fuel resilience consecutive consistency billion billion in expense, the of and ability of performance. a with of over our to While speaks our our drive our of over year

the flow, billion reinvestment balance quarter, related of nearly million to business sheet flow for $XXX $XXX operating the allowing to aircraft aircraft and in generated through million in the cash CapEx modifications. Turning $X.X we and for cash with

This for million is up purchase finance expected our be Our and operating guidance, our to were is recent full-year of decision leases. $XXX $X.X that aircraft prior reflecting from previously slated CapEx billion. to

we quarter, aircraft than we've free While flow our remain as our will the committed in the XXXX. over generated to owners at We billion to cash substantially market. returning cost to a aircraft $X been differently improved generation, net cash finance decision lease rates In we flow will be lower the the the reduced diluted reduces seeing flow the years, repurchases our short-term returns finance With $XXX nearly past $XXX over $XXX we've both five to share and in and our fully to consistent in dividend share of approximately million returned yield billion dividends million shareholders. share of X.X%. with by return and current XX% free count million shareholders dividends $XX buybacks, through and in cash

the investment $X.X health financial million to Delta's this just million liability sheet at and return markets access net the better grade better years how cost Over $XXX our bending time same month the the An is agility grade pension current Achieving from strength and delivered closing, rates, the adjusted investment and our In we've flexibility business through momentum our of to our sign for curve. five cash level earnings revenue sheet. of S&P Company. capital dramatically debt by manage astounding gives past. quarter period, reaffirmed credit reduced balance of of us balance in and by our rating another an the is market also underlining rating, different the time. the we Last and business of strength over the the solid improving

to back into Looking this the momentum Q&A. as And with drive to to excited XXXX, business expansion. call I'll that, margin back to over I'm turn we the the Jill continue begin

Jill Greer

Thanks Paul.

we a on Day return and year Before Q&A, for minute this take to we XX. Investor calendars your everybody will mark December I'll our New York to have as go just

So the more us. details to we'll hold date in go out for date, but that that closer meantime,

you Q&A? if for instructions to Lisa, So give could the analysts the now the

Operator

Evercore question Pfennigwerth ISI. comes Thank [Operator from Our Instructions] with you. first Duane

Duane Pfennigwerth

Hey, thanks.

a in so passenger you basic maybe that premium the provided coming quarter. in talking spends from of I growth and could the out passenger really revenues why revenue action that premium, So, products your about criticism drove if industry breakout economy. what's of your time but just given Thanks. the you break about the XX% much third Delta, not in release. does included in is all the appreciate wondered looks It like that business on

Edward Bastian

basic pretty industry competed that Frontier. marketplace Well, as really the articulate years the a didn't basis a or Duane, and being the I ago low-end been think why put in we was at we about commoditized like-for-like have economy we've on with Spirit product

as I be many really thing sector, commoditized from them the put they the when what where to spectrum. brought for about and be started this. the the as they're most still overhead think – on in to still people as about written, all in we think to that's we we be those our and of was have needed not we something that low-end products weren't to want market. years what were make still when try early we'll well, in I really excited the them channels we services to forms products supplying competing ours was think marketplace customers that we charge superior available that had innings we necessary They that well for those buy; to to and fuel all currency. people was those And in the easy and the need OTAs we with buy all growth expanding baggage. not are is we that's buy above will not to But continue a over humane services, and And but and in of devised us And didn't in as sectors. of next what to get we we're think will they believe these also only easier did and for

Jill Greer

Duane, breakdown It is the simple. cabin And flown. follows the fairly

Duane Pfennigwerth

Sorry, understand I that, didn't Jill.

Sorry.

Jill Greer

– product business or line. cabin it if One be that the in Delta and flew Class, Premium you Select, will premium Comfort+, travels in First then customer Delta If

Duane Pfennigwerth

the I growth. And that great. Glen, domestic then think you revenue but XQ? – into relative into great growth seats it, regional wonder you mean XX% I do quarter? That's That's How mid-teens for RASM you could expect growth that broke on if the questions. if sorry do so December just missed taking the to the out. X% accelerate growth about Thanks unit we

Glen Hauenstein

XXXX. a and closer business year period But get it. bit a as demand very because into have core certain the long exit a Yes. and the current domestic. we to between year will Thanksgiving on a this we are business excited Christmas, We're that yields in challenge on we're demand this period and we head the very pretty is good but trends a going to trends become in of as be business December about place

Duane Pfennigwerth

Thank you.

Operator

Baker JPMorgan. Jamie our from take next We'll question with

James Baker

Hey, good morning everybody.

recoup able systems as booking Have faster never the FedEx question been to with industry close? changes there is ever articulate ask turns Ed, talked curve? that, reason time. it the I'm First industry's I fuel that six the don't higher but is. schedule five wonder to curious Are having your the could largely recoup it six Is for ability driver they fuel agree I you what about reason been that or I higher to shifts simply you faster. that And think the simply as better unhedged? I real I mean than say happen in the trade is know if months. practically than you in is

progress bolster only any industry should you the on or obviously So, multiple, any that? can thoughts make your further further

Edward Bastian

Sure, do fuel, FedEx not. for Jamie. we has which to the Obviously surcharge ability

So, we've can ourselves. that's the that issue becomes industry-specific know, regulatory an and a whether about but in we that difference matter fundamental opportunity, control an that ever past, talked not a that's don't I

I brand and Delta, things. service terms the is gives health of bit a know a you platform. in of the at us I this pricing the of airlines in improvement the think it's strong – tell can relative of quarter number and of to are mentioned. don't report to pace everything it business their other not of reliability little what I the it's recapture Certainly the I'm you terms going

than sure given cost demand price has had and our certainly the cover You us history travel an in have product of can you we our can we ever where Delta. for that We have at only ability quarter demand busiest to greater your fuel. make and

meaningful, the helped us productivity, able travel. certainly benefits in of non-fuel I zero that time of growth real on think the of the Technology product is a work and done point, we've recapture. to business non-fuel have premium part is to the it be that focus are cost terms upgauging on certainly and in side

are that's Our terms been volumes in digits year-on-year of helpful. up corporate that double revenue

not? does all incentive it all question, the hedged? too I got above. impact costs of it's having or we certainly It's that. know, combination covering the haven't But across make we are an So, that Is time. the thought think to on that are I same everybody's an a don't much board real it of of about create interesting certain

the helping probably So on that's as well. margin,

James Baker

And to trying That bit better. second also a question on income the Duane's statement I'm Okay. for breakdown Glen, understand question. follow-up to the helps. revenue little

of the be XX% my On main kind on upgrade, in, cabin a cause offer category? when category the and I in Also year-on-year check premium of just $XXX then an ticket do get I miles upsell the upsell? in classify if or then business I just the you really category, start and the $XXX as premium want buy that I to the to using mechanics I momentum guess understand I to category does once behind slow that increase. potentially would loyalty app the in captured that $XXX

Glen Hauenstein

No.

premium do the and the growing are we exit more on is it, MD-XXs we those seats. we end these the And previously, usage generate products XX% think of as indicated bring through day what to and the substitute I to we of trying as upgauge. accelerate we're at And as XXX cabins we a services. the

equation. app your answer cash do with excited is the items, pay or that line it clearly we're or comes through able of your be more whether the to mileage. margin we really with you pay more but couple about of whether real that ecosystem not able So about the experience, to give because revenue And want and being things on not and you things the nothing to because take real from us buy think the key different you the through keeping when cabins next that's seats way those to you. frequent program, think our and you be is that's of either on want I to way in it the that it's want is they how really the grow need as one your to there's do continue able you to we And we from to the and where to P&L us in And doesn't revenue the supply have is it miles to what let are pieces affinity matter is making there. of control this years the you higher And to it your us comes what airport. flyer of or ways these fill up, burn

James Baker

if I slow, and concern It's is to rate, to is that to in that just as XX% look necessarily people shift going at miles, say a that. it when be beginning loyalty is start that all Look, that accurate. oh! which deceleration starts people my get premium my to using cabin concern are wouldn't business there

So dollars into the does reclassify just again, amount premium using upsell, when that of an I'm for incremental or the upsell? everything

Glen Hauenstein

answer is so let sat it's where amount, in first the entire it's because $XXX you So would the me the question go whole cabin. the

James Baker

I that's cool. fair, think

Glen Hauenstein

try by And looking we But I'm cabin classify all we'll can because time well out as do is online. me we crazy. the Jill the loyalty figure will – by Right. and bring that at how to like that we

James Baker

question. many roll, over I'm next have sure will you, I to everybody. I the to Thank so turn it eyes caused

Jill Greer

Aspirational goals.

Operator

our Deutsche take next Bank. question We’ll with Linenberg from Michael

Michael Linenberg

here got good Hey, nice for everyone. morning, two Hey, quarter I Paul. questions here.

the in Thanks. just or for you And the one? quarter you have two, your bps, fixed number September like June Just if for that the what here? as means in environment, what liability, floating versus the the refresh XX just maybe then of the pension debt, number rate rate can change the of of composition means; us rate on that kind rising discount

Paul Jacobson

morning Sure, question. Good thanks for and the Mike.

secondly, And us the appreciation on especially we a floating then on for billion a rate talked traction $X.X XX have contributions. pension pension of than rate less couple before, the basis for of we've in actually we very you overfunded at over when floating with our good of into a $X billion So you P&L, other rates lowers net basis are that years last when every points by account and good the year as our last interest that's about liability take – and actually XX% as look we because the liabilities. been is plan exposure us the thing aggregate about in source increase cash

and in rates a interest fact higher for net shape of we're fine in beneficiary we're them. So

Michael Linenberg

Thanks, Paul. Thanks everyone.

Operator

our Wolfe We'll next Research. with Keay from Hunter take question

Hunter Keay

thanks. Good Hey, morning.

Mike's on question to follow-up Paul. there, Just

rates million at about decision used How I impact impact use toward the pension know you word all? pension question in Thanks. the million on if that the context NOL that talked to to year; $XXX You've the and how plan answer can the impact pension that higher next $XXX overfunded. contributions contributing do and of liability you

Paul Jacobson

Sure. the our terms minimum above probably in funded Thanks, there word of contribution. Hunter. wrong I overfunded, used

Hunter Keay

meant. I what that's Yes,

Paul Jacobson

still overall. But the plan as is, we know, underfunded

$XXX the of next rate long-term million in higher we've has $XXX consistent been strategy, million the we've as well the as expectations Our margin And over Investor with time, XXXX disclosed as XX% much that that all us hundred a which environment earmarked well earmarked being year that – couple we've funded gets basis points above of funded pension et closer prior that to target. at gets on us Days plan. cetera, fully interest

to see move. rate the remains part strategy that environment So as continue to we that evaluate of our continue we'll and

Hunter Keay

it that Okay. And on have you fund portion the question, of does NOL or any more to decide impact less? if the

Paul Jacobson

Yes.

are extend does tax, deductible to so actually NOL for it pension our So an contributions underfunded immediately marginally. plan

Hunter Keay

Okay, thanks. Paul. And then another you, for one

that this capacity just As and sensitive like about CASM-Ex next year the to I'm type that whatnot guide, I that think from is or side seen sort percentage the of really of loosely asking time? CASM-Ex to maybe points out years and fixed But every take I is removed, over costs ASMs, it rule X how depends in headwind gauged, and of different points of of number the where that at that's there you've that CASM-Ex X%? X% about variable the that's you end is realize thumb it of translates Delta capacity And the if number the say and a on day. the number sub-X% of X

Paul Jacobson

be It different. can

to you is depends answered think it or et own that out, I that where your being some added taken effects capacity extent upgauging question the cetera.

So, really of rule a I think isn't thumb. there

and planning process, before, as we about those our estimates. XXXX we got mentioned to deliver increased feel through year good I've As ability we've next about confidence look continue sub-X% CASM our to

Hunter Keay

Okay, thanks.

Edward Bastian

Hunter, this is Ed.

other real the seeing We and products to talked XXXX changes, in the thing the in numbers a you some traction that initiatives. the next traditional the one upgauging, in the to And we year and of gain the dollars from started to that's think year in as going One number role obviously improvements that the we've about or of on top here progressed XXXX. past. be I next million of is I network is think that Delta incremental hundreds over see that playing is as we're year look

Hunter Keay

Thanks, Ed.

Operator

Vernon with next our from question Research. David Bernstein take We'll

David Vernon

thanks Hey, good the morning taking time. for and

of are on revenue I end the fuel bit it endure quicker do price guys of in expect that you increases we may in be the than Do past. price. kind of up little of period how curious on you as hold you fuel the be we to your lower will to have Glen, like the sounds just recovering a thoughts was able think that So you in to fuel moderate should stickiness a environment? next to more maybe if more cost

Glen Hauenstein

fuel if history you the think over, were rolled at still the time I we last hedged. look

took So I if long moderate long here last that in hedge does be to of lot the time, line. took we what it without time a fuel and wind the that That's flow happened able real wind time a that in would opportunity have a the a the think it to up bottom is down.

is way I very on the So, that expect would it sticky down.

David Vernon

of guidance are here step kind unit in a the in you at for then, preliminary Paul, ending – the next X%. through the X% of cost It the X%. the sounds a of on like opportunities XXXX? cost of Can And the for minus year the traction. to guidance curious into be where to walk bit and We're for right. what cost year up thoughts just have All kind expectations X% terms initiatives there might Delta little us One least of

Paul Jacobson

the the year for they the mind January increase every wage there's we mentioned, attendant. to flight the pilots as on achieve next pressure X challenge lapping X Ed for sit sit a think One call in that ground Keep year. the that opportunities in – initiatives this I on the Ed in as of regular ourselves general as productivity Delta, with and Well, increase mentioned October for a well bit the little

as we planning work can Investor pressures So, every we at those provide detail in cycle, those Day. our more are present through year single and

David Vernon

All right.

Looking forward to it. Thanks guys.

Operator

Our next question comes Buckingham from with Dan Research. McKenzie

Daniel McKenzie

to be catastrophic Paul, morning. – could to just that I'm of supply years. around demand today, a it wondering where sheet guys. potential coming make for commodities does And volatility idea the here? has it mismatch insurance permanent is thinking this over three about a relative how but Delta's commentary I'm sense going does you're five there bullish Hey, fuel been balance good and really some secure given there this not with Thanks, to just lot just

Paul Jacobson

good Well, morning, Dan.

I and very it, hedging any in not think we're as about pursuing we think that talked a good position. we're

what environments. from think the proving able what year, as that other. year high been been number important in our what environments; be the we're that. to this model And direction I tricky in or the we've We've successful here and price I business past that costs that's is it's low moves midst Where in gets in over you've standpoint. think to we've recover quickly little one is volatility, and oil it accelerated businesses bit fuel price in successful front that the of note absorb demonstrated the the line to to in this ability seen we've oil or the a when in durability the has one proven

average So, of the in that to does results better than hedging. I which refinery tune integrated we to materially gallon. to the to are on continue believe continue $X.XX the without per we're fuel Certainly, we right as helps our strategy us that $X.XX think deliver trajectory industry the

Daniel McKenzie

with up? Understood, labor I'm rate, respect And Delta quarter just that offering getting today? Glen, at more wondering started for average road the $XX appetite some approach to the if what warriors you at in driving upsell insight the of And provide tight if is continue industry corporations conditions given into and I'm corporations are can to then the buy to just support what what's and the was okay. it third

Glen Hauenstein

and job go. we the way But got That getting that's really us we're scratching one to advantages continue to the able improve there hope Clearly sales a a surface a be have of that Steve gives will long we been products team lot to premium that of our we've the and there. only lot into today. sales done incorporated an and the agreements amazing of have

in length these or prices relatively the on is competitive pointed based of as marketing thing sophistication out. They in of terms were new in other or haul ascribing people in are The products coarse pretty our since markets. beginning to you differential

And customers the on terms what so rate actual now receiving. that's upsell are that provide granularity today in really is indicate more focused we're that that to of true much value will

So offering And we're because upgrade what Comfort+, or money. the haul for that that's is. might the to example a to it may way be for able But be on a on long rate well an really upsell to flight, it generating worth $XX. competitive $X tailor higher short $XXX haul market, Transcon average each a market

Daniel McKenzie

the Understood. time. Thanks for

Operator

question with next Raymond Syth our take from We'll Savi James.

Savanthi Syth

Could about follow-up looking partner. news just on might there and some is your Hey, to that provides? there partner know I strategic refining for you good make? kind of little might with exploring in does margins expand what And about ask, just going I Trainer was talk advantage IMO and a here, a bit morning. relative that we're a you're of XXXX that Paul, get general, this Trainer improve Trainer if benefits a items some what talk strategic

Paul Jacobson

Thanks Well, the good for Savi. question. morning

finding allow to and that talked us keep to Trainer don't operating particularly about that a take still all As we've some we've get talked while fuel plant. us years to strategy, focused products strategic the the – the gasoline the the on of harness us often about and need, we benefits partnership with diesel, jet over and the

comment it So on up, was to a with start turnaround that. itself, work through process. opportunity I that process to but the good we continue coming the won't

could the that but of As out affect think XXXX, be it IMO both the but to time in XX% expect refinery's we production preponderance about produce offset a a because for increases jet jet an higher internally prices, less the it higher speculation airlines, about fuel to in there of that is seems airline that can any crude bad see to diesel owns bad the it cracks. would relates jet. XX% for That's we that and and refinery to talking spent I lot we help

come. forward So, continuing we Trainer benefits in to to to it the that relative look and years see advantage would to help continue expect the would our of

Savanthi Syth

you. Thank right. All

Operator

comes from Our Jack next Atkins question with Stephens.

Jack Atkins

as the Right, following last there margin pretax up mean you your in I planning about what regard sort could do thank are think with your or internal much could into to for expectation of XXXX, as baking next on from do just low on the think year expansion IMO spreads very you for you XXXX? just about IMO point what crack broader impact you XXXX, time. Paul, the prices

Paul Jacobson

fuel rule, and But we'll get year. That's expect that tend on we uncertainty planning our of are $X generally a back based What conservatively on crude that, to modeling environment we to next year-over-year, is in looks going to Well, about go there's through We're the but cracks especially are tough fuel. we up what especially as still billion higher ends crude prices. on thanks as to up the the when half be of XXXX. expecting as Jack. cracks as more higher – accordingly for we like see plan depending to we XXXX prices where go half general back be

Jack Atkins

having in can point tariffs, of for on impact And are on Transpacific into impact beginning either and the war of corporate Ed between that to China demand change to think or sort have is an global your Thank you tariff seeing follow-up you that. out for as our question this Glen sort Okay. trends we're and U.S. do you seeing with any for sense behavior your in the as is trade the regard tariffs flows. that either any Asia a far tell? then at of Are as booking you or

Glen Hauenstein

Well, any it impact. seen really haven't watching meaningful is. as We're Jack, we everyone

market have capacity specifically some of based Pacific revenues expectation. added given in with of had well of our Atlanta-Shanghai quite China well launch and put done that we doing especially range Our into our within the the recent the quarter

seen So we it. haven't

Jack Atkins

you for time. the Okay, great. Thank again

Operator

We'll next with question Becker take our from Cowen. Helane

Helane Becker

for operator. Hi the you everybody. very Thank time. Thanks much,

there want think perspective I I say, just How perspective? cost to from you a really and you right week, that facility now. operations program I Cuomo and talked kind about So was will expansion last of guys wondering from nice Governor JFK a both affect have

Edward Bastian

Ed. is this Helane, Hi

working obviously some a now, of laid are to been Authority think I JFK. out. strategy between with We Right the deals. long at and the long-term with it's taking that way the as There's to Governor documentation out Port to we premature. do figure the A initial vision and vision's go actual commitments

to X. goal Our Terminal unify is

excited the into couple eventually TX creating the about we're which capacity vision, building Terminal we'll for years talking in port yet. with the version. facility place don't be We've some a X, will been that have for Governor's We and Terminal brought So I additional the with them last out support unified X more that of by. and be

not are One as carriers challenges home as facilities same generally in hopefully, get at and resettled. you big think the that alliances of appreciate the will airport the JFK is the I over time

Helane Becker

decade next spend. I Okay. $XX think in any – last at that way call the And construction all? billion then about in does change the talked conference change that you number that Does over airport

Edward Bastian

of meaningfully. in A bit there. Not little that's

build-out is are going a that not to be anticipating amount. substantial that We

Helane Becker

to looking Washington. when to just continue uninterrupted air Okay. you're the Brexit Ed, And last heard in. about into then plugged ask about you one agreements anything kicks can travel? Have XXXX of first quarter pretty ahead being negotiated I question

Edward Bastian

don't certain for inside our a Helane, I have all vested market have it's UK to what issue the we be us. don't anticipate you're and interest that's I going I any asking meaningful intelligence if me, a think making unfettered in remains to access

Helane Becker

Great.

Okay. Thanks very much.

Jill Greer

more to question for time one going we're analyst. Lisa, the And from have

Operator

question Morgan Rajeev our take the analyst We’ll Thank you. Stanley. with Lalwani from from last

Rajeev Lalwani

CASM know international the question regional RASM, you domestic feeling sorry rather Glen, just bit you for some about talked a me environment for the you're then a just on Good And so capacity, how in. I color morning. given Thanks squeezing you. about can on? – provide and little On breakdown? earlier. FX, XQ

Glen Hauenstein

We that's foreign I we dollar of toward point the stronger travel changes U.S. that's a recent think network see origin reemphasis we XXXX our The you'll of on and further. reorient arena the clearly travels great have the U.S. international of I on is that origin of impacts with of point to as – even of tends something it as favor we'll one be Investor of well as at talking there's question. currency a places think think as the I we us move and see over the a where tend then higher Brazilian of opposed Chinese sale high an sale and places about impact as to Day. point all so point foreign currency devaluation

Rajeev Lalwani

just Okay. regionally? And then

Glen Hauenstein

As weeks. sitting look Latin speak see far to we kind where better as the than the regions the think from we've go, I few last bottom we of we're terms the what in seen as now, at of in

looking volatility, the then strong just positive about and core think core think that into a the And XXXX. to and start the I but not lot the of strong. the business demand be about. we So that but it. positioned demand very remains the there Transatlantic in quite RASM we're The Atlantic as remains is I through all talked the and winter this of despite talked the the It's growth in cabin well for from is Latin months strong FX next over to we're and capacity to Ed of bottom and incredibly more will see couple fact despite some the facing rhetoric we're particularly in we've winter in Transatlantic Pacific trough, calling

Rajeev Lalwani

Thanks. for If there. Paul one I in can sneak

moving you of just what parts on? all spend, considering the years the whether higher fuel in on that what's you're just some and for CapEx number Glen. deferring with getting forward good Sorry and you can over off, Paul, just maybe or thoughts then rates going so pulling and cutting leasing talk years a couple with next you're about not of aircraft

Paul Jacobson

Sure, Rajeev.

didn't operating year, that XX% CapEx given continuing into this our to P&L, the strategy the flow we saw business. the whipsaw do short-term receptivity for challenge recapture to to Obviously of our price think organization adjustments and of we've is any the business than the fuel been reinvest and want higher to still back be but I able what a temporary of cash in intact. make what we we'll as

financing march and to going path feel along and save that of decision tens of year. to a that The guidance dollars good today a capital same stepup really continue that we're So, we millions for given. us about represents the just that talked different will the about we've

Rajeev Lalwani

And Great. month. Thank Ed, the next with luck run good you.

Edward Bastian

I'm to need it. you. Thank going

Jill Greer

Ned call that will our Well, to portion the turn is Officer. of analyst over wrap the I up Communications going to and now Walker, Chief

Ned Walker

one We themselves process they be could if Jill, the a this point. media Thanks. We'll follow-up. could Okay. quick process question you and at and if for underway. everyone most accommodate welcome question, to to like to Hey, up the limit everyone. the a shouldn't the get to thanks Q&A and and ask review able ahead queuing ask of Lisa, go media begin we'll I'd

Operator

The take We'll Instructions] [Operator our you. Tangel Thank sir. question first Journal. Andrew Street with Yes from Wall

Andrew Tangel

Cabin Hi, fares and there. how could so give a and in versus fares business quarter? Good this breakdown you far if raised morning. us premium all the all much have Main third of you year Wondering

Paul Jacobson

disclosure. much was were of revenues X% that Overall, of our We the in the of typically kind that and unit don't up kind give effect. quarter pricing

Andrew Tangel

idea much an you elsewhere much more overall inflation fuel how the to to other give this more room fares where and given road do raise the How flexibility year fares you'll next us nationwide? can Well. are recover have got raise down and we're of incomes costs? and seeing year later you've to

Glen Hauenstein

expect fare to I the prices of pass and that. we to Well, to along to you that to able upcoming the environment. healthy the were we rise, demand is on very can the be economy continue the don't oil extent for cost Delta or speculate healthy, is pricing product tell

Andrew Tangel

you. Thank

Operator

We'll Kelly Yamanouchi The from take next Journal-Constitution. with question our Atlanta

Kelly Yamanouchi

like you on would summer have ethanol there. this President what Hey, of I the expect impact Trainer Trump's ban list to on might refinery. ask

Paul Jacobson

Well, Kelly, Paul. this is

renewable we improve are to administration's standards market fuel of RINs. efforts applauding I trading think the help streamline and the the

refinery applaud the find significant compliance try in We RINs efforts to a the and a for lower have seen the benefit of this year cost solution. to

Kelly Yamanouchi

for change a does any affect your – strategic affect it Does plans way? in the refinery

Paul Jacobson

Like well. nice a refinery I RINs the the and we cost No, it doesn't. said, realized performing in benefit is lower

Kelly Yamanouchi

Thank Okay. you.

Operator

Dawn next Our with question USA comes from Gilbertson Today.

Dawn Gilbertson

guys My has do question you a I'm in to impact good move more with as humane it? September approach you have carry-on basic Americans any Hi, morning. to described if seen beginning from economy. wondering bag, allow your

Glen Hauenstein

Well, or choose most sell we and our amount of products, an because Cabin. to have into modest basic sellup they're those Main not. to of customer the better what We Cabin into sellup don't with amounts presented incredible the are base Main even chooses when economy

of that policy. with very our in haven't small change new a it's So, total seen a sales percentage and we Americans

Dawn Gilbertson

you. Thank

Operator

Josephs from with CNBC. next question Leslie take We'll our

Leslie Josephs

from basic main and offer. domestic? think what me I'm you XX% on economy economy economy rate basic Hi, Main the good I you curious international expensive into passengers to is bought Could fares something is morning. Cabin. for Main then more premium Cabin cabin of economy Comfort+ upsell tell like Main just the about for considering Cabin

Edward Bastian

to Well, available we I based seats think amount have the on a sales. it's of lot

asking with how take are rate? presented it, people So, you're is many offer take the that who that

Leslie Josephs

if are is that Like up. the what buying of there's gauge percentage of people Yes. any

Edward Bastian

available few of a factor XXs our now first which of number factors started Select, upgrades. and next start. now all the I of haul class for long good. in that high only those these XX% on is for We're We've runs selling years, think The the stage. first amazing over is selling the relatively going from to SAT is cabins but Comfort+ a example to is load about an flights, bring gone class minimal is what our available to the then when seats. load XX% about the newest that in the rest are internationals of product you about Premium And on – we're to factors we tell could load XX% cabin. we of based selling selling off

Leslie Josephs

there is that if you Premium are any way And to do considering Thank Select, Okay. to yet it? upgrade you offer or not, you.

Edward Bastian

use. about want Yes. the control is That's ability whatever currency what future in to you excited however travel to the to we're and with your want you upgrade

coach company the that if in – and for sit it’s you Select So or want in you cabin, to a buys we'll cash. to would $XXX ticket be want your have Premium for offer you you a XX,XXX an miles you

those where kinds pay like in buy of or are trying however you'd easier So and it. all it to that really to simpler for making buy we're to go of with buy to offers it allowing you to

Leslie Josephs

available now that's that's something or That's to Okay. available? going be

Edward Bastian

available be are is but XXXX. in on to be will – dollars. generally available available some which is now, available mileage cash fourth get mobile, Mileage in are to Some early now, the quarter, really will what we're trying

Leslie Josephs

Okay. you. Thank

Ned Walker

one more question, Okay. for And have please. time we

Operator

Russell Flightglobal. from with our next take Thank you. Edward We'll question

Edward Russell

Hi. Thank you today. for taking question the

Ned Walker

Ed. welcome, You're

Edward Russell

very to Minneapolis. about the in in ask is wanted I the quarter. performance Detroit strong

you seen of out pulling I've like some markets connecting However, markets? capacity there why those Could strength Peoria. Akakan and about some the talk impacting and reductions there you're

Glen Hauenstein

We are growing Detroit.

As new of We're have Ana. November in San Detroit added year to we Santa in a markets, matter added fact, we we Detroit Detroit. significant last I and adding growth believe to Jose

the that cities, network our of out make And Detroit in making go. go, some places cities we're more top rationalizing people schedules we focusing Detroit not on capacity are in those Detroit trying in that money regional so that to cities. XX want want And of to extent to to people into in the we're the to people to relevant

who number at on the less are and day, than alternatives to you was of any given Peoria If people XX Detroit region. went it look probably from in there the

to the go efficient, Detroit from want Honolulu. Ed So in new providing announced streamlining, making the with people last and network to services and more places Detroit we're the very they excited. month

and XXXX to into Detroit. going bit and we're we're be And committed so really quite a service growing we to there's more Detroit are about because Detroit excited

Edward Russell

Great. Q&A Thank of End you.

Ned Walker

on and everyone. XX We'll and Glen, year-end XXXX. back Paul. September the concludes York call. on New quarter see conference That analysts January Investor Ed, our fourth Thanks, Okay. and back quarter our XXXX at December day, the in Day results in of Good call

Operator

participation. conference. concludes for Thank you That Thank you. your today's

You may now disconnect.

Delta Air Lines (DAL) 11 Oct 182018 Q3 Earnings call transcript