Delta Air Lines, Inc. (NYSE:DAL) Q3 2023 Earnings Call Transcript

Sheila Kahyaoglu: Thank you. Good morning, guys. Ed, I wanted to ask you a question. You made a comment about you’re leaning into the cost curve and really leading the industry here with pilot pay and the like. So, the question comes, how do we think about your double-digit margins today versus low-cost carriers and what they’ll report in Q3 and margin moving pieces maybe into 2024, if you want to provide that or maybe the Delta versus Delta and other carriers?

Ed Bastian: Sheila, you should look at our ’24 guide that we gave you with our three-year plan. The good news at Delta is that we have all of our labor costs at the new market across the board today in posting those double-digit margins. So, to the extent other carriers need to be increasing their labor cost in future negotiations, they’re just going to be chasing the Delta cost. And I think that conversion of industry rates is something we’ve talked about as kind of another opportunity as we look at trying to make sure we’re all running a better business here, and we’re not — we have the same incentives to make sure that our costs are finding their way into our pricing.

Sheila Kahyaoglu: Sure. Now it makes sense. And if I could ask one more, a lot on Delta TechOps. Obviously, a big asset for Delta right now. Anything you could talk about? I think you’ve previously said GTF shop visits are running at 70 to 80 engines. I don’t know if that was only GTF or all engines ramping to potentially 400. Maybe if you could just give us the — talk about the opportunity longer term with Delta TechOps and what utilization is?

Dan Janki: Yes. Talk about it at baseline this year, TechOps for geared turbofan engine overhauls would be in the 150, 160 range. We have built capacity to take that to — up to 350 and continue to discuss long-term — medium- and longer-term capacity needs with Pratt related to that. So, we talked about it at Investor Day. Very optimistic about our position, not only the heritage that we have and the great expertise that we have in the Delta TechOps team, but our positioning as it relates to being on all the key next-generation platforms, whether that’s geared turbofan, whether that’s Rolls and also the LEAP engine create a real set of opportunities for us as we think about this business and multiples of what it can be today over the medium- and long-term.

Sheila Kahyaoglu: Thank you so much.

Julie Stewart: That will wrap the analyst portion of the call. I’ll now turn it over to Tim Mapes to start the media questions.

Tim Mapes: Thank you, Julie. Matthew, if we could, as we transition from the analyst questions to those from the members of the media, maybe repeat the instructions for everyone, please.

Operator: Certainly. At this time, we’ll be conducting a Q&A session for media questions. [Operator Instructions] Your first question is coming from Dawn Gilbertson from Wall Street Journal. Your line is live.

Dawn Gilbertson: Hi, good morning. Ed, I wonder if you could give us any more color, Ed or Glen, on the reaction to the SkyMiles changes and when you expect to announce the things you might be rolling back or changing?

Ed Bastian: Hi, Dawn. I’ve mentioned publicly over the last couple of weeks that we’re certainly receiving good feedback from our customers with respect to the changes. I have indicated that we had too many changes rolled out at the same time, and we needed to go back and reassess the planned rollout for the new qualification levels. I mentioned this morning on the CNBC interview, there’s two things, though, that are common throughout all of the feedback. One is there is the intense loyalty to Delta, which is really heartwarming to see. The loyalty to this brand is great. We’ve worked hard to build it and we maintain that. We will continue to maintain that. There should be no question about that. And secondly, that most everyone also agrees that something has to be done, because everyone sees that the premium number of customers that we continue to build are in excess of the premium assets that we have to offer.

And so figuring out how to better rationalize and make certain that the service levels for our premium customers are where they need to be is — there’s various ways to get it. We’ve received a lot of ideas as to different ways to think about it, and you’ll be hearing from us in the coming days.

Dawn Gilbertson: Okay. If I could just have one quick follow-up on that front. What is driving — in terms of the reaction, I mean, are you seeing just feedback or are you seeing an impact on credit card sign-ups and/or cancellations? I mean, what’s driving this pretty quick change to your initial plans?

Ed Bastian: Well, it’s the feedback. It’s not — no, we’re not seeing any change in trajectory rather on acquisitions or changes in spend levels. Everything continues to stay intact, as Glen, I think mentioned during some of his comments. This is good feedback that we’re seeing and candidly, with some of it, I agree with them.

Dawn Gilbertson: Thank you.

Operator: Thank you. Your next question is coming from Alison Sider from Wall Street Journal. Your line is live.

Alison Sider: Hey, thanks so much. So, there’s been some analysis recently about sort of the potential impact of cost savings if people really started taking weight loss drugs like Ozempic in big numbers. Is that something you look at, at all? Do you factor that into your fuel projections or anything like that?

Ed Bastian: No, we don’t, Ali.

Alison Sider: And then if I could follow up. I was also curious on potential Israel evacuation flights. I know there’s ongoing discussions with the government on this. But would Delta be open to flying Israel under a charter if the government asks or if there was a craft activation? Or would you rather just fly to points outside of Israel? Is there any openness, I guess, to flying kind of under those circumstances?

Ed Bastian: There are discussions, as I’ve indicated. Right now, we’re looking at providing some additional lift to Europe to get people out of Europe. But no, we don’t have any plans to be flying into Israel. It’s considered unsafe for a U.S. carrier to operate in that airspace currently.

Alison Sider: Thank you.

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