Good morning, everyone, and welcome to the Delta Air Lines March Quarter 2024 Financial Results Conference Call. My name is Matthew, and I'll 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. As a reminder, today's call is being recorded. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

Thank you, Matthew. Good morning, everyone, and thanks for joining us for our March quarter 2024 earnings call. Joining us from Atlanta today are: CEO, Ed Bastian; our President, Glen Hauenstein; and our CFO, Dan Janki. Ed will open the call with an overview of Delta's performance and strategy, Glen will provide an update on the revenue environment, Dan will discuss costs and our balance sheet. After the prepared remarks, we'll take analyst questions. We ask you to please limit yourself to one question and a brief follow-up so we can get to as many of you as possible. And after the analyst Q&A, we'll move to our media questions. Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events. All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements. Some of the factors that may cause such differences are described in Delta's SEC filings. We'll also discuss non-GAAP financial measures, and all results exclude special items, unless otherwise noted. You can find a reconciliation of our non-GAAP measures on the Investor Relations page at ir.delta.com. And with that, I'll turn the call over to Ed.

Well, thank you, Julie, and good morning, everyone. We appreciate you joining us today. Earlier this morning, we reported our March quarter results posting pre-tax earnings of $380 million or $0.45 per share, a $0.20 improvement over last year, and revenue that was 6% higher and a new record for the first quarter. Free cash flow was $1.4 billion and we delivered a return on invested capital of nearly 14%, putting Delta's returns in the top half of the S&P 500. We are delivering industry-leading operational reliability and have widened the gap to our competition. Last summer, we made forward-leaning investments in the operation. And since then, our teams have delivered operational performance that is among the best in our history, with mainline cancellations down 85%, setting new records for completion factor in both the fourth quarter and the first quarter. I'd like to sincerely thank Delta's 100,000 employees for your dedication, professionalism, and hard work in delivering these outstanding results. In February, we recognized the efforts of our people with $1.4 billion in profit-sharing, more than the rest of the industry combined, continuing Delta's longstanding philosophy to reward industry-leading performance with industry-leading compensation. Reflecting our people-first culture, Forbes ranked Delta the fifth-best large employer in America, and Delta was recently named the 2024 Global Airline of the Year by Air Transport World for our outstanding commitment to safety, operational performance, and premium customer service. While airline travel and transportation is what we do, it's the experiences on Delta that set us apart as a leading consumer brand and why Delta was recognized as number 11 on Fortune's list of the World's Most Admired Companies. Exciting customer-facing enhancements are on the near horizon, including the opening of new Delta One lounges in JFK, Los Angeles, and Boston, the continued introduction of modern and fuel-efficient aircraft, new premium cabin service offerings, upgrades to the Fly Delta app, and the international expansion of fast free Wi-Fi across our fleet. The rollout of Wi-Fi and Delta Sync continues to be a tremendous success. Since launching last year, customers have logged more than 45 million free streaming quality sessions on-board and millions have joined the SkyMiles program through this channel. Recognizing our investment to ensure the future of travel is connected, we took the number two spot in the travel category of Fast Company's list of the Most Innovative Companies, the only airline to be recognized in the ranking. Loyalty to our brand has never been stronger. We continue to set new records with our remuneration from American Express, our most important commercial relationship, and are well on our way to our long-term target of $10 billion. On February the 1, we announced enhanced and refreshed benefits for our Delta SkyMiles American Express Cards, providing more direct value, and the customer response has been very positive. Turning to our outlook. With strong first-quarter performance and visibility into the strength of summer travel demand, we remain confident in our full-year guidance for earnings of $6 to $7 per share, free cash flow of $3 billion to $4 billion, and leverage of 2.5 times, the three main guideposts that we shared with you in January. For the June quarter, we expect to deliver the highest quarterly revenue in our history, a mid-teens operating margin, and earnings of $2.20 to $2.50 per share. Our forecast for pre-tax profit of approximately $2 billion is on par with 2019 and just shy of last year, due to higher fuel prices. Demand continues to be strong and we see a record spring and summer travel season with our 11 highest sales days in our history, all occurring this calendar year. Spending on services recently surpassed goods for the first time in five years and there is further runway to return to their long-term trends. Delta's core consumers are in a healthy position and travel remains a top purchase priority. Generational shifts and evolving consumer preferences are driving secular growth in premium experiences. Business travel demand has taken another meaningful step forward this year with growth accelerating into the mid-teens over last year. When you put this level of demand strength together with the industry's increased focus on improving financial returns, this may be the most constructive backdrop that I've seen in my airline career. Our industry-leading performance continues to demonstrate the strength of Delta's differentiated brand and returns-focused strategy. And with our disciplined approach to capital investment and focus on free cash flow, Delta is exceptionally well-positioned to further strengthen our balance sheet and deliver significant shareholder value. In closing, the momentum in the business continues to build. We are focused on delivering excellent reliability, elevating the customer experience, and improving efficiency across the company to support growth in our earnings and cash flow. I am excited for Delta's opportunities ahead, and we'll talk more about that and provide new long-term financial targets at our Investor Day, which we are scheduling for November 19 and 20 in New York City. Please put that on your calendar. Thank you again. And with that, let me hand it over to Glen for more details on our commercial performance.

Thank you, Ed, and good morning. I want to start by thanking our employees for providing the best service and reliability in the industry to our customers every single day. 2024 is off to a great start and we're delivering on our commercial priorities to optimize our network, grow higher-margin revenue streams, and invest in our future. Revenue for the March quarter increased 6% year-over-year to a record $12.6 billion on capacity growth of 6.8%. This result is at the high end of our initial guidance, with upside driven by industry-leading operational performance and strength in close-in bookings. Since the start of the year, we've seen a sustained acceleration in business travel. Managed corporate travel sales grew 14% over the prior year, with Technology, Consumer Services, and Financial Services leading that momentum. We delivered positive unit revenues in our two largest entities, domestic and transatlantic, reflecting the continued optimization of our network. Total unit revenue growth improved 3 points sequentially to down 0.7%, including nearly a one-point headwind from cargo and MRO. Domestic revenue grew 5%, with record March quarter unit revenues, up 3% over the prior year. The more than 7-point improvement from 4Q to 1Q reflects strong demand trends improving the industry backdrop. International revenues grew 12% on a unit revenue decline of 3% as unit revenue growth in the transatlantic was muted by capacity investments from the continued rebuild of our Latin and Pacific franchises. Diverse high-margin revenue streams generated 57% of total revenue, differentiating Delta and underpinning industry-leading financial performance. Premium revenue was up 10% over the prior year, and we have runway ahead as we continue adding more premium seats to our aircraft, improving our retailing capabilities, and further segmenting our products. Total loyalty revenue grew 12% on continued strength in the American Express co-brand portfolio with record quarterly remuneration of $1.7 billion. Following the refreshed co-brand benefits, we saw our card applications reach new records as we are seeing the highest premium acquisitions mix in our program's history. Turning to our outlook, consumer demand is robust and premium trends remain strong. The outlook for corporate travel is positive. Ninety percent of companies in our recent survey intend to maintain or increase travel volumes in 2Q, putting us back on track to deliver record corporate revenues in the back half of this year. For the June quarter, we expect revenue growth of 5% to 7% on capacity growth of 6% to 7%, with unit revenues flat to down 2% from last year's very strong performance. Similar to the March quarter, 2Q faces a headwind from the normalization of travel credits. Domestically, we expect unit revenues to be flattish over the prior year, with growth focused on restoring our core hubs where departures and seats are not yet fully restored. The final stage of our core hub restoration will be the full return of regional flying. Pilot hiring has stabilized, increasing the capacity we expect to fly over the summer. We expect progressive improvement through 2025, driving higher asset utilization and improving our profitability. In the transatlantic, we are looking forward to another strong summer with record revenues. 2Q unit revenues are expected to be similar to last year as we lock in record performance and benefit from the healthy demand for our premium cabins and improved corporate trends. In Latin America, profitability remains solid. Unit revenues are expected to be down double digits due to pressure in shortfall leisure markets. These markets are expected to see healthy improvements in the second half of the year as supply and demand comes back into balance. And while flying into deep South America, we are very pleased with the results. We are increasing capacity about 40% with minimal impact to unit revenues as we continue to deepen our ties with our JV partner LATAM. We expect Pacific unit revenues to be in line with the prior year on 30% growth in capacity, driven by strong demand for Korea and Japan offsetting lower unit revenues in China. Profitability is expected to set a record as we continue to harvest the benefits of our multi-year restructuring. In closing, I'm pleased with how we have started 2024. Delta is continuing to lead on all fronts, with industry-leading margins and returns highlighting the strength of our trusted brand and differentiated commercial strategy. And with that, I'd like to turn it over to Dan to talk about the financials.

Great. Thank you, Glen, and good morning to everyone. For the March quarter, we delivered pre-tax income of $380 million, an improvement of $163 million over last year. Earnings of $0.45 per share were at the upper end of our guidance as great operational performance and strong demand more than offset higher-than-expected fuel prices. Operational excellence is central to Delta's brand promise, and I couldn't be prouder of how our teams are delivering record reliability for our customers. A strong completion factor drove a one-point higher capacity and non-fuel unit cost favorability. Non-fuel CASM was 1.5% above last year and ahead of guidance. Fuel prices averaged $2.76 per gallon, $0.16 higher than the midpoint of our guidance range. The refinery provided a $0.05 benefit, generating a profit of $49 million. This was down $173 million from last year on more normalized refining margins. Fuel efficiency was 1.9% better than last year, benefiting from the continued renewal of our fleet and running a strong operation. Operating margin of 5.1% was a 0.5 point higher year-over-year. Our pre-tax margin improved over a point, benefiting from reduced interest, pension expense, and higher earnings from our equity investments. We generated free cash flow of $1.4 billion. This was after paying $1.4 billion in profit-sharing to our employees and investing $1.1 billion into the business. Debt reduction remains a top priority. Our leverage ratio improved to 2.9 times during the quarter. We repaid $700 million of debt, including $400 million of scheduled maturities and $300 million of additional debt initiatives. We expect to repay at least $4 billion of debt this year and continue to be opportunistic in accelerating debt reduction. We are currently investment-grade rated at Moody's and BB+ at both S&P and Fitch, with all agencies now on positive outlook following updates from Fitch and Moody's during the quarter. Moving to the June quarter guidance. Combined with our outlook for top-line growth, we expect an operating margin of 14% to 15% with earnings of $2.20 to $2.50 per share. Fuel prices are expected to be $2.70 to $2.90 per gallon, including a $0.10 contribution from the refinery. At the midpoint of this range, our all-in fuel price is expected to be over 10% higher than last year. Non-fuel unit costs are expected to be approximately 2% higher than last year, consistent with our full-year outlook of low-single-digit growth. Growth is normalizing, and we've entered a period of optimization with a focus on restoring our most profitable core hubs and delivering efficiency gains across the enterprise. The investments we made in fleet health and reliability in the second half of 2023 are paying off, supporting industry-leading operational performance. As we discussed with you in January, these investments are expected to continue through 2024 as we complete an elevated volume of heavy airframe and engine checks while managing through industry-wide supply chain constraints. The intensity of hiring and training has moderated. The teams have good momentum in delivering on our efficiency goals for the year. This will help fund the investment in our people, in our operations, and the customer experience that support our revenue premium. In closing, we continue to be confident in our full-year outlook of earnings of $6 to $7 per share and free cash flow of $3 billion to $4 billion. Our industry-leading operational and financial performance is a result of the hard work and dedication of the Delta people. I'd like to thank each of them for what they do every day. With that, I'll turn it back to Julie for Q&A.

Thanks, Dan. Matthew, can you please remind the analysts how to queue up for questions and go to our first analyst question from Duane Pfennigwerth.

Hey, good morning. Thank you. Just on the improved cost execution, you just touched on it in the script there, Dan, but can you speak to maintenance expense and the outlook relative to your expectations? The tone sounds like you're turning a corner on maintenance, and how do you think about that line into the second half and perhaps into next year?

Maintenance is on track and performing as anticipated. As we mentioned earlier this year, we expect maintenance costs to increase year-over-year by $350 million. For the full year, the first quarter met our expectations, and the team is executing well. The investments we've made in fleet health will continue throughout this year, with proactive maintenance visits to the aircraft showing positive effects. Year-over-year, maintenance-related cancellations have decreased by 80%, and sequentially, they've improved by 30%. The team is doing a great job, staying on plan and performing as projected.

Duane, if I could add on to that, I want to congratulate the Tech Ops team, John Laughter, whose leadership over there in terms of helping to make that turn. We are seeing a renewed set of confidence back in the team. It's been a tough few years on the rebuild. Too early to declare victory. We know the supply chain continues to have a tremendous amount of constraint in it. But I'm confident that we're on a good journey. It's a good path here.

Appreciate those thoughts. And then maybe more of a conceptual one for my follow-up on corporate and the continued recovery in corporate you're pointing to. I assume that's generally close in. And I wonder if you could comment on if you're seeing a decrease in average trip length. So maybe more trips but fewer days on the road per trip. Any commentary on those trends?

No, I would say we're experiencing both trends. We're noticing shorter trips as well as longer ones, where travelers are combining leisure with business. Overall, they are booking a bit further in advance than before, which I believe is due to the elimination of change fees. We've observed some shifts in the booking patterns, but I am optimistic about our corporate bookings as we move through this quarter and into the next few quarters.

Thank you very much.

Oh, yes. Good morning, everyone. Glen, I want to follow up on what you mentioned about the normalization of travel credits and how it continues to be a slight challenge. Can you provide details on the impact of that on June TRASM?

I think we said in our previous that we faced headwinds in up to a couple of points. And I think we're not going to go into the details of that, but that's generally what we've disclosed in the past. Yes.

Okay, great. And then my second question is for Ed. Can you provide us with an update on the appeal process with the DOT regarding Aeromexico? What does that timeline look like and are there any milestones we should anticipate? Thanks.

Hey, Mike, it's Peter Carter. Thanks for the question. That was a tentative order. And I think, as you know, our strong view is, the DOT really struck out on that one. They're typically a great partner. But this was an example of regulatory overreach, which is why we've challenged it. It's bad for consumers. It's bad for competition. It's bad for the local economies that those flights have served. We are currently engaged with the administration and discussing, I'll say, less punitive solutions than the tentative order that was proposed. And I would say, we've had hundreds of our, I'll say, allies with respect to the connection between Mexico and America weigh in, in support of this joint venture. So, we think this is going to take some time before the DOT issues a final order, a number of months, but we're cautiously optimistic that they are going to come up with a better solution.

Great. Thanks for that, Peter. Thank you.

Thank you. Good morning. Glen, reflecting on the original guidance from three months ago, it indicated a flat RASM for the year. Currently, we're seeing a slight decline in Q1, and the midpoint for Q2 suggests a similar trend. What is your visibility regarding a potential RASM improvement in the second half? At this stage, do you lean towards seeing more upside or downside risks related to that flat RASM? Additionally, is the impact of travel credits expected to be larger or smaller in the second half?

No, I think it's pretty clear that the travel credit headwinds are consistent throughout the year. However, we are ahead of our internal plan to achieve a flat performance for the year, and the comparisons will become easier as we progress. Looking at the guidance for the second half and what has been scheduled, it appears that industry capacity will peak in the second quarter. Therefore, I believe we have a favorable outlook for the second half of this year, and we are currently on track or ahead of our plan.

I want to follow up on RASM a bit. Last year, your absolute RASM in the second quarter significantly exceeded seasonal expectations, but then it fell short in Q3. This year, you are projecting to again outperform pre-pandemic seasonality. Do you believe there is a seasonal shift from Q3 to Q2 compared to what we've seen in the past, and does this benefit Q2? Could it potentially negatively affect Q3? I'm interested in your thoughts on this.

I have some thoughts, and yes, it has changed. This change is particularly related to schools in the South starting earlier in August, with Georgia schools going back the first week of August now. This has significantly altered the landscape over the years, resulting in a stronger second quarter and a somewhat weaker third quarter. As we plan for the future, we are incorporating these changes into our capacity plans.

Okay. All right. Thank you, guys.

Thanks. Good morning, everyone. So, it looks like your leverage is getting to be in a pretty good place. When do you think you can start flexing the balance sheet for other uses of cash, kind of CapEx, cash return kind of over the next 12 months?

Thank you, Ravi. We are not ready to make any comments or decisions regarding that yet. We still have more debt than we are comfortable with, and reducing that debt remains our top priority for cash usage. Interestingly, while preparing for this call, I found that if you consider our target for the end of this year and account for the elimination of the Pension H obligation we had at the end of 2019, we are actually quite close to the leverage ratio we had at the end of 2019 before the pandemic. We have made significant progress. That said, we will discuss this further at our Investor Day in November. However, our primary focus will continue to be paying down debt for some time.

Got it. That's helpful. And maybe as a follow-up and a little bit of a nuanced detail question here, kind of obviously, with the Paris Olympics kind of being a pretty big catalyst for transatlantic travel this summer, kind of are we thinking of that potentially bringing on some noise towards end of 2Q, early 3Q? Kind of is that something that you would caution us in terms of modeling our cadence versus seasonality?

Well, generally, the Olympics are not good for airline revenues, and this year I think is no exception to that. So, while we see a very favorable backdrop for Europe in its totality, there are some challenges for Paris as generally business travel ceases to and from the local markets as the Olympics approach. So, I wouldn't say that that's going to be a windfall. It's actually going to be a bit of a headwind for us in the numbers we shared with you.

That said, we are very excited as the sponsor of Team USA for the Paris Olympics and we'll get through it.

Thank you very much, operator. Hello team. I have two questions. In the first quarter, your landing fee appeared higher than I typically expect for that period. Could you explain that? For my follow-up question, as an American Express cardholder, I've noticed issues with acceptance rates, particularly in Europe. Are you beginning to see improvements in that area? Thank you.

Yes. On landing fees, when you look at it year-over-year, yes, they're up, volume, one; two related to the cut-in as it relates to our generational redevelopment projects, you're picking up some of that expense. And then I would say the third item, airports across the country in 2022 and 2023 benefited from CARES. And as those have now gone away, they're adjusting their rates and you're seeing that come through.

And on American Express global acceptance rates, we worked very hard years back with American Express on improving the domestic acceptance rates and right now they're at all-time highs in terms of the number of merchants that you can use American Express at domestically and they are also doing that internationally. So, particularly places that we're strong and we work with them on prioritizing those places that Americans like to go for vacations.

Okay. That's very helpful.

Hey, good morning, everyone. So, Glen, I had a question just with regards to your capacity. How are you thinking about the cadence as we move into the back half of the year? Obviously, with the first half capacity up north of 6%, 3Q schedules are still sort of above your 3% to 5% original guide. How should we think about your growth as we move through the back of the year, because it would imply-based on 3Q schedules that 4Q would be down. I kind of find that hard to believe, but just any thoughts there would be helpful. Thank you.

I want to extend my gratitude to our operating teams for their outstanding completion factors, which exceeded our expectations. If this trend continues, as I hope it will, we could reach the upper end of our 3% to 5% guidance. While it's still early to make definitive statements, I believe we could align with that 5% based on how the completion factors perform.

That's helpful. Thank you. In your prepared remarks, you mentioned MRO headwinds in the ancillary revenue line for the quarter. What is causing that? I would have expected that, given everyone's increased maintenance expenses, it would have provided more of a tailwind. Any thoughts there? Thank you.

Yes. I would say two things. First, regarding our third-party activity, we are limited by the constraints of the industry, specifically concerning materials and our ability to produce output. As previously mentioned, our Tech Ops team, led by John, is concentrating on the Delta fleet. However, I would note that the ongoing constraint remains related to immaterial issues and turnaround times associated with it.

Maybe just following up on that point of thought there, Glen, as you think about the improvements in regional utilization, is there also some room for improving utilization to prior pre-COVID levels on the narrow body fleet as well? Or is this primarily just a regional issue?

No, I would hope so. If we look at our wide bodies, we're now at or above where we were in '19 in terms of annual utilization. And this is going to be a game of working with our operators to improve asset utilization across the network, whatever they are planes, airports. And that's the game we're playing, that's the long game and I think that's been a really exciting challenge for us all.

Hey, good morning. Just a follow-up to Jamie's question on the premium revenue. Just kind of curious if you could share how much of that 10% is coming from volume versus yield, and I think you mentioned continuing to grow the premium offering. So just curious what the trend might be.

Right. I would say right now, the premium is probably a 50-50 split between traffic and yield. Well, I think we've said that, if you look at the longer-term trends, that we really haven't been adding coach seats into the domestic arena over the past 10 years. And so, all of our growth has been in the premium products and services. And I think on Investor Day, we're going to talk a little bit more about where we see that going, but I think we see a long runway for that in the coming years.

Thanks, Dan. Matthew, can you please remind the analysts how to queue up for questions and go to our first analyst question from Duane Pfennigwerth.

Good morning, everyone, and thank you for having me. I have a follow-up question to Sheila's. Considering that fleets in the industry are aging, could you provide a general sense of how valuable Delta TechOps will be for you over the next decade, and the competitive edge you have over your traditional rivals? Thank you.

Yes, we can. I believe this is a unique advantage for us; our fleet has become younger over the past few years. Additionally, given the constraints in the industry regarding OEMs, we have focused on restoring the network through our flex fleets. We are operating 80 717s and flying the 757s longer than we had originally planned, which puts additional demand on our TechOps teams to ensure we have reliable aircraft. This flexibility allows us to be more agile. As we move through this period and enter a phase of more normalized growth and consistency in equipment, we will also begin to see natural retirements. We haven't retired any aircraft in 2022 and 2023, but we'll start doing that in the latter half of this year. This is where our team excels—naturally retiring aircraft while recovering and reusing materials as they phase out fleets, just as they did with the MD-88s and 90s. They have a long history of doing this successfully, which is what lies ahead for us.

Stephen, I want to build on Dan's comments by mentioning two points. First, in the first quarter, our overall mainline reliability and completion factor was the best we've ever had in a first quarter. This is significant considering the challenges we've faced and the ongoing supply-chain constraints. I credit a lot of this success to our maintenance team and TechOps team for ensuring the product is ready every day and capitalizing on the opportunities in front of us. This trend should continue positively over the next few years, as Dan mentioned. The second point is regarding MRO. We have shifted our focus to our own fleet rather than our customers' fleets for now, but in the coming years, we expect to resume growth in this area. The growth rate we've discussed is still achievable; it’s simply waiting for us. I am very excited about what this looks like over a five to ten-year timeline. Our capacity to capture this business will be even stronger than we anticipated before the pandemic due to the experiences we've gone through. So, I want to commend the TechOps team; there is still much work ahead, but we are definitely on the right track.

Thank you for the question, Stephen. That will wrap up the analyst portion of the call. I'll now turn it over to Tim Mapes to start the media questions.

Certainly. Thank you. That completes our Q&A session. And everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.