The paragraph is an introduction to the Delta Air Lines March Quarter 2025 Conference Call. Matthew, the operator, mentions that the call will feature a presentation followed by a Q&A session, and it is being recorded. Julie Stewart, Vice President of Investor Relations, introduces the speakers: CEO Ed Bastian, President Glen Hauenstein, and CFO Dan Janki, who will discuss Delta's performance, revenue environment, and financials, respectively. She also notes the presence of forward-looking statements and non-GAAP financial measures. Ed Bastian then begins his remarks by revealing Delta's first-quarter pre-tax earnings of $382 million, or $0.46 per share, which is consistent with the previous year.

In the March quarter, the company reported a 3.3% revenue increase, setting a record for the period, with an operating margin of approximately 5% and a free cash flow of $1.3 billion. Despite a challenging start to the year, the team's efforts contributed to solid profitability, leading industry returns, and high operational performance. The Delta team's dedication was celebrated with a $1.4 billion profit-sharing payout for 2024's performance, and Fortune Magazine ranked Delta as the 15th best company to work for. While demand in the Main Cabin has softened due to economic uncertainty, international operations, along with Premium and Loyalty revenue streams, remain resilient. The company is focused on controlling what it can, maintaining margins and free cash flow amid economic challenges.

The paragraph discusses Delta's strategic focus on maintaining capacity growth in the second half of the year and managing costs to align with demand, especially in domestic Main Cabin seats. The company aims for low single-digit growth in nonfuel unit costs by leveraging its reliability and premium service. Delta's June quarter outlook anticipates double-digit operating margins and significant pretax income, despite flat revenue. Although an updated full-year projection isn't provided due to macroeconomic uncertainties, Delta expects solid profitability and cash flow in 2025. The company emphasizes its diversified business model and structural advantages to ensure financial durability and industry-leading performance. Delta remains committed to managing margins, cash flow, and returns effectively.

Glen Hauenstein expressed gratitude to employees for their exceptional service and highlighted the company's March quarter revenue of $13 billion, a 3.3% increase from the previous year, despite a 1% decline in unit revenues. The quarter saw diverse, high-margin revenue streams growing mid-single digits, with premium and loyalty revenues up 7%. American Express remuneration rose by 13% to $2 billion, and travel product revenue increased 7%. Cargo and MRO revenues grew 17% and 7%, respectively. Domestic revenue saw a slight 1% increase, while international revenue grew by 7%, with strong performances in transatlantic, Pacific, and Latin markets. The outlook for the June quarter projects revenue changes between -2% to +2% compared to the previous year, amid recent policy changes and market dynamics.

The paragraph discusses the current state and strategies of a company facing cautious consumer behavior and fluctuating corporate travel trends, with flat corporate volumes and continued demand softness in the Main Cabin, particularly during off-peak times. Despite this, Premium, Loyalty, and International sectors show resilience, with strong international bookings originating from the U.S. The company is leveraging its brand strength and partnerships, such as with American Express, to maintain high load factors and grow its SkyMiles membership. To align supply with moderate demand growth and optimize margins, the company is reducing expected capacity growth to flat for the year's second half, with a year-over-year decrease in main cabin seat growth. It is executing on commercial priorities aimed at long-term margin expansion through customer experience investments and revenue diversification. A significant milestone achieved is a 10-year maintenance agreement with UPS, supporting revenue diversification. The company adapts to the year's unexpected start by leveraging its advantages and maintaining its long-term strategy.

In the March quarter, Delta reported a pretax income of $382 million and an operating margin of 4.6%, with flat earnings per share compared to the previous year despite a challenging macro environment. Nonfuel unit costs rose by 2.6%, better than expected. Delta faced slightly higher fuel prices but still generated $1.3 billion in free cash flow after significant investments and profit-sharing. The company repaid $530 million in debt, ending the quarter with a leverage ratio of 2.6 times, leading to a credit rating upgrade from Moody's. Looking ahead to the June quarter, Delta anticipates an operating margin of 11% to 14% and earnings of $1.70 to $2.30 per share, with modest nonfuel unit cost growth. Delta plans to manage capacity growth by limiting net aircraft additions to less than 1% and aligning its workforce and suppliers to lower growth levels, ultimately expecting reduced workforce levels through natural attrition.

The paragraph discusses Delta's proactive adjustments to align supply and demand in response to the evolving environment, focusing on protecting margins and cash flow. Delta aims to repay at least $3 billion of debt this year and plans to strategically manage high-cost debt through repayments or refinancing. The company emphasizes its long-term commitment to a consistent strategy, leading to a durable business capable of navigating uncertainty. Delta remains confident in its financial outlook over the next three to five years. During a Q&A, an analyst, Conor Cunningham from Melius Research, inquires about Delta's second-quarter guidance and concerns about potential price-sensitive market weaknesses affecting other sectors. Glen Hauenstein acknowledges monitoring these concerns closely.

The paragraph discusses the current state of wealth and the impact of economic conditions on Delta Airlines. Despite a $5 trillion reduction in overall wealth, the affluent cohort's wealth factor remains $32 billion higher than in 2019. Delta is observing strong cash sales, particularly in long-haul travel, but is also monitoring market demand closely. Ed Bastian, responding to questions from Conor Cunningham, states that Delta has historically capitalized on economic disruptions, positioning itself advantageously. He suggests that while the current economic challenges are uncertain, they are unlikely to be prolonged, and expects Delta to emerge stronger. Lastly, Andrew Didora from Bank of America inquires about potential changes to Delta's 2Q schedules amid capacity cuts.

In the paragraph, Glen Hauenstein discusses Delta's strategy regarding capacity cuts for the remainder of the year. He mentions that while the second quarter is mostly unaffected, the company plans to reduce capacity starting in August, particularly in the Southeast due to schools reopening earlier. These adjustments aim to enhance profitability and margins by focusing on high recapture potential areas. Additionally, Hauenstein notes that Delta's premium revenue is currently at its highest percentage of total revenues and has shown resilience, even in challenging economic conditions.

The paragraph discusses a business strategy focused on managing capacity and costs in the face of economic challenges. While there are issues in the Main Cabin, the company remains optimistic about the resilience of the Premium segment, with a strong intent to repurchase among customers. In response to uncertainty, the company is reducing capacity growth to around 2%, below initial projections. Dan Janki explains that cost savings will come from cutting high-cost capacity and managing direct flying costs, particularly regarding crew expenses and maintenance cycles, to maintain their CASM-Ex outlook.

The paragraph discusses adjustments in airport operations and workforce management due to changing volume levels, emphasizing the need to align labor hours accordingly and find nonvalue-added costs to manage. Ed Bastian mentions announcing these decisions in advance to stay ahead of scheduling. During a technical difficulty interruption, Julie Stewart resumes and introduces a question from analyst Duane Pfennigwerth about capacity cuts and fleet retirements. Glen Hauenstein responds, focusing on domestic main cabin off-peak times and accelerating the retirement of older airplanes as primary strategies.

In the paragraph, Dan Janki discusses the status of older aircraft models, while Duane Pfennigwerth asks about the factors driving growth in card spend and its impact on loyalty. Glen Hauenstein responds, explaining that the majority of the growth is due to existing card members increasing their spending, with acquisitions contributing just three to four percentage points to the double-digit growth. Despite not yet having revenue data, transaction levels remain high. Mike Linenberg from Deutsche Bank then inquires about recent booking trends, asking if there has been an increase in cancellations. Glen Hauenstein notes that there was a brief drop in bookings for about a day or so, but sales quickly rebounded to above last year's levels, with no significant increase in refunds.

The paragraph discusses changes in the booking pattern for international flights, particularly Transatlantic trips. There has been a shift in the booking curve, with bookings happening further in advance than before. This shift left airlines with empty seats in February and March, prompting adjustments to encourage earlier bookings. As a result of these changes, the airline entered April slightly ahead of their targets and aims to improve further into May, June, and July. Currently, international flights for April are booked over 90%, May is in the 80s, and June is in the 70s, indicating strong early summer and spring bookings.

The paragraph discusses the competitive environment in the airline industry, focusing on the strategies of Delta and low-cost carriers. Glen Hauenstein from Delta shares that their strong brand and high demand give them an advantage, allowing them to retain customers even when offering lower-priced seats. This situation exerts pressure on low-cost carriers. Tom Fitzgerald inquires about tariff risks affecting Delta's cost structure, particularly concerning its Airbus orders and related supply chains. Dan Janki explains that Delta's supply base is largely service-related and predominantly sourced in the U.S., indicating a strategy to manage tariff-related risks effectively.

In this excerpt from a conference call, Savi Syth from Raymond James inquires about revenue expectations and capacity plans for the second quarter, highlighting domestic and international performance. Glen Hauenstein responds, indicating that the domestic sector, particularly the main cabin, is weaker compared to international sectors like the Atlantic and Pacific, which are performing well despite potential impacts from new tariffs on China. Latin performance aligns with expectations. Hauenstein notes a strategy to cut unprofitable flights, concentrating on off-peak periods rather than peak days. Syth seeks clarification on potential regional capacity cuts in the second half, and Hauenstein suggests cuts will focus on unprofitable areas. The conversation then shifts to Tom Wadewitz from UBS for further questions on international performance.

The paragraph discusses the impact of tariffs on travel markets between the U.S., Canada, and Mexico. Glen Hauenstein notes a decline in bookings from Canada and mixed performance in Mexico, with pressure on travel for visiting friends and relatives (VFR) more than business travel. The company plans to reduce capacity in these regions. Tom Wadewitz raises concerns about potential risks in transatlantic travel if European travel to the U.S. declines while U.S. travel remains strong. Hauenstein explains that the company focuses on U.S. point of origin due to historically higher fares, representing 80% of their long-haul international travel. They have not observed a decline in international demand to the U.S. yet but remain cautious.

In the paragraph, Sheila Kahyaoglu from Jefferies asks about the risks to Delta's corporate travel demand returning to pre-pandemic levels and whether the changes are due to volatility or cost-cutting. Glen Hauenstein and Ed Bastian from Delta respond by noting that industries like auto have been hit harder, while banking and tech are doing better, leading to a flat year-over-year portfolio for Delta. Ed Bastian highlights that during uncertainty, companies often cut corporate travel to protect cash flow and margins. However, Delta's corporate travel demand has remained flat, showing no negative change despite a 10-point slowdown from the start of the year, as companies navigate future uncertainties.

In this paragraph, Sheila Kahyaoglu asks Dan Janki about the conditions needed to reduce the fleet and increase retirements. Dan explains that despite flat capacity, they are revising their net additions downward, focusing on managing retirements and being cautious with capital expenditures and cash for fleet additions. They plan to add fewer than 10 aircraft, resulting in less than 1% net growth. He mentions the aim to operate within a 20%-30% retirement range, likely exceeding 30%. This strategy focuses on removing unprofitable and costly flights to improve margins. Later, David Vernon inquires about the impact of tariffs on the CapEx budget and possible aircraft delivery deferrals, with Ed Bastian responding.

In the paragraph, there's a discussion about Airbus being a key partner for aircraft deliveries and the company's stance on not paying tariffs for these deliveries. The speaker emphasizes the importance of minimizing tariffs due to the uncertainty and potential cost increase of 20%. Following this, there is a focus on the airline's pricing strategy, specifically the price differences between Main Cabin and Delta Comfort. Glen Hauenstein indicates that premiums for Delta Comfort are increasing compared to the Main Cabin, and this trend is expected to continue widening in the next quarter despite the weaker demand period. David Vernon questions the sustainability of this trend, to which Hauenstein admits uncertainty about the future but confirms the current observation of growing separations in pricing tiers.

Glen Hauenstein emphasizes the importance of Delta's long-term investments in areas like reliability, club networks, and customer loyalty programs. He argues that while competitors may easily expand premium seating, fostering customer loyalty is more challenging and requires significant investment over time. He suggests that in a challenging economic environment, competitors may struggle to make similar investments, potentially widening Delta's lead. As competitors attempt to align more closely with full-service carriers, Delta sees opportunities to attract their loyal customers. Hauenstein also notes that, unlike previous downturns where international travel was more affected than domestic, this trend isn't occurring yet, possibly due to longer booking cycles for international travel.

Glen Hauenstein and Ed Bastian discuss the strong performance of international cash sales, particularly in transatlantic travel, expected to persist through October. Despite general economic uncertainty, baby boomers, who are currently a significant traveling demographic, continue to travel due to their substantial wealth. Bastian notes that since 2019, Delta's core customer base has predominantly come from U.S. households earning $100,000 or more annually, a group that has accumulated $35 trillion in wealth, impacting travel trends positively.

The paragraph discusses market fluctuations, specifically a recent pullback in the $5 billion to $7 trillion range, and how it affects consumer behavior and spending priorities. Despite economic concerns, there is confidence in the strong demand for experiences over acquisitions, as seen in booking and American Express data, and especially in the premium product category where Delta excels. The speakers acknowledge potential new learnings during this period and emphasize that the market is currently at the same level it was a year ago, suggesting stability. A subsequent question is raised about the booking patterns for Delta's Premium versus Main Cabin, with the response indicating there are no significant differences. The conversation then leads to an inquiry about RASM and CASM, directed towards Ed.

In the paragraph, Ed Bastian addresses concerns about managing Delta amid post-COVID challenges and a potential downturn. He states that no involuntary actions are planned but emphasizes using voluntary measures for cost management, as during COVID. Many new hires are experienced, familiar with industry volatility, and joined Delta for its reputation. Bastian often reminds frontline teams of the industry's unpredictability and sees change as an opportunity for Delta to stand out. He expresses confidence in Delta's ability to adapt while acknowledging the industry's humbling nature. The conversation concludes with thanks for addressing a challenging question.

In this paragraph, Brandon Oglenski from Barclays questions Ed and Glen about the airline industry's strategy regarding off-peak times, considering past years' economic growth. Glen Hauenstein responds by explaining that during periods of revenue growth, airlines expand their off-peak time channels, leading to a current overcapacity on days like Tuesdays and Wednesdays compared to competitors like American or United. When faced with downturns, the airline adjusts by reducing capacity on these weaker, less profitable days. Despite this, off-peak times have high recapture potential, making them beneficial in adjusting capacity, as opposed to peak times like Friday evenings.

The article discusses a conversation between analysts and company executives about the company's fleet management and maintenance planning amidst a fluctuating market environment. Brandon Oglenski asks Dan Janki about potential fleet retirements and their impact on maintenance. Dan confirms plans for incremental retirements and fewer net additions, noting that this period offers a chance to reduce volume and costs associated with high-cost flying and maintenance savings. Ravi Shanker from Morgan Stanley inquires about the nature of economic downturns, questioning whether the transition from slowed growth to stalled growth before a decline is typical, and if the current situation should be viewed positively since it's not worsening.

In the article, Delta executive Ed Bastian reflects on his 26 years at the company, highlighting the challenges the airline has faced, such as 9/11, recessions, and COVID-19. He emphasizes the airline's ability to manage adversity due to their familiarity with necessary actions and quick response capabilities. Despite current uncertainties in global trade, Bastian expresses confidence in navigating through them. Ravi Shanker asks about the percentage of Delta's Transatlantic revenue originating from Europe and any potential impact on capacity due to non-economic reasons. Glen Hauenstein responds that 20% of their Transatlantic revenue comes from Europe, and they can adjust by fulfilling demand from other world regions if necessary. So far, they haven't experienced significant softness, but they remain vigilant.

The paragraph is from a Q&A session during a call where Mary Schlangenstein from Bloomberg News asks about Delta's negotiations with Airbus concerning avoiding tariffs on new planes. Delta's Ed Bastian responds that the tariff just took effect and that they plan to work closely with Airbus, expressing hope that the issue will be resolved through trade discussions rather than through actions by either company. He highlights the trade imbalance between the U.S. and Europe in the aerospace industry, noting that the U.S. exports significantly more to Europe. Mary also inquires about a potential decline in international leisure travel in the Main Cabin.

The paragraph is a transcript from a Q&A session involving various individuals discussing topics related to the aviation industry. Glen Hauenstein mentions that the international premium cabin is outperforming the main cabin but does not provide specific numbers. Alison Sider inquires about deferring aircraft deliveries due to tariffs or growth slowdown, to which Ed Bastian responds affirmatively regarding tariffs. Alison also questions any changes in pilot training following a Toronto incident, with Peter Carter stating the investigation is ongoing and no comments can be made yet. Leslie Josephs asks about the Trump administration's response to reversing Biden-era consumer regulations, and Peter Carter indicates that the Trump administration has issued an order freezing many proposed regulations.

The paragraph concludes a conference call, with Tim Mapes expressing hope for long-term outcomes and the operator thanking participants for their involvement.

This summary was generated with AI and may contain some inaccuracies.