Delta Air Lines Q2 2023 Earnings Call Transcript

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Provided by Quartr
July 13, 2023

There are 18 speakers on the call.

Operator

Morning, everyone, and welcome to the Delta Airlines June Quarter 2023 Financial Results Conference Call. My name is Matthew, 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. If you have any questions or comments during the presentation, you may press star 1 on your phone to enter the question queue at any time.

Operator

I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you, Matthew. Good morning, everyone, and thanks for joining us for our June Joining us from Atlanta today are CEO, Ed Bastian our President, Glenn Hauenstein Our CFO, Dan Jenke. Ed will open the call with an overview of Delta's performance and strategy. Glenn will provide an update on the revenue environment, and Dan will discuss costs and our balance sheet. And after the analyst Q and A, we will move to our media questions.

Speaker 1

Today's discussion contains forward looking statements that represent our beliefs or expectations about future events. All forward looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward looking statements. Some of the factors that may cause such differences are described in Delta's SEC filings. We'll also discuss non GAAP financial measures, and all results exclude special items unless otherwise noted. You can find a reconciliation of our non GAAP measures on the Investor Relations page at ir.delta.com.

Speaker 2

And with that, I'll

Speaker 1

turn the call over to Ed.

Speaker 3

Thanks, Julie. Good morning, everyone. We appreciate you joining us. Today, thanks to the great work of our team, we announced record revenue and earnings, Reflecting the strength of demand for and momentum of Delta's differentiated brand. During the June quarter, we generated earnings $2.68 per share, a 90% increase over last year.

Speaker 3

This marks the highest quarterly earnings result in our history, an Revenue was 19% above last year And we achieved a 17% operating margin. This resulted in operating income of $2,500,000,000 Bringing our operating profit over the last 12 months to $6,000,000,000 We generated over $1,000,000,000 of free cash during the quarter, Bringing our first half free cash flow to $3,000,000,000 We continue to repay debt and we reinstated a quarterly dividend, Signifying strong execution on our 3 year plan and creating value for our owners. At Delta, transportation is what we do, But experiences are what we deliver and that's made possible by the exceptional service provided by the industry's best employees. The 90,000 Delta people continue to deliver for our customers during this busy summer season. Over the 4th July weekend, Our people delivered a great operation completing over 21,000 flights with a 99.5% completion factor An industry leading on time performance.

Speaker 3

The Delta people continue to be recognized. During the quarter, the Points Guy Ranked Delta as the best U. S. Airline for the 5th year in a row with consistently high scores for reliability, customer experience, network Sharing our success with our team is core to Delta's culture and we continue to maintain a position of industry leadership on pay. During the quarter, eligible employees received a 5% pay increase on the 1st April.

Speaker 3

And year to date, we have accrued over $660,000,000 in Profit sharing, in fact more than the total profit sharing paid out for full year 2022. We expect our profit sharing payout next February We will continue to lead the industry by a wide margin. We will always be guided by our values of putting our people and our customers first. They are the driving force of our success. I want to thank our entire team for all they do for Delta and our customers.

Speaker 3

As I have recently noted, the industry backdrop remains constructive. Air travel demand is strong and the consumer is in good financial shape, Particularly the premium consumer base that we target. After years of spending on goods, consumers want to travel. It's their number one big ticket purchase priority and they desire premium experiences. No one provides this better than Delta.

Speaker 3

At the same time, aviation infrastructure is still fragile and the industry continues to face multiple constraints across the supply chain, Aircraft delivery delays and training needs. As a result, we see a significant gap between the supply that is in place and what demand could sustain, And we expect this gap will remain for an extended period of time. Turning to our outlook. With our first half performance and visibility To the back half of the year, we are raising our full year outlook and now expect earnings of $6 to $7 per share. For the September quarter, demand momentum continues.

Speaker 3

We expect to deliver double digit revenue growth of mid teens operating margin And earnings of $2.20 to $2.50 per share. Glenn and Dan will provide more details on the components of our outlook. As we move to 2024 and beyond, our path forward is clear. The strategy that we shared at our Investor Day just a few weeks ago positions Delta incredibly well for the future. Our long term priorities are to run the world's best airline, unlock the power of our brand, Transform through digital and deliver long term shareholder value.

Speaker 3

Our strategy is underpinned by a commitment to financial performance With a focus on free cash flow, return on invested capital and earnings durability, we are currently executing ahead of our 3 year financial plan and are well positioned to achieve our 2024 earnings target of over $7 per share. On free cash flow, we introduced a new goal to generate over $10,000,000,000 of free cash flow from 2023 to 2025. In closing, thanks to the outstanding work of our people, Delta continues to set itself apart. We have unique opportunities to grow earnings by leveraging our powerful brand, extending our durable competitive advantages And accelerating our digital transformation. One other point I would like to add.

Speaker 3

While our team has been hard at work returning the level of excellence to the skies Our customers deserve, we have not let go of our commitments to our community. Our team was recently recognized as the number one Corporate blood drive donor of the American Red Cross with the 6th consecutive year with record units of blood collected. To me, these types of achievements are as rewarding as the great financial and operational results that we are publishing today and what makes this company truly great. Thank you again. And with that, let me turn the call over to Glenn and Dan to go through the details of the quarter.

Speaker 4

Thank you, Ed and good morning. I want to start by recognizing our people for their exceptional work during the Always challenging peak summer travel period. Thank you. Delta produced record June quarter revenue of $14,600,000,000 Up 19% over last year. Revenues were ahead of our initial expectations with momentum in June.

Speaker 4

June 30 was a new record for industry volume and our highest summer revenue day in history. Total unit revenues were up 1.3% Consumer demand strength continues to be the primary driver of our revenue growth. Business travel in the quarter improved year over year, primarily driven by international. Overall, international Premium revenue grew 25% supporting growth in unit revenues and continuing to outperform main cabin. Delta Premium Select is now offered on over 80% of our wide body fleet and customer response to the product has been terrific With returns outpacing our expectations.

Speaker 4

Total loyalty revenue was up 20% versus last year with continued momentum in our American Express Co brand portfolio. Remuneration of $1,700,000,000 was 22% higher year over year With $3,400,000,000 through the first half, we are firmly on track to exceed the $6,500,000,000 target for this year And focused on reaching our new long term goal of $10,000,000,000 Turning to the outlook for September quarter, we expect total revenue to be similar to 2Q, increasing 11% to 14% year over year. On capacity outlook of 16% growth, unit revenues are While a deceleration from the June quarter, this is consistent with historic performance between 2Q and 3Q When factoring in the holiday shifts and tougher international comps as we lock the removal of restrictions. Domestically, demand remains robust and our core hub rebuild is advancing with growth focused in Atlanta. In our coastal hubs, we are leveraging facility investments And progressively improving margins.

Speaker 4

On international demand strength is continuing and we are confident in delivering record profitability and margins System bookings for travel beyond Labor Day are encouraging into the fall. On corporate, we expect steady improvement in demand. Our recent corporate survey shows businesses expect to increase travel in the second half Morgan Stanley's recent global corporate travel survey, where respondents indicated travel was expected to grow 9% year over year in the second half And 8% into 2024. Delta's capacity growth will normalize to mid single digits in 2024, Enabling us to further improve reliability, optimize the network and drive efficiency to reduce unit cost and support margin expansion. With an integrated and proven commercial strategy and the best people in the industry, we have significant opportunity ahead.

Speaker 4

In closing, I am so proud of the team for delivering a great first half of the year and excited about the momentum we are building.

Speaker 5

And with that, I'll turn it over to Dan to talk about the financials. Great. Thank you, Glenn, and good morning to everyone. For the June quarter, we delivered earnings of $2.68 per share and an operating margin of 17%, Ahead of our guidance and a significant improvement over last year. Our non fuel unit costs were down were up 2.4% Fuel prices for the quarter averaged $2.52 per gallon, including a refinery benefit of $0.04 We generated operating cash flow of $2,600,000,000 and after reinvesting $1,600,000,000 Into the business, free cash flow was $1,100,000,000 Liquidity ended the quarter at 8,800,000,000 With adjusted net debt of $19,800,000,000 During the first half of twenty twenty three, we repaid $3,000,000,000 of debt, including $1,400,000,000 of early repayments with a focus on our high cost debt.

Speaker 5

For the year, we expect to repay over $4,000,000,000 of gross debt, resulting in interest costs over $100,000,000 lower than our initial Our leverage ratio improved to 3.2 times on a trailing 12 month basis. This is down from 5 times at the end of the year. During the quarter, we announced the reinstatement of a quarterly dividend, Opening the shareholder base to yield focused investors. Now moving on to guidance for the September quarter Non fuel unit costs have reached an important inflection point. We expect non fuel unit costs to decline 1% to 3% Year over year in the September quarter.

Speaker 5

This is consistent with our expectations for a low single digit decline in the second half of twenty twenty three. Rebuild costs are substantially behind us and capacity is returning through our most efficient core hubs. July marks our peak ASM production For the year and capacity seasonally declining in the fall and winter. As our capacity growth normalizes It enables our operating teams to drive efficiency. We have over $1,000,000,000 opportunity from initiatives across the enterprise as hiring and training slow And our workforce gains experience.

Speaker 5

Improving our non fuel unit cost is an enterprise wide priority and remains within our control. On fuel, we expect the September quarter fuel price to be between $2.50 to 2 point This includes a 4 step refinery benefit. As part of our routine maintenance done once every 5 years, The refinery will undergo a turnaround in mid September that will continue through November. With production offline during this period, We expect the refinery to breakeven during the second half of the year. With our 2nd quarter performance And our Q3 outlook, we now expect the full year earnings to be $6 to $7 per share And an operating margin greater than 12% and free cash flow of $3,000,000,000 Delivering these financial results also positions us to reduce our leverage ratio to 3 times by the end of the year And significantly improve our return on invested capital.

Speaker 5

For the full year, we expect our return on invested capital to be approximately 14%, A 6 point improvement versus last year. In closing, we're ahead of plan in 2023 And in 2024, we remain confident in delivering earnings per share of over $7 share while generating over $4,000,000,000 of free cash flow and achieving our investment grade metrics. As we shared at Investor Day, we see significant opportunities beyond 2024 As we build on the strength of the core airline, leverage our existing capital base to grow high margin revenue streams We couldn't do this without the hard work of our employees for delivering for our customers every day. I'd like to thank the Delta people for all they do. Now with that, I'd like to turn it back to Julie for Q and A.

Speaker 1

Matthew, can you please remind the analysts how to queue up for questions?

Operator

Certainly. We do ask that all Q and A participants please limit to one question and one follow-up question then reenter the queue. Your first question is coming from Helen Becker from TD

Speaker 6

Hi, team. Thanks for the time here. I just have a point of clarification and then my question. The point of clarification is Dan. Did you just say that you're going to do more than $4,000,000,000 in free cash flow for this year?

Speaker 6

And is that an official guidance And then my question really has to do with, as you think about Your digital footprint and the technology investments that you have to make, how are you thinking about what's customer facing versus What's back office and the cost to invest in both? Thank you.

Speaker 5

I'll start with the first one. And as it relates to free cash flow for this year, 2023, At Investor Day, we rate our guidance from $2,000,000,000 to $3,000,000,000 $3,000,000,000 is the number for this year, and we expect as part of our 3 year plan, We said that we'd be at $4,000,000,000 greater in 2024. And Ed talked about the 3 year collective plan that we're working towards, which is over

Speaker 3

And Elaine on your question regarding digital, I think I mentioned a couple of weeks ago at our Investor Day, I consider this one of the most important activities That we are making in the company. We are on the one hand, we're far along. We've been working on this for a while, but clearly we have a lot to go And most of the work that we are doing is clearly within the run rate, our CapEx run rate. I don't Anticipate any increase in capital as a result of that. If anything, a lot of the work that We should start sunsetting by the end of 'twenty four in terms of moving our infrastructure to the cloud will start to dissipate and that'll

Operator

Thank you. Your next question is coming from Ravi Shankar from Morgan Stanley. Your line is live.

Speaker 7

Thank you. Good morning, everyone. Glenn, you commented on the fall. Any chance you can expand on those comments a little bit more, Especially U. S.

Speaker 7

Domestic, I think you spoke about corporate a little bit. I think most folks are focused on what the demand looks like beyond the summer, which is obviously

Speaker 4

Right. We see strong demand both domestically and internationally as far as we can see. And we can see internationally probably to the end of summer IATA in October and see very, very strong results there. And domestically, we've seen some very positive trends. I think that was one of our increases in the June quarter we've talked about in the earnings and We've seen some inflection in terms of close in build where it's starting to look better as we move later in the summer, and we're very encouraged with those trends as well.

Speaker 7

Great. And as a follow-up, maybe to Ed or Dan, kind of you're going to hit your long term EPS target of $7 at the end of your guide this year, which obviously is very, very impressive. But I think, what's the next bar here? What's the next step? Are you looking at And obviously, you just gave us kind of the long term outlook at the Beyond Analyst Day in terms of the initiatives out there.

Speaker 7

But what are we thinking in terms of kind of financial targets for the long

Speaker 3

Hi, Ravi. We're going to we need to get to $7 first before we talk about what's next.

Speaker 5

We're only halfway through

Speaker 4

a 3 year plan.

Speaker 3

Yes. We've already just increased the current year guide. We will Most likely some point next year, hopefully the first half of the year, have our updated long term plan conversation where We can talk about where we see the long term financial targets for the company going. But right now, we want to focus on doing a very busy part of the year. We want to deliver a great operation for our customers, and we'll talk more over the course of the next 12 months as to how far the EPS can get.

Speaker 7

It's a very high quality problem to have, Michael.

Speaker 3

Thank you.

Operator

Thank you. Your next question is coming from Katie O'Brien from Goldman Sachs, your line is live.

Speaker 8

Hey, good morning, everyone. Thanks for the time. So yesterday, we had a pretty sizable month over month I did some quick analysis that shows that that data isn't very correlated to the industry's RASM or yield Historically, but it doesn't feel quite right to fully ignore a data point like that. I guess, did you see anything similar to that Step down in your own data, maybe on domestic or lower end of the field fair spectrum. I know you're guiding to a decel in 3Q versus better than what myself in the street was forecasting, but a deceleration.

Speaker 8

Is it as simple as that? Or are there flaws in how that CPI data is calculated where it's relevant Thanks.

Speaker 4

Well, the methodology is a sample of a sample. And so we're not seeing the same and It's a different data point than what we have and what we're seeing. So I'll leave it to that. If you want the definition, which I think One thing for

Speaker 3

the call, because I know a lot of people have this question. Just think about where we were last May June. Demand had just turned on in a crazy hot way. Supply was really low. People didn't care where they were going or how much they spent.

Speaker 3

They just wanted to go someplace. And we're seeing fares of 30%, 40%, 50%, in a lot of particularly in a lot of the domestic markets where they could travel That's obviously not sustainable and that's the comp set that you attend the data that's being compared to as well. So we're now at a much more normalized level of stability in the fare environment, particularly domestically. And I think that it's a really Poor comparison to try to draw what that one CPI print was off of a survey of the survey and how that relates to Delta for the

Speaker 8

I very much agree. Maybe one more for Dan too. Dan, you're well on your way on your 3,000,000,000 Free cash flow target, understand fuel is invaluable to see how the ATL shapes up in the back half of the year. But if your free cash flow was to come in better, Would there be upside to that $4,000,000,000 plus debt pay down you spoke to? Is that at all capped by your level of prepayable debt?

Speaker 8

Or you're happy to Pay prepayment penalties, it means you take down that interest cost burden faster and deers the business. Thanks for all the time.

Speaker 5

Certainly. Any as we've talked about, paying down debt is a priority here, generating cash, paying down debt. To Head to head, any additional cash that we generate, we certainly would pay down debt with it. I think you'll see us even in the back half of this year, we will be over that $4,000,000,000 that Talked about a gross debt pay down. And our team's been Ken and the team out there have been really good about doing it.

Speaker 5

What we've done year to date, we've done actually through open market repurchase And other activities and we're just going to continue to work down the debt.

Speaker 8

Great. Thank you.

Operator

Thank you. Your next question is coming from Mike Linenberg from Deutsche Bank. Your line is live.

Speaker 9

Yes. Hey, can I I just want to touch back on, I think, Ed, you talked about summer being strong, maybe Glenn also added For international, not summer, but international being strong, extending into the fall? And I did note that for Many of your seasonal European markets, it does look like you've extended the season into November, December, and instead of restarting in April or May, it seems like they're Is there a secular shift that is going on here where you're just Picking up more and more international, it's a longer season. Maybe these markets are becoming more mature on one hand. And my follow-up would be, when you look at your domestic, What's the load factor points that are being driven by international?

Speaker 9

Is it 5 points of load, 8 points of load factor That are on a connecting itinerary. Thanks for answering my questions.

Speaker 4

Sure. On the seasonality, We have extended a lot of those seasonal deferrals because of the way we did maintenance in Past and we're adjusting that. I think what we want to accomplish for most of our markets is at least a full season of Summer IATA, which is of course October. And so you've seen a lot of extensions into that period. We have seen travel patterns emerging post pandemic to Europe that tend to see that Southern Europe has a longer season than it And so we're taking advantage of that, while Northern Europe does have a much shorter season.

Speaker 4

And so trying to work both of those issues to Create a network that produces the best returns on a year round basis. And we have a lot of improvement. We're going to have Really great summer and our goal is to have a great winter as well. And so that's what we're

Speaker 10

working on right now.

Speaker 4

And on the domestic portion of International Journey, I think in the last call we said it was about 10, and I think that's about where it's staying. And again, It depends whether you call domestic portion of international journey to the long hauls or to the short haul including the Caribbean and Mexico. And The number I'm giving you includes the Caribbean and Mexico, which is really part of North America. If you took the truly long haul side of that, it would be a lower number.

Speaker 9

Okay. Thanks very much.

Operator

Thank you. Your next question is coming from Sheila Kahyaoglu from Jefferies. Your line is live.

Speaker 11

Thank you. Good morning, guys. And great quarter on profitability. You raised the margin guidance For the year, for 12% for 2023, that implies 100 basis points of improvement in the second half. How much of that is coming from fuel and nonfuel cost?

Speaker 11

You mentioned that down 1 to 3 points. Is it all just cost benefits? Or are you Assuming some continued to be outstrip in the Atlantic like we were just talking about and benefit from domestic hub restoration.

Speaker 5

When you think about it, first half to second half, a couple of things to think about. Certainly nonfuel is the biggest driver there. We were up in the first half, I mean down low single In the back half, that's your real benefit related to that on that basis. The other benefit you have is when you think about The half's, you really have a second quarter pretty similar, but you have a 4th quarter versus a 1st quarter performance in that half And when you put all that together, that also drives that margin performance, first half versus second half.

Speaker 11

Great. Thank you. And then if I could just ask a follow-up on cash. The CapEx assumption, does it still remain 5.5? And Should we think about the Skyline at 43 aircraft for the year, given you mentioned some delivery constraints?

Speaker 5

Yes. We've held our even as we updated our free cash flow for the year from 2% to 3%, we've held our CapEx at 5.5%. We're still holding right around That's 40 two-forty three aircrafts for the year, that can always move around as the year by a few.

Speaker 12

Thank you.

Operator

Thank you. Your next question is coming from Scott Group from Wolfe. Your line is

Speaker 13

live. Hey, thanks. Good morning. Glenn, you said that the 3rd quarter RASM Would have been in line with seasonality if you make a few adjustments. Can you just maybe give a little bit color on the adjustments you're sort of Thinking about and then just I don't know if I heard it yet.

Speaker 13

So maybe just share domestic versus international RASM expectations for the Q3?

Speaker 4

Yes. On the seasonality between 2Q and 3Q, we had some of the days shift. The outbound 4th July was in 2Q, which is some of the best days of the summer, as we pointed out in this. So if you take that and adjust for that, we're about a point off The normal and hopefully we can make that point up in quarter. But if you look back to last year, I think that's the more important comp when you see the deceleration 1 to midpoint of minus 3.

Speaker 4

Last year's international RASM went between 2Q and 3Q was up 16 As the restrictions travel restrictions went off in 2Q, so that had that big surge in demand on a limited capacity last year. So I think we're really we're looking at a 2Q to 3Q that's really right in line with what we think the seasonal norms are.

Speaker 13

Okay, helpful. And then Dan, I don't know if I'm getting a little ahead of myself, but when I think about the inflection in CASM in the back half this year, That's still with a pilot deal. So as we look ahead to Nexure, I know you've already said down low single digits, but am I wrong in thinking that The first half is going to be better than that?

Speaker 5

Well, the pilot deal you have throughout this year. And as we've talked about, you have And every quarter, and it's about 4 points along with the wage increase overall for the entire Delta workforce that came through for the year. When you think about next year and you think about what we talked about is the low single digits, really We've out there with mid single digit capacity growth. You get that benefit. And then as you get into the scale and efficiency And rebuild, that is another element that we'll benefit from.

Speaker 5

So we get efficiency, you won't have to repeat the rebuild that we had This year and then the offset to that is the continued movement as it relates to a couple of points when you think about pilots and wages into next year. And that's what gets you to low single digits is the general framework associated with the drivers there.

Speaker 10

Okay.

Speaker 13

All right. Thank you, guys.

Operator

Thank you. Your next question is coming from Jamie Baker from JPMorgan. Your line is live.

Speaker 10

Hey, good morning. So Glenn, does your Q3 RASM guide assume any share pickup at the expense of any competitors that Maybe alternating their distribution strategy or rethinking their Northeast footprint?

Speaker 4

There's 2 questions in there. And the first question is, I think our Q3 is based on what we see in the 2nd quarter and moving forward, and haven't been any changes to distribution strategies in the quarter. So I'd say it's what we see today just moving forward from there. And on the cessation of the NEA, listen, we compete well in New York. We've had a Long history of competing well in New York and we're really confident how that as it evolves that we'll be able to continue And

Speaker 10

on the corporate survey work, any And how individual sectors are responding, for example, is the messaging from your tech customers unchanged from what it's Tim, that sort of thing. I think

Speaker 4

we pointed out that the laggards are the ones that are most encouraged as you get to the fall. And I think You know, Ed has always said and I agree with him 100% that your propensity to travel is directly related to whether or not you are in the office And as we see more and more offices trying to reopen or reopening and people are trying to get back into Corporation is trying to get people back in the office. I think that's a great constructive backdrop for us as we head into the fall in the post Labor Day period.

Speaker 3

That's great. Thanks for Jamie, I'd like to add one additional comment there. All these comparisons in terms of Corporate travel, unfortunately, are still all made to 2019. And we lose sight of the fact that our economy is 20% plus or minus larger than it was in 2019. So what you're talking about actually is there is a lot of room to improve For Corporate America on travel and I think that's part of the underpinning why we think there's going to you're going to continue to see some steady, Steady improvement here this fall and you're hearing it from the travel managers as well.

Speaker 10

Good. We happen to agree. Thank you everybody.

Operator

Thank you. Your next question is coming from Connor Cunningham from Melius Research. Your line is live.

Speaker 10

Hi, everyone. Thank you. Just to follow-up on Jamie's question. So you do sound a bit better on corporate travel recovering in the back half. But I'm just curious like Just to be clear, is that in your guide or is that additional upside, if those things do come in a little bit better?

Speaker 4

We have a continued slow and steady build in our guide. If it was to accelerate beyond what it's been doing, that would be upside.

Speaker 10

Okay. That's helpful. And then just on the domestic RASM, I think you guys are going to be one of the best in the industry, if not the best. I was just Curious if you could unpack what was the outperformance there? Is that purely just your core hub rebuild and coastal investments kind of coming in at higher unit revenues?

Speaker 10

Just trying to understand maybe back to Katie's question like the differences between regular economy seats and what Delta kind of offers out there? Thank you.

Speaker 4

I think we said that it's been continuing to be led by premium products and services and Our domestic rebuild has, as we've spoken about earlier, initially focused on the coastal gateways and now Right now, moving back into the core, and so we have the lapping of the investments we made in the coastal gateways coming out of COVID, now Producing very good returns for us as well as the investments in the core, which of course come in at higher unit revenues. So I think it's a combination of

Speaker 3

those two factors moving together.

Speaker 10

Thanks again.

Operator

Thank you. Your next question is coming from Safi Syth from Raymond James. Your line is live.

Speaker 12

Hey, good morning. Just curious on the international capacity, it's been growing at a faster pace than domestic given that that's where the restoration has And to a greater degree, I was curious how long you expect international capacity growth to kind of continue to outpace domestic here?

Speaker 4

Well, as capacity trends down as we head out of restoration into a more normal growth cycle, I think you'll see A pretty even distribution between domestic and international as we head into 2024. We really haven't given any guidance on that yet. And internally, we haven't even completed our 2024 plan yet. But I would expect it to be very similar split between domestic and international.

Speaker 12

Got it. And if I might just ask on the Latin entity, Glenn, just could you provide a little bit more color on what you're seeing, especially Broken out between kind of near international, which recovered first in kind of the South America markets?

Speaker 4

Yes, of course, we've been really thrilled with the results with LATAM and the improvements in Our South America revenue base. So South America is moving at a great clip and again The short and medium haul Latin America markets were some of the first to recover and they are still continuing to be strong, but not Posting those great giant gains they did in the early part of the recovery.

Speaker 12

Okay, great. Thank you.

Operator

Thank you. Your next question is coming from Duane Pfennigwerth from Evercore ISI. Your line is live.

Speaker 14

Hey, good morning, and congrats on these strong results. On your Transatlantic JV, I just wondered if there's any new approaches, maybe any learnings to the pandemic that will Change the way you operate going forward versus maybe what you've done in the past, how much each side flies, things like that?

Speaker 4

We have a great Transatlantic joint venture. It was the first one and the most integrated and one that we think has huge customer benefits And it's always evolving, and that's the great and we have great partners that want it to evolve. So we're continuing evaluating how we approach the marketplace together. You've seen some swaps in the fall from things that we have flown to the things that our partners are now going to And so I don't think there are any huge headline changes, but it's always evolving.

Speaker 14

Okay. And then maybe just for my follow-up on seasonally shaping capacity. It looks like nominally, ASM's peak in July, they stepped down a little bit in August and they stepped down a little bit again in September, which seems to make some sense. Not all your peers are kind of taking that approach. In some cases, August is bigger than July, etcetera.

Speaker 14

So is this just getting back to kind of your view on normal

Speaker 4

No, absolutely, it's more normal seasonality. Of course, in the South, you have The schools going back earlier and earlier this year for example, schools go back in Georgia the 1st August. And so we're through the summer travel period in South, whereas the North tends to go back after Labor Day. So if you look more granularly, you'd see the Southern, the Atlanta hub and the South Trends down in the second half of August and we keep the northern tier operating a little bit longer and then pull that down after Labor Day. So we are actually getting much more back to where we want to be as we say we come out of restoration to a much more normal seasonality.

Speaker 5

That's helpful. Thank you.

Speaker 1

We'll now go to our final analyst question.

Operator

Your next question is coming from Brandon Oglenski from Barclays. Your line is live.

Speaker 15

Hey, thanks for letting me ask one here. Glyn, so I guess, and I know we're not guiding to 4Q here, but implied revenue in 4Q maybe feels a little bit softer than 3Q for the full year, Just given your full year guidance, sorry. Is that conservatism around the off peak periods like we were talking about back in 1Q with booking trends that have just changed and No cancel fees that or the lack of cancel fees that have changed consumer behavior?

Speaker 4

Yes. I just think we know the least about 4Q right now. And so as we get towards the end of this quarter, I think we'll have a much better view that we could share with you on the October call. Okay.

Speaker 15

I appreciate that. But I guess, can you talk maybe structurally, how are you approaching the off peak period differently than earlier this year?

Speaker 4

Well, I think what we have left to go in the year is we have to get through Labor Day of course and I think we have good visibility through Labor Day. Then we have October, which is historically a very strong travel month for business. So we'll see how that unfolds. And then we have the holidays, which are the peak holidays. That's all that's really left in the year and we have good bookings for the holidays.

Speaker 4

We have good visibility on that. So it's really going to depend on and I think it's potential upside as you said earlier is Does business travel more return more than we expect? And if so, then we have some good upside for the back half of the year. If not, we're going to trend where we see today.

Speaker 15

Okay. I appreciate it. Thank you.

Speaker 1

That will wrap up the analyst portion of the call. I'll now turn it over to Tim Mapes to start the media question.

Speaker 16

Thank you, Julie. Matthew, if you would please just remind the members of the media about queuing up for the call and we'll jump in with members of the media.

Operator

Certainly, at this time, we'll be conducting a Q and A session for media questions. Please hold while we poll for questions. Thank you. Your first question is coming from Alison Sider from Wall Street Journal. Your line is live.

Speaker 2

Hey, thanks so much. Yes. I wanted to ask about, ViaSat yesterday reported it had, a deployment issue with its recently launched satellite. Just curious if that causes any potential problems for Delta's free Wi Fi plans, either for like the current what's currently in place or, for the future rollouts or and if you have to

Speaker 3

Hi, Ali. Obviously, we were disappointed as ViaSat was With the news yesterday, but we're committed long term and they will get through this. We see no meaningful impact to our To where we stand currently with our domestic capacity, we're working closely with them to make sure that domestic performance maintains what we've been seeing, which has Great. I think if anything, it may cause a delayed rollout on some of the international markets, but it's too early to tell.

Speaker 2

Okay, thanks. And I also wanted to see if Delta has any view on some of the proposals that Congress is considering around simulator Training counting towards pilot experience hours, if that's something you do favorably or if Delta would have any plans to offer A trading program of its own, if the Senate proposal goes through or how you're thinking about that?

Speaker 16

Hey, Allison, it's Peter. Delta has not weighed in on those particular proposals. We think the way Pilots are trained is obviously incredibly effective, and it's important to maintain those type of training requirements.

Speaker 4

Thank you. Thank

Operator

you. Your next question is coming from Leslie Joseph from CNBC. Your line is live.

Speaker 2

Hi, good morning, everyone. Also wondering if Delta has any view on raising the Pilot age potentially to 67, if not beyond that at some point. And then also with the affirmative action ruling from last Is Delta reviewing or looking at its current DEI policies and expecting any changes that it has to make? Thanks.

Speaker 3

Leslie, I'll take the first. No, we don't have a point of view on that. I think that's something that within the pilot community there's A lot of different opinions around. So we'll stand by and observe and watch how that discussion unfolds. Peter will touch on the affirmative action.

Speaker 16

Yes. Hello, Leslie. I will tell you at Delta, we continue to be fully committed to Our DE and I objectives, and also we don't have an affirmative action program at Delta. We always hire the very best.

Operator

Thank you. Your next question is coming from Mary Schlangenstein from Bloomberg News. Your line is live.

Speaker 2

Hi, good morning. Thank you. With your expectation that the corporate travel recovery is going to slowly continue during the fall, will that step up enough that it'll Make up for any decline in leisure travel after schools return? Or do you not expect to see that Historical dip in leisure travel this fall?

Speaker 4

Well, I'll just give you a view of what we do see because domestic demands of course come a little bit later on, but International travel post Labor Day, we see very robust leisure demand continuing through the October period. And so combine that Hopefully, we'll get some upside surprise on the increase in business, but we're not really counting on anything more than what we see today.

Speaker 2

Okay. Thank you very much.

Operator

Thank you. Your next question is coming from David Shlutnik from TPG. Your line is

Speaker 17

live. Thanks very much. Good morning, everyone. I wondered if Delta has any contingency planning or views Surrounding the legislation potentially affecting credit card fees and charges, I know that would probably have a significant impact On your Amex revenue, are you planning for if that works its way through or how to make up for that or anything else? Thanks very much.

Speaker 16

Hey, David, it's Peter. Obviously, that's legislation that we're watching carefully. And if in fact it becomes the law, we will adjust But we don't really think it has a good opportunity to be ultimately signed into law.

Speaker 9

Thank you.

Speaker 16

Thank you, David. Matthew, I think that'll wrap it up for questions from members of the media.

Speaker 1

All right. Thank you, everyone, for joining us, and I hope you have a great rest of your summer, and we'll talk to you in October.

Operator

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

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Earnings Conference Call
Delta Air Lines Q2 2023
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