1. travel
2. transports
3. air travel
4. airlines

Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
PARTICIPANTS
Corporate Participants
Jill Sullivan Greer – Managing Director-Investor Relations, Delta Air Lines, Inc.
Richard H. Anderson – Chief Executive Officer & Member, Board of Directors, Delta Air Lines, Inc.
Edward H. Bastian – President & Director, Delta Air Lines, Inc.
Paul A. Jacobson – Chief Financial Officer & Executive Vice President, Delta Air Lines, Inc.
Bill Carroll – Senior Vice President – Finance and Controller, Delta Air Lines, Inc.
Glen W. Hauenstein – Executive Vice President and Chief Revenue Officer, Delta Air Lines, Inc.
Kevin Shinkle – Senior Vice President and Chief Communications Officer, Delta Air Lines, Inc.
corrected transcript
Other Participants
Darryl Genovesi – Analyst, UBS Securities LLC
Julie A. Yates-Stewart – Analyst, Credit Suisse Securities (USA) LLC (Broker)
Andrew G. Didora – Analyst, Bank of America Merrill Lynch
Mike J. Linenberg – Analyst, Deutsche Bank Securities, Inc.
Jamie N. Baker – Analyst, JPMorgan Securities LLC
William Jeffrey Greene – Analyst, Morgan Stanley & Co. LLC
Helane R. Becker – Analyst, Cowen & Co. LLC
Duane Pfennigwerth – Analyst, Evercore ISI
Dan J. McKenzie – Analyst, The Buckingham Research Group, Inc.
Jeffrey Dastin – Reporting Intern, Thomson Reuters
Edward Russell – Air Transport Reporter, Americas, Flightglobal
Ted Reed – Transportation Reporter, TheStreet, Inc.
Susan Carey – Editor, The Wall Street Journal
MANAGEMENT DISCUSSION SECTION
Operator: Good morning, ladies and gentlemen, and welcome to the Delta Air Lines First Quarter
2015 Financial Results Conference Call. My name is Sherlan 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. [Operator Instructions] As a reminder, today’s conference is
being recorded.
I would now like to turn the call over to Jill Sullivan Greer, Managing Director of Investor Relations.
Jill Sullivan Greer, Managing Director-Investor Relations
Thanks, Sherlan. Good morning, everyone, and thanks for joining us. Here at Atlanta today, we
have Richard Anderson, our CEO; Ed Bastian, our President; and Paul Jacobson, our CFO; and we
have the remainder of the leadership team here in the room with us for Q&A.
Richard will open the call, Ed will then address our financial revenue performance, and Paul will
conclude with a review of our cost performance and cash flow. To get in as many questions as
possible during the Q&A, please limit yourself to one question and a brief follow-up.
Today’s discussion does contain forward-looking statements that represent our beliefs or
expectations about future events. All forward-looking statements involve risks and uncertainties that
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
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. All results exclude special items, unless
otherwise noted, and you can find the reconciliation of our non-GAAP measures on the Investor
Relations page of ir.delta.com.
And with that, I’ll turn the call over to Richard.
Richard H. Anderson, Chief Executive Officer & Member, Board of Directors
Thanks, Jill. This morning, we reported the best first quarter in Delta’s history, producing solid top
line growth, margin expansion and substantial free cash flow. Our pre-tax earnings grew 34% from
last year to $594 million despite $300 million from early hedge settlements in the quarter.
We earned $0.45 per share versus the consensus of $0.44. We grew our top line revenues by 5%,
increased our operating margin by 1 point to 8.8%, and generated a return on invested capital of
22% for the last 12 months.
corrected transcript
Our strong cash generation continued, with $1.1 billion of operating cash flow and north of $500
million of free cash flow in the first quarter. We contributed $900 million to our pension plans,
maintained net debt levels at just over $7 billion, and returned $500 million to shareholders in
dividends and buybacks.
We continued to run, by far, the industry’s best operations. In the March quarter, we delivered 98.6
completion factor that had a lot of tough weather days in it, but we did have 25 days with zero
mainline cancellations. Our mainline on-time rate improved 3.1 points to 83.4%. This operational
performance is contributing to solid increases in customer satisfaction. We have achieved all-time
highs in our net promoter scores, and our customer complaint rate has decreased by 23% so far
this year.
These outstanding results were made possible by the dedication of our employees who work hard
every day to provide an industry-leading customer experience and outstanding returns to our
shareholders.
Looking forward, the business on the whole is performing quite well. While the strong dollar is
creating a $600 million headwind for our international revenues, it is also a factor in keeping fuel
prices down, which will contribute over $2 billion in gross savings year-on-year in 2015.
We are looking at June quarter operating margins of 16% to 18%, up over 200 basis points yearover-year, with over $1.5 billion of free cash flow in the June quarter. These record results and cash
flow show that the strong dollar is a net positive for Delta.
We will use that cash flow to further reduce our debt levels and buy back our stock. These are
permanent, positive changes to our capital structure. But even with this record level of
performance, we have a lot of work left to do to improve our business for our owners.
The domestic business is performing very well and demand is solid. Our network and product
investments, combined with the world class customer service of our employees, have widened our
domestic revenue premium to the industry, which currently stands at 115%. We will continue to be
disciplined with our domestic capacity levels with our domestic growth driven by higher gauge and
fewer total airplanes, which will cause us to improve efficiency and drive higher operating margins.
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
On the international side, like all U.S. global companies, we are working through volatile currencies
around the world. We are taking action to address these issues by reducing our international
capacity by 3% year-over-year this winter. This is a 6 point reduction versus our planned capacity
levels.
Unlike other U.S. global companies, our margins and profitability will expand in 2015 in the face of
currency volatility because of dramatic fuel cost reductions and top line growth. With flat system
capacity for the fourth quarter, we should get our unit revenue growth back on the right trajectory.
Cost productivity is a core part of Delta and we’ve kept our non-fuel CASM growth below 2% for
seven consecutive quarters. We have good control of our costs and we continue to drive
productivity through domestic up-gauging, technology investments and leveraging our scale.
The biggest cost opportunity ahead of us is fuel. We restructured our hedge book this quarter,
which will put the bulk of our hedge losses behind us after this quarter. So starting July 1, we will
have significant tailwind from fuel, with fuel prices 25% lower than what we’ll pay in the first half of
the year.
Over the long-term, our focus is on building a durable business model, not just through our margin
expansion efforts but also by taking risk out of our enterprise. We have the best labor relations in
the industry, with a strong pay-for-performance culture and a history of working collaboratively with
all of our employees.
corrected transcript
On business risk, we have spent considerable time diversifying our revenue streams and building
out a geographically balanced network. 15% of our passenger revenues are part of immunized joint
ventures and 20% of total revenue is from non-ticket sources.
Finally, we are reducing our financial risk. We have lowered our fixed cost structure uniquely with
our aircraft purchase strategy, which gives us the flexibility to quickly make capacity adjustments.
We have also substantially strengthened our balance sheet with nearly $10 billion in debt reduction
in less than five years.
We are only two notches away from investment grade and, with another strong year in 2015, we
expect to operate Delta with investment grade credit metrics by year-end. With a clear path to longterm margin expansion and reduced risk, we get improved earnings predictability and better
visibility to the long-term cash generation of this business.
We are investing in our future at a healthy base of $2 billion to $3 billion annually, which is more
than sufficient to support our strategies. And this year, we expect to generate $4 billion to $5 billion
in free cash flow after those investments. Less than 10% of the S&P 500 generate free cash flow at
this level.
In 2015, Delta will, once again, comfortably exceed our long-term commitments to our owners. And
despite being one of the top performers in the S&P 500 over the last several years, we believe
there’s considerable upside in Delta stock. Our free cash flow yield is roughly 12% to 13%
compared to the S&P Industrials’ average of 5% to 6%, and our P/E multiple is at roughly half the
level of this peer group.
We are working through our updated long-term plan now. We’ll take the plan to our board at the
end of this month. A part of that work includes developing the next set of metrics that will guide the
business, including the optimal long-term debt target and level of shareholder returns for the
company.
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
We believe this plan will give long-term equity holders very clear guidance on our future and what
they can expect from our cash flows, and it will show that Delta has earned a place among the top
tier S&P 100 companies. We look forward to sharing those plans with you in mid-May.
With that, I’ll turn the call over to Mr. Bastian and Mr. Jacobson.
Edward H. Bastian, President & Director
Thank you, Mr. Anderson, and good morning, everyone. We delivered a record March quarter with
pre-tax income increasing over 30% to $594 million, despite a $300 million early hedge settlement.
Our net income was $372 million or $0.45 per share versus consensus of $0.44. We expanded our
operating margin by a point to 8.8%, which includes the impact of the early out-of-quarter hedge
settlements which cost us roughly 3 points of margin. These results are in line with the initial margin
guide we gave in January.
The quarter was obviously impacted by our $1.1 billion in hedge losses. But to give you a better
sense of the core performance of the business, at market fuel prices, our margin for the quarter is
17.8%, among the best in the industry, and provides a good go-forward perspective on our margin
expectations given our hedge losses will be largely behind us as of July 1.
I want to thank the great Delta people for their dedication and determination that made these record
results possible.
corrected transcript
We continue to grow the top line, which [ph] will be up (10:46) 5% to $9.4 billion against a backdrop
of roughly 45% in lower market fuel prices and $105 million in currency headwinds.
Corporate revenues increased 3% despite pressure from currencies, with strength in the
transatlantic driven by our joint venture with Virgin Atlantic and from the financial services industry,
both up double digits in the March quarter. Our recent survey shows corporate travel managers
continue to be optimistic about the remainder of the year, with roughly 85% of respondents
anticipating they will maintain or increase spending over the balance of this year.
We also saw good traction with our ancillary revenues. Merchandising revenues including branded
fares, first class up-sell and preferred seating grew by 27% and contributed an incremental $50
million to our top line this quarter.
However, the strong dollar and lower international surcharges are causing our revenue
performance to fall short of expectations. As Richard mentioned, we are taking action with our
winter capacity plans to address these issues, which I’ll give details on in just a few minutes.
First on the March quarter. Passenger unit revenues declined 1.7%, driven by 1.5 points of
currency effect. However, the underlying demand environment is stronger than the [ph] RASM
upticks would (12:06) suggest. In fact, on a currency-neutral basis, unit revenues were essentially
flat with last year’s levels.
Our domestic performance remained solid with RASM flat on 5% higher capacity. And as a
reminder, two of those capacity points were caused by the first quarter of 2014 winter storm
cancellations which created 1 point of RASM benefit that we had to overcome this year.
Our Seattle expansion is performing well, with domestic unit revenues up 2% on 55% higher
capacity. We also saw strength in our JFK long-haul markets, especially the transcons, as we
continue to make corporate gains in New York and Los Angeles. Our hub-to-hub markets also
performed well with 4% RASM gains.
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
In the transatlantic, unit revenues declined 3%, driven entirely by a 3 point currency headwind on 4
points of higher capacity. Strength in core Europe and London offset headwinds in Africa, the
Middle East and Russia, which pressured entity unit revenues by more than 2 points. To give
perspective, these markets collectively saw a unit revenue decline of 15% despite 10% capacity
reductions.
We’re pleased with the performance of our two transatlantic joint ventures this quarter as these
relationships with Air France-KLM and Virgin Atlantic allowed us to expand margins despite
significant currency pressure on the euro and the pound.
In Latin America, unit revenues declined 4% on 13% higher capacity. The entirety of the decline
was driven by currency and pressure from last year’s Venezuelan capacity reductions. Our
partners, GOL and Aeromexico, contributed $33 million in incremental revenues this quarter, and
we have more opportunity to expand these relationships. Along with Aeromexico, we have filed an
application for antitrust immunity for a new $1.5 billion joint venture between the U.S. and Mexico.
This is a significant opportunity that expands options for customers to the largest market in Latin
America.
corrected transcript
We face our toughest revenue environment in the Pacific, where unit revenues declined 9% with
roughly 7 points of the decline driven by foreign exchange. Specifically, the yen revenue headwind
in the quarter was $40 million net of hedges. For the remainder of 2015, our yen hedges are valued
at about $110 million.
Now, looking forward to the June quarter, we are forecasting total revenues to increase about 2%,
with RASM down 2% to 4% on 3% higher capacity. About 3 points of that RASM decline is
attributable to currency and international surcharge declines. It’s also important to note that we are
lapping a very strong Q2 2014 performance, in which we grew system RASM at 6%, which is the
toughest comp we’ll face this year.
Our summer revenue performance, combined with significantly lower fuel prices and continued
strong cost controls, should result in another record profit, with second quarter operating margin of
16% to 18%, up 2 points year-on-year. Excluding hedges, our second quarter margins are
expected to be north of 20%.
Domestically, the demand environment remains stable and we expect unit revenues to be roughly
flat this quarter on 3% to 4% more capacity. This is consistent with the performance we saw in
March and what we’re already seeing in April.
We expect international RASM to be down in the high single digits in Q2, with 5 points of impact
from currency. In addition to currency, we’re also continuing to experience softer demand trends in
certain markets including Brazil, Russia, the Middle East and Africa. However, revenue headwinds
from currency will be more than offset by cost reductions and fuel price declines. Cash flow and
margin performance in the international entities will be at record levels this summer.
Post Labor Day, we will reduce our planned international capacity by 6 points, resulting in a 3%
year-on-year reduction to get our RASM performance back to better levels for the winter. This
reduction will be a key component to achieve the pricing improvements necessary to drive longerterm sustainable margin expansion.
In the transatlantic, we will reduce our planned capacity levels by 5 points, resulting in a 0% to 2%
capacity decline for the fourth quarter. The biggest adjustments will be in Africa, India and the
Middle East, which will see a reduction of 15% to 20%. In addition, we will suspend service to
Moscow for the winter season.
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
In Latin America, our network investment tails off later this year, with capacity growth less than 2%
by the fourth quarter. To address the RASM pressure we’ve seen from the devaluation of the real,
we’ll reduce capacity to Brazil by about 15%. We’ll also make adjustments to longer haul ethnic
markets that are highly reliant on foreign point-of-sale traffic.
These capacity adjustments, along with lapping the impact of last year’s capacity reductions in
Venezuela, should drive a better unit revenue result.
Pacific will take longer to show improvement as we take the next steps in our networking structuring
there. Through gauge reductions, we’ll take another 15% to 20% of capacity out of Japan, including
a 25% reduction in our intra-Asia and beach flying since those markets have been significantly
impacted by the devaluation of the yen.
These capacity reductions will be achieved through down-gauging, which will allow us to retire six
more 747s by the end of the year. In total, our Pacific capacity will decline 10% in the fourth
quarter.
We should have good margin and cash flow performance through the seasonally strong second
and third quarters. Once the peak summer season ends, we are moving quickly on our capacity
actions, which will continue to drive momentum in the business.
Now, I’ll turn the call over to Paul to go through the details on cost and cash flow.
corrected transcript
Paul A. Jacobson, Chief Financial Officer & Executive Vice President
Thank you, Ed. Strong cost control is the highlight again this quarter and was a key driver of our
strong margin expansion we realized before early hedge settlements. Total operating expenses
increased by $356 million, driven largely by higher volumes and investments in our product and
people, as well as by higher profit sharing expense which was up 40% versus last year.
Non-fuel CASM declined 1.4% on a 5% capacity increase, driven by up-gauging initiatives, lower
maintenance expense due to the 50-seat retirements and other productivity improvement efforts.
FX also benefited non-fuel CASM by about a point.
Moving on to fuel, our total fuel expense increased slightly as lower market prices were offset by a
higher consumption at our hedge losses. Our all-in fuel price was $2.93 per gallon, down from
$3.03 in the same period last year. The early settlements added about $0.33 per gallon for the
quarter.
The refinery made an $86 million profit this quarter versus a $41 million loss in the same period last
year. The improvement was driven by lower crude costs driven by an increase in North American
consumption, a continued favorable crack spread environment and an increased throughput.
Over the last four quarters, the refinery has produced a cumulative profit of over $220 million. We
expect that to continue to build in 2Q, with a projected profit of approximately $80 million.
As Richard mentioned and as we disclosed previously, we took steps in the first quarter to
restructure our second half 2015 hedge book in order to balance our exposure while still retaining
some level of longer-term upside protection. In February, we took advantage of the 20% spike in
forward curves to settle about a third of our second half 2015 hedges for approximately $300
million. We also extended a similar portion of our exposure out at the back half of 2015 and into
2016.
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
While the second quarter will have approximately $650 million in hedge losses, the average price
per gallon will be significantly lower than what we realized in 1Q. Specifically, we are projecting an
all-in fuel price of $2.35 to $2.40 per gallon for the June quarter.
For the June quarter, we’re approximately 40% hedged against an increase in prices but have
nearly full downside participation of about 90%, all the way down to Brent prices of $40 a barrel.
For the second half of the year, given the hedge book restructuring, we expect our fuel price per
gallon to be consistent with the industry average. We have a total of about $300 million in hedge
losses for the second half and 90% to 95% downside participation to a Brent price of approximately
$40 a barrel. This will equate to roughly 25% lower price per gallon for Delta in the second half
relative to the first. For the second half of the year, we expect our all-in fuel price to be in the range
of $2 and $2.05 per gallon, which is approximately $0.70 to $0.75 lower than 2014.
Overall, we continue to expect fuel cost to be an enormous tailwind and provide a net benefit of
$2.2 billion for Delta for the year. We’re also well-positioned to benefit if fuel remains at these levels
in 2016.
As a result, our already strong cash flow will continue to grow, which will allow us to further
strengthen the balance sheet by paying down debt, fund our pension plans and return cash to
shareholders in 2015 and beyond.
corrected transcript
For the March quarter, we generated more than $1 billion of operating cash flow, net of $900 million
in pension contributions. This compares to $605 million of pension contributions in last year’s
March quarter.
We have subsequently made substantially all of the remaining 2015 contributions for a total of $1.2
billion for the year. We also reinvested roughly $600 million back into the business, primarily related
to aircraft modifications and the purchases required for our domestic re-fleeting.
For the June quarter, we are projecting $1 billion in capital expenditures primarily related to 737900 and A330 deliveries as we continue to reinvest in the business for the long term.
With the more than $500 million of free cash flow we generated during the March quarter, we
continued our path of increasing shareholder capital returns with $75 million of dividends and $425
million of share repurchases. To-date, we have completed $1.3 billion of our existing $2 billion
authorization.
Adjusted net debt at the end of the quarter was $7.4 billion and our debt reduction lowered interest
expense by $55 million for the quarter. We continue to expect strong free cash flow generation
going forward and remain committed to a capital allocation strategy that drives value for our
shareholders. We look forward to updating you on our longer-term capital deployment plan in May.
In closing, I’d like to, once again, thank the entire Delta team for another record-breaking quarter.
We have the best employees in the industry and our performance is driven by their contributions.
Thanks. And with that, I’ll turn it back to Jill.
Jill Sullivan Greer, Managing Director-Investor Relations
Thanks, Paul. Sherlan, we’re now ready for the Q&A portion of the call with the analysts. If you
could give instructions on how to get into queue.
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
QUESTION AND ANSWER SECTION
Operator: [Operator Instructions] We’ll have our first question from Darryl Genovesi with UBS.
<Q – Darryl Genovesi – UBS Securities LLC>: Hi. Hi, good morning. Thanks very much for
taking the question and thanks for all the detail on the capacity cut. I guess just the first one, when
we kind of think about the future outlook from here, and I know you’re not ready to give 2016
capacity guidance yet, but should we think about this as a reduction in kind of the overall capacity
levels that you would see from [ph] Q4 (24:06) forward or is this capacity cut more about a bigger
swing between the peak periods and the off-peak periods?
<A – Ed Bastian – Delta Air Lines, Inc.>: Darryl, this is Ed. The guidance we provided for the
post-Labor Day, you can expect should carry through the winter season into the spring of 2016.
And obviously at that point, we’ll be in better position to understand where fuel prices are and
where currencies are. It focus, as you know, largely on the international network. So we need some
time to see how the volatility settles a bit, but we’re keeping all our options open.
corrected transcript
<Q – Darryl Genovesi – UBS Securities LLC>: Okay, thank you. And then also, I just had a
question on tax. At your Investor Day, and maybe this one’s for Richard, you alluded to the
potential to maybe pay a tax rate less than the 38% you’ve been running through the P&L by taking
advantage of some of international JVs. I suppose you’re not ready to provide an update on exactly
what rate you might expect. But I was wondering, if that is the case, should we also expect a
reduction in the book tax rate going forward for the purpose of the P&L and then also perhaps a
retroactive revision higher to the current NOL balance?
<A – Richard Anderson – Delta Air Lines, Inc.>: Well, the question with respect to the book tax
rate is above my pay grade. I don’t know whether I would really be able to explain that. I do think
that we’ll be in a position, probably by our Investor Update in December of this year, to update you
on our tax strategies. We do have viable options given the breadth and scope of our international
operations to have a positive impact on our tax rate.
<Q – Darryl Genovesi – UBS Securities LLC>: Thank you.
<A – Richard Anderson – Delta Air Lines, Inc.>: And Bill Carroll’s here, our Controller, and the
person to whom I direct all accounting questions.
<A – Bill Carroll – Delta Air Lines, Inc.>: Yeah, there won’t be any impact on the NOL.
<Q – Darryl Genovesi – UBS Securities LLC>: I’m sorry, Bill, I didn’t hear you.
<A – Bill Carroll – Delta Air Lines, Inc.>: I’m sorry. There will not be any impact on the net
operating losses. I mean, those are...
<Q – Darryl Genovesi – UBS Securities LLC>: Okay.
<A – Bill Carroll – Delta Air Lines, Inc.>: ...pre-tax numbers that will come through [ph] and this
will be at what rate that get benefited at (26:22).
<Q – Darryl Genovesi – UBS Securities LLC>: Okay, thank you.
Operator: We’ll go next to Julie Yates, Credit Suisse.
<Q – Julie Yates – Credit Suisse Securities (USA) LLC (Broker)>: Good morning. Thanks for
taking my question. A question on the revenue environment. So, Q2 PRASM marks the fourth
quarter of deceleration and the reasons are well telegraphed. But it seems that Q2 could be
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Delta Air Lines, Inc.
Company▲
DAL
Ticker▲
Q1 2015 Earnings Call
Event Type▲
Apr. 15, 2015
Date▲
shaping up to be the low point for unit revenue growth and that Q3 directionally improves with the
prospect of potentially returning to positive comps in Q4 since headwind start to anniversary,
capacity will be lower, and even maybe the branded fares contribution run rate will improve. Is this
the right way to think about unit revenue production as the year progresses?
<A – Ed Bastian – Delta Air Lines, Inc.>: I think that’s consistent with our expectations, Julie.
We’re not giving guidance beyond Q2 right now, but directionally, yes.
<Q – Julie Yates – Credit Suisse Securities (USA) LLC (Broker)>: Okay, great.
<A – Richard Anderson – Delta Air Lines, Inc.>: The part – I mean the one thing to not miss in
all that is that we will have really fine margins in Q2 and Q3, margins we haven’t seen before.
<Q – Julie Yates – Credit Suisse Securities (USA) LLC (Broker)>: Sure, sure. And then maybe,
one for Ed. Can you break down the Q2 PRASM expectations by international geography and the
currency hit that you expect in each?
<A – Ed Bastian – Delta Air Lines, Inc.>: I don’t know that I have all the details to Q2. The
guidance we have given was more post-Labor Day. We expect a, I think we said, about 3 points of
the system-wide RASM decline to be driven by currency and the fuel surcharge declines, which
covers, I’d probably say, 75% of what the overall international RASM decline.
<Q – Julie Yates – Credit Suisse Securities (USA) LLC (Broker)>: Okay.
corrected transcript
<A – Ed Bastian – Delta Air Lines, Inc.>: So on balance, our minus 2% to 4% is effectively similar
to what we saw in Q1, where FX drove the majority of that unit revenue overall decline.
<Q – Julie Yates – Credit Suisse Securities (USA) LLC (Broker)>: Okay, great. Thank you very
much.
Operator: We’ll go next to Andrew Didora, Bank of America.
<Q – Andrew Didora – Bank of America Merrill Lynch>: Hi. Good morning, everyone. Look, I
know we’ll be getting more into the kind of capital returns and the balance sheet story in a few
weeks, but I just wanted to ask maybe you could frame your thoughts or maybe some factors that
you consider in terms of setting a leverage target and how that target changes over the course of a
cycle.
<A – Richard Anderson – Delta Air Lines, Inc.>: This is Richard. Candidly, we look out in our
five-year plan, even with high fuel price assumptions in a pretty conservative plan, that the
enterprise just continues to generate more cash. Particularly as we get to investment grade credit
metrics, we can continue to keep the return on invested capital at the kinds of rates that we see
today.
So when we do think about the capital investment levels, which is really the first piece of the puzzle,
we are really comfortable that the $2 billion to $3 billion of balance sheet CapEx is a really
comfortable rate long term. It’s significantly more than our depreciation. And so, we’re comfortable
with that level of CapEx investment in the business.
And really, what ends up driving the long-term debt target is where we want our weighted average
cost of capital to come out, number one. And number two, being certain that we have the business
really de-risked, because the best way to provide a long-term stable investment for long equity
holders is to make sure we have the best labor relations in the industry and make sure that we
have a much lower beta on our balance sheet because you have events like we’ve had in the last
six months where currencies become much weaker against the dollar. We have Ebola in Africa,
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[ph] yen at ¥120 (30:49), and Russia and the Middle East, because of global political issues,
creating headwinds in our business. And I just used those as examples. So, the best way to make
Delta secure in that environment is to have low levels of debt. But we don’t want the debt levels to
end up being so low that our weighted average cost of capital ends up going up, because it’s so
heavily equity-weighted.
<Q – Andrew Didora – Bank of America Merrill Lynch>: That’s very helpful, thank you. And one
last one, probably for Paul. I think you mentioned to-date you’ve contributed $1.2 billion to the
pension plan. Are you done for the year or do you plan to continue to fund that throughout the
course of 2015? Thanks.
<A – Paul Jacobson – Delta Air Lines, Inc.>: Good morning, Andrew. That substantially
completes our contributions for 2015. There’s $5 million here and there that can’t vary by timing
based on funding rules, but it’s substantially done.
<Q – Andrew Didora – Bank of America Merrill Lynch>: Great. Thank you.
Operator: We’ll go next to Mike Linenberg, Deutsche Bank.
corrected transcript
<Q – Mike Linenberg – Deutsche Bank Securities, Inc.>: Yeah, hey. I want to go back, Ed,
you’ve talked about Japan and some of the impact that that had on PRASM. You didn’t say much
about China, and I think we just got some additional information out from China that suggests that
the economy’s growing at the slowest rate, I guess, since 2008 or 2009. That said, you did have
that change in the visa requirement. So I’m just – are you really seeing any softness out of China,
or is it just because of the structural change that’s going on in the marketplace with the visa
restrictions being lifted for the most part? Are you still seeing good flows out of that market?
<A – Ed Bastian – Delta Air Lines, Inc.>: Yes, Mike, we are seeing good flows. But candidly, the
industry capacity between China and the U.S., I think the number in Q1 was about 20% of an
increase. So, the supply is certainly outstripping demand, but demand is strong and our early
indications on the new flight that we’re launching between L.A. and Shanghai are very positive. So,
we’re not the predominant player in China at this point. So, we’re still building strength as we go.
<Q – Mike Linenberg – Deutsche Bank Securities, Inc.>: Okay, great. Then, just another
question, and Ed or maybe even Glen can answer. The discussion about maybe allowing more
long-haul flights out of LaGuardia, I mean I think specifically they’ve talked about LAX and San
Francisco. Is that something that makes sense, that something that you’re in favor of? Is there the
risk that if one or two carriers end up doing it, everybody tries to get slots to do it and you end up
having too much capacity in transcon markets? Just your thoughts on that.
<A – Ed Bastian – Delta Air Lines, Inc.>: We are supportive of the lifting of the perimeter rule. We
think it’s something that’s incredibly important for New York as they build the future of aviation in
the New York metropolitan area and re-visiting an outdated ruling from over 30 years. We are
prepared and we’re ready to respond if it does get lifted. And I think it will be good for the city, I
think it will be good for us as a company, and I think it will be great for consumers in the
metropolitan area.
<Q – Mike Linenberg – Deutsche Bank Securities, Inc.>: Okay, thank you.
Operator: We’ll go next to Jamie Baker, JPMorgan.
<Q – Jamie Baker – JPMorgan Securities LLC>: Hey, good morning. A question for Glen, a
follow-up to Mr. Linenberg’s question. Should we assume that any long-haul LaGuardia flying would
complement the JFK flying, as opposed to grow it? And are 767s supported at the terminal there in
LaGuardia?
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<A>: [ph] Yes, they do (34:38).
<A – Glen Hauenstein – Delta Air Lines, Inc.>: Well, an interesting factoid is that the 767-400
was developed for LaGuardia by Boeing for Delta. So the answer is, yes, 767s can fly. 757s can
also fly. And while I wouldn’t comment on our exact schedules, I would expect that responding to
demand in a set where the constraints were lifted, we would likely serve both airports from the West
Coast.
<Q – Jamie Baker – JPMorgan Securities LLC>: Okay. And just to clarify, I was thinking more
about the 300s since those are in the transcon figuration that you use, the 400s are not. But it’s a
good point that you make.
A follow-up for Richard as it relates to pilots and labor. A year ago, I think the conventional wisdom
was that the industry might, over time, move closer to Delta as it relates to profit sharing. American
was obviously an outlier, but many view that as unsustainable. Today, I think it’s fair to ponder
whether Delta might move closer to where others in the industry are as opposed to vice versa. I
know you’re philosophically in favor of profit sharing, but would we be remiss in at least
contemplating a revision to your formula beginning in 2016?
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<A – Richard Anderson – Delta Air Lines, Inc.>: We’re in the midst of negotiations with our
pilots, so it’s premature to really comment on that. But our formula has really served us pretty well. I
mean I think that we’re working right now on our five-year plan, and there aren’t very many
companies in the S&P 100 that are going to approach the kind of quality of earnings and the quality
of cash flows we have with the structure that we have today.
<Q – Jamie Baker – JPMorgan Securities LLC>: Okay. And just a quick follow-up on that. On the
five-year plan, since you brought it up, Richard, have there been any changes in regard to your
long-term oil price assumption?
<A – Richard Anderson – Delta Air Lines, Inc.>: Well, I mean, we’re still in the midst of working
on our five-year plan, so we’re going to – as I said in my remarks, we’re due to present it. We’ve
had several meetings with our board. We have another meeting with our board. And then, we’ll see
you in New York, I think, on May 13. But you know that our long-term philosophy, and this is how
we’ve always run the airline, is to assume a high fuel price and to assume a much higher fuel price
than the forward curve. And that...
<Q – Jamie Baker – JPMorgan Securities LLC>: Got it.
<A – Richard Anderson – Delta Air Lines, Inc.>: ...that does a lot of good things for you. I mean,
let me put it this way: Having tried different ways to budget airlines over a really long period of time,
the only rational way that we found is to assume a high fuel price over the long term, because
you’re never disappointed when it’s lower. But if you assume a low fuel price and the fuel price
ends up being high, then you’re put in a situation where you’ve got to go tear apart the company in
order...
<Q – Jamie Baker – JPMorgan Securities LLC>: Yeah.
<A – Richard Anderson – Delta Air Lines, Inc.>: ...to get your cost down. The other thing it does
is it puts a discipline in our pricing and in our revenue management, because our revenue
managers and our pricers, they don’t get the benefit of making an assumption, a planning
assumption, over the long term that there’s going to be a [ph] fuel good guy (38:01) out there and
that the fuel has to be recaptured, that we use a fuel price and then we’re going put the burden on
our team to be sure we capture that.
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And then lastly, when the fuel price is high, then you’re not going build a whole lot of capital in a
long-term plan to buy a lot of extra airplanes. It’s going force capital efficiency both in terms of the
airplanes you select and how many airplanes you buy.
So, that philosophy won’t change. Now, what our numbers are, we’ll wait and talk to you about that
in May.
<Q – Jamie Baker – JPMorgan Securities LLC>: Sure. All right. As always, I appreciate a very
thorough response. Thank you, Richard. Thank you, Glen. Take care.
Operator: We’ll go next to William Greene, Morgan Stanley.
corrected transcript
<Q – Bill Greene – Morgan Stanley & Co. LLC>: Hey, there. Good morning. Richard, can I ask
you a follow-up on that last point? And that is, do you think about this year then, given effectively
fuel surprise significantly verses a long-term assumption in the plan, does this year sort of appear
as kind of a peak margin year and so we can kind of think about, well, they’ll take actions next year
on both capacity and costs if fuel is higher to make sure that it turns out that this is not a peak
margin year? How do you think about adjusting for that, or do you have these anomalies and you
think about a long-term trend instead?
<A – Richard Anderson – Delta Air Lines, Inc.>: Well, if you think about running the enterprise to
be able to capture higher fuel prices and you build in the kind of operating leverage that we’ve
consistently achieved in this business, you’re going to continue to improve margin and it will
translate into long-term double-digit EPS growth. So when you have a model where fuel cost is
covered by the business – in other words, higher fuel prices are going be taken into account either
in our pricing or our capacity – you can then build around that all the operating leverage that we
have a really good track record of developing and you can continue to produce that mid-single-digit
EPS growth.
<Q – Bill Greene – Morgan Stanley & Co. LLC>: And when you think about that sort of plan
within an industry context, it seems at least one risk seems to me that some of the smaller
competitors, when you put them in aggregate, maybe 20%, 25% of the capacity out there in the
domestic market, they may change their fuel price assumptions. How do you counter that? How do
you think about the competitive dynamic there such that you’re not sort of losing out, if you will, or
losing share? Or is that not really a concern anymore, we don’t care about share?
<A – Richard Anderson – Delta Air Lines, Inc.>: Well, I mean, we’re a margin-driven enterprise –
a margin and a cash flow driven enterprise. So, we really look at the totality of the pricing
environment with our capacity to be certain that we’re going hit the long-term financial targets that
we lay out in our five-year plan.
<Q – Bill Greene – Morgan Stanley & Co. LLC>: Is there any evidence that the industry is losing
discipline in your mind or not so much?
<A – Richard Anderson – Delta Air Lines, Inc.>: I wouldn’t comment on that, because I think it’s
just too much commentary on future capacity in the industry. But when you look at what Delta’s
been able to do, even in this quarter, when you take our fuel hedges away in this quarter, we would
have been approaching an 18% margin. So when you look at what we were able to do with
capacity plus pricing, it’s really pretty remarkable. The underlying business at Delta in the first
quarter ex fuel hedging decisions that were made in prior quarters, so you’re looking at an 18%
margin. I mean that is...
<Q – Bill Greene – Morgan Stanley & Co. LLC>: Yeah.
<A – Richard Anderson – Delta Air Lines, Inc.>: ...remarkable. That is remarkable.
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<Q – Bill Greene – Morgan Stanley & Co. LLC>: Agreed. All right, I appreciate the time. Thank
you.
Operator: We’ll go next to Helane Becker with Cowen & Company.
<Q – Helane Becker – Cowen & Co. LLC>: Thanks very much, operator. Hi, everybody. Thank
you for the time. Just, I think, Richard, and not to negotiate on a conference call, but I think you
exchanged openers with your pilots already for the contract. Can you just say what expectations
are relative to both sides’ expectations? Are you far apart? Is there going be a tough negotiation, or
can you offer any comment on that?
<A – Richard Anderson – Delta Air Lines, Inc.>: Yeah, let me offer my best commentary on that,
which is to look at our track record. And the track record we have with our pilots is something that
we’re proud of, which is, look back all the way to 2007 – 2006 actually. Go all the way back to 2006
and I think there’s been one, two, three, four, five – five agreements that were all done in advance
of amendable dates.
corrected transcript
And remember, over that same period of time, we’ve proudly posted the most dramatic financial
performance of any enterprise over that timeframe in the S&P 100. I mean there may be others, I
haven’t gone and checked. But by any measure, it’s this process and it’s served us well, and I think
it’s served our pilots well because the pilots are key leaders in making Delta a preferred airline for
our customers. And we’re going to continue – we’re working very hard and hopefully have a good
confident path to continue that same process and practice.
<Q – Helane Becker – Cowen & Co. LLC>: Thank you very much. Can I just ask Ed a question? I
think you were quoted in a trade magazine that I read yesterday saying that foreign currency
headwinds this year would be $1 billion, and then on the conference call you talked about $600
million. And I’m just kind of wondering if they took your comments out of context or you can
reconcile the difference.
<A – Ed Bastian – Delta Air Lines, Inc.>: Thanks, Helane. I was talking in general terms. And I
was also including in my thought process on the $1 billion the impact of fuel, surcharge declines as
well which is an incremental cost, largely related to currency since it’s affected by fuel prices and
the strong dollar. So, we’re in the same neighborhood.
<Q – Helane Becker – Cowen & Co. LLC>: Perfect. Okay, thank you very much for your help.
Operator: We’ll go next to Duane Pfennigwerth, Evercore ISI.
<Q – Duane Pfennigwerth – Evercore ISI>: Okay, thanks. Good morning. I wanted to ask you
about your international margins. And obviously, it’s a little tricky to do on the first quarter given the
hedge impact. But as we think about the second quarter, can you talk about the regions where
you’re seeing year-to-year margin expansion? And can you also, I wonder, give us sort of a rank of
your profitability by region, sort of what would be kind of your most profitable region as we think
about a seasonally stronger June quarter?
<A – Ed Bastian – Delta Air Lines, Inc.>: Duane, we are not going to give you all the details that
you asked for, as you would expect. But when you look at the margins of our international business
– and again you have to take the hedges out because they will largely be out of there by July 1 and
those are singular decisions taken corporately, not in the regions.
All the margins in our businesses look really healthy in the upcoming summer period. I’d say the
strongest margins will continue to be in Europe despite the weakness in the euro. We have a
growing business at Heathrow, which is doing fabulous. We have a great relationship and, again,
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strong partnership with Air France-KLM and Alitalia, so the continent is also looking very, very solid
and very strong.
Our Latin business – seasonally, Latin America in the second quarter is not as strong. They’re offseason. But absent Brazil, which is having some real struggles, the majority of Latin America is
doing very well.
And the Pacific business, we’re in the midst of our restructuring, and I think you have to wait to see
the effects of that by the end of the year, post summer.
<Q – Duane Pfennigwerth – Evercore ISI>: Okay, thanks. On Latin, I wonder – just a follow-up to
Julie’s question, the down 4% unit revenue in the first quarter, can you talk about sort of the shape
of that trend into the second quarter?
<A – Glen Hauenstein – Delta Air Lines, Inc.>: The shape is relatively similar. I think as you
move through the quarters, you actually get the currency headwind becoming stronger because, as
you know, international’s sold far in advance. And so, those tickets tend to be out 60 days, 90 days,
120 days, all the way out to six months, nine months. And as we were selling last fall for the spring,
we were selling them at very different exchange rates.
corrected transcript
So, you see the exchange rate differentials becoming more of a headwind in the second quarter, as
one of the previous questions indicated. The good news is as you head towards the fourth quarter,
you start to see that headwind become a flattening experience for international. I think we’re
positioning, and Ed has charged us to go in to the next quarter with positive revenue momentum,
and that’s our plan.
<Q – Duane Pfennigwerth – Evercore ISI>: Okay, appreciate that. Now, I’ll sneak one more in
here. The 10% of your expenses that are non-USD, I assume that’s primarily labor and primarily
euro, any color you can offer there is appreciated. Thanks for taking the questions.
<A – Paul Jacobson – Delta Air Lines, Inc.>: No, Duane, actually it’s primarily like navigation
charges and local expenses for handling, and it’s really scattered throughout the globe.
<Q – Duane Pfennigwerth – Evercore ISI>: Thank you.
<A – Jill Greer – Delta Air Lines, Inc.>: Sherlan, we’re going to have time for one more question
from the analysts.
Operator: That will come from Dan McKenzie, Buckingham Research.
<Q – Dan McKenzie – The Buckingham Research Group, Inc.>: Oh, hey. Good morning, guys.
Thanks for squeezing me in here. Just going back to the margin questions earlier, Richard, I think
you’ve said more than once this year you believe Delta could expand margins this year holding fuel
constant. And just based on the second quarter here, it would imply a much stronger second half of
the year than what we all are modeling, and it’s presumably on both cost and revenue. So I guess
my question is, is the impact from FX simply greater than expected to hit that outcome at this point
or was that comment really tied to hitting the goal at some point later this year?
<A – Richard Anderson – Delta Air Lines, Inc.>: [ph] Ed, that question. (49:13)
<A – Ed Bastian – Delta Air Lines, Inc.>: Dan, this is Ed. Could you clarify, because I think you
asked several questions in one?
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<Q – Dan McKenzie – The Buckingham Research Group, Inc.>: Okay, sure. So, it really comes
down to this goal of Delta being able to expand margins this year holding fuel prices constant, so
throwing in the 2014 jet fuel price into the 2015 and expanding margins...
<A – Ed Bastian – Delta Air Lines, Inc.>: Right, right.
<Q – Dan McKenzie – The Buckingham Research Group, Inc.>: I think Richard has shared
more than once that he believe Delta could do that. I’m just wondering if the FX headwind at this
point is simply greater than expected to hit that, or was that comment really tied to just a specific
quarter some point later this year.
<A – Ed Bastian – Delta Air Lines, Inc.>: Well, certainly FX has deteriorated. I don’t think any of
us anticipated the significance a year ago, what we’d be facing. But, yes, I’d say that’s correct. We
are still focused on expanding our core margins. As we said, if you took the hedge loss out in Q1,
then we had an 18% up-margin and a 15.5% pre-tax margin, substantial improvement in raw
numbers. And I think there is margin expansion there if you were to – I don’t have the math in front
of me, but if you were to fuel-adjust on a year-over-year basis, you’ll continue expansion in the
quarter.
corrected transcript
<Q – Dan McKenzie – The Buckingham Research Group, Inc.>: Okay, very good. And then, a
second question here, Ed, since, I guess, I have you. This is a soft question. Delta has made
enormous investments in the business over the past few years obviously, and I would imagine that
that strengthens the brand by a significant degree and that, of course, should benefit revenue. But
how are you measuring the investments made in the business? Is the net promoter score really the
best measure for measuring the brand? And if so, how has that evolved with the investments that
you’ve made in the business?
<A – Ed Bastian – Delta Air Lines, Inc.>: Well, our net promoter score is, we believe, the best
measure of brand performance and it’s across multiple consumer industries, not just the airline
industry. And we’ve seen a very tight correlation between improvements in our unit revenue
performance and out-performance that’s directly attributable to customer satisfaction and net
promoter score. In the first quarter, our overall unit revenue performance on the domestic was [ph]
1.15 (51:30) indexed against our competitors, which is substantial. And we had close to a 40% net
promoter score in the first quarter as well on the domestic business.
So there’s no question, we think it’s strong measure. It’s what we use in our internal incentive
metrics. Now, obviously, you need to drill down to far more specificity. You really can’t look at just a
broad score; you got to then look at all the drivers that accumulate that score. And we’re constantly
focused on continuing to make investments to improve areas of underperformance on a customer
standpoint, particularly international. But we do think – and we’ve been pleased with the tracking
that we’ve had with net promoter score, our financial performance, our employee morale and
satisfaction, and obviously our financial performance and our stock price.
<Q – Dan McKenzie – The Buckingham Research Group, Inc.>: Fantastic.
<A – Richard Anderson – Delta Air Lines, Inc.>: The other thing you can’t miss in all that, Dan, is
that a lot of the investment we’ve made has had a huge payback. I mean that investment, the
investment you’ve seen us make, is also what’s driving non-fuel CASM seven quarters in a row
below 2%. So you see, when you run a really, really good operation, your unit costs are lower. I
mean, Ed, what was the fact you had yesterday on completion factor at Delta versus our
competition?
<A – Ed Bastian – Delta Air Lines, Inc.>: So if you were to look at 2014 domestic performance,
we had 197 days last year with perfect completion. And obviously when you run a perfect schedule,
that makes everything much better for your customers, for your employees, for your operation. If
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you were to add Southwest, American and United combined in 2014, their total number was 13. So
as a consumer-driven and customer-driven company, we’re delivering for our customers. And Gil
West and the operating team are doing a fabulous job, and we’re going get better yet again this
year.
<Q – Dan McKenzie – The Buckingham Research Group, Inc.>: Wow. Okay, fantastic. Thanks,
guys.
<A – Jill Greer – Delta Air Lines, Inc.>: Thanks, Dan. Sherlan, that is going to conclude the
analyst portion of the call. And so, I will turn it over to Kevin Shinkle, our Chief Communications
Officer, for the media portion.
<A – Kevin Shinkle – Delta Air Lines, Inc.>: Good morning. As Jill said, I’m Kevin Shinkle. We
have about 10 minutes for questions. So to accommodate everyone, please limit yourself to one
question and one brief follow-up. Sherlan, can you please repeat the instructions, then we’ll take
our first call.
Operator: [Operator Instructions] We’ll go first to Jeffrey Dastin, Thomson Reuters.
corrected transcript
<Q – Jeffrey Dastin – Thomson Reuters>: Could you elaborate on the exact changes Delta might
like to see to open skies agreements if the United States asks for compensations with Qatar and
the UAE?
<A – Richard Anderson – Delta Air Lines, Inc.>: Yeah, this is Richard Anderson. What we have
asked for is consultations and that those consultations would lead to some accommodation that
takes into account the $41 billion of subsidies that have been provided to the United Arab Emirates
and Qatar, and that would be with respect to the routes that are flown between those countries and
the U.S. and with the particular focus on Fifth and Seventh Freedoms.
So, we’ve laid our case out to the United States government. They’re taking it seriously. We’re in
the process of answering questions with them. And the end result needs to be like the Chinese
steel case or agricultural cases that the U.S. frequently brings, where you come up with remedies
that will address the subsidy number, that is actually the largest subsidy number, I believe, that has
ever been proven in a WTO case.
<Q – Jeffrey Dastin – Thomson Reuters>: Just to clarify. So, might there be a clause discussed
about capacity dumping or price dumping?
<A – Richard Anderson – Delta Air Lines, Inc.>: Correct.
<Q – Jeffrey Dastin – Thomson Reuters>: Great. Thank you so much.
<A – Richard Anderson – Delta Air Lines, Inc.>: Yeah.
Operator: We’ll go next to Edward Russell, Flightglobal.
<Q – Edward Russell – Flightglobal>: Hi. I wanted to ask a bit more on the Pacific restructuring.
You mentioned that you’re planning to move six more 747s this year. How many 747s you’ll be
moving in total? And also, will there be any route cuts in addition the down-gauging?
<A – Glen Hauenstein – Delta Air Lines, Inc.>: There will be no additional route cuts. All of this
will be achieved through down-gauging or frequency reductions. And there will be seven 747-400s
remaining, six flying.
<Q – Edward Russell – Flightglobal>: Thank you.
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Operator: We’ll go next to Ted Reed, TheStreet.
<Q – Ted Reed – TheStreet, Inc.>: Thank you. My question was basically asked, but are you
happy with the way things are going so far in Washington in regards to the Middle East subsidies?
<A – Ed Bastian – Delta Air Lines, Inc.>: We just need to see where we end up. I mean we’re
pleased with the progress we’ve made and pleased with the work of our colleagues. American and
United have worked hard with Delta to make the case.
So I’d say, Ted, overall, yes we are. But in the context of the Pacific Trade Agreement and the
Atlantic Trade Agreement, I think our government needs to first address the largest subsidy that’s
ever been brought to the U.S. government before we go deeper into more liberal trade regimes with
state-owned and state-subsidized industries.
<Q – Ted Reed – TheStreet, Inc.>: All right, thank you.
Operator: We’ll go next to Susan Carey, Wall Street Journal.
<Q – Susan Carey – The Wall Street Journal>: Good morning. I just wanted to ask a little
question about your Aeromex [Aeromexico] ATI application. The DOT seems rigid on the fact that
they are not going to consider it, the submission, until Mexico and the U.S. actually have open
skies, and I’m a little bit confused about this misunderstanding.
corrected transcript
<A – Richard Anderson – Delta Air Lines, Inc.>: Well, Susan, this is Richard. I don’t think there
is a misunderstanding. There was a side letter signed between the United States government and
the Mexican government that basically conditioned the open skies on ATI.
This is very common. This is what the United States government did with Japan and has done in
other open skies regimes.
<Q – Susan Carey – The Wall Street Journal>: Okay, thank you.
<A – Richard Anderson – Delta Air Lines, Inc.>: Yeah, thank you.
Richard H. Anderson, Chief Executive Officer & Member, Board of Directors
Okay. With that, we will conclude our call today. Thanks to everyone for joining and listening.
Operator: That concludes today’s conference. Thank you for your participation.
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