Delta Air Lines, Inc. (NYSE:DAL) Q4 2023 Earnings Call Transcript

Dan Janki: Yes. As said maintenance was up $350 million for the year with a focus on the first part of the year. The other piece of it is you think about efficiencies, efficiencies just build as you progress through the year. One example is we’re down on – we’re fully staffed. One place we’re hiring is pilots that will be down 50% – over 50% from last year, but again, front half centric with training associated with it as you get ready for the summer. And that really normalizes the historical levels in the back half of the year. So just a good steady drum beat of efficiencies as we pace through the year.

Conor Cunningham: Appreciate it.

Operator: Thank you. Your next question is coming from Stephen Trent from Citi. Your line is live.

Stephen Trent: Good morning, everybody, and thanks very much for taking my question. This might be for Ed or Glen, but you addressed it a little bit in an earlier response. But how deep do you think this supply chain stuff goes? First, we have the GTF engine, now the MAX 9 door plug. Do you think we’ve kind of reached the bottom, or are you concerned there could be more to come 6 months to 12 months from now?

Ed Bastian: Thanks, Stephen. This is Ed. I hope there’s no more surprises, but I’d be lying to you if I thought that’s the case. I mean I think we’re continuing to work through the – in this post-pandemic world, the implications of the supply chain issues that we saw. And while the MAX 9 issue is a one off, separate issue, I’m not referring to that. I am referring principally to the engine side of the business. And there’s a lot of work on Pratt. We have a lot of reliance on Pratt. And their challenges that they’re facing have been well chronicled. One of the things that we see on the engine side is as a lot of the incremental resources that our engine providers and suppliers have put their resources against it also strips away resources from maintenance work on their existing business with us.

So we’re working through as efficient a manner with Pratt. They were in this week and spent a lot of time with them. Roles and gee, everybody in the engine world has challenges, not just on the original build, but more importantly on the parts and the repair side of the business. And a lot of it’s an experience factor level. All the suppliers in our industry lost a tremendous amount of experience due to the pandemic. And it’s taking time to get that back, to get the turn times, down to where they need to be. And when you have higher turn times, that not only delays the entry into service, it also causes costs to go up.

Stephen Trent: I appreciate that, Ed. Thank you. And as my follow-up, I appreciate as well what you mentioned on the Latin market doing well. Any high level color respect to – with respect to sort of deep LATAM versus short haul LATAM. I mean I presume a lot of the uplift you’re seeing is from the JBA spooling up, but just wanted to make sure I understood that correctly. Thank you.

Glen Hauenstein: Yes. I think you described it perfectly. There’s a little pressure on the short haul LATAM, particularly on the resorts, where a lot of capacity was added by the industry year-over-year. But we’re having really incredible performance into deep South America as we continue our coordination of launching the JV with LATAM. And we’re very excited about the short-term and the long-term prospects there.

Stephen Trent: Great. I appreciate that, Glen, and thank you very much.

Operator: Thank you. Your next question is coming from David Vernon from Bernstein. Your line is live.

David Vernon: Hey, good morning, guys, and thanks for taking the question. So Dan, as you think about what happened in 2023, as far as kind of the cost creep that led us to a little bit of a higher cost position than maybe you would have thought in the beginning of the year. Can you give us a kind of rundown around kind of what you missed in 2023? And then with that as kind of a backdrop, talk to some of the sources of risk that you might see for that most single-digit outlook for CASM, MAX in 2024.

Dan Janki: Yes, predominantly, yes, David, certainly, two drivers. First, we flew less capacity and kept the cost into invest back into the business. That was one. And the second piece was what we talked a lot in the second half of the year was the investment in maintenance and the cost associated with maintenance. And those were really, when you look at where we were, from what we got it to where we ended up just over plus two, those were the single two biggest drivers associated with that. When you think about that as we go into New Year, four here, a lot different backdrop as we’re in a more normalized growth environment. When you’re thinking and planning and the teams are executing the 3% to 5% growth versus 17% to 20% growth, the focus really less on this training and hiring and the restoration of the airline and our operating teams are focused on the operational performance and fine tuning that.

And as you do that, that sets the stage to drive the efficiency. And things that we actions that we took in if we are paying off, if you look at the maintenance doing a lot of work and there’s a lot to still go. But the fourth quarter performance aircraft out of service down 30%, maintenance cancels down over 80%. So that those actions that they’re taking around, proactive reliability, getting the touch time on the aircraft, paying dividends, but that’s really what allows us when you’re in that normalized environment, you can really stay after that consistently day in and day out. That sets the stage for the execution around efficiency.