Delta Air Lines Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Vernon - Bernstein Institutional Services LLC - Analyst : So Glen, first question for you on the election. Can you just help us get comfortable with how you're separating out that impact from what you're seeing internally? And maybe talk to what gives you confidence that this isn't just a weakness in the consumer that's showing up in some of the forward revenue data?

Question: David Vernon - Bernstein Institutional Services LLC - Analyst : Okay. And then maybe just, Ed, can you talk at a high level about how Delta is thinking about domestic capacity kind of going forward, lower cost airlines cutting capacity? Does it make you think about share any differently here?

Question: Jamie Baker - JPMorgan - Analyst : A couple for Glen. So Glen, when I think about the phenomenon of tightening domestic capacity, my assumption has always been that the first routes that are called provide the greatest uplift to RASM? And from there, RASM benefits still accrue over time, but at sort of a declining rate of improvement. Is that the right way to be thinking about it that the benefits are front-end loaded? Or is the reality of something different?

Question: Jamie Baker - JPMorgan - Analyst : The latter, the beneficiary, so Delta in this case. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 10, 2024 / 2:00PM, DAL.N - Q3 2024 Delta Air Lines Inc Earnings Call

Question: Jamie Baker - JPMorgan - Analyst : Okay. All right. That's very helpful. And then second, on corporate demand, I'm curious what sort of recovery you're thinking about for 2025? But more importantly, does it influence how you think about the network? I mean, hypothetically, I'm not arguing that this would happen. But if we saw a full restoration to where corporate trends would be had COVID not occurred would you need to rebalance the network much? Or would it simply be an exercise of potentially allocating less capacity to lower fare buckets?

Question: Savanthi Syth - Raymond James - Analyst : Glen, I was wondering if you could give a little bit more color on how you're thinking about kind of the unit revenue projection in the fourth quarter by entity and just kind of the trends beyond the elections.

Question: Savanthi Syth - Raymond James - Analyst : What your expectations are?

Question: Savanthi Syth - Raymond James - Analyst : Very helpful. And if I might, just on the -- follow-up on the Hurricane Helene impact. You called out the impact of $0.03. I know it's really early days. I was just kind of curious if you have kind of the impact of Hurricane Milton in your guidance and how you're thinking about it?

Question: Mike Linenberg - Deutsche Bank - Analyst : Glen, I recall -- I want to say this was to the last conference call or maybe it was a conference where I think you were asked about where organic demand was relative the fact that we were seeing demand up 7%, 8% in the summer. And I think you had indicated that actually a lot of it was promotional -- driven by promotions and then our organic demand was maybe closer to about 4% domestically. When I heard you talk about in the comments in your script, you talked about domestic where it seems like supply and demand are now in sync. And if I look at where domestic supplies right now, it is about 1.5%, 2%. Are you sort of indicating that maybe domestic demand organically is around 2%? Are we running a little bit better than that? Can you just -- some additional color on that?

Question: Mike Linenberg - Deutsche Bank - Analyst : Great. And then just my second question, I think, on the distribution front, it does look like you've -- I believe, correct me if I'm wrong, you may have recently sort of renewed your agreements with all of the GDSs. And I know that you've been moving more into sort of the -- on the NDC side with respect to distribution. How should we think about that, your cost of distribution -- is that going to be maybe a potential tailwind as we head into 2025?

Question: Conor Cunningham - Melius Research LLC - Analyst : Really outside of you guys and United, the industry continues to try to reinvent itself through product and network changes. When you think about the opportunity that presents to you, just how aggressive do you like pretend -- like thinking -- or thinking about being just given the turmoil and others? Like you're already deepening your moat like in real time. I'm just trying to understand how deep it is or how deep you can get it from here?

Question: Conor Cunningham - Melius Research LLC - Analyst : Okay. That's helpful. And then we're starting to hear a little bit more or see the products that the domestic leisure carriers are offering. And when you look at Delta Comfort+ in that offering and compare it to what the industry is announcing, you talked a little bit about Delta Sync, but what else is there to kind of to widen that gap to the new products that are already out there or that are being announced, I should say? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 10, 2024 / 2:00PM, DAL.N - Q3 2024 Delta Air Lines Inc Earnings Call

Question: Duane Pfennigwerth - Evercore ISI - Analyst : Just on seasonality, obviously, there's a lot of or a bit of noise right now in the baseline with hurricane impacts and with holiday shifts here in October. But as we look at volume growth for the industry, it looks like trends are following much more 2019 baseline than they are really last year. And so I wanted to ask you, do you see seasonality changing on the leisure side or on the corporate travel side? And was there anything about this time last year that was an anomaly?

Question: Duane Pfennigwerth - Evercore ISI - Analyst : That's helpful. And then just -- thanks, Glen. For my follow-up, as you think about more modest fleet growth, less training investment, less maintenance investment, maybe there should be a question mark at the end of that one, going forward. What inning are we in for productivity, recovery at Delta? And what metrics should we be watching on that front? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 10, 2024 / 2:00PM, DAL.N - Q3 2024 Delta Air Lines Inc Earnings Call

Question: Scott Group - Wolfe Research - Analyst : So I know, Glen, you don't typically talk much about like monthly trends, but just directionally, just so we understand, can you maybe give some color, like is October in your view of December, right, if we eliminate the November and the elections, are October and December positive on unit revenue?

Question: Scott Group - Wolfe Research - Analyst : Okay. Fair enough. And then Dan, can you just maybe talk about some of the puts and takes to be thinking about for CASM next year? I know we'll get probably more of a guide at the Analyst Day, but just directionally just puts and takes to be thinking about? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 10, 2024 / 2:00PM, DAL.N - Q3 2024 Delta Air Lines Inc Earnings Call

Question: Brandon Oglenski - Barclays - Analyst : So Ed or Glen, you guys did volunteer, so maybe I'll try to provide a little bit of a preview of Investor Day out of here. But you did talk about Atlanta being up in the summer schedule next year. I think you even have a news article saying flights could be up high single-digit levels. Can you maybe specifically speak to that aspect of the strategy as you look forward without maybe giving too much away?

Question: Brandon Oglenski - Barclays - Analyst : Really appreciate that, Glen. And then, Dan, maybe just as a quick follow-up on that. I mean does this have broader implications for your airport costs because those seem to be part of the inflationary pressures here on the industry at whole. Going back to your core hubs, does that have a positive impact looking ahead? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 10, 2024 / 2:00PM, DAL.N - Q3 2024 Delta Air Lines Inc Earnings Call

Question: Thomas Fitzgerald - TD Cowen - Analyst : This past summer, United launched an advertising network, depending on the success of that, is that something you'd look to be a fast follower on?

Question: Thomas Fitzgerald - TD Cowen - Analyst : And then just if I may, a quick modeling question. Does your fuel guide include a refinery -- or assume a refinery benefit or a refinery headwind?

Question: Ravi Shanker - Morgan Stanley & Co. LLC - Analyst : You guys were pretty vocal on the 2Q call that the industry had to take out capacity in 3Q and 4Q. From where you sit right now, looking at 1Q capacity, how do you feel about that? And do you feel like it's in a good spot or do you think there's more to come out? Or kind of how does that evolve?

Question: Ravi Shanker - Morgan Stanley & Co. LLC - Analyst : Understood. And maybe just a follow-up for Dan. Congrats on the investment grade here. Obviously, kind of big change from the pandemic time. Where does that lead the balance sheet kind of going into '25? And how do you think about continued debt paydown versus cash return?

Question: Sheila Kahyaoglu - Jefferies - Analyst : Maybe two questions on premium. So if you look at premium cabin, it's outperformed main cabin by 9 points over the past two quarters versus the previous trend of about 5 points. So first, I guess, can we talk about the spread? How long does that continue? Does main cabin catch up? Or does premium have more to go?

Question: Sheila Kahyaoglu - Jefferies - Analyst : Maybe the second question on that same topic. How do we think about the margin implications of the benefit in the main cabin catch-up, which is clearly underperforming? Does it have a lesser impact on margins as we head into '25? Or do you see premium and main continuing to grow at the same rate?

Question: Andrew Didora - BofA Global Research - Analyst : Most of my questions have already been asked. But I know I've kind of asked this on some past calls, but as we prepare for Investor Day next month, and we think about the long-term free cash flow generation potential at Delta. Dan, can you just give us a sense of kind of when you become a cash taxpayer? And I think when you were a cash taxpayer pre-pandemic, your cash tax rate was in the low to mid-teens. Does that still hold? Any color around that would be helpful.

Question: Andrew Didora - BofA Global Research - Analyst : Got it. That's helpful. And then maybe just a second one for Glen. Just from transatlantic commentary seems very positive. It seems like competitive capacity there looks pretty constructive over -- from what we can see in schedules. How would you rank the potential for transatlantic revenue generation amongst all of your entities as we head into 2025?

Question: Stephen Trent - Citi Investment Research - Analyst : Just wanted to dig in a little more. You mentioned your technology investments. I think I recall seeing Delta TechOps is using drones to help with -- in equipment inspections. And can you mention maybe sort of broadly thinking how you may deploy innovative solutions across your business?

Question: Stephen Trent - Citi Investment Research - Analyst : Super. Well, I'm looking forward to November and thank you very much for the time.