Economy Processed transcript of the conference call or presentation on...

Processed transcript of the conference call or presentation on the DAL result 10-Apr-19 14:00 GMT

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ATLANTA April 9, 2020 (Thomson StreetEvents) – Minutes of the conference call or presentation of Delta Air Lines Inc results released April 10, 2019, 2:00 p.m. GMT

* Edward H. Bastian

Delta Air Lines, Inc. – CEO and Director

* Glen W. Hauenstein

Delta Air Lines, Inc. – President

Delta Air Lines, Inc. – Vice President of IR

* Paul A. Jacobson

Delta Air Lines, Inc. – Executive VP and CFO

Delta Air Lines, Inc. – Senior VP and Chief Marketing & Communications Officer

* Daniel J. McKenzie

Sanford C. Bernstein & Co., LLC., Research Department – Senior Analyst

* Helane R. Becker

Wolfe Research, LLC – MD and Senior Analyst at Passenger Airlines, Aerospace & Defense

JP Morgan Chase & Co, Research Department – equity analyst for US airlines and aircraft leasing

Stifel, Nicolaus & Company, Incorporated, research department – MD & Airline Analyst

Good morning everyone, and welcome to the Delta Air Lines financial results conference call in March. My name is Jake and I will be your coordinator. (User Guide) Reminder: Today’s call is being recorded.

I would now like to hand over the conference to Jill Greer, Vice President for Investor Relations. Please continue.

Jill Sullivan Greer, Delta Air Lines, Inc. – Vice President of IR [2]

Thanks, Jake. Good morning everyone and welcome to our March quarter earnings call. Our CEO Ed Bastian comes to us from Atlanta today. our President Glen Hauenstein; and our CFO Paul Jacobson. Our entire management team is in the room for the Q&A meeting. Ed will open the call and provide an overview of Delta’s financial performance. Glen will then deal with the sales environment and Paul will conclude with a review of our cost performance and cash flow. (Operation manual)

Today’s discussion contains forward-looking statements that reflect our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Some of the factors that can cause such differences are described in Delta’s SEC filings. We will also discuss non-GAAP financial measures. All results exclude special elements unless otherwise stated. A reconciliation of our non-GAAP key figures can be found on the Investor Relations page at ir.delta.com.

And here is Ed.

Edward H. Bastian, Delta Air Lines, Inc. – General Manager and Director [3]

Thanks, Jill. Good morning everyone. Thank you for joining us today. Delta today reported a pre-tax profit of $ 832 million, or $ 0.96 per share. The core business developed well and we saw a good upward trend in our contract renewal with American Express. We increased our earnings per share by 28%, increased our operating margin by 150 basis points and achieved a return on investment after taxes of 14.5% in the past 12 months. This achievement shows how we are implementing our unique brand, unmatched competitive advantage and a number of initiatives to drive profit growth, margin expansion and solid returns for our owners.

This also underlines our confidence in our future. This is one of the reasons why we are speeding up our share buybacks and giving back $ 1.6 billion to our shareholders this quarter. We achieved 7.5% sales growth as demand for our product continued to be strong. Our side business achieved double-digit growth and we expanded our leadership position in delivering high value to our customers.

It starts with industry-leading reliability as the world’s best-run airline. Despite a very difficult winter weather, we achieved the best closing factor for the March quarter in our history with 99.06%. Reliability and our service culture underpin the strength of our brand and enable us to build lasting customer relationships.

The domestic net promoter score averaged 50% this year, an increase of 7 points over the previous year. For this reason, we achieved the best sales bonus in the industry. And not only our customers noticed that. Earlier this week, Delta exceeded the airline’s quality rating and was the only airline to improve in all categories.

It is equally important that we continue to adhere to cost discipline. Unit costs for non-fuels declined slightly, which is the third consecutive quarter of a cost trend below inflation and gives us a good view of the achievement of our expectations for unit prices for non-fuels for the full year of 1%. The combination of sales dynamics and cost discipline led to an improvement of our pre-tax margin by 1 point. This was a successful step on our path to improving margin performance for the entire year. And our growth in earnings per share of 28% in the March quarter should be among the top 10% of companies in the S&P 500. At the heart of this achievement are the Delta employees, whose hard work and customer focus are what make Delta apart. I would also like to thank them and congratulate them for starting the year with $ 220 million in profit sharing next year.

During the quarter, there were exciting developments in loyalty, maintenance, repair and overhaul, as well as our fleet, which ensure that we build on our earnings momentum, strengthen our strategic advantages and further diversify our sources of income. 55% of our sales now come from premium products and non-ticket sources, compared to less than 40% in 2011. The growing sources of income from loyalty and MRO are an essential part of the $ 3 to 4 billion free cash flow we expect to generate this year. Our long-term agreements give us better visibility and even more confidence in the sustainability of this level of cash generation. It is important that they are decoupled from airfares and offer stability in any economic environment.

Last week we announced a contract extension with American Express that extends our agreement until 2029. Delta and American Express are two great consumer brands. Our shared passion for service and innovation is the basis of our long-term partnership. Our American Express partnership is our most important business relationship, and I appreciate the trust that Steve Squeri and the rest of the AmEx team have in Delta. While our AmEx contract should not expire for several years, the early extension accelerates the momentum by providing security on a platform for mutual growth and investment. We anticipate that the new agreement will enable significant growth in Delta SkyMiles’ credit card portfolio, creating not only the most valuable co-branding program in the industry, but also one of the most valuable co-brands for consumers worldwide. Delta’s benefits are expected to grow to $ 7 billion by 2023, up from $ 3.4 billion a year earlier and just $ 1 billion earlier this decade. This growth course shows the strength of the Delta brand and the growing attractiveness of our value proposition for our customers.

As the largest MRO in North America, we also expect double-digit growth and sales of more than $ 800 million this year. And we are expanding this business by developing new skills and securing long-term partnerships. During the quarter, we completed construction of the world’s largest engine test cell. The test cell opens the door to new major engine test features, including those in our agreements with Rolls-Royce and Pratt & Whitney. As we continue to invest in and expand our maintenance business, we expect MRO sales to reach $ 2 billion in the next 5 years.

And finally we continue to rebuild our fleet. Although we have significantly improved our fleet in recent years, we expect significant efficiency gains to support sales growth and contribute to Delta’s continued margin advantage. With more than 80 new deliveries this year, 2019 will be an important year for this initiative.

We had a milestone this quarter with the first flights with our ultra-modern Airbus 220. This innovative aircraft sets a new standard for the domestic narrowbody product. Our customers love it and we find that they book specifically for the Airbus 220. We have planned 90 shipments of this product in the next few years alone.

So 2019 got off to a really solid start. The core business performed well in the quarter, which together with the upward trend in American Express renewal gives us more confidence in our full year plan with strong sales growth, margin expansion and double digit profit growth. Business is on the move and there are significant opportunities ahead. We have a strong foundation with our strategic advantages, which are our culture, our leading operational reliability and unrivaled network, our loyalty program and relationship with American Express, and an investment grade balance sheet. These benefits, combined with a great brand powered by the best professionals in the industry, provide the engine to add long-term value to our owners.

Before passing the call on to Glen and Paul, I would also like to take a minute to introduce Tim Mapes, who will be our Chief Marketing and Communications Officer next month. Tim has more than 25 years of experience with Delta and was one of the leading forces behind the Delta brand. Tim takes on this role because our good friend Ned Walker is retiring well. Ned, you leave Delta and the industry an incredible legacy of leadership and service. And on behalf of the entire Delta family, thank you.

And now I’m going to transfer the call to Glen to discuss the sales environment.

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Glen W. Hauenstein, President of Delta Air Lines, Inc. [4]

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Thanks, Ed, and good morning everyone. First of all, I would like to thank the Delta team. The unmatched service is the basis for our increasing customer satisfaction. This allowed us to achieve record sales of $ 10.4 billion in the March quarter, up 7.5% year over year. We have made good progress on our long-term priorities to drive revenue and profit growth by leveraging our network, premium offerings, our co-brand agreement with American Express and our side business.

Starting with our top line. Corporate sales remained healthy and grew 8% in the quarter. In our latest business travel survey, 90% of travel managers expect to maintain or increase their travel expenses in the second quarter. This is a record for our survey in the June quarter.

In the first quarter, 55% of our sales came from premium products and non-ticket sources. Premium product revenue increased 8% to over $ 3 billion in March, an increase of 4% in premium capacity. Looking ahead, premium revenue growth should accelerate over the course of the year as we launch more aircraft with a full range of products and improve our ability to sell all of our premium products on delta.com and on external channels.

Freight sales decreased 5% in the quarter. Similar to what you’ve heard from freight companies, we see challenges from lower volumes and currency headwinds. Our MRO business is developing well with an increase in sales of almost 40% compared to the volume of new customers and a larger workload of existing customers. The growth rate will weaken in the June quarter, but will still be in double digits compared to the previous year.

Total loyalty revenue increased 1.2 percent to $ 1.2 billion, just over $ 100 million compared to the improvement from the new contract with American Express. The demand for SkyMiles as a currency is stronger than ever. Miles redemption rose 12% in the March quarter as we gave our customers more opportunities to use their miles. Increasing customer loyalty and trust is at the heart of our business and we find innovative ways to reward our customers for their loyalty. Customers are increasingly using miles for products and services that go beyond award tickets as we expand miles as a means of payment. During the quarter, we launched miles as a currency for mobile devices and gave SkyMiles members the option to upgrade to a premium experience through our app. We have seen an overwhelmingly positive response as sales in the March quarter already exceeded our original estimate for the full year.

On average, there are already 4,000 customers who upgrade with miles every day, with more than half of these transactions being carried out via mobile phones. This led to growth of almost 4 points in repayment in the quarter. Our goal is to give customers the opportunity to use miles for products and services across the entire spectrum of the Delta ecosystem. We plan to provide significant additional features over the course of 2019.

Our close relationship with American Express is a source of real competitive advantage. The co-branding credit partnership offers Delta a unique source of income by expanding our exposure to broader consumer spending, not just when traveling with Delta. This is reflected in a new quarterly record for the purchase of SkyMiles American Express cards. Our partnership with American Express is an increasingly important driver of our business, which is growing faster than the core airline. Co-branding card spending continues to exceed double-digit growth in the industry.

In 2019, our total contribution from the American Express relationship will be more than $ 4 billion, compared to the previously expected $ 3.7 billion. For the next three years, we expect continued solid growth with a more significant increase from 2023, which will increase our total contribution to almost $ 7 billion, twice as much as last year. We expect Delta’s sales advantage to be around $ 500 million in 2019, which has an impact of approximately 1 point on annual sales.

Let us turn to the details of the piece proceeds. Sales rose 2.4% with 5% higher capacity. Our record completion factor added 1 capacity point in quarter. While this was very good for our customers, our brand and our profitability, the additional capacity reduced sales by around 0.5 points. Despite this pressure, we are above the focus of our original TRASM guidelines and the new American Express agreement offers another advantage. Revenue from passenger units rose 0.6%, but was put under pressure by higher capacity, currency, Easter time and government shutdown. Despite this headwind, we expect a healthy sales premium of more than 110% for the industry.

Domestic sales rose 6.9% in the quarter after PRASM improved by around 1%. Business revenue growth outperformed the leisure business in the quarter, with corporate volumes up 10% and average business prices up 2% due to high volumes. Leisure trends were restless but improved over the quarter. Atlantic unit sales decreased 2.6%, with the currency and Easter shift causing 2 points of headwind. We saw pressure on leisure demand in Europe, which weighed on the performance of the main cabin. Corporate and premium income increased compared to the previous year.

In the Pacific, unit numbers declined 2.8% as strong demand was insufficient to offset a 9% increase in stage and a 1 point headwind in currency. Korea performed best with sales up 2% as our joint venture synergies with Korea continue to grow. Sales in China increased more than 25% with 30% higher capacity, which put moderate pressure on unit sales growth. Our capacity growth to China will slow in the second half of the year as we annualize the additional flights added to the market in 2018 on an annual basis. In Latin, sales increased 2.4%, the second consecutive quarter of positive sales growth driven by an improvement in demand and demand earnings trends in Mexico and the Caribbean.

Looking ahead, total sales are expected to grow 6% to 8% in the June quarter, including 1 benefit from the agreement with American Express. We expect sales growth of 1.5% to 3.5% with a capacity increase of 4% to 4.5%. Domestic demand is strong. Leisure continues to increase as we approach peak second-quarter demand. We expect Atlantic to return to sales growth as demand shifts to its US origin in the summer season and corporate trends remain strong.

In the Pacific, currency, capacity growth and the June quarter phase will continue to put sales under pressure. However, we see profitability improve as we implement our long-term vision for Asia. Our fleet is becoming more efficient. Our product is improving. We have the right partners. And with these building blocks, we are back on a growth path for the first time in 7 years. The performance is on track or exceeds our expectations.

Latin is expected to remain the best performing company as strength continues to improve in Mexico, the Caribbean and Brazil. We expect Brazil to see a year-on-year RASM improvement in the June quarter for the first time in a year.

We expect sequentially an improvement in passenger revenue per ASM of 1 point in the June quarter with a sequential improvement in all companies. On a TRASM basis, however, this improvement is somewhat mitigated by other sales pressure due to lower growth rates in the secondary business. It is important that our passenger unit in the second half of the year the rate of domestic capacity – I’m sorry. Excuse me, what is important, for our passenger unit sales development in the second half of the year, domestic capacity growth is expected to slow by approximately 2 points. This gives us more confidence in our sales history for the year as a whole.

When thinking about our networking opportunities, we used our first mover advantage to expand our # 1 or # 2 positions in our coastal gateways. Later this year, we began to focus our growth on our higher-margin core nodes through more efficient, wider-gauge aircraft. We continue to increase our scalability, maintain our sales premium and improve our margins.

With an incremental capacity of around 1 point, which depends on our record operating performance and the increased measurement and stage length, we now see a capacity outlook for the full year 2019 in the range of 3% to 4%. However, we are always aware of our operating environment and will take the necessary action as we see it – we need to do this if we continue to see higher fuel prices or economic uncertainties affecting our margin expansion.

The slightly higher capacity combined with additional revenue of $ 500 million from the renewal of American Express supports overall sales growth of 5% to 7% in 2019 compared to the original forecasts of 4% to 6% on Investor Day. Finally, the strength of the March quarter results and the contract renewal with American Express strengthen the confidence and belief that we have in both our short-term and long-term strategies.

I am handing it over to my good friend Paul.

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Paul A. Jacobson, Delta Air Lines, Inc. – CEO and CFO [5]

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Thank you, Glen, and good morning everyone, and thank you for coming to us. On our Investor Day, we reaffirmed our commitment to always deliver superior financial results. For us, it’s about creating value through revenue growth, margin expansion and free cash flow generation through prudent capital allocation.

Our March quarter results gave each of these priorities a solid start to the year and gave us more confidence in our full year outlook. This is the first quarter in which we have expanded margins both on an operational basis and before tax in almost two years. Our operating margin of 10% in the March quarter was 1.5 points higher last year and will remain unchanged until 2017, although fuel prices in the market are around 20% higher this year.

For the March quarter, our unit costs without fuel decreased by 0.2 points, which is another quarter with a strong cost development. This was better than our original forecasts as record operations resulted in an additional capacity of around 1 point, some postponement of the timing of costs in the second and third quarters, and continued good cost control dynamics across the company compared to the second half of last year continued.

Fuel prices tend to be higher, so maintaining a disciplined cost history is a top priority for us as we continue to strive to expand margins throughout the year. I would like to thank the entire Delta team for their continued commitment to this effort.

For the June quarter, we expect unit costs excluding fuel to grow by 1% to 2%. It is important to note that with the efficiency gains we have achieved through our fleet conversion, we expect to accelerate the decommissioning of our MD-90 fleet. Our June quarter cost forecast includes approximately 1 point – approximately 0.5 point impact for this decision.

Our results, combined with our ongoing fleet transformation and work with One Delta, keep us on track to achieve our goal of unit cost growth of 1% without fuel in 2019. This year is important for us on our way to fleet transformation. We’re streamlining the delivery of our existing fleet through One Delta, continuing to put older aircraft with nearly 40 MD-88s out of the fleet this year, and introducing next-generation engine technology with two new aircraft types. These new aircraft generate significant efficiency advantages and enable sales growth both through a higher premium seat mix and through improved customer satisfaction. This supports our industry-leading sales premium and margin advantage.

In February we launched the A220. By the end of the year we will have 28 of these aircraft and will expand this fleet to 90 aircraft by 2023. A220 deliveries allow smaller regional aircraft to be decommissioned, the least efficient and least expensive aircraft in our fleet.

We are also the North American launch customer for the A330-900neo. This aircraft will be added to our fleet this summer and will enable more efficient flying in the Pacific with a premium product that is expected to improve margins by 5 to 10 points over the replaced aircraft. New aircraft with engine technology also offer us the opportunity to structurally shift our cost curve downwards and at the same time benefit from a larger track width and a better product. Our order backlog enables the exchange of 35% of our main fleet by 2023, so that we can further optimize this simplification and the efficiency advantages lead to further margin improvements.

Total fuel expenses increased $ 87 million in the quarter over the previous year. The refiner’s profits were pressured due to lower gas crack spreads, resulting in a loss of $ 34 million, or about $ 0.04 per gallon, in the quarter. For the June quarter, we expect a total fuel price of $ 2.10 to $ 2.20 per gallon, which is the same as last year and increased slightly compared to the March quarter. These results include a slight refinery profit for the quarter.

It is important that our volatile and One Delta initiatives in March brought about a 2.1% improvement in fuel efficiency, twice as much as in the same quarter of the previous year, and an indication of the efficiency we expect in 2019 to promote our environmental sustainability goals and lower our costs.

Non-operating expenses for the quarter were $ 69 million higher than a year earlier due to pension pressure and lower equity partner earnings. These are expected to repeat in the quarter.

Looking ahead to the June quarter, the expected 6% to 8% revenue growth combined with a 1% to 2% increase in unit costs for non-fuels and a slight weakening in fuel prices year on year support our expectation of further margin expansion and another quarter of double-digit EPS growth. We expect earnings per share to be in the range of $ 2.05 to $ 2.35, an increase of more than 20% year over year in the middle and well above expectations for S&P’s earnings growth. This corresponds to a pre-tax margin of 14% to 16% compared to the previous year’s result of 14.1%.

Let us turn to the cash flow and the balance sheet. We generated operating cash flow of $ 2 billion in the quarter, improving over the previous year from higher profits and the timing of our voluntary pension contribution. We reinvested in CapEx at $ 1.3 billion, resulting in free cash flow of $ 760 million. The March quarter result and the added value of AmEx give us increasing confidence in reaching the upper end of our full-year free cash flow forecast of $ 3 to $ 4 billion compared to $ 2.3 billion a year earlier. In fact, we expect to reach almost this level in the first half of this year alone. For the full year, our free cash flow conversion is expected to improve to around 80% of net income. The tailwind from the strong sales growth includes – including the added value of American Express and an improved cost history. This is an increase of 33% compared to an average of 60% in the past two years.

Our strong cash generation and healthy balance sheet enable us to consistently return cash to our owners. With the confidence this management team has in the sustainability of Delta’s profitability, market volatility provided an opportunity to accelerate our buyback plans within the year. We repurchased $ 1.3 billion in stock at an average price of $ 50.55, withdrew 26 million shares in the quarter, and distributed dividends of $ 233 million. Our buybacks were funded by a $ 1 billion seasonal working capital loan, of which we have already repaid $ 300 million. The balance is expected to be repaid by the end of this year.

We continue to expect to return approximately $ 2.5 billion to shareholders in 2019 through dividends and buybacks, and remain committed to returning 70% of free cash flow to shareholders each year. In the first week of April, we committed $ 250 million to our voluntary pension fund for the year, and we expect to be able to provide the remaining $ 250 million later this year.

Due to our strong balance sheet, we recently refinanced due dates of $ 500 million. The completion of our $ 500 million EETC refinancing is approximately 1/3 of our planned due dates for 2019 at a mixed interest rate of 3.2%, which will save us approximately $ 9 million in interest expense annually.

Because debt is comfortably within our target of 1.5 to 2.5x adjusted debt versus EBITDAR, we will continue to use a variety of sources of finance to refinance debt maturity or take advantage of market conditions and debt at higher cost to refinance. Unsere Rendite nach Steuern auf investiertes Kapital nach 12 Monaten beträgt 14,5%. Dies sind fast 200 Basispunkte mehr als im Vorjahr, was auf eine verbesserte Rentabilität und Steuerreformvorteile zurückzuführen ist. Wir sind auf dem richtigen Weg, 2019 einen ROIC nach Steuern von 15% zu erzielen, der unseren Erwartungen am Investorentag entspricht.

Mit Blick auf die Zukunft haben wir eine solide Dynamik und sind auf dem richtigen Weg, für das Gesamtjahr ein starkes Umsatzwachstum, eine Margenausweitung und ein zweistelliges EPS-Wachstum zu erzielen. Diese Leistung ist eine Bestätigung unseres Engagements zur Verstärkung des Delta-Unterschieds. Die Kombination unserer starken Marke und unserer unübertroffenen Wettbewerbsvorteile liefert weiterhin branchenführende Ergebnisse und wird den Wert unserer Eigentümer langfristig steigern.

Und damit werde ich Jill wieder anrufen, um mit den Fragen und Antworten zu beginnen.

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Jill Sullivan Greer, Delta Air Lines, Inc. – Vizepräsidentin von IR [6]

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Danke, Paul. Jake, wir sind bereit für Fragen der Analysten. Wenn Sie ihnen Anweisungen geben könnten, wie sie in die Warteschlange gelangen können.

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questions and answers

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operator [1]

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(Bedienungsanleitung) Wir werden zuerst von Joseph DeNardi mit Stifel hören.

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Joseph William DeNardi, Stifel, Nicolaus & Company, Incorporated, Forschungsabteilung – MD & Airline Analyst [2]

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Ed, im Jahr 2018 haben Sie 3,5 Milliarden US-Dollar in bar aus dem Verkauf von Meilen erhalten und etwa 1,5 Milliarden US-Dollar an Marketinggebühren gemeldet. Sie sind auf dem richtigen Weg für 2 Milliarden US-Dollar im Jahr 2020. Wenn Sie im Jahr 23 7 Milliarden US-Dollar erreichen können, werden Sie Marketinggebühren in Höhe von 3 bis 4 Milliarden US-Dollar zahlen. Wie könnten Sie das möglicherweise nicht als separate Geschäftseinheit herausbrechen? Ich spreche nicht davon, es zu spinnen oder zu verkaufen, sondern es nur zu segmentieren. Was denkst du dort?

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Edward H. Bastian, Delta Air Lines, Inc. – Geschäftsführer und Direktor [3]

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Ich denke, es ist ein gutes Problem, sich Sorgen zu machen, Joe. Wir freuen uns vor allem über die neue Erneuerung. AmEx ist ein großartiger Partner und unsere beiden Marken passen strategisch und mit unseren Kunden und unseren Mitarbeitern so gut zusammen. Wenn wir unser Treueprogramm erweitern, haben Sie Recht, es wird eine Frage der Offenlegung geben, um aus Sicht der Eigentümerschaft und der Governance einen besseren Einblick in die Treiber unserer Rentabilität in die Zukunft zu erhalten und ob dies in einem Segment oder was auch immer der Fall ist Offenlegungsformat. Ich bin mir nicht sicher, was es dauern wird. Aber es ist etwas, dem wir, wie Sie wissen, mehr Aufmerksamkeit geschenkt haben, und wir werden das weiterhin in Betracht ziehen.

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Joseph William DeNardi, Stifel, Nicolaus & Company, Incorporated, Forschungsabteilung – MD & Airline Analyst [4]

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OK. Das ist hilfreich. Und dann, Glen, nur – oder Ed, wenn Sie nur über einige der Annahmen sprechen können, die dahinter stehen, die 7 Milliarden Dollar zu erreichen. Es scheint ein weiterhin starkes Wachstum der Kartenakquisitionen und -ausgaben für die Karte zu bedeuten. Was gibt Ihnen das Vertrauen, dass Sie das auch weiterhin tun können? Und dann, Glen, haben Sie einen weiteren bedeutenden Schritt im Jahr 2023 erwähnt. Können Sie also darüber sprechen, wie hoch der Gesamtwert der Vereinbarung bis zum Ende sein könnte?

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Glen W. Hauenstein, Präsident von Delta Air Lines, Inc. [5]

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Nun, wir sehen weiterhin ein deutliches Wachstum über das Jahr 2023 hinaus. Und einer der Hauptgründe für die Beschleunigung der Vertragsverlängerung ist, dass wir weiterhin in neue Produkte und Dienstleistungen für Verbraucher investieren können, von denen wir glauben, dass sie dies tun werden Karte relativ immer attraktiver und treiben die weitere Akquisition voran. Und das war wirklich einer der Hauptgründe, dies zu diesem Zeitpunkt zu tun. Wir sind also gespannt auf die Zukunft davon. Wie ich in der Ergebnisaufforderung ausgeführt habe, hatten wir eine weitere Rekorderfassung im Skript. Wir hatten im ersten Quartal ein weiteres Rekord-Akquisitionsquartal. Und zu Beginn des zweiten Quartals bleiben die Akquisitionen sehr stark. Und ich denke, wenn wir unseren Kunden weiterhin den Wert bieten können, dass sie die Karte erwerben möchten, für die wir mit American Express einen großartigen Plan haben, werden wir diese Erwartungen bis 2023 und darüber hinaus erfüllen oder übertreffen.

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operator [6]

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(Bedienungsanleitung) Wir kommen nun zu einer Frage von Joe Caiado mit Crédit Suisse.

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Jose Caiado De Sousa, Crédit Suisse AG, Forschungsabteilung – Research Analyst [7]

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Ed und Paul, Sie generieren hier eine Menge Cashflows. Dies war bereits vor der Erneuerung des AmEx-Vertrags der Fall. Die Aussichten für den Cashflow sind jetzt noch besser. Zweiteilige Frage hier. Ich weiß, dass Sie verpflichtet sind, 70% des freien Cashflows an die Aktionäre zurückzugeben, aber Sie haben dieses Niveau auch regelmäßig überschritten. Ich bin also gespannt, wie Sie darüber nachdenken, die Bereitstellung dieses inkrementellen Cashflows, den Sie in diesem Jahr erhalten, zu priorisieren. Und dann ist der zweite Teil der Frage, Ed, da Sie über das Vertrauen, das Ihnen dies gibt, und die Nachhaltigkeit Ihres Cashflows gesprochen haben, bin ich gespannt, ob Sie ein Ziel für die jährliche Umwandlung des freien Cashflows in der Zukunft haben.

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Paul A. Jacobson, Delta Air Lines, Inc. – Geschäftsführer und CFO [8]

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Joe, ich fange damit an und Ed kann nachgehen. Obviously, the American Express agreement provides us with increasing confidence about our performance throughout the year and in part helps to convey that confidence through my comments about coming in at the top end of the free cash flow range for the year. It is still early in the year and we are facing increasing prices and we’re cautiously optimistic about that. We have said, with the announcement of the first quarter buyback acceleration, that we maintain the optionality to give back more. So consistent return of capital back to shareholders is obviously a big priority for us and we expect to continue that into the future.

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Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [9]

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Joe, to add on to Paul’s comments, I agree with him. I think it’s a great start to the year. We’re excited with how the first quarter came. But I think it’s still early to be raising full year expectations, whether it’s in guidance or for profitability, EPS or cash flow. We do face a lot of volatility in oil prices. And while demand has been solid, I’d like to at least get through the second quarter before reassessing those full year expectations. So from my perspective, I’d say we are cautiously optimistic. We’ll be in the top half of the guidance range that we gave you, both on EPS as well as on free cash. But we’re not ready to raise those ranges or expectations right at this moment.

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Jose Caiado De Sousa, Crédit Suisse AG, Research Division – Research Analyst [10]

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That’s fair. I appreciate that. And then a second question, if I may, for Glen. I would just love to get your thoughts, kind of big picture, on the booking curve and what you’re seeing. It feels like perhaps we’re seeing some more heavy discounting on longer-dated bookings, but better close and offsetting. Just love your thoughts there.

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Glen W. Hauenstein, Delta Air Lines, Inc. – President [11]

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I don’t think that’s what we see at all. As a matter of fact, forward yields for every month out through the second quarter are in positive territory on higher bookings. So we see relatively robust leisure demand as we enter the second quarter.

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operator [12]

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Our next question will come from Hunter Keay with Wolfe Research.

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Hunter Kent Keay, Wolfe Research, LLC – MD and Senior Analyst of Passenger Airlines, Aerospace & Defense [13]

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Ed, putting aside the issues — Boeing’s current issues with the MAX, how does the potential aftermarket work and your relationship with the engine OEMs factor into how you’re thinking about buying the NMA?

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Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [14]

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Well, I’d say it’s premature to be speculating on the NMA. It’s — Boeing has not even approved the release of it for sale. So I think we’re a little early here. We are — we consider all components of the aircraft and the revenues and the opportunities that it brings as we evaluate a new fleet family. It was an important consideration in making decision in the 321neo, which product we went to with the geared turbofan as well as the MRO benefits that provide it. It will certainly be in the considerations as we think about the NMA but I think trying to get down to that level of speculation probably is way too early.

————————————————– ——————————

Hunter Kent Keay, Wolfe Research, LLC – MD and Senior Analyst of Passenger Airlines, Aerospace & Defense [15]

————————————————– ——————————

OK. And then how does the AmEx agreement factor into how you view the life cycle of the customer? Is there a construct to where you’re willing to subsidize a few years of price-sensitive consumption affairs or even losses or low margins to potentially strategic customers in exchange for like a 25- to 50-year long-term relationship with increasing spend as that customer builds wealth?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [16]

————————————————– ——————————

Well, I — that’s a question obviously for AmEx as well as for us. We are — when we think about AmEx and our relationship, we think for the very long term. We don’t think in terms of contract periods and renewal extensions. AmEx, one of the real attractive components to AmEx is the presence it has and the opportunity it creates in some of our high-value segments. So yes, if you’re asking, do we invest in acquiring high-value potential customers early in their life, absolutely. And it’s one of the reasons I think our brands align so well because we have similar strategies in terms of how we think about our brands and how we think about consumers.

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operator [17]

————————————————– ——————————

And now we’ll hear from Duane Pfennigwerth with Evercore ISI.

————————————————– ——————————

Duane Thomas Pfennigwerth, Evercore ISI Institutional Equities, Research Division – Senior MD [18]

————————————————– ——————————

Just to come back to AmEx for a second. Can you comment on the underlying drivers of that $7 billion contribution by 2023? How much of that is contractual rate? How much of that is customer spend? And how much of that is new customer acquisition, if you would?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [19]

————————————————– ——————————

Duane, we are under contract confidentiality obviously with American Express that you can appreciate. I can tell you it’s all of the above. And as we get further into the new contract, I think some of those, your questions, will start to answer themselves.

————————————————– ——————————

Duane Thomas Pfennigwerth, Evercore ISI Institutional Equities, Research Division – Senior MD [20]

————————————————– ——————————

OK. We’ll wait for that to be revealed. And then, Glen, you touched on mobile briefly. Can you talk about mobile more broadly? What does it represent as a percentage of your bookings today? How large is that revenue stream and how quickly is it growing?

————————————————– ——————————

Glen W. Hauenstein, Delta Air Lines, Inc. – President [21]

————————————————– ——————————

Mobile is by far the fastest growing and it’s about 20% of our direct bookings, 20% to 25% of our direct bookings. And it seems like every week and every month that moves on, mobile becomes a bigger and bigger chunk of total bookings. So that’s really the place that we see an incredible amount of growth and that’s where consumers are seeming to want to go in order to book delta.com or book directly with Delta. So very exciting and we have lots of great new releases coming this year, which we think will continue to enhance the customer experience with more and more utility that you can have in the palm of your hand.

————————————————– ——————————

operator [22]

————————————————– ——————————

Helane Becker with Cowen will have the next question.

————————————————– ——————————

Helane R. Becker, Cowen and Company, LLC, Research Division – MD & Senior Research Analyst [23]

————————————————– ——————————

Just on the MRO business, you said it was $800 million in revenue this year and you want to grow it to $2 billion over some time frame going forward. Can you just talk about the CapEx that you need to get to that level? Or with the new large test cell, is that built out now?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [24]

————————————————– ——————————

Well, Helane, the good news in that is a lot of the growth that we need is now contractually provided for with our relationships with Rolls-Royce on the Trent as well as on the Pratt & Whitney and the geared turbofan. As those products come to market, the geared turbofan is still early in its introduction as well as the new — some of the new Trent products. You will see that the revenue ramp towards the back end of that period at a higher clip than you’ll see in the front part of that 5-year period. This year, we’re doing well. We’re looking for double-digit growth top line as well as margin improvement from the MRO. But it really starts to take off, pardon the pun, over the next couple of years.

————————————————– ——————————

Helane R. Becker, Cowen and Company, LLC, Research Division – MD & Senior Research Analyst [25]

————————————————– ——————————

OK. That’s really helpful. It’s okay, I get the puns, too. Just when you think about — so I don’t — I want to ask this question, but you’re not going to really answer the whole question because you started negotiating with your pilots. And when you think about your go-forward CapEx and the growth of the airline, the replacement cycle and so on, how do you manage their expectations in terms of growing the non-ticket revenue or main cabin revenue, that’s 45% of your total revenue, with what their demands are for what they expect their future income to be?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [26]

————————————————– ——————————

Well, you’re right. We’re not going to talk about our discussions with our pilots. We have just begun and it’s going to take quite some time to reach a productive conclusion. When we think about our company, we think about all the constituents that are important to our company, all of our employees, not just our pilots that create the opportunity and the value that we’ve already created and as well as the future. We think about the investment needs that we have to make in our — continued in our product and our growth. We think about the investments we need to make in our customers, investments we need to make in our communities as well as the investments we need to continue to make in our owners. So in that context, I’m certain we’ll reach a good and fair conclusion of our pilot negotiations, but it’s — we’re not going to do it publicly and it’s far premature to even begin to speculate on any construct there.

————————————————– ——————————

operator [27]

————————————————– ——————————

And our next question will come from David Vernon with Bernstein.

————————————————– ——————————

David Scott Vernon, Sanford C. Bernstein & Co., LLC., Research Division – Senior Analyst [28]

————————————————– ——————————

Maybe Glen or Ed, could you just kind of talk in simple terms like what Delta actually needs to do to get this incremental sort of $3.5 billion of revenue? Is this just a function of pricing on a mileage basis, a new card issue? Can you kind of break through the drivers of what actually Delta needs to do to kind of secure this revenue benefit?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [29]

————————————————– ——————————

David, it’s a good try. I’ll give you the same answer I gave last time, we’re under confidentiality and we can’t give you those specific drivers in terms of — but it is all of the above. Obviously, we’re going to be investing alongside AmEx in new cardholder, not just acquisitions, but developments in terms of spend and portfolio size and range and the opportunities to expand in that regard. Economics of the card, obviously, have improved itself in terms of coming back to Delta. So I’d say those are a couple of the main drivers.

————————————————– ——————————

David Scott Vernon, Sanford C. Bernstein & Co., LLC., Research Division – Senior Analyst [30]

————————————————– ——————————

Yes. I mean, I guess, it’s just trying to — it’s hard to sort of handicap the certainty with which to put in — put that number to a model without really kind of understanding the drivers of kind of…

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [31]

————————————————– ——————————

Let me suggest that we have pretty good optimism on getting to the $7 billion in that time frame we gave.

————————————————– ——————————

David Scott Vernon, Sanford C. Bernstein & Co., LLC., Research Division – Senior Analyst [32]

————————————————– ——————————

OK. All right. Then maybe just as a follow-up topic on a different subject. Transatlantic, when you mentioned that Europe is looking like it’s firming up a little bit as we get into the summer months, there’s a lot of speculation that there’s going to be some new capacity added into that transatlantic market. Can you talk a little bit about kind of Delta’s experience on the yield curve when other sort of low-cost entrants maybe kind of came into that transatlantic market? And help us think through what some of the puts and takes for Delta could be, if we do hear an announcement that another carrier may be flying the transatlantic soon?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [33]

————————————————– ——————————

Well, as you know, we faced and have faced significant competition from low-fare and ultra-low-fare carriers in the transatlantic for quite some time. So this is not something new. And we’re sitting in a very good position, we think, with our partnerships in the transatlantic and with our core products and services that will continue to improve over the next months and years. So we feel very secure. And as you look at transatlantic capacity, there are always new entrants coming and there are always entrants leaving, if you will. So we’ll see what the supply and demand balance is, but we’ve had a very good couple of years in the transatlantic and we expect that to continue.

————————————————– ——————————

David Scott Vernon, Sanford C. Bernstein & Co., LLC., Research Division – Senior Analyst [34]

————————————————– ——————————

But did you see a material impact as sort of maybe Norwegian came into the market a few years ago or was it sort of [just got part of the] noise?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [35]

————————————————– ——————————

As you know, last year was one of the best years we’ve had in many years in the transatlantic and this year is shaping up to be another great year. So I think the data points would suggest that we’re in a very good spot.

————————————————– ——————————

operator [36]

————————————————– ——————————

Next question will come from Jamie Baker with JPMorgan.

————————————————– ——————————

Jamie Nathaniel Baker, JP Morgan Chase & Co, Research Division – U.S. Airline and Aircraft Leasing Equity Analyst [37]

————————————————– ——————————

Glen, sort of an arcane one to start. Could you give us a summary of interline agreements with U.S. and Canadian competitors? I realize it’s a small part of the business. But to the extent that MAX cancellations continue, it would help to understand which airlines can send passengers over to you. Also, if and when somebody does, is the fare you receive what the passenger paid fare was or is it something more akin to like an ID75 off your full fare?

————————————————– ——————————

Glen W. Hauenstein, Delta Air Lines, Inc. – President [38]

————————————————– ——————————

I don’t think we want to disclose the details of our interline agreements with our partners. But it is not the fare that the customers paid, we’ll say that. And we do have interline agreements with the 2 major U.S. carriers that are our competitors and that’s 2 of the 3 that are experiencing those small cancellations. I think now most of them have taken those out so they’re trying to get proactive and get way ahead of the re-accommodation. So we don’t expect a significant number of day of departure re-accommodations from them.

————————————————– ——————————

Jamie Nathaniel Baker, JP Morgan Chase & Co, Research Division – U.S. Airline and Aircraft Leasing Equity Analyst [39]

————————————————– ——————————

OK. And second, probably for Ed or Paul, on AmEx. How far ahead of the industry curve do you think that Delta is with the new terms? Or actually — no, no, no, scratch that because I don’t think you’ll answer. Let me try it differently. If you were to rank the contributions to your margin premium, so if you were to rank the contributors to the margin premium and I gave you the categories of loyalty economics, domestic RASM premium, MRO, fleet and CASM, would those be the top 5? And what would the descending order of contribution be? Again, those categories are loyalty, RASM premium, MRO, fleet and CASM. You have 30 seconds.

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [40]

————————————————– ——————————

It sounds like a 30-minute game show, Jamie. Listen, we are — we were clear in our comments that we — this contract extension will lead us to our goal of being not just the most valuable card in the industry, but one of the most valuable cards in — consumer cards in the world. I don’t know that we’re #1 at this moment as we sit here within our industry, though I certainly expect over the next few years we should be #1. Relative ranking, I’d have to give some thought to how you’d want to — what kind of cost you’d like to allocate to all those revenue categories that you gave us.

————————————————– ——————————

Jamie Nathaniel Baker, JP Morgan Chase & Co, Research Division – U.S. Airline and Aircraft Leasing Equity Analyst [41]

————————————————– ——————————

OK. I guess, we’ll send you home with the home version of the board game then. I appreciate the answers all the same.

————————————————– ——————————

operator [42]

————————————————– ——————————

Now we’ll move to a question from Mike Linenberg with Deutsche Bank.

————————————————– ——————————

Michael John Linenberg, Deutsche Bank AG, Research Division – MD and Senior Company Research Analyst [43]

————————————————– ——————————

Just 2 quick ones here. Hey, Ed, on the MRO, I recall a time, it was a few years back when Delta used to provide on a segment basis the profitability of your MRO. And I think the margins, operating margins, were in the mid-teens. Is that consistent with the profitability of that business today?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [44]

————————————————– ——————————

Yes, it is.

————————————————– ——————————

Michael John Linenberg, Deutsche Bank AG, Research Division – MD and Senior Company Research Analyst [45]

————————————————– ——————————

OK. Groß. And then just my second question, and Ed, this is back to you. Just the headlines out about possibility of tariffs on Airbus equipment. Would there be a distinction if for Airbus aircraft, maybe narrowbody, aircraft coming out of Alabama that are built by American workers, any thoughts on that? I know it’s early.

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [46]

————————————————– ——————————

Well, I don’t know, Mike. Obviously, the aircraft that we’re going to be taking next year out of Mobile, you would think would be — should be exempt from a potential tariff issue. But we’ll wait and see.

————————————————– ——————————

operator [47]

————————————————– ——————————

And that question will come from Dan Mckenzie with Buckingham Research.

————————————————– ——————————

Daniel J. McKenzie, The Buckingham Research Group Incorporated – Research Analyst [48]

————————————————– ——————————

Going back to the use of free cash flow this year, Delta has done strategic investments really well. And without comment to what you may or may not do, I’m wondering if you can at least comment on whether there are any interesting opportunities that you’re currently evaluating?

————————————————– ——————————

Glen W. Hauenstein, Delta Air Lines, Inc. – President [49]

————————————————– ——————————

Such as?

————————————————– ——————————

Daniel J. McKenzie, The Buckingham Research Group Incorporated – Research Analyst [50]

————————————————– ——————————

Strategic investment perhaps in another partner or at least a bigger investment in an existing partner?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [51]

————————————————– ——————————

Dan, as you know, we’re not going to speculate on future strategic investments on the call. The one that’s out there that we have indicated we’re in discussions with is Alitalia, and I’ve confirmed that several times publicly that we are talking to the rail system of Italy FS as well as with the Alitalia leadership and the Italian government about potentially making an investment. But it’s not the size that I think would warrant us getting into a discussion of what that means for our use of free cash flow. I think that will be an investment that’s somewhat limited. And we certainly haven’t made a decision in terms of timing on that.

————————————————– ——————————

Daniel J. McKenzie, The Buckingham Research Group Incorporated – Research Analyst [52]

————————————————– ——————————

Understood. Second question, just regarding the move to maintain the full year EPS. There is some macro noise around Brexus — Brexit, pardon me, and some slower growth worries out of Europe. And I appreciate the positive revenue commentary on the Atlantic. But on the U.K. piece of this, what are you seeing today? And can you just remind us what the U.K. component is to the overall revenue pie here just given the JVs?

————————————————– ——————————

Glen W. Hauenstein, Delta Air Lines, Inc. – President [53]

————————————————– ——————————

Well, U.K. is about 20% to 25% if you include the Virgin piece, much less for us. And what we’re seeing is actually fairly decent summer travel to the U.K., both in business and in coach. So we have — this second quarter, we’re expecting U.K. unit revenues to be flat to up slightly. And so while we have waited for years for the impact of Brexit on air travel, it has not yet materialized and we’ll keep a close eye on it. And if we have to make adjustments, we will. But I think there’s so much uncertainty around what it actually is. It’s hard for us to action it at this time.

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [54]

————————————————– ——————————

And to be clear on Glen’s comments, that 20% to 25% is of the transatlantic JV, not of Delta, so it’s obviously a much smaller part of Delta.

————————————————– ——————————

Glen W. Hauenstein, Delta Air Lines, Inc. – President [55]

————————————————– ——————————

25% of the transatlantic.

————————————————– ——————————

Jill Sullivan Greer, Delta Air Lines, Inc. – VP of IR [56]

————————————————– ——————————

That’s going to wrap up the analyst portion of the call. Before we turn it over to media, I just want to say on the behalf of the entire IR team that you have been a fantastic partner for us. And we look forward to working with Tim and we’ve been lucky to work with and learn from one of the best. So we’ll hand it over to the media team.

————————————————– ——————————

Tim Mapes, Delta Air Lines, Inc. – Senior VP & Chief Marketing & Communications Officer [57]

————————————————– ——————————

Great, Jill. If we could, as we transition to the questions and answers from members of the media, if you wouldn’t mind just repeating the instructions and a reminder that we just like to keep the questions themselves as succinct and short as possible with one follow-up to allow us to get to many of these as we possibly could.

————————————————– ——————————

operator [58]

————————————————– ——————————

(Operator Instructions) And we will hear first from David Koenig with the Associated Press.

————————————————– ——————————

David Koenig, [59]

————————————————– ——————————

I did have a question, a follow-up to one of the analyst questions on the MAX cancellations and the interline agreements. Are those customers coming over on interline agreements? How profitable are those? And I’ll include my follow-up here. Do you have any forecast yet as to how many additional passengers you might see because of MAX-related cancellations at your other airlines?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [60]

————————————————– ——————————

David, this is Ed. It’s — the MAX, it represents a really small part of our industry’s market share at this point. And we’re not going to get into any specific details relative to interline arrangements we have with some of our partners that may be flying that product.

————————————————– ——————————

David Koenig, [61]

————————————————– ——————————

Does that mean you do not expect many passengers to come over on those?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [62]

————————————————– ——————————

I would expect the numbers are not going to be material to Delta.

————————————————– ——————————

operator [63]

————————————————– ——————————

We will now hear from Tracy Rucinski with Reuters.

————————————————– ——————————

Tracy Rucinski, [64]

————————————————– ——————————

You indicated that the size of any Alitalia stake would be limited. How large of a stake is Delta willing to take? And what has held up a deal so far?

————————————————– ——————————

Edward H. Bastian, Delta Air Lines, Inc. – CEO & Director [65]

————————————————– ——————————

We are not going to speculate on either the size of our investment other than what we’ve already said or the time it’s going to take to bring that to a conclusion.

————————————————– ——————————

operator [66]

————————————————– ——————————

Moving to Edward Russell with Flightglobal.

————————————————– ——————————

Edward Russell, [67]

————————————————– ——————————

Paul, you mentioned that Delta is accelerating the retirement of the MD-90s. Could you outline how — when does Delta plan to remove the MD-90 fleet?

————————————————– ——————————

Paul A. Jacobson, Delta Air Lines, Inc. – Executive VP & CFO [68]

————————————————– ——————————

Well, what I mentioned in my comments is that we’re considering that. We expect to make that announcement in the quarter, at which point we’d provide more details on exact timing, replacement, et cetera.

————————————————– ——————————

Edward Russell, [69]

————————————————– ——————————

OK. And then a second question on premium products. What is Delta — how is Delta viewing — I mean, you’re shrinking your business cabins on some of your new aircraft, the A330-900, the 777-200. I mean, how do you view premium demand when your upfront cabins are shrinking on these widebodies?

————————————————– ——————————

Glen W. Hauenstein, Delta Air Lines, Inc. – President [70]

————————————————– ——————————

Well, we don’t look at it as reducing the number of premium seats because we are introducing an entirely new cabin on the airplane. So what we’re trying to do is best match the consumer demand with the products and services that we have. So if you look at the total premium seats on those airplanes, they’re actually increasing as we introduce Delta Premium Select to the international marketplace. And that will be complete, but on all of the international widebodies by 2021. And we’re very excited with the initial returns, that customers are selecting that. I think when we look back at what customers wanted to buy from us years back, we had coach and then we had a flat bed and there were so many opportunities to satisfy consumer demands in between. So now having all 5 cabins available, I think we feel very comfortable with the size of each one of those.

————————————————– ——————————

operator [71]

————————————————– ——————————

And that last question will come from Elliott Blackburn with Argus Media.

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Elliott Blackburn, [72]

————————————————– ——————————

I just hope to get an update on the progress Delta has made on efforts to find a partner at the Trainer refinery.

————————————————– ——————————

Paul A. Jacobson, Delta Air Lines, Inc. – Executive VP & CFO [73]

————————————————– ——————————

Sicher. We — as we stated in January, we continued to work through that. That is a — it’s been a long process because it’s been a complex one. We still do that. We have no update to that guidance at this point.

————————————————– ——————————

Elliott Blackburn, [74]

————————————————– ——————————

And I guess if there’s any kind of outlook you can give on the role of that refinery within Delta going forward? Does it take on any greater or lesser importance as we see kind of forecasts for higher distillate prices next year and kind of a general rising jet fuel environment? What’s kind of your longer-term outlook on that facility?

————————————————– ——————————

Paul A. Jacobson, Delta Air Lines, Inc. – Executive VP & CFO [75]

————————————————– ——————————

Sicher. The refinery has always been a strong asset for Delta. And the process that we outlined was in an effort to try to find ways to strategically enhance that value to Delta. But as we look at both the forward curves out and the out-years, the potential prospects of increased prices of jet fuel as it relates to IMO 2020, there’s obviously a forward view of profitability at that refinery which will serve as a very effective counter effect to increasing fuel prices. Not only the direct production from the refinery, but also the fact that we’ve been able to use that production to lower our prices throughout the country and throughout all the sites where we purchase jet fuel has created a sustainable advantage for Delta and we don’t expect that to change under any circumstance.

————————————————– ——————————

Tim Mapes, Delta Air Lines, Inc. – Senior VP & Chief Marketing & Communications Officer [76]

————————————————– ——————————

With that, we’d like to close by thanking everybody for their time today, particularly thanking Ed, Glen and Paul for their comments. I’d add my personal thanks to Ned for his help during these weeks of transition and thank everyone again for your time, and we will see you on July 11 for second quarter.

————————————————– ——————————

operator [77]

————————————————– ——————————

And everyone that does conclude today’s conference. Thank you for your participation today.

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