DAL - Earnings call transcript Q2 2019

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Operator

Good morning, everyone, and welcome to the Delta Air Lines June Quarter Financial Results Conference Call. My name is Jake, 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, on Good to for everyone Thanks, June and quarter us our earnings joining Jake. thanks call.

our Joining us our Paul and Bastian; CEO, our Jacobson. CFO, from Atlanta President, today Glen are Ed Hauenstein;

during here is will Paul Delta’s environment, Ed call performance, team leadership will the the entire in many room a address cash with Q&A conclude possible open Q&A, flow. questions overview review as get in for brief an give cost and then yourself and will the limit of and performance To and Glen session. as to the please question the of our one follow-up. revenue Our the

contains materially future cause statements. that discussion or could statements forward-looking from beliefs actual and our expectations events. to results the uncertainties Today’s the about forward-looking differ that statements forward-looking represent All involve risks

otherwise of are differences special discuss financial cause measures. the All We’ll described in unless may factors exclude also Some SEC filings. non-GAAP noted. such results that Delta’s items

find a You measures IR ir.delta.com. reconciliation the non-GAAP can at page of our on

that, Ed. with here’s And

Ed Bastian

Good morning, everyone. today. Jill. joining for us Thanks Thanks,

operating Our demonstrate June and action. results financial quarter in The Delta record Difference

points We We’re expansion operating owners. initiatives of solid growth, flow. powerful earnings to for generated pipeline expanded more margin with earnings billion quarter and billion X translating $X $X.X $X.XX and reported of share. drive margins brands, to unmatched competitive our a we per Earlier our profit in today, returns free June and advantages pre-tax than XX% cash increasing by

across ever system, combined XX% people year’s to XXX by already mainline single global our more XX last This without a industry we’ve customers far. Delta record choosing translating to run To-date, service in provide our Delta. performance. than a cancellation great cancellation. the And reached achieved days continue the days with the without is over for We we’ve a improvement operation best product, reliability the

XX.X million boardings history in in first quarter. June time passengers record ran And record our flew marked strong X.X% denied highest in our these load the even and had and for quarterly we build. that which topline improvement a of result, billion, the involuntary to a zero was our entire drove momentum factors with the quarter. in and history the highest demand total in $XX.X history, our result As continues an an this volumes, Delta revenue our This

five our reach experiences best-in-class With ten experienced days. delivering affinity revenue history new in scores over consistently our customers, top of the and net days for promoter our our heights travel just last the people seeing are brand our We we XX growth.

world’s that’s We but trust of our have just earning and and customers we’re not airline consumer airlines excellence also brand sign unmatched service. one most top global of among brands. the The alongside valuable our preference through the from a best operational the essence brands, is mentioned

do Our in are serve. live, matter to people keep advantage. customers but every continue to serve work are Delta's And they get day. count our us them the business and only they around our climbing, to moments improving they the world they very the because best competitive connect and the communities that on not year-after-year where to They back strongest customers,

one a thank and year in Delta American fantastic second row. Cross the by to the congratulations week, say Red them as donor is service. their for want number recognized this I Earlier accomplishment. was in for And the the blood country a corporate This

have $XXX So towards Day far million Valentine’s this profit year, we sharing. accrued next

us financial invest level at generation strength can and and Delta's and to harnessing drive competitor a are business cash foundation global across in customer sustainably are quality we innovation business, the allowing match. to profitable improvements loyalty experience, Delta's no stronger the Across customer growth. the and

cash flow, $X what billion flow free of half XXXX. the of we positioning first to in all produced During cash the more we in free XXXX, achieve billion than in in year, $X.X us generated

the We our right provide and our to future that best-in-class to customer are continue tools investing ensuring service. to have customer to ensure for employees experience the elevate brand while continue

exciting, our One benefits of to example the domestic this is narrow-body deliver our the owners. fleet, transformation will which our Glen and as well as to customers is expect we cover substantial to

billion of in as This first On of invest open front, airport that four fall, Concourse on construction balance meeting by investment-grade we five to a the advantage. sheet G, included years. Delta been we we'll are project milestone key facilities will efficient have will the taking needs the a $XX in long-term billion facility LaGuardia. next New over By the our York able of in more process, utilizing our cost over hubs build competitive achieve that we've the new concourses at a our and terminal major control focused $X.X facility customers,

e-commerce We're fastest meaningful U.S. sites in more These are also only functionality, also as the of distribution with choosing channels our top app. in add Delta.com growing to continue and our customer-facing to the customers site making but one satisfaction our us. investments interact are customer we to the with directly to not Delta is our Fly technology. highest

employees further of technology level Our and helping more us service. customized our differentiate are investments deliver offers to enabling our

as our the personalizing preferred engaging with customer of interactions, customers view their our deepen we technology increasingly single stream, celebrating milestones customer are channels we through and relationships. our Through

experience starting November, reinvented continuing enhance launch experience. just industry-leading, valued. will that every in more an our Cabin also customer we Main feel to even We're will make onboard international announced that We

spending We are also taking more for steps to in-flight. provide options time

free steps first two-week in the the and an testing by a more took conduct Wi-Fi create months to ahead experience customers to we prefer. quarter, towards we'll test, life completing bringing the During

providing be in-flight the of best in the are committed to differentiation. will It We point sky. entertainment another

shareholder pending for our joint of was $X an our And largest built most portfolio of growth Korean, stability partners. a Air. in with finally, as long-term Pacific piece intend supports our of equity to venture Korean regulatory XX%, the We This of investment important of Hanjin and KAL, a stake global our strategies. investment to increase approval. The we recent foundation franchise, the billion part strategic have addition X.X%

So, in confidence have summary, momentum. our in executing well, continued and we we’re

we full-year $X.XX As over are share, is a EPS. per XX% raising $X.XX last which year’s our to improvement to earnings a result, guide

to a increased the the raise quarterly announced per in Board’s XX% also a at increase this is represents dividend X.X% We by yesterday’s year dividend decision sixth we’ve and This our to row $X.XXXX that yield price. share. the

XXXX the cash for the model of sustainability strength rest the expectations of raised the our $X momentum billion capital strategy. demonstrates shareholder-friendly total ahead. for has results this it We’ve and The our of significant business business and our expectations allocation Delta shareholder to on return free flow year. with our positive also Importantly, opportunity

our These operational with powered culture, great program reliability employees a durable and long-term advantages engine balance very and for our the our with drive customers, a Express American grade the loyalty value have strategic network, brand foundation to by unrivaled our combined in We investment advantages, sheet. and owners. relationship people provide best leading and of meaningful the an business our

I’ll the now, and it quarter. Paul of discuss the details to And Glen turn to over

Glen Hauenstein

good everyone. and Ed, Thanks, morning,

or fly The Their why growth more start service our more quarter team. consecutive to with is a X% thanking unmatched to Delta. revenue work quarter Exceptional X.X% provide reason in performance the hard a are of the and quarter choosing seventh I’d the enabled people customers are Delta like growth June $X level than X times record a ever operational prior the of that the billion topline GDP. than year. more, increase over is by

our SkyMiles products Delta and remains onboard both currency. our strong, for Demand

Our increasing in investment in products, revenue are capacity. products billion, than and paid With airport more reliability scores. XX% a to reshaping premium by affinity This Premium brand X supports our distribution, load increase points were more service than factors and product improved premium industry these to customers X% remains revenues perception the up customer satisfaction and year-over-year. increased which premium record XXX%. driving more $X choosing at

loyalty grew million contract the to Express a The in benefit $XXX April. billion American announced XX% $X.X renewal from revenues including roughly

drivers and advantage. Our remain long-term are Express loyalty sources relationship true competitive with our business program American of and key of

year on the Express our more most among satisfaction record is more our But customer SkyMiles track members increase of loyalty of rate ago, American are members this and signing cards. double for a at acquisitions New and to importantly, that members are just years SkyMiles three levels. up at of

More During digits. over using the upgrade their increased load factors. new quarter, shift spend season remained functionality as well on strong million option this and X.X improved to travel currency business quarter. expectations both customers using earlier relative to March our with co-brand double are the April cards demand and robust in and and has Both very peak mileage leisure exceeding since received and purchase. leisure our volumes Easter post record uses, This and to contributed members is travel been Miles year. to this have experience The summer launch

the financial Corporate softness are of managers consistent manufacturing sectors. strength as This quarter. and was industries domestic corporate survey, our automotive driven air revenues service travel expect X% up XX% is the In recent this remained versus in maintain with quarter. year technology prior the of spend This last to in most travel pockets for increase travel year. healthy, healthcare, increasing international by their being and offset or X% by

revenues on continues both capacity yield to industry outstrip volumes and as Cargo lower declined XX% demand.

year. the cargo this mitigate the outlook implementing cautious We of impact, are for very strategies remainder to the actively are on but

on by over to unit higher to the Passenger points specifics demand. sequentially were guidance revenues quarter, X.X%, compared capacity. up strong were X.X% unit in up revenues prior revenues driven year, Turning our unit Total X improving quarter. March on the above X.X%

up grew growth in This PRASM. Domestic years XX% revenues nearly with every Boston in unit with revenues. revenue half. in revenues system the with a over improvement the XX% X.X% domestic five prior best led X.X% higher performance on is year unit

Boston a with for over choice departures Delta airline increasingly Now XXX travelers. of day, the is

unit X.X% grew revenues headwind by increase revenues X.X%. X.X-point a by offset to currency our Internationally, as we

we as restructuring. performance multi-year for While we continue able performance Pacific forecast, versus were opportunity maintain softer our improve to see We to was margin year. our execute our to initial profitability prior revenue than Pacific on

performance morning's Additional quarter release. press in commentary on this the June for may found be the entity

forward system or -- to a a revenues. September to in great X% to start to one this increase July Looking with off Sunday expected X.X% a revenue improvement last the is unit number is total on day revenue Sunday? new quarter, X.X% to X%

Jill Greer

This Sunday. past

Glen Hauenstein

past This Sunday.

Okay.

and demand to monetize the see and in holiday strong. remains passenger transatlantic. made lead have Domestic, a corporate investments Main underlying in customer should to the improving to from as we continue Premium strong, we deceleration about Cabin the we remains slight expect growth pressure sequentially, X While point the demand Easter product leisure timing TRASM experience.

be roughly year in are by corporate moderate back demand. origin some dollar is of international, half U.S. demand U.S. offset over to revenue are softer the stable to year flat In strength. lap European headwinds beginning unit and of currency we the leisure point prior expected Atlantic strong as as trends

In quarter, revenue the we our be Pacific, declines unit lap begin comp should expect and as but to this to the headwinds will ease. year June moderate similar exchange later as foreign we

entity best continues Brazil remain by system in we decline positioned our and to our joint capacity performing is charter Latin run capacity X% and both venture year from trending is international and increased to grow Mexico, grounded completion incremental the flying Full as factor, flying. airplanes modest above with September first expect strength assist to including from capacity in higher our on slightly partners X%, half rate. quarter additional

quarter outstanding I'd an like charter to our and performance. strong on congratulate year-to-date team

with opportunities hubs our growth term, targeting We're longer perception our potential, competitive and to leveraging revenues, scale the our of and our efficiency expand our upgauging. think Delta's of profitability consumers. and we our in the in capacity minds differentiate the our advantages brand lie grow both markets best core As the improving and though Delta of

currently XX transforming of significant spent Delta's our midst evolution fleet are hub in While domestic were substructure, history. the the last most years the we fundamentally in

us over expanding We narrow-bodies routes, over With on XXX the on are to focused and our aircraft deliver products leading right services focused to set the deliver service, the getting right margins. and allowing efficient fleet with a aircraft scale more margin drive network. next larger best gauge of we seats premium serves the are help percentage are These of Delta's four which that years, a higher building profile. our customer

the will Comfort upgraded and international our international Not to Our Select our will Premium become fleet of deliveries, including extends fleet more the end efficient XXXX. by new well. only as fleet with have Plus entire entities interiors transformation

more ability network, the a our our The are combined flying agreement our what a for agreement; XXXX, scale global by and service that to improved should XXXX. gives our American contribution for partner products international with of customers network, alone the we $X nearly double foundation create drive product investments in efforts recent us best economics to in to of profitable underlie confidence revenue in seamless improved billion our experience continue drive Delta's class The premium Express growth. within and saw our to global

closing, demand to throughout In rest we strong continue year. the expect the of

of and for first pipeline again raise growth to X% results to initiatives give half target strong Our our us to year. the full X% revenue confidence

we about opportunities. more we're excited with are quarter great result, even pleased as As runway record the our June

that, with to And friend, turn I'll my Paul. it over good

Paul Jacobson

Glen. morning. morning, joining and everyone, for Thanks, Good you this again thank us

year owners. through against continue topline results our plan that show growth, Our to delivering margin return the Investor expansion to and first drive the half we're of consistently our to Day both,

expanded earnings XXX than of also shareholders. have the first half grown generated $X.X has with XXXX revenue of per all going of back of We’ve to free XX%. and margins cash the share flow, billion billion grown In X%, operating points, basis more $X we’ve by by year, that by our

year on earnings after-tax XX.X% free is flow give raise ROIC confidence trailing made have strong XX-month full per to revenue, us Our as a and These share investments results basis guidance. returns. are cash driving the we

million XXX a to return at on expect the Day. a date plan at initial growth, full year, growth. updated X% margin basis track topline X% now shareholders XXXX. to is and outlined and Investor we're deliver in to This we our the EPS to to above billion results For With points expansion full-year, for $X expectations $XXX XX% increase of least

Turning quarter billion. June record $X results. income a set June with of quarter to We pretax

year; years. Our of two XX.X% highest than last operating X.X the achieved XX% higher of margin margin was was points our in pretax we've

our basis on for least now year target of track and versus aXXX exceed XXXX. improvement points We’re margin expect firmly full to expansion at

One solid initiatives cost throughout contributing. to efficiency all operations, Delta fleet continue our and deliver with We gains performance transformation

retirement X%. quarter, $XX guidance due of approximately our For the the non-fuel largely by XX accelerate X% were as permanently of two This X.X%, MD-XX up This the aircraft decision June end to the associated pressure expense million of depreciation limited costs the were is XXXX. to to fleet higher June to our of retired. quarter unit with impact line in included to with years

in retire another will to by and periods. nine year these We of depreciation future aircraft moderate end expect MD-XX

a efficient friction more team gains The Delta from transformation efficiency our to small we is aircraft One number drive to the well. opportunities out of ongoing into a transition cost as incremental fleet enabling approach sub-fleets. as of has identified and minimizing fleet, operating

fleet exit realize asset. This time. the to benefits such service as and and less aircraft training into continue streamlining entry MD-XX. enables reduce scheduling AXXX-XXXneo, drives type we’re will to we incrementally And as management through through on the new we induct We ROIC better fleet simplification another crew and the as unproductive minimize time efficiencies idle higher in

year we X%. year’s as CASM-Ex In comparisons the cost growth. Non-fuel our full half us the XXXX, giving in costs faced of of unit capacity last from guide tougher of well year, X.X% back increased performance as the first in confidence decelerating half approximately

levels. remained prior year. While June market during expense volatile prices. X% flat $XX $XX were fuel fuel fuel quarter, was prices Total the Refinery million last below to profits Brent million on roughly of decreased lower year

we expect year. decline efficiency and were drove prior equity the a a than and the quarter due partner lower in efficiency the June gain Our re-fleeting Non-operating initiatives fuel $XX Delta our X.X% to income fuel for improvement full in and year million for in One a pension higher quarter X% expenses earnings.

the prior we due million expectations range This be year, lower expect primarily these to $XXX of earnings. partner to above million. in full non-operating is to the $XXX For now expense

range to cost per share, from equates pretax June XX.X% gallon. result. non-fuel This growth the we is unit per last $X.XX similar of X% For favorably year’s fuel This X% for XX.X% share versus all-in last to the earnings up to to price per to be and prior XX% of in and quarter, September expect year the includes $X.XX expectation to midpoint. quarter. of XX.X% an to $X.XX to margin of down This $X.XX comparing a year’s

approximately Our the from gallon benefit $X.XX. refinery expected this guidance an million is September by $XX roughly contribution to the per quarter fuel includes which price quarter,

cash the balance to Turning sheet flow. and

voluntary X.X of low $X.X remains operating address Adjusted obligation million ratio the at in a to our X.X sheet produced $X.X the with than billion more balance our June growth Our end we the last times. half free strong. strategy, debt-to-EBITDAR our nicely during flow of is continue margin of times We cash allocation target Consistent conversion our billion contribution both June leverage proactively This of X.X net pension generated benefited with flow to of $XXX year, reinvested quarter. of of This business of free to first cash and billion. income, ahead quarter. expansion. cash $X.X the $X.X top-line bringing by represented into billion, XXX% flow capital and

performance in guidance Investor and to nearly net Our flow full Day. which is This billion of free year billion, our half expect initial in first from for $X sets the unchanged up cash includes us full expectation XX%. achieve year the $X.X provided of CapEx income conversion strong for we

the healthy also to back Company. the consistently our return while Our us cash cash investing enable sheet owners, future and generation to in growth balance of

first With a the the During returns we flow earlier of this earlier the the shareholder six of buyback than facility accelerated $X loan. anticipated. in with running our ahead plan, first short-term repayment quarter funded completed We billion to billion cash of year. returned months we $X total quarter, over just the million shareholders. year, $XXX are the buyback Including accelerated through short-term

approximately dividend consecutive allocation increased more diluted our $XX while XX% XXXX, by Since our our and We've our than have and for six share fully to years. billion that investing owners. first reduced returned announcing importantly, in done we've our But we count business also people. in strategy capital

funded debt plans Additionally, part of ratings. levels we're our the to our improving maintain pension as commitment low our maintaining investment grade status and of credit

activity and third durability on the increase validation brand. our are a of dedicated powerful business our people network, quarter our and unrivaled results consistent These and conviction the Our in XX% of demonstrate dividend strong continued repurchase our sustainability our model.

long-term Our our advantages industry-leading and to for deliver competitive stakeholders. of drive all results continue value

I'll that, with to over begin call And Q&A. back turn Jill the to the

Jill Greer

you for questions if ready Paul. could the we're Thanks, instructions. from the analysts, Jake, give

Operator

[Operator Linenberg with Instructions] with Mike We Deutsche begin Bank. will

Mike Linenberg

morning, Good everyone. Yes. Hey. Yes.

one I follow-up. and one So, have

guess one Glen. Just first the I to

And the this quarter, I You called out as hub. officially think strength in Boston. [ph] announced over think I was last Boston a maybe

think there Austin. I other was like some cities out also about focus press some and Nashville maybe

your about XXXX, across be will to we think domestic focus how growth think we system? your or Glen, As newer or capacity of should in these the cities it more about split allocated hubs,

Glen Hauenstein

Great question, Mike.

year, I think, we our have to focus Boston and us year is a for that commitments half up over next towards XXX. true the take departure levels city

air we higher those higher growth across our operation, growth. you can with more where focused For than efficient starting they Austin, are will allow been those significantly is cities familiar fit to we've years. the high Nashville, hubs late cities have with and us terminal, Raleigh, travel system and the Boston, earnings of And general. various of summer, all shared making And take growth Seattle, are for Boston. are over we who is this grow in carriers what profile that the entire our over targeting our terminal will we Boston And to continue that in so on drive

and hubs markets continue been grow thoughts So, make existing continue efficient. our growing our to that's where to more really are to to

Mike Linenberg

Is year? you to status went to pension on required $XXX where And funded you the -- just any are sounds great. and million is contribute were And the Okay, this Paul could? to. at contribution. the the beyond more this -- Thanks. you there above It point, maybe pension, more if jumping what required like you over of then what’s

Paul Jacobson

the for question. Thanks Mike. morning, Good

that the contributions all voluntary. So, made we are

Right very is funded relief, good committed with be we’ve XXXX. in achieve with airline all have mid-XXs. completed we we're end low a year the by But of plan Investor the to the line required remain to through on Day status The talked As now, return we try and XXXX. expect our at of front. to funding about we XX% an well, to in globally, equity performing markets fully

Operator

next that JP with now come question Jamie Baker will will and We the move to Morgan. from

Jamie Baker

everybody. morning, Good

a First Glen either for for or it’s hypothetical. Gil; question,

would comfortable If Simply had your Hopefully phase RASM? substantive reintroduce hypothetical, and you an asking be a what how detrimental way you're in fleet Delta grounded wouldn’t to a for aircraft manner Delta grounded operation? now, intelligent into right a prove most from would I'm in profitable that way to portion of operational the its back aircraft perspective, answering.

Ed Bastian

this industry. what it’s other to be Hey. jump it. It's answer Actually to us been appropriate a Ed. not our carriers speculating are clear Max what know Jamie, going has We impact line. the and is for as asking, you real going really dramatic do. I’m on a to to to that -- to it’s had I’m ought

the I expected time to to managed, question. think have out when in call actions we're current and the carefully should there. interim, I we watch going to guess But, be to But development competitors. second going to the don’t or the comes the or reintroduction is of continue no think looking see the be our

Jamie Baker

Paul. Second probably for

understand the of is consolidation. to trend. continue is wasn’t which at order possible. Delta it's rank a of sustainability driver, continues drives the phenomenon we’ve Similar just that had of that trying the trend this last segmentation, hopes given a and a There's from rate of long-held you my you loyalty quarter, drivers grow possible goods to better predicting capacity course significant I could services. probably consumer there to that this. view is of that of -- assume biggest revenue the nicely I'm ahead that question So, new to shift demonstrate to to but ways it what lays

Glen Hauenstein

Jamie, it’s Glen.

Express not the to the really that And we it within driver are is you those it. one all think, It thing. is performance. transaction, is, the I American quarter key excellent mentioned about just that but are not while contributors things

being able And people willing I to I charge what and being able think and to think a combination the you in products, customers to it. to want products being to much for to pay of charge those us services able able fly, it’s as being right to everything understand put just where they're markets for mentioned.

Jamie Baker

Okay...

Ed Bastian

is this as is just Glen’s I’ll well. Jamie, Ed. This growing a on chime in business. response

I more tactics we’re see than actions to fundamental how this on in other multiple positioned it the ever for I a think when in go, but very, capitalizing baby future. think explore, wondered business in has the interested to to as ownership, boomer here. greater are continue looking this you, than to mature world and with whether before, for to of are whether you aware what People is GDP, a this years had And are the it’s back the of into a But, before. we terms about consumers really And best very to segment consumers, product that’s experience a people I continue millennial, demand world more in world seeing think talk we’re strong. people that a ever the performing And versus technology was drive it. the grow value impact that’s airline looking think business. well you huge connecting and wanting the impact whether the the all of it’s as of growing market more

Jamie Baker

understandably you the just -- a first. deflected could question, since I squeeze third in deflected if And

reiterating Just getting asked hub? Mike’s years back about do ago, how and to about a question XX define question you I Boston

Ed Bastian

an hub. I think is is that of we clearly opposite traffic. a the hub a place a endpoint And connect

and service over over Boston, connecting new for we year, extent partners to more traffic Boston from we’re X,XXX consider the from day Asia. U.S. traffic beginning connect And a example so, Boston to a This the with and to to would we’re Europe that our hub. it more almost people started

define I hub. city think we about Now, when to a that’s think people what our you a through connect as ability

Jamie Baker

very you much, gentlemen. Thank care. Okay. Take

Operator

We’ll Rajeev Morgan now from Stanley. hear Lalwani with

Rajeev Lalwani

that and trying think potential comments in as some Good and the of Thanks seeing come leading is cargo But, morning. Glen, when of outlook demand just Ed’s you’re to passenger; we’re looking comfortable I'm to get seen I more and maybe wanted as guess you rollover? for time. cargo, something your to indicator particular forward. well. more with as divergence you’ve the a before the I in back about

Glen Hauenstein

Well, any but take a Rajeev. certainly contributor not -- those X% of not It’s been major impacts. base. is probably are that Cargo impact our could the industry total less just across airfreight us and same companies revenues. the seeing big has not seeing airline than The industry, the to of in we’re total revenue the freights express

as much in I for there in due think near of a inventory lot year is airfreight. last demand existed. advance not of the and geopolitical the result, the reduction big And is currently a as to build tariffs all the trade that tension

probably transportation and higher shipping of volume. getting amount So, forms other of are a

on direct something to I it’s has important really the that’s see time what So, at but don’t correlation think our same base. it any passenger to us we

Rajeev Lalwani

a items seen D&A then, cost labor We’ve you i.e. where that inflationary that trend And not on? you then, we’re you just do of pick is capacity how it and industry year. for obviously about given keeping talked so offset about? a feel forward, at, looking curve for That’s helpful. question going step-ups you guys, the cost the generally, on Is steady, potential creating And CASM for this for simply tailwind or side, side. on by the some up Paul, the

Paul Jacobson

obviously contributing has and more with better of helped. our consistent by Sure. We've CASM half Thanks, factor been of revenue We the our benefit bit that first Rajeev. that, and non-fuel benefiting the to enjoyed a little seen alongside in some in higher results index. have and that pressured some we’ve operational the completion performance

see than negative almost revenue half the from perspective. some cetera. we we index Last merchant money and to around pressure capacity, at of growing rate that spend more twice is with So, XXXX, CASM. that revenue et commissions around had all of good fees, But,

going for full comps in, but So, we X% about line delivering very the between bit little holding we and to X% that year. comfortable tougher the got a X% feel

MD-XX feel earnings additional somewhat. the our fleet, we But, the confident. into from regular Obviously, D&A do has we pressured absorbed that which

to continue Delta we're diligent on of continue going total we there One $XXX the we about almost to number. it pressure forward, Obviously, two million that on $X to $XXX need through holding contributed and Looking see the feel first incrementally this about the XXXX progress to on over that. do million first really our X% and term. from track good One potential years the Delta. that to below track billion are from horizon, exceed half in year program long is goal constantly we We're to good but It's

Rajeev Lalwani

you, Thank guys.

Operator

from Hunter with hear Research. now We'll Wolfe Keay

Hunter Keay

morning. Good Hey.

Ed Bastian

morning. Good

Hunter Keay

Couple Can by you loyalty. me, of hear questions way? Sorry. the on

Ed Bastian

Yes. you. hear We can

Hunter Keay

All that travel, you from strong right. the point your commoditize like can for feel loyalty a is look airfare? there you where and air aggregators fully yourself feel that Is so of remove

Ed Bastian

of on to a our and we is, landscape aggressive and to to to want strategy that. better that towards led product the it. customers. would how Delta buy buy customers consumers think continuation buying We would as to directly Delta they and to been choose flights has migration and to that's buy Our to to want might answer to want way a do let that's continuing loyal build want direct buy a say from a Delta certain distributors, how I or evolve. focus never do the something is you The Delta, we question continue more a ticket. see do want channel just who to them Delta no and way And the to And

Hunter Keay

those a customers, not? Delta argue southwest a good And without go lot I price they of customers Delta feel now of price without straight that comparing. guys mean, lot a I there would comparing Why like buy because value. it’s airfare

you're representative So, not maybe if with a going going why this not you and product business we're question. not our just you. the that's to to sell XX-year maybe way of do But, the commoditize in value are getting, is say, X

Ed Bastian

tickets our XX XX% probably, were of Hunter, down thoughts Today, you years somewhere my sold more delta.com take more over let We're I’d as right, XX%. to look one-third is online down to ago, traffic. about that the And me to you're offer agencies. we're direction of around obviously. here. say, forward, and going that going

the and I to on experience in sell But that to to our and agencies won't those the the invest don't online for ground over us differentiated need a need aware same stake that continue in order So, to say channels. content time, we put at think provide we together in have our are sites. a them customers their to they

Hunter Keay

just related Thanks. happen one know book comparing? more Okay. or many it. Do one, how guys And to survey through to customers price without quick with you work maybe whatever, just you directly

Ed Bastian

We have no idea.

Operator

Raymond question Syth our with James. will come And next Savi

Savi Syth

cost the on side. question a Just

the airport if tariff, particular, projects on I’m the wondering an what in and cost cost, With that’s having general then and LaGuardia implication types on airport you're of for and the the that. impact just in working project

to a for general that of to of pressure I or lot funding some think going industry projects funding we're cost that airport see projects to may if see general if related translate getting just we're seeing in airport curtailed? if and wondering a and in just we to start higher might and of lot these

Ed Bastian

inflationary a said, going we've other in those the being this for the one York on that both for we're LA places, on bit New tariff labor work seen budget. feel pressure structural have steel done strong is these on the of that is the phenomenal has has just elements. being financing controlling been some by There an benefits Good controlling of teams general ground and Thanks a the and areas piece the competition and I morning, lot we both job. The and bigger where and projects have on we that. would in able say and doing related been inflation a the target, on Certainly, That construction to Savi. team little of on of is obviously and schedule manage amazing things these through of infrastructure is constructing. work and actually tight. of remain projects,

Savi Syth

to any inflation some these down well, slows airports it’s of here? increasing kind of at cost and continue airport you look projects we're thoughts, or of on other get going as So, kind actually economy if if a of see then to this curtailed as as follow-on

Ed Bastian

a infrastructure of I and think, features board, more not all is lot the cost are to make happening, to across at board. continue customer experience the but across streamlined going these of improvement more to you're inflation just see But our there more better, airport modern. hubs going and with enhancing the customer

feel good inflation moving And those line we general products can all those our goals. ahead. comfortable that and about So, cost We deliver in projects we it. of rate absorbing feel as with are actually

Glen Hauenstein

our two, stab previous done first might and be about cities a are when few airplane where up tend couldn't And below driving were to ago slightly. look larger a bit trends initial during construction. the the CPE efficient, small tend you're before investment, facilities, think years we cities U.S. when getting be you we have our getting I the at where a if the which what to Sitting with smaller. is, and significantly Kennedy we facilities, you the year bigger the today, aviation made or went a you getting now those the just think to big CPE more take industry, even I Savi, by if in is the at through

as really, the for are more projects these So, enabling airlines to the become efficient well.

Operator

from And now, with Brandon a we take Barclays. will question Oglenski

Brandon Oglenski

everyone. morning, Good

of hit revenue like go sustainably of the different or hey, potentially of to branded you fares I just this growing a purchases decommoditization just at seat? consumers it like to, we’ve novelty thinking, idea know, want kind can like call Glen And So is is I talk or on as back to GDP. seat products, circle products. wear back the a repeat above But Ed, that or these have seen, segmented could off a of you this

Ed Bastian

and in products and continue we I higher sticky. I pointed drive become think higher and that to load think, why and and every paid And we services. higher, year, that’s the products premium get more out factors it's the more loyalty into those

as So, were being thing and that customers buy. they value. look we ago and a to I genesis Delta to providing we of it what products was really that thought that or XX% something think been of to premium with revenue, or those was years of most full grow our sectors, continue we more industry this ability I you say to lowest that’s fare. back even all think customers, it’s wrong ten the five the towards to XX% of survey than of provide did the results choosing consumers the a And bottom What for really lot that that geared really that of mattered weren’t they then services; fare. having that all when was figured and we customers when only XX% race is out to And and with about we able dissected the want and its transformation on this what and other when people

Glen Hauenstein

whether where those the in Brandon, revenue that diversity thing topline the level is other streams highest loyalty our components to our scores growing single of the high is is but other their multiple easily been powerful, promoter of it’s that record. I’d of And that And been. the digits net other at has year-on-year, years two were GDP add thing we’ve the in and revenues last again

purchasing providing. ever they the in services these are Delta they’re is that only products, more than new not So, satisfied even

continue I I pretty a sustainable at it’s accelerated quite pace. grow to think So, think and it’s going to

Brandon Oglenski

always and we’ve travel it Well, on because Okay. had cars. makes hotels sense options

I ask if to here. want one can, I analyst nerdy So, question

guys X% year. are to growth for guiding So, X% the topline to you

X%, Let’s to X% around say quarter. is the fourth for capacity close

I guidance be like close the to slowdown a in on that’s yields TRASM there Is or a think implying the that caution flat. industry suggests bit more the that anything maybe in would economy?

Ed Bastian

That’s we’re being friendships analyst to guide. topline not right. a question. As probably any conservative nerdy we’re I expecting the numbers, in in No, our just a said long-term see little -- so, you’re

Brandon Oglenski

appreciate right All I it.

Operator

we’ll from America. now, Bank of And Andrew Didora hear with

Andrew Didora

does wanted get thinking on, thoughts here morning, of on about fuel. see everyone. step show Hi. year into the this back of change just up XXXX? there jet how your your any And and the contract hedge ways Good Paul, kind of the into futures as to the head what Are as we all impact to from thoughts and refinery? meaningful maybe this I IMO-XXXX the half on at that a actually you’re we end

Paul Jacobson

its serve morning. about good refinery, of that. against we for a day, and given production the as At effectively diesel end as jet Andrew, said, XX% the Thanks the will hedge that.

would a we’ve thought near or been the extreme Certainly, it of least it hasn’t we’re bit but like curve at feel cases expected on seen be. pressure the we So, little well-positioned into going that. had market in that future’s what

seen profitability So, well-positioned other performing is PES watch to gasoline And recent refinery. those on and able we’re keep to we’re it results. and deliver that the by announcement continuing We’ve pressure of we shut to refinery feel to some given products The well. it continue upward the like down close. be on their to

Andrew Didora

excellent and on bit fuel, in little helpful what particularly you has my economy? in slowing some jet follow-up you of sustainable remind And maybe hedge. this see the flow pull I a forward, how face any free guess here That’s case just execution, play you obviously on the going it. on talk been Got question cash out? the maybe levers possibly these can year. diesel And have Can of scenarios billion to this of $X jet you rising Thanks. us

Ed Bastian

the Express levers But, pretty We cash spending conversion always have We’ve changes. the talked that, strategy flexible is right be that voluntary contributor capital able allocation why to balanced Well, the deal. a deferral manage they've cetera turn to up and been it to loyalty versus program, if flow we capital because steadily. And our about the going rates, flexibility cash that the is you one, huge our the and to respond sure. can look which on see. et be American at is

sheet sizable very continue year cash our well balance going and a Some forward. strong that's to in amortization. increases principally generation is expected as This particular, of which in couple operating enhance the the to depreciation we've and will that expenses, pension as of lapped non-cash related grow, to

cash increasing should the continue earnings well. as that So, the and see of you stream efficiency

feel good being to that we and future. about, confident the about performance we’re on we're able continue into trajectory the So,

Andrew Didora

you. Thank Great.

Operator

The next question moment, Vernon. David will come please. One from

David Vernon

Hey. Hello?

Operator

Go ahead.

David Vernon

a to second, theme for the Paul. back Coming of infrastructure

If airport bit. that that off point where a a investment, cash been is the start some last Delta to you years a from of leverage fall money flow over has get because airport sort of we're projects pretty there little quality several in non-aircraft free CapEx for amount investment terms into think low horizon of could next if you the is I'm of base the there about several years, just putting in to a network? wondering off starting point around start where

Paul Jacobson

David. Well, that, for thanks

from airport for we we markets are are doing in through general tax-exempt excluding also, those that time. because on the investing are finance those those projects the funds, repay activities, over or We standalone they large a and we because

clearly, Lounge think there airports revenue across investment for I or steady stream product are driven into program of investment in the and of be customer the our and paying We’ve as Company is by the satisfaction. significant themselves the Sky So, by And performance well. Club whether to going airports the put dividends a scores it's us. those

we significant go and create projects will scale But, us forward. talked large operational a some as over will for little benefits efficiencies bit loads. they time, the see be non-large able about, costs And infrastructure higher changing be infrastructure don't So, to those be of to amortize great customers. those I and the for they for here as Glen significantly,

David Vernon

in maybe for you bigger for as advantages, that cost follow-up, airline. a the a tie just And Glen, as as kind of creates

the the that market? in As example, change competitive LaGuardia, against carrier airport how finish sort of the lower we for kind development cost does of at dynamic the that of

Glen Hauenstein

understand accommodate can is. to our to constrains we that new And and it, constrained travel you accommodate bigger facilities. that But, time. I don't a have larger how you’ve do to it as significant in in over New order know air to the airplanes put they're have we in that facility I drive think ability efficiencies react there growth speculate on if to cost used growth of how to we City, going think want York the that

aerospace City realize particularly New I York think we how in constrained all is. summertime

no more airplanes really is there. there put to way So, to be in able

enablers efficient, more have are to going the bigger airplanes we're facilities to those there that So, of that. and in key put are

David Vernon

be Given be would that cost think your I cost absorb, relatively you employment scale or wouldn’t right? that am more than benefit, to impactful carrier for about for per it lower might not higher the thinking you a

Glen Hauenstein

model would business a favored CPE our in Clearly, be high environment.

Operator

Cowen. Now, we Helane Becker will from question a with take

Helane Becker

But think on? and more regarding to about focus of from could to in and they investors. on rather about little add about is domestic than Thank brand the think your seem be you areas regard how more what talk be lot pretty guys think investors big edge where you than is there international And to environmental the you. that One we whether that U.S. the leading talk but doing bit should seems so you don’t are maybe I internationally -- a and efforts sustainability a of and efforts. that you're

Ed Bastian

a we Helane, our brand how our going is to right. responsibilities part are governance good the increasingly you in of very important thanks. future. ESG and It’s become in of operate to absolutely question our an and Sure.

is that it as year as to the today the reduce industry Europe I'm continue an line and that to our to today it's in but by in X% You right commitments bigger say with continuing continue a We’ve lot an on footprint a as is to well XX% which are footprint its as and to of to of a up industry to year the emissions. as our we which by in well in reduce requires made XXXX, and need we commitment where fuel per that by that. We’ve than here as in made U.S., right is is a pleased are going emphasis probably point grow as commitments well. meet airline to Delta company

amenity off which just well new a eliminated there continue add is We’ve taking made single I new use lot in going a our blankets for in company kits got We're plastics of wrappers be the and Every big a of saw of our make to lot plastic. the commitment to as small from we’ve to on-board that's lounges, airports we to announcements. international all efforts, the that impacts. aircraft, eliminate the day up our here as as soon. a

So, paying ESG is attention something that to. we are good

more we point for of in it’s And think, to I effort pride as people lead increasingly will Delta that pay the too. forth attention investors bring well. a be going as

Gil West

a there add, associated that just waste this hand sustainability is that. reduced, hand cost savings would with the as is efficiency Gil, goes also I with because is in right,

associated to whether fuel example, else So, we save be, efficiency as waste, everything an with it’s money on. but fuel,

Operator

comes question Evercore. Duane with from Our next Pfennigwerth

Duane Pfennigwerth

book corresponding accelerated strong considered far congrats to potentially ask facilitate pricing two And of the have order Max? your take How I MD-XXs and current out to there retirement about wanted Thanks you the opportunistic you a does on that? Was you? the years on results. order any the new narrow-body early.

Paul Jacobson

benefits Hey, is Paul. for Thanks orders we going to feel the simplification, which to MD-XXs question. thought Duane. is trajectory translate about the be on it. to This fleet as part reduce comfortable the book. Driving that to drive able were And we the complexity The in retire that continued is the better good that we’re business, forward. existing on decision order our with of efficiency new fleet the significantly with the to going accompanying we decision of feel through, to balance move There and simplification. that

Duane Pfennigwerth

pricing opportunistic Max? the by you on any have been tempted And

Glen Hauenstein

a narrow-body two that stay course. And ago transformation his think Duane, Glen to the we’re we to XXX. going got decision are about in very I We’ve -- years we talked on the that that focused invest in made comments.

Duane Pfennigwerth

my you. what in Latin were Thanks America? Thank taking was easier Mexico, the more back just second get the questions. of RASM, was of you follow-up, us actually it half. comps it enough. half strong And Fair last the then, in much year, remind the just Can South very weakness drivers for main easier, for

Glen Hauenstein

those really year, and both in both, at have had which It was those turnarounds Brazil turnaround. -- are Latin Mexico of last the marketplaces that centers

Duane Pfennigwerth

you. Thank

Jill Greer

we’re the Jake, going time one analysts. have more to for from question

Operator

with question that Research. And from you. McKenzie will Thank Dan come Buckingham

Dan McKenzie

to volumes there’s my of a Thanks in questions you been morning. smaller can managed On also for to the revenue sustainability. accounts. the corporate elaborate on tie squeezing tied change if in velocity I’m accounts wondering and underlying here. revenue, Both me here. unmanaged Good I'm hope Hey. larger

wondering, I what guess, One revenue are new competitors And accounts story some extent existing had the there your account, just more I'm of turned to new operational disruptions. about the just is from on getting corporate getting substantial potentially revenue to pipelines pretty more? pay or

Glen Hauenstein

headwinds. really the paying up So, been the both accounts it throughout about by very isn’t it’s story. and more. volume been have down internationally this the But It’s Volumes corporate yield really trends have primarily actually driven really domestically a year. currency been year slightly stable

we’ve being in of seen domestically with So, terms volumes. double-digits volumes, robust weeks the many very up particularly

about back. growing are have So, I clearly overwhelmingly And of industries excited the there industries scaling and the But are volume. in think positive for that we’re are broadness been are relatively there trends that this. general,

Dan McKenzie

of that this is just sort outlook as And have one offsets like to that sounds of of some in elevated the also the got Max macro And this offsets helping being to think ex-Europe? from thing those to side the It sounds about impact of potentially the it headwinds, some like of kind the equation and volumes the here. I to on strong international Glen, actually you’ve these revenue question from back coming ties revenue Should clarify those. risk. year corporate the of outlook being some risks I factoring later year. we later is second for is some some

Glen Hauenstein

the as more longer sale you advance starting higher -- I quarter, in really the to a dollar. has international go we as think, we’re sale through And than the know, and domestic. year lap fourth

headwinds end of year. some the -- should to should or quarter we're move of better be the lap weakness the we the the mitigation at through in as starting So, And the sectors. tail some fourth of of looking also

large mentioned impact in the pretty hub As has that expect us. very call, big and Midwest a automotive had you with And on we earlier Detroit a presence, as been in might a down. have

those to comps. we're we the actually lower as fourth get lapping So, quarter,

And environment so, a we get Hopefully, biggest should improve. can of back our actually constructive that sectors. in one to

a to we forward very And year. to strong so, looking really are close the

Dan McKenzie

good. helpful. quarter. Good very Very Thanks That's on job much. the

Jill Greer

that's portion think the of the to up analyst going call. I wrap

media hand if to in for media get will the in instructions Jake, the to our you to mates We over how could it team. the give queue.

Operator

first to [Operator CNBC. And we’ll Leslie Josephs Instructions] go with

Leslie Josephs

the to for please this Thanks had those taking with morning. be Could two-week last and Good throughout quarter test free on tests? quarter. the on going what’s said it the Wi-Fi questions. in the network? tests a Where you Hi. update Thanks. you when are and You you us expect

Ed Bastian

Sure. of our a Wi-Fi when learned Leslie, broadband that two We weeks It global this great you technical about lot We capabilities is on Ed. on entire you limited with did capacity conduct a test. scale. face was a free want challenges open up to across network. the

ready now year, entertainment customers later in connected. important certainly to come, this it's that we're We think And stay We they be think continue will sky. I that a will but something free the is test will our on when and are to next path distinguish the Delta coming here. announce

Leslie Josephs

to said or Thanks. purely cash. in one class class first paid the quick that XX% And class in first of morning, on as about just interview XX% Delta business is follow-up first you well? this that like is then, One That's

Ed Bastian

product, XX% range. well XX% as that as load domestic factors our to That’s essentially international, paid first-class our both in

Leslie Josephs

last year… What it was

Ed Bastian

What's that?

Leslie Josephs

Sorry. year? What last was it

Paul Jacobson

the you give can details. of I Well, some

Leslie Josephs

Thanks. Okay.

Ed Bastian

Importantly, get up And ability distribution the it's to And mileage about of not the more into to that's flyers -- one It's cash. one those here, sit increasing their cash to to trying frequent bring we're continuing when upgrade ways increase diversity think has been the to I the and cabins. there. for and real -- that's we of the talk people keys. using and more

Leslie Josephs

Thanks.

Operator

Tracy And now, from hear Rucinski we Reuters. will with

Tracy Rucinski

Air your morning. in interested context investment. little on more hearing Good Hi. Hanjin a I'm Korean

anyone expect have mentioned the contacts from relationship governance? for family. and KCGI, Korean Cho do family personal out role activist with Cho you your in what the the ask to wording close in help corporate fund, You to Did Air

Ed Bastian

well We this Tracy, Ed. company. a is close with relationship as as with family have the do the

we daily many made companies. But that contact not in make to in investment partners main on basis is I’m in around thesis. how across the globe. of us are investments with going comment our relative And develop Korean almost you’ve the investment, seen our consistent we the two investment to our We

So, I considered don't think about all at should there anything it. be unusual

Operator

take Reed now will with question Forbes. a from Ted We

Ted Reed

questions. I you. have two Thank

Max, guys long ordered competitors decided When it, something the the about was too Max. is not just wait -- what to first you the had reason? was or or buy else? Your So, it was the it had cost

Ed Bastian

to from looked OEM. is has. We neo. looked dismissing, We commitments at Max, looked good with Pratt the of a We and turbofan We the on a the looked performance. that engine. at competitive able at at and do the look We the cost in we what geared Whitney tool the were the we’ve received Listen, at I’m aspects it’s view that not of very OAL product. product. the customer all

analyzing in quite was close a call. the forth. was us. day So, for comprehensive few a and carried But a months back We and review. spent It it XXXneo aggregate the going

Ted Reed

All right. Thank you.

Secondly, about I ask Boston. would to like

-- get you get said once to you you, said Is flying competitors interested are Asia, Glen, to the in? you going XXX? And something Boston to be you it that XXX. You for you also is mentioned that are

Glen Hauenstein

our No. I Boston Asia. said, from partners to were flying

and this partner As Korea success. it launched to was Boston year know, our incredible you on an XXX may Korean

been well way. quite doing that they’ve So, on

own very they medium-term objective as our into think here of been We’ve is we And growing will we’ve our see hub. profitable we’ll I But there the us. that, a expand in think at the get that think year. market XXX, service kind we it’s for very to XX our working XX we’ll XXX grows. months. with been franchise partners, We beyond think move I and sustainable next next and how

Ted Reed

important one in market share the carrier in it Boston? Is to be number

Glen Hauenstein

No. It’s important and to be loved. the most most profitable

Ted Reed

right. you, Glen. All Thank

Ed Bastian

Jake, question, we have for time one please. final

Operator

final that from Media. come And with Blackburn question Argus Elliott will

Elliott Blackburn

bought continued the does fuel for years to New part ask, a York closure you production cost to outlook Good and touched in that you Trainer Delta's bit Philadelphia refinery supply region? How Thanks. and in market. the the ensure in wanted guys on this the refinery back I morning. of change planned fuel

Paul Jacobson

question. was for Thanks Jacobson. Trainer purchased Paul refinery originally is That this Elliott, for like just this. events

about the our supply using saw taken XXXX, as this a done saw in back opportunity and drive we used to an connection take benefit more control refinery As operations region for $X.XX we commercial contracting the we've it in just with various gallon closures bit in through us that. average and per against little competitors over on We've production our to believe the Certainly, PES production logistics expect expertise the help region might year. positioned $XXX we to facility. and translates we well the to us benefits this million to increases is the refinery on have. the of from rebalancing offset in means some the any refinery lost That we with the And we going all per Trainer that see. see

Elliott Blackburn

how Thanks. partner for generally facility area? changing also that your this in guys kind seek at Do refining continue of is that you or outlook a to

Paul Jacobson

Ultimately, a for us. remain the refinery. enhance of quo. being to we -- through to to needs looking return always we overall interested time at the have got manage together the structure investors our that to found structure we’ve and the put decided opportunities in the all and of deal process, status went able met that firms how we We’re and We weren’t talking for multiple

that put expect structure we’ve on our and no changes in So, process. we down that pencils

Elliott Blackburn

much. very Thanks

Ed Bastian

will today’s call. conclude That

We’re about grateful sharing and forward great we talking for October. be time everybody. to look in the everyone’s results you, Thank that will

Operator

again, gentlemen, ladies today. for your your will you conclude We this for Once conference and participation. do thank

now You may disconnect.

Delta Air Lines (DAL) 11 Jul 192019 Q2 Earnings call transcript