Delta Air Lines, Inc.

1 on your phone to enter the question queue at any time. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations and Corporate Development. Please go ahead.

Thank you, Matthew. Good morning, and thank you for joining us for our September quarter 2025 earnings call. Joining us today from Atlanta are CEO Ed Bastian, our President Glenn Hauenstein, and our CFO Dan Jenke. Ed will open the call with an overview of Delta's performance and strategy and Glenn will provide an update on the revenue environment, and Dan will discuss costs in our balance sheet. After the prepared remarks, we'll take analyst questions. We ask you to please limit yourself to one question and a brief follow-up so we can get to as many of you as possible. After the analyst Q&A, we will move to our media questions. As a reminder, 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. And with that, I'll turn it over to Ed.

Thank you, Julie. Good morning, everyone. We appreciate you joining us today. This quarter's results reinforce that Delta's competitive advantages and differentiation have never been more evident. In the September quarter, Delta's revenue growth and earnings came in at the top end of our expectations. delivering performance that we anticipate will lead the industry across all key financial measures. Revenue grew 4%, led by premium, corporate, and loyalty, reflecting the power of Delta's brand, the financial strength of our customer base, and improving industry fundamentals. We reported pre-tax income of $1.5 billion and earnings of $1.71 per share, with an 11.2% operating margin. Free cash was $830 million, bringing our year-to-date free cash flow to $2.8 billion. We generated a return on invested capital of 13%, five points above our cost of capital, and in the top half of the S&P 500. Operationally, Delta once again led the industry on reliability and customer experience. Through a busy summer, our teams delivered for our customers, and I want to thank them for their outstanding work and dedication. Their professionalism and care create the trust that consumers have in the Delta brand. Sharing success with our people is core to our culture. We've accrued nearly $1 billion year-to-date towards next February's profit sharing because when Delta succeeds, so should our people. I also want to recognize the essential aviation workers, the controllers, TSA officers, federal air marshals, and many others who are keeping our system safe and secure during the ongoing government shutdown. Thank you for your professionalism and your commitment to the traveling public. We're hopeful that Congress will act to reopen the government as soon as possible. Now turning to our outlook. Our fundamentals are improving, and the positive momentum is continuing. Since July, travel demand has strengthened, led by a rebound in business travel, which was up high single digits in the quarter. The US economy remains on solid footing, and our customer base is financially strong. with rising preference for premium products and services. SkyMile's membership is expanding, particularly among younger consumers, and engagement is strong across all cohorts. Consumer spending on the Delta Amex co-brand card is up double digits year to date, with a recent acceleration in travel and entertainment that mirrors the improvement that we're seeing in bookings. Premium revenue growth remains robust. The main cabin trends are improving. Structural change has taken hold across the industry as unprofitable flying is rationalized and carriers not earning their cost of capital adjust strategies to prioritize returns. Against this backdrop, we expect to deliver a double digit operating margin again in the December quarter with earnings comparable to what we earned in the September quarter. This would be at or above our all time fourth quarter earnings performance. This brings our outlook for full year earnings to approximately $6 per share, which is in the upper half of our July guidance range. Free cash generation remains a key differentiator for Delta, and we are updating our full year outlook to $3.5 to $4 billion, growing our cash generation over last year and consistent with our long-term framework as we build a fortress balance sheet. At the heart of our position of industry leadership is a relentless focus, on elevating the customer experience. We're investing across every phase of the journey to make travel with Delta more seamless, personalized, and premium, growing our value proposition to customers. On the ground, we're harvesting the benefits of generational investments in our airport infrastructure. This includes upgraded airport facilities, modernized sky clubs, the launch of Delta One lounges in JFK, LAX, Boston, and Seattle. By year end, Delta One check-in will be available across all of our hubs. We've also partnered with Uber to begin streamlining the airport pickup and drop-off experiences, enhancing convenience from curb to gate. In the year, we're continuing to expand premium seating and enhance service offerings, ensuring more customers can experience our most elevated products. Digitally, we're delivering a connected experience for SkyMiles members, With nearly 1,000 aircraft equipped with fast, free Wi-Fi, well more than all of our U.S. competitors combined, our integrated platform is setting the standard for in-flight connectivity and personalization. Exclusive partnerships with American Express, Uber, and most recently, YouTube, extend SkyMiles further into our members' daily activities, deepening engagement and preference for the Delta brand beyond the flight. And it's all powered by our people. delivering welcomed, elevated, and caring service that reinforces our industry leadership, sustains our durable revenue premium, and underpins our strong financial foundation. In closing, our financial focus remains on profitable growth, margin expansion, and disciplined capital allocation, all aligned with the three to five year framework that we shared last November. As we enter the final stretch of our centennial year, I'm more optimistic than ever about Delta's future. Thank you for joining us today. And with that, I'll hand it over to Glenn to discuss our commercial trends and demand, followed by Dan with the financial details.

Thank you, Ed, and good morning. I want to begin by thanking the Delta team for their outstanding commitment throughout the busy summer season and to our customers for their continued loyalty to Delta. For the September quarter, revenue increased 4.1% year-over-year to $15.2 billion, a third quarter record and ahead of our guidance as momentum built through the quarter. Trends across our business are improving, and customer preference for the Delta brand is showing up in our results. Total unit revenue improved by 0.3% over last year. Importantly, domestic unit revenue turned positive, with sequential improvement as the quarter progressed. This was supported by a main cabin inflection as industry supply moderated and demand improved, materializing earlier than our initial expectations. Internationally, profitability across all entities was strong, with premium continuing to bolster results. Corporate sales trended positively throughout the quarter, up 8 percent over prior year, with sequential improvement across all sectors. Domestic corporate sales grew double digits, including mid-teens growth in our coastal hubs. We see opportunities for further growth as corporate confidence rebuilds, reinforced by 90 percent of our most recent corporate survey respondents anticipating that their 2026 travel volumes will increase or remain steady year over year. Diverse high margin revenue streams grew double digits year over year and contributed 60 percent of total revenue. Within that, premium revenue grew 9% with improvement across all products driven by a strong demand and consistent investment in premium offerings. Loyalty revenue improved 9% and travel adjacent products grew mid-teens as SkyMiles members engaged beyond the flight and throughout our loyalty ecosystem. Fargo revenues increased 19% driven by the Pacific. Maintenance repair and overhaul revenue grew more than 60% on higher volumes and timing of shipments. Delta's loyalty ecosystem continues to be a powerful driver of enterprise value, anchored by the attractiveness of the SkyMiles program, a financially healthy, highly engaged member base, and our exclusive co-brand partnership with American Express. Co-brand holders are among our most valuable customers, traveling more often and spending more on Delta. While roughly one-third of active SkyMiles members hold a co-brand card today, we have further runway as both engagement and member penetration continue to rise. A key proof point is the sustained momentum on spend growth, which has outpaced other consumer credit cards by 2X over the last few years. During the quarter, spend grew at double-digit pace with new card acquisitions up year over year and a record mix of customers choosing the premium cards. With that, remuneration from American Express increased 12% over prior year to $2 billion in the quarter, keeping us on track to deliver over $8 billion this year and advancing towards our long-term goal of $10 billion within the next few years. Turning to the outlook, the environment continues to improve. Over the past six weeks, sales trends have accelerated across all geographies and in every advanced purchase window. positioning Delta to close the year from a position of strength. While we are monitoring potential impacts from the U.S. government shutdown, we have not seen a material effect to date. For the December quarter, we expect total revenue to grow 2% to 4% year-over-year on top of last year's record performance with solidly profitable unit revenues. Passenger RASM is showing healthy improvements sequentially, reflecting continued strength in domestic, and a step-change improvement in the transatlantic on firmer main cabin trends and corporate demand. At the same time, financial divergence across the industry has never been greater. As carriers prioritize earnings, their cost of capital, and eliminate unprofitable flying, competitive capacity in our hubs is down year over year, and we expect a very healthy supply-demand balance across the industry into 2026. In closing, very optimistic as we enter the final quarter, building our momentum and positioning Delta for continued top line growth and margin expansion into 2026. And with that, I'll turn it over to Dan to cover the financials.

Thank you, Glenn, and good morning to everyone. Delta's competitive advantages drove another strong quarter. As we continue to set the pace for the industry, our teams are delivering operationally for our customers and driving efficiency. Year to date, we are outperforming the industry across on-time performance, completion factor, and net promoter score. Our premium offerings, industry-leading loyalty programs, and elevated experiences we provide across the entire travel journey is driving increased customer preference for Flying Delta and underpins our differentiated financial results. In the September quarter, we delivered record third quarter revenue of $15.2 billion, with an operating margin of 11.2% and earnings of $1.71 per share. Non-fuel unit cost growth was approximately flat the prior year, bringing the year-to-date non-fuel unit cost growth to less than 2%, consistent with our low single-digit guidance at the start of the year, even as we've reduced capacity after the summer peak to align to demand. I want to thank the entire Delta team for their hard work to achieve these results. Delta generated third quarter operating cash flow of $1.8 billion. And after reinvesting $1.1 billion into the business, we generated free cash flow of $830 million. On our capital structure, we continue to take an opportunistic approach. Last month, we successfully repriced our SkyMiles term loan. reducing the rate by 225 basis points. This demonstrating the strength of our balance sheet and the attractiveness of Delta Credit. Strong cash generation has abled debt pay down of nearly 2 billion year to date, with gross leverage ending the quarter at 2.4 times. Now, turning to the outlook. For the December quarter, as Glen shared, we expect revenue growth of 2 to 4% year over year, with positive unit revenue. On the cost side, disciplined execution supports non-fuel unit cost growth in low single digits in line with our full year guidance. With that, we expect fourth quarter earnings of $1.60 to $1.90 per share and an operating margin of 10.5% to 12%. For the full year, this brings earnings per share of approximately $6. in the upper half of our guidance range we provided in July. On free cash flow, we are updating our guidance to $3.5 to $4 billion. This outlook is within our long-term target range, enables us to pay down debt while returning cash to shareholders. Our capital allocation priorities remain unchanged, reinvesting where returns are strong, reducing debt, and maintaining our Fortress investment-grade balance sheet. which was recently recognized by Fitch with a revised outlook from stable to positive during the quarter. Our investments are focused on the customer experience, as Ed and Glenn spoke about, and on driving efficiency through technology and our fleet. We continue to advance our fleet renewal strategy with approximately 40 aircraft deliveries this year and next. These additions drive meaningful value for our customers through expanded premium seating and for our shareholders through increased efficiency and greater scale among our key fleets. Looking into 2026 and beyond, our focus is on profitable growth and delivering long-term financial targets outlined at our Investor Day last November, including earnings growth, durable free cash flow, debt repayment to drive sustained value for our shareholders. In closing, I want to extend my sincere thanks to the entire Delta team for their commitment to one another and to our customers. And with that, I'll turn it back to Julie for Q&A.

Thank you, Dan. Matthew, can you please remind the analysts how to enter the call queue and go to our first question from Dwayne Finneyworth of Ever4ISI.

Certainly. Everyone at this time will be conducting a question and answer session. Once again, if you have any questions or comments, please press star then 1 on your phone at this time. Your first question is coming from Duane Finningworth from Evercore ISI. Your line is live.

Hey, thank you. Good morning. With respect to the strong improvement in cash flow year-over-year and operating cash flow, can you just expand on the drivers of that improvement? How much of that is just the working capital benefit of maybe – the booking curve normalizing versus earlier in the year. Maybe there's some dynamics around MRO. Any thoughts you have would be helpful.

Yeah, certainly, Dwayne. Thank you for the question. Year-to-date, we're on track to where we were last year on similar earnings. And that's even with actually a headwind as it relates to the booking curve. As we talked about over the summer, that spring and summer, that compressed, it's starting to expand significantly. We haven't yet gotten all that back. We expect more of that to materialize here in the fourth quarter, and the underlying improvement to offset that is coming out of working capital. We built up a lot of just, I won't call it inefficiencies, but excesses. We're rebuilding the airline, and now's our time as we drive efficiency to work that off, and you're seeing that in working capital.

Thanks. And then maybe, Glenn, for my follow-up, one of the questions we got from a generalist this morning was, can you put the corporate recovery in context, excluding any benefit from a CrowdStrike comp? In other words, are we fully back? How would you put this corporate recovery in context? Thank you.

Yeah, I think we're well beyond where the CrowdStrike impact was from last year, and we're seeing similar results to what we disclosed in the third quarter earnings moving into the 4Q. And I just remind you and other people on the call that while corporate revenues have recovered to 2019 levels and are actually slightly above those now, that the number of passengers that are booking because fares are higher are still in the high 70s. So we think as business continues to normalize, we have a lot of runway to continue to expand the corporate demand.

Thank you. Thank you. Your next question is coming from Tom Fitzgerald from TD Cowan. Your line is live.

Hi, everyone. Thanks very much for the time. I was wondering if you could unpack the improvements you're seeing in the domestic market and how much that might be unique to you, just given your exposure to higher income households.

Well, certainly, I think there are exposure to higher household income cohorts. has enhanced our relative position versus carriers that are catering to a more stressed, lower to middle income environment. So we'll see as everybody else reports, I can only speak for Delta in the strength that we've seen and continuing to accelerate as we head into the fourth quarter.

Okay, that's really helpful. And then just kind of on the same topic, I was wondering if you could unpack some of the mixed shift benefit that you might see as we move into 2026 and 2027, as you take on delivery of new aircraft. Thanks again for the time.

Well, we continue to invest in the higher-end products, whether or not that's opening up new Delta I lounges or check-in areas. And so as we continue to take delivery, they come with a higher mix of premium products. And if you look next year, well, we haven't given any guidance, but Most of our growth, if not almost all of it, will be in the premium sectors. Yes.

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

KATIE O' Hey, good morning, team. Thanks for the time. Maybe one for Dan, you know, not asking for 2026 guidance, but this year your unit cost performance benefited from efficiency gains from growing into your workforce and your fleet and your airport assets. I guess what inning are we in in that efficiency growth, and are there further tailwinds from this into next year?

Yeah, we talked a bunch about this at the investor day last November, and all those trends are intact. We certainly are still in the early to middle innings where we believe over the term we can continue to drive efficiency by growing into that workforce, continue to get growth in the generational airports that we've built that are actually in our run rate, the investment that we've made in fleet as we get scale and efficiency as we continue on the fleet renewal. And then the other element that we talked about is just the role of technology. and that it will have in regards to enabling our workforce and giving them tools and transparency, just be more efficient. And we think that is certainly in the very, very early innings of the unlock. And we have years of that in front of us.

Yeah, that's great. And then my second one is actually a bit of a follow up to Tom's. I wanted to dig in a bit on domestic main cabin turning positive specifically. Can you give a little more color there? I know one driver of that is that domestic main cabin seats for Delta are down year over year. Can you tell us by how much, and then maybe the converse of that, I know back in August when I was in Atlanta, we spoke about how you're adding, you're doing some retrofits to add incremental Delta comfort seats this year. What does this year's retrofits do for premium seat mix into next year? I know you said most of next year's growth driven by premium seats, but just wondering specifically how the retrofits contribute to that as well. Thanks so much.

Right. Certainly, as we continue to the premiumization, if you will, of the Delta ecosystem is really dependent on two things. One is the retrofits, which you mentioned, which accounts for probably about 25% to 30% of the incremental premium seats, and then new aircraft deliveries that are continuing to come with a higher mix of premium as they roll out of the factory. So both those contributing to the continuation of improving the experience for our customers. And then lastly, on main cabin demand, we have seen an inflection. Our main cabin seats are down slightly. They're not down significantly from last year, so relatively flat. But what we have seen is the rationalization of capacity in many of our hubs. As a matter of fact, if you look forward through November, capacity in almost all of our hubs is down year over year from competitive sets, which is allowing us to rationalize the seats that are there and continue to drive unit revenues up.

Really helpful. Thank you.

Thank you. Your next question is coming from Jamie Baker from J.P. Morgan. Your line is live.

So, you know, for Glenn, premium revenue growth exceeded that of main cabin by 13 points. That's obviously a new record. And I guess my question is a bit of a follow-up to, you know, Katie's. I mean, obviously part of the outcome is driven by weakness in the low-end consumer, but can you drill down a bit deeper on, into actual changes in consumer behavior. For example, if you look at SkyMile's member behavior, how much premium growth is driven by your more affluent members taking more trips versus maybe less affluent flyers trading up to a better experience. You know, there seem to be so many moving pieces to explain the 9% rise in premium, the 4% contraction in Maine. We obviously know the outcome is great, but any further comment on the specific building blocks would be helpful.

Well, Jamie, I think, you know, we've been outlining this for many years that we think that premium still has a long runaway. And as you know, following this industry for a long time, we were not selling premium seats 10 or 15 years ago. We were giving them away. And the reengineering of the whole purchase process where we made them much more affordable and much more attainable has allowed people to buy up into those categories. And we've always said that we aren't really at the end state in terms of getting the distribution systems where we need them to be. to make sure that those products are being displayed to consumers or agencies the way that they need to be. And that's been a long journey, too. So, yes, it's been a transformation. And, yes, all of the above are true, that people are attaching to these products, and then the repeat rate on them is incredibly high. And I think in previous calls I've equated it to the car that you drive today. Is it better than the first car you had? The answer is probably yes. And you don't see many people going back to cars that are worse. And I think once people get used to traveling in a certain product, whether it's Comfort Plus, Delta Premium Select, or Delta One, they tend not to go back. There are retention rates in the mid 80s. And so the intent to repurchase very high, the continuing to expand, the availability of the products, the price points on the products. And this is a journey, a long journey we're on. So I think it's a great question. And I think we see that there are many, many more opportunities in premium in the coming years.

I appreciate it. Jay, if I could add to that. Yeah. A couple of things. There's also, you need to look at the geographies, right? Look at the investment we've made in LA and Boston and New York and, you know, the coastal investment in Seattle. That's where a considerable amount of premium lives. And Delta historically wasn't as big in those markets as we are now and Not only have we moved in there, we've built generational experiences through the airports, the Delta One lounges. Corporate travel is our bread and butter. We are the very best at it, very best serving it. Corporate travel is premium, right? And so all of these things go in, as you said in your question, there's a lot to that. But we see a considerable amount of continued momentum forward in premium. And the question we get from customers all the time is, when can we get more?

Well, thanks for that, gentlemen. And that actually leads to my follow-up. What does the Venn diagram look like between premium and corporate? So if J.P. Morgan buys me a main cabin ticket to Miami, that's clearly going to show up as corporate for you. It's going to be on our discount. But if J.P. Morgan buys me Delta One to Los Angeles, I guess that counts as both corporate and premium.

Yes.

So could you quantify sort of what that overlap?

One percentage of premium is corporate? Yeah. It's probably 30% to 40%. We can get the exact number. Okay.

Okay, good.

More and more, more and more, and I think this is the exciting part for us. If you think about one of the issues we had many years back, the difference between yields on corporate and high-yield leisure were very, very different. And so it was a steep cliff if you weren't filling your planes with corporate on what you had to fill them with. And now those adverts, in some cases, corporate personal leisure is higher than corporate these days. So it's given us a really nice ability to manage. And one of the issues we've had with our team that we've been working on is sometimes we run out of seats for corporate and we have to go and put more seats in market because corporate was getting squeezed out by higher yielding leisure.

Excellent. And if I could just be the third follow-up, just because you brought that point up. You had said 2027 was the year in which premium would overtake main cabin. Any reason we wouldn't see that occur in a quarter or two next year?

I think you will.

Okay. Thank you very much, everybody.

Thank you, Jeremy.

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

Everyone. Thank you. Glenn, you had a chance to talk about your first car. I think it was the Rambler. I think you referenced that a couple, a couple of months ago. Maybe we can stick with the premium discussion because there still seems to be a fair underappreciation for what's going on here. I think out there. So like, Obviously, the revenue growth on premium versus main cabin has been very, very strong for quite some time. But I was hoping you could talk about the profitability of the segments of the cabin. I mean, should we look at the gap in just the terms of the growth overall as a good benchmark for the differences in overall contribution? There seems to be another step function change coming on seat mix. So it just seems like there's a further step function change coming on profitability as well. If you could just talk about the segments on a profitability standpoint, that would be helpful.

I just think that when you think about what's different and what's changed over the last 10 or 15 years, the premium products used to be lost leaders, and now they're the highest margin products. That's really the headline. And really in descending order of their premiumness is their margin. So the best margins are in the most premium products. and you just work your way down. Now, we've had some convergence on Delta premiums alike, which has actually been so popular as we've introduced it that the margins are starting to converge with D1, and we're working on separating those back out again. But, you know, really exciting opportunities. These are relatively new products for the airlines. We've only had them, and we've only been selling them, and we've only been selling them in widely available distribution for less than 10 years.

Interesting. Correct. Maybe on corporate, just to follow up to Dwayne's question in general, I got a similar question as well. So I know that there's some CrowdStrike noise within it, but the 8% number is obviously a lot. And if you look at some of the other travel industries out there, they're not calling out a gain like that. So to me, it seems like you're driving additional share gains. Or maybe you could just talk about how the overall market is expanding in general and how you're continuing to drive share. Thank you.

Well, first of all, I'd like to call out our sales team there, the best sales team in the industry. They're doing an amazing job for us. And clearly we are continuing to take share on the margin. So, you know, we monitor our share and then we reconcile it later. But I think, you know, we're seeing mild gains in total share and certainly higher gains in revenue share. But, yeah, there's a lot of opportunity as we look forward here is that, corporations are still not traveling in the volumes they did pre-pandemic. And so as that travel continues to come back, and I think we could look at third quarter sales and take the CrowdStrike out of it. We're still in the double digits.

I think what I'd add on corporate, because I've heard it a couple of times, that somehow it might be driven by CrowdStrike. Actually, that 8% September was higher than 8%. It was 9%. And that didn't have CrowdStrike in it. So I think there's real momentum here with corporate. It's across all the segments. This hasn't anything to do with the technology outage.

Yeah, one other thing, Connor, I'd add is corporate suspended travel in the early part of the year. So there is also what was some level of pent-up demand to get back out, and I don't think you can underestimate that. I don't see that stopping, by the way, because, you know, our outlook when we ask the corporates, they're going to continue to grow. But there was clearly for four or five months, This spring, we were not seeing any corporate growth, and then they all got back on the road together at the same time.

So, yeah. Awesome. Thank you.

Sales up into this week are staying at or above the numbers we disclosed before.

Awesome.

Thank you. Thank you. Your next question is coming from Andrew DeDora from Bank of America. Your line is live.

Okay. Good morning, everyone. Maybe, Glenn, switching gears a little bit and speaking about Atlantic here, obviously rising down 7% in 3Q. I know you spoke about a step function change happening here, but I doubt you're expecting to get back to flat in 4Q. But maybe could you speak to how Atlantic performs throughout 3Q and kind of what you need to see in order for that entity to climb back to flat unit revenue?

Well, yeah, I think... Third quarter was clearly disappointing, and I think it was a host of things. Some of it might have been our fault in terms of where we thought the booking curse would be and how we held out for higher fares. And so next year we're going to be much more aggressive in building a solid book earlier in the year. I think the other thing was the booking, as Ed refers to it, as the spring swoon. When the spring swoon was happening and everybody got a little nervous when tariffs were introduced, That was the booking window for the latter part of the summer. So that had some impact on the main cabin as well. And then finally, I think we've discussed earlier is that given that the cohort on the premium products is really in their 60s, the fall has become a relatively more attractive period than the summer in terms of high yield leisure. So it's a combination of all three. So we're going to attack it multifaceted next year, I think, You know, we're going to hopefully not have any kind of swoon in the whole demand set. We're going to be a little bit more aggressive in terms of main cabin and filling up those cabins earlier in the bucket curve. And then we're going to adjust our capacity to make sure that we're not creating the church for Easter Sunday in July and August. We're going to flatten that out more for the summer out of season to have a better distribution of capacity.

That's interesting. Thank you. And then, since you spoke about kind of margins within the cabin, curious if you'd be willing to rank your geographies by margin performance thus far in 2025, and maybe how you expect that to change, if at all, heading into 4Q in 2026. Thank you.

Historically, we had a domestic premium and an international, and I'm not going to go beyond the international as a whole, but this year, they're relatively similar. They've converged on each other, and You know, we're going to have a race. We've got our domestic for 26, our domestic improvement versus our international improvement, and we're going to compete them against each other and see which one can generate the higher returns next year.

Great. Thank you.

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

Oh, yeah. Hey, good morning, everyone. Hey, Glenn, back to you. shutdown. If you sort of think back to 2018 and 2019, when did it start to bite? I mean, we're day nine in and what, can you recall what that financial impact was to Delta?

We said at the time it was a little bit less than, it was about a million dollars a day. Now it's less than a million dollars a day for various reasons. One is that, uh, DCA travel was off even before. So, uh, So, you know, DCA has not been a real driver in terms of revenue improvement this year. So less than a million dollars a day now, and it was about a million dollars a day previously.

Great. And then just a second quick one here. I thought it was interesting you called out Austin in your release. Clearly non-hub flying. Historically, non-hub flying tended to be lower margin, RAS and dilutive. What's changed? What makes the Delta product? Oh, maybe I'm answering the question. I'll leave it to you. Why is it different this time? Thank you.

I think, you know, we used to look at the airline at a route level, but that wasn't really thinking about what's inside the minds of customers and, you know, what makes customers choose Delta over a different carrier. And I think the answer is relevance, right? If we're not relevant, We cannot acquire the SkyMiles. We cannot acquire the credit cards. And so the ecosystem, you have to have relevance. And that's why it's important for us to have focused cities. And those focused cities have been quite profitable for us, sometimes exceeding that of the hubs. And so we're continuing to invest in focused cities. We don't have a lot of them. But the ones we do have, we've chosen for specific reasons. And let's say Austin, we've chosen because we don't have a Texas hub. Everybody else has a Texas hub except Delta. And as you know, Texas, in and of itself, is a huge revenue market. So seeing those opportunities, looking at the demographics, looking at the GDP of generation for these cities, and saying, where do we need to have a relevant offer so that people will join our SkyMiles program, they will join and get our credit cards and we can produce a relevance.

Very good, thank you.

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

Good morning guys and thank you for the time. I want to maybe follow up on the Atlantic comments. So two questions there. You know, how do we think about Atlantic capacity next year? Glenn, you mentioned more evenly dispersed. I guess, how are you thinking about that? And maybe secondly, given your competitor just announced some new additions, how are you thinking about competitive capacity, your own network planning, as well as the A330-350 product?

Well, I think our product is best in class in the transatlantic. We continue to monitor our relative performance in terms of net promoter scores, and I think it's leading right now, and it's going to get much better as we continue to deliver new airplanes with – the Delta I suites and with the enhanced Delta Premium Select and larger Delta C-plus cabins. So I'm really excited about the product that we're putting in market. We've chosen not to fly narrowbodies in the transatlantic because of product and brand issues. And so we're not going to go in that direction. But next year's capacity, I don't know. I mean, I think it's early in the game. Not everybody's announced what they're going to fly. And usually everybody announces what they're going to fly, not what they're not going to fly. And so that usually follows after what we're going to fly next year. So we'll see how it all shakes out. I think it's going to be probably low single digits. And as far as our summer, we'll be probably in the very, very low single digits, if growth at all, in the very peak months of July and August, with a slightly higher shoulder season, which is becoming more peaky.

Great. Thank you.

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

Hey, good morning. I wonder if you could share what you're seeing on the Latin America side, perhaps kind of broken out by near international and long haul.

Latin America, long haul, short haul.

Yeah, long haul has been very solid for us. It comes into season in the winter. It's looking for a very good, strong winter season. Short haul has been a mixed bag. Caribbean doing well. Mexican beaches under a little pressure, but all still very profitable for us. So continuing to make investments in those regions.

That's helpful. If I might, on the maintenance side, Dan, community has Do you expect 2026 to be above or below in terms of heavy maintenance events? And setting that aside, like what are you seeing in terms of inflation on maintenance parts? Is that getting better?

Savi, I apologize. We weren't able to hear you clearly on this side. I know it related to 2026, but I couldn't hear the context of the question. Could you repeat it?

Sorry about that. On the maintenance side, Do you expect 2026 to have kind of more or less heavy maintenance events? And beyond the events, just on inflation, just what are you seeing on that maintenance and parts? And is that improving from kind of heavy levels?

Yeah, we're still in the early stages of our planning for 2026. So we haven't worked through all our capacity and maintenance. More to come on that as we work through the fall here. As it relates to Inflation, yes. You know, I think that's still one part of the supply chain, both as it relates to material availability, to repair, to components. All those have had inflation above the normal. They're coming more in line as the industry continues to get better, but it's got a long ways to go. We've kind of said that that part of the supply chain is multi-year in nature as it relates to the opportunities in front of it to any aspect of it you can look at. The turn times and performance are still not at levels that we experienced in that 17, 18, 19 perspective. And as those come more in line and get healthier, you're going to see greater efficiency out of that.

Understood.

Thank you. Thank you. Your next question is coming from Scott Group from Wolf Research. Your line is live.

Hey, thanks. Good morning. The fourth quarter earnings guidance is basically the same as Q3 earnings. And we've never really seen that before, I guess, if you exclude CrowdStrike last year. I guess I'm trying to understand, do you think this is just the new seasonality that makes Q4 a lot stronger? Or would you say maybe that you under-earned in Q3? And maybe it's some of both. I think the implications for how to think about next year would be different based on how you think about that dynamic.

Yeah, fourth quarter, it's actually at or slightly better than third quarter. And I think it's being driven by strong premium demands and corporate travel in season. So we have a nice long season. If you remember last year, we had the election. And in the October period, we had the country kind of froze right before the election and unlocked a little bit after the election. But we had that period. We also have some favorability in terms of the calendar. So I think fourth quarter, as long as business is traveling, is a very strong quarter for us. And I think in third quarter, particularly in the transatlantic, we are going to strive to do better in next year's third quarter because we think we have some opportunity if we had to replay that to improve our results on the margin.

Okay. So maybe some of both. And then about a point of the revenue growth in Q3 was from MRO, maybe a little help from cargo. Is that sort of sustainable into Q4 and going forward, that MRO strength?

The MRO over the long term, yes, you're going to see it. You won't see it every quarter at 60% plus. I'd say both the second and third quarter were quite strong as it related to MRO. For the year, you think of it more in that 20% to 30% range, but we would like to see many years of MRR growth, well above the growth of the core airline and being double digit. But you won't see it at those levels. You'll see much, actually, I think as you, fourth quarter is probably closer to flat year over year.

And on cargo, great third quarter. And a shout out to our cargo team. I think they did a fabulous job. We have seen some I'd say choppiness as we enter the fourth quarter, and we'll see what the final result is, but I wouldn't expect that the 19% would be sustainable into 4Q. It's probably going to come down from there, and we'll see, but still probably growth in cargo.

Thank you, guys. Very helpful.

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

Great. Good morning, everyone. Glenn, maybe a couple of follow-ups to your earlier comments, kind of specifically focused on 1Q. Can you help us understand how you're thinking about 1Q network planning, just given all the continual noise that continues to be out there, and also what happened last year with the kind of close-in weakness and corporate and everything else? Are you treating last year as a one-off, or are you kind of being more cautious going into next year because of that?

I think we're going to head into 1Q the same way we're exiting 4Q, which is with a very strong backdrop. And the quarter we know the most about is the quarter we're in, and the quarter we know the least about is the fourth quarter of next year. But as the first quarter comes into focus, the demand is looking quite robust. And so let's hope that that spring swoon doesn't occur again next year.

Understood. And just on that topic of 1Q and focusing on Transatlantic, you guys have been talking about that shoulder season strength for some time now clearly manifesting right now. Last year in December, you said that 1Q of 25 in Transatlantic. was setting up for one of the strongest years you've ever seen, and part of that was driven by a favorable U.S. dollar. The dollar is not as favorable right now, but are you, from what you can see right now, do you see European strength continuing into 1Q26 similar to what you saw coming into this year?

Yes.

Easy enough.

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

Hey, good morning, and thanks for taking the question. Maybe this one's for Ed or Dan, but you guys, I think in your prepared comments, talked about your long-term goals of margin improvement. And I think everyone would agree on this call that airline stocks could be pretty cheap, but maybe margin growth would really be welcomed for investors. So I guess in that context, what is in your control here as you're looking to 2026? I'm not necessarily looking for guidance, but Does it just have to be a market that's growing capacity a lot less than we have in the past few years? Or is it all these things that we're talking about on the commercial side that just gain more momentum? And what can you do on the cost side as well? I think Dan was just hinting at efficiencies there, too. Thank you.

Yeah. You know, I think I'd point you back, thanks for the question, to a lot that we talked about last November. There were a lot of things in there that we talked about that were Delta specific as it related to things that are in our control as we look forward. And we want to drive, we run the company for margins. We want to drive margins up into the mid-teens as we laid out. And we feel that the playbook and the strategies and priorities in front of us enable us to do that. Starts with those growing up. High margin revenue streams faster than the core. Premiums at the core of that. We talked about premium seats growing. Main cabin outpacing main cabin. So you have more product out there. Continue to grow the Amex relationship and loyalty faster. So those are things that help you as it relates to the top line. The fleet renewal supports that. And then you look at the things that we want to do that and still drive revenue. good cost performance of low single digit. And again, it goes back to the growing into the airports that are already in our run rate. It goes into the fleet actions that we've been growing of simplifying the fleet and getting scale out of it associated with it. And then long-term continue to grow and get more efficiency out of not only our workforce, but the entire supply base, but also the benefits that technology bring to it. So we want a steady march over time of of doing that. Now, certainly, the industry backdrop could be beneficial to that. Supply and demand stay in balance. There's real opportunity for that also to support additional margin growth in excess of the things that are delta-specific and controlled.

Just maybe as a really quick follow-up, I think you guys said co-brand spend was up 12%. I might be off on that, but Do you talk to some of the loyalty drivers right now and how sustainable that is looking into next year?

Well, I think it's been driven by two things. One is the premiumization of the card itself. So we've been acquiring a record number of premium card holders, and their spend is multiple of what our base member card spend is. So while you look at the total acquisition numbers and say, I think this is our seventh year of a million or more acquisitions, that the mix of those acquisitions is skewing higher and higher in terms of reaching a more premium audience. And those customers have better credit scores, so they get approved more often, and they spend more on their cards. So that's been really one of the key drivers for us, is not only in the total volume, but the number of premium cards that we've been able to acquire. And that's driven versus our 2x growth versus total card spend. And that's been year after year that we've been able to do that. looking to continue to do that through 26. And the more attractive and the more, you know, if you think about the question that was preceded about why Austin or why Raleigh, well, these are high-income growth areas. These are places that we've acquired a lot of cards in, and trying to understand the interaction between the airline and the card and how to maximize both of those together as opposed to just looking at an individual route.

Thank you, Glenn. Thanks, Dan. Thank you. Your next question is coming from Tom Wadewith from UBS. Your line is live.

Yeah, good morning, and thanks for the question. Wanted to see if you could give maybe a little bit of additional sense of the, you know, looking at 26, you know, you're saying that you'll be in line with the multi-year view, so let's say 10% earnings growth, something like that. Do you assume that you get to, you know, revenue growth, low significant budget revenue growth, some kind of revenue growth in main cabin? Or should we think about this where you really get there with the good visibility you have on the premium and card and other things, and that, you know, you kind of get to that multi-year growth without a meaningful swing up in main cabin?

Well, I think we've already seen an inflection in main cabin, which is very exciting to us. And You know, the trends that we see today are probably the trends that are going to carry us at least through the beginning part of 2026. So I would expect that main cabin does have improvement as part of our base revenue assumptions for 2026. And on top of that, the continued growth of the premium products and the card spend as well. So, yeah, I'm excited about the fact that we have finally inflected in the main cabin.

Okay, but you wouldn't necessarily see that as upside. That's kind of assumed within getting to what the multi-year is.

We haven't given any guidance on that yet.

Yeah, okay, okay. I appreciate that. That's fair enough. The improvement in main cabin, do you think that that's like, you know, I think the consumer and especially kind of lower-end consumer is, you know, it's unclear whether, you know, how optimistic you should be. So, Do you think that what you've seen in the sales trend that's been favorable is that consumer is flying more? Or do you think it's just Delta share and kind of industry capacity rationalization that's been beneficial? Or what do you think the kind of bigger driver would be of that improvement you see in 4Q and carrying into 26?

You know, at the low end of the industry, there's been a lot of seats removed. And that's allowed us to get a footing on fares. I think when you think about the financial performance of the carriers that are catering to the lower income customers, they have not been good. And some have had to declare bankruptcy. And it's the restructurings that they're going through and having to get higher fares. They need more money to survive. And so we had one of our competitors say something about it's just math. Well, it is just math. They have to get their fares higher in terms of – and that helps us get a footing on our main cabin as well.

Matthew, we'll now go to our final analytics question.

Certainly. Your last question is coming from David Vernon from Bernstein. Your line is live.

Hey, good morning, team, and thanks for fitting me in here. So, Glenn, maybe just a quick micro question for you in terms of the competitive capacity being down in Delta hubs year over year. I'm wondering if you're seeing any kind of difference in domestic revenue trends in your hubs versus some of the point-to-point leisure markets. I'm trying to get a lot of questions about whether kind of what you're seeing in main cabin is going to be an industry-wide thing or more of a Delta-specific thing.

Well, we have three categories. We have coastal gateways, we have core hubs, and then we have focus cities. And they've all been behaving well. I'd say the biggest improvements have been in the coastal cities where we've seen a big uptick in These are also the biggest and wealthiest cities in the country, the New Yorks, the LAs, the Bostons, Seattles, where corporate travel is significantly improving year over year and our share is improving. So that's really been a big driver of it. And the hubs have been performing very, very well. And our focus cities, the ones that we're investing in, are as expected. So yeah, I think it's a broad brush improvement from where we were just 90 days ago.

Excellent. Thanks for that. And then maybe just if we kind of step back for a second, coming back to the commentary around earnings consistent with a long-term financial framework, given the weakness and the weirdness, frankly, of 2025 with the second quarter slowdown, some of the irregular ops days, I mean, if we don't have something like that repeat, is there any reason to think that we shouldn't be at the upper end of the framework you guys have laid out and passed and just thinking just Edwin Walker- The concert is going to be so much easier in for for for a big part of next year that that maybe we shouldn't be thinking that i'm wondering if there's a reason we shouldn't be thinking it would be at the higher end of your your longer term financial framework.

Dave Kuntz, I David said i'll take that. Dave Kuntz, You know we haven't given 26 specific insights you know, have we completed our planning process so we'll probably be better equipped to talk about that towards the end of this year early next year, but no question we saw some pretty pretty strong edwin's. that came quite abruptly, hit us in late January, early February. We had the aircraft incidents, which certainly hurt revenue growth in some important markets. You had a lot of the trade uncertainties, while consumer confidence plummeting, and to the point where Delta, as you recall, we wound up pulling our guide. There was so much uncertainty for a short period of time. No question that we have some tailwinds as we look forward into the new year. And if today's environment projects into 26, I think 26 is going to be a really strong year.

All right, that's very helpful. Thank you very much for the time.

All right, Matthew, that will wrap up the analyst portion of the call. I'll now turn it over to Tim Mates to start the media questions.

Thank you, Julie. Matthew, as we transition from the analyst to members of the media, if you wouldn't mind, please, describing how best to enter into the call queue and the process for one follow-up, please.

Certainly. At this time, we'll be conducting a Q&A session for media questions. If you have any questions or comments, please press star then one on your phone. Please hold while we poll for questions. Thank you. And once again, everyone, if you have any questions or comments, please press star then one on your phone. Please hold while we poll for questions. Your first question is coming from Leslie Joseph. Your line is live.

Hi, everyone. We've seen Amex, Chase, and some others raise credit card fees. Just wondering if you see any pushback from customers in terms of acquisitions on your end, if you think that Credit card annual fees at least can keep going up. And then my second question, also seeing really long upgrade lists, which I guess would be good for you guys because you have a lot of elites, not just on your airline, but others. And curious how you're managing that and if the percentage of paid seats in premium has gone up since the last time you've updated everybody. Thanks.

And card fees. But we also injected a lot of value for customers. And we had a record acquisition in that this year. And so we're very pleased with the results. I can't really comment to the results of Amex or Chase. But I would say, as long as you're providing more value to the customers, it seems like a pretty safe bet that there's going to be strong demand for those premium products across the spectrum. And in terms of our standby list, yes, there's There's a long standby list, and we have a lot of premium customers, and that's one of the reasons we've expanded our Comfort Plus offerings because our most elite customers are allowed to upgrade into those products at time of booking, and we didn't have enough of those. If you look across the spectrum, we were generally sold out of Comfort Plus early in the booking curve, and now being able to increase that so we can accommodate more of our most premium customers with premium offerings at time of booking.

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

Hi, good morning. In your forecast for transatlantic travel, I'm wondering if you still expect that to be mostly driven by U.S. point of sale, or do you see a rebound from non-U.S.-based

You know, it's always been U.S. point of sale driven. And so the question is, how U.S. point of sale will it be? You know, our point of sale revenue on a revenue, we're approaching 80% U.S. point of origin. So, yes, that we hope that there's going to be more. The dollar, of course, has strengthened. That makes coming to America more of a bargain. for customers and so hopefully we see that translate into a little bit higher European point of sale, but we are mostly a U.S. point of origin driven company.

What are some of the other factors that are ongoing that you see constricting non-U.S. point of sale? Is it still some of the concerns over immigration policies, things like that?

clearly safety concerns. There's a whole host of concerns of travel to the U.S., but I think we still have a great product here, and we have great cities, and we have people with relatives and friends and family, and so there's going to be demand. The question is how much demand, and the good news for us is we're not totally dependent on that. It's not our core business, but I would expect hopefully that next year is a little bit better than this year for European point of sale. For nothing else is that the appreciation of the Euro has made European fears look relatively more attractive.

And Mary, this is Ed. The conversation, it's also on the margins. It isn't as if Europeans have stopped traveling. They're still traveling in large numbers. The numbers may be down 5%, 7% in some of the markets. Long term, we think our business model is very healthy for global and you're going to continue to see us pursue that.

Great. Thank you very much.

Thanks, Mary, and congratulations. Matthew, let's squeeze one more in, please. Certainly.

Your last question is coming from Neeraj Chokshi from New York Times. Your line is live.

Hey, thank you. I was just curious, you know, there's some talk about the industry sort of bifurcating, you know, Delta and United on one side doing very well, and then sort of the rest. Brett KenCairn, But you know, I guess, do you agree with that that assessment and then, if so, is it structural is it a sort of industry phase just sort of curious to get your sense of what's happening.

James Pfeiffer- it's clearly happening. James Pfeiffer- If you look at the results this quarter, as I mentioned on CNBC this morning, we expect 60% of the overall industry profits to be driven by delta expect the rest of it probably to be driven by united. largely, and then you have everybody else. And this is not a new phenomenon. This has been happening really since COVID hit over the last four or five years. You know, there's a lot about the industry fundamentals that have changed that we at Delta are driving a much higher level of quality experience, whether it's reliability, whether it's the product and services that we offer. whether it's the partners we're bringing to the table, whether it's the expansion internationally. And if you are in a category that is seen as more of a commodity purchase, they're having a very difficult time. The cost structures have increased as labor costs have gone up. It's been very difficult to get airplanes to get supply growth. Those lower-end models depend on high growth. And there's a lot of congestion in the U.S. marketplace in terms of the sky. So I think the bifurcation you're seeing is going to continue. And eventually there will need to be rationalization to enable the lower end of the price spectrum to continue to sustain itself, to be able to continue to attract capital. And I think we're seeing this all play out right in front of our eyes. Thank you.

Matthew, that will wrap this up, please.

Certainly. Ladies and gentlemen, that concludes today's conference. Thank you for your participation today.