Good morning, everyone and welcome to the Delta Airlines September Quarter 2024 Financial Results Conference Call. My name is Matthew, and I will be your coordinator. At this time, all participants are in a listen-only mode until we conduct a question-and-answer session following the presentation. 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, and good morning, everyone. Thanks for joining us for our September quarter 2024 earnings call. Joining us from Atlanta today are our 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, and Dan will discuss costs and our balance sheet. After the prepared remarks, we'll take analyst questions. We ask that you please limit yourself to one question and a brief follow-up so that we can get to as many of you as possible. After the analyst Q&A, we will move to 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. Please note that Page 2 of the earnings release today outlines the impact of the CrowdStrike-caused outage on our Q3 profitability and unit metrics, consistent with our initial disclosure on August 8th. Now, I'll turn the call over to Ed.

Thank you, Julie. Good morning, everyone. We appreciate you joining us today. Before we begin, I want to provide a quick update on Hurricane Milton. Safety of our people, customers, and communities is always paramount. To that end, we've issued a fee waiver and implemented fare caps for those who need to change their travel plans or fly out of the storm's path. We've also added additional flights and up gauged aircraft into Florida this week to accommodate those evacuating the state. Between yesterday and today, we have canceled approximately 600 flights in total, but we'll have a better sense of the impact as we learn of how our airports fared overnight. Our hearts are with all those in the Southeast who have been affected during the storm season. Now turning to our earnings report. Earlier this morning, we reported our September quarter results, consistent with our latest guidance. On an earnings per share basis, our results would have been at the high end of initial guidance, excluding the $0.45 impact from the CrowdStrike-caused outage. Delta continues to lead the industry, operationally and financially, while delivering on our 2024 plan. Year-to-date, our on-time performance is best in the industry, and our completion factor leads the network carriers even when including the impact of the outage. Financially, we have delivered double-digit operating margins with nearly $3 billion of free cash flow year-to-date. Following the Fitch upgrade in July, our balance sheet now has two investment-grade ratings and our dividend yield is in line with the S&P 500. Delta's year-to-date profitability is expected to represent 50% of the industry's total profits with a double-digit return on invested capital that is more than twice the industry average, reflecting the durability of our business model. I'm incredibly proud of the Delta people for delivering these results. I want to thank them for their outstanding work during this busy summer period and their dedication to providing best-in-class service for our customers. Sharing our financial success with our people is a long-standing pillar of our culture. With this quarter's financial performance, we've accrued nearly $1 billion year-to-date towards next February's profit sharing. We expect this will be among our top profit-sharing payments in Delta's history and more than the rest of the industry combined. The combination of our industry-leading reliability and best-in-class service from our people has firmly established Delta as the premium airline of choice, empowering our brand momentum. The new Delta One Lounge in JFK has been an incredible success with very high customer satisfaction. Building on this momentum, this morning, we opened our new Delta One Lounge at LAX and we will be opening our third Delta One Lounge in Boston this December and a fourth in Seattle early next year. By year-end, Delta will have over 700,000 square feet across 55 Sky Clubs and three Delta One Lounges, a one-of-a-kind position across many of the largest airports in the country. On board, we are enhancing the customer experience with the rollout of our popular Delta Sync product to more than 330 aircraft, offering SkyMiles members a personalized experience that provides a smart TV on the seat-back screen. More than 90% of our domestic mainline network now offers fast, free Wi-Fi. This summer, we began introducing fast, free Wi-Fi on long-haul international flights. Across the network, Delta's advantages continue to build. Core hubs are nearing full restoration as we close out the year, and we are harvesting the investments we've made in coastal gateways to improve margins and support profitable international growth. Around the world, we're continuing to develop our JV partnerships and leverage our strengths. Our recently announced summer 2025 Transatlantic schedule will build on our strong performance in our largest and most profitable international region. As brand preference continues to grow, we are driving deeper levels of engagement and our SkyMiles membership is attracting a younger consumer. We have seen a significant evolution in our active member base post-COVID, with 3 million more active members under 40 years of age, more than doubling member engagement with non-air partnerships allowing us to earn a higher share of wallet. Deeper engagement with Delta drives higher customer satisfaction, reinforces loyalty, and creates greater lifetime customer value. Turning to our outlook. Consumers are continuing to prioritize premium experiences, and our core customer base is in a healthy financial position with travel remaining a top spend category. Corporate travel continues to improve and Delta is well-positioned as the business carrier of choice. Importantly, domestic supply growth continues to rationalize. Across much of the industry, there has been an accelerated pace of change, and we are encouraged by the actions the industry is taking to improve profitability and returns. In the December quarter, the improved revenue trends we saw in the month of September are continuing. We expect to grow earnings 30% over last year, with pre-tax income of $1.4 billion, which would mark one of the best, if not the best, fourth quarters in our history. With this, our full-year outlook for earnings is expected to be around the midpoint of our initial $6 to $7 EPS guidance from the start of the year, excluding the $0.45 impact from the CrowdStrike-caused outage. As we approach the end of our three-year plan that we laid out in late 2021, we have delivered consistent financial performance, restoring our financial foundation while navigating ever-changing macro and industry environments from a position of strength. Our performance is a testament to the durability we are creating at Delta, built on years of investing in our people and our product while continuing to restore our balance sheet strength. Delta has built unmatched competitive advantages and structurally improved our business for the long-term. Next month, at our Investor Day, we will introduce an updated long-term financial framework that builds on our durability and reflects the opportunities we see ahead to create sustainable long-term value for our owners. As we approach our 100-year anniversary next year, I've never been more excited about Delta's position and the opportunities that lie ahead. Thank you again. 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 all of our employees for their hard work during this busy summer travel season. They are the Delta difference. Delta delivered September quarter revenue consistent with our latest guidance despite the impact from Hurricane Helene. During the quarter, unit revenue improved sequentially in all geographic entities reflecting the strength in travel demand and an improving industry backdrop. In the month of September, unit revenue inflected to positive in both domestic and transatlantic markets. Domestic industry seat growth moderated significantly from the peak in June, with the industry now growing seats in line with demand. Transatlantic benefited from ongoing strength in U.S. point of sale and a rebound in Paris demand as soon as the Olympics ended. Corporate travel sales were up 7% during the quarter, led by double-digit growth in coastal hubs with broad-based strength across sectors. Delta is the clear industry leader in offering premium experiences and more choices for our customers with significant investment across the travel experience over the last 15 years. Our new Delta One Lounges in New York and LA with dedicated check-in and private TSA security truly differentiate Delta's premium offering in the two largest revenue markets in the United States. We also introduced Delta Premium Select on TransCon flights between JFK and LA and we'll expand this offering to all daily frequencies next month. Similar to our international rollout, the initial customer reception to Delta Premium Select has far exceeded our expectations. Consistently delivering an elevated experience that customers value is driving outperformance in premium products across geographies. During the quarter, premium revenue growth outperformed the main cabin by 9 points. At the same time, Delta is growing SkyMiles membership and deepening our customer engagement. The success of our strategy is best illustrated by our unit revenue premium relative to the industry, the growing loyalty of our brand, and our increasingly diversified revenue base. Year-to-date, 57% of our revenue has been generated outside of selling main cabin seats, underpinning Delta's financial leadership and supporting durable performance that significantly outpaces the industry. Royalty revenue was up 6% versus last year, with growth in our SkyMiles membership and strengthened American Express co-brand portfolio. American Express remuneration for the quarter was $1.8 billion, up 6% year-over-year, delivering solid performance against a backdrop of moderating inflation. Cargo revenue was 27% higher than last year with double-digit growth across all international regions. I am encouraged by the results and the opportunity to better leverage our increasingly cargo-capable fleet. Looking forward, demand for travel on Delta remains healthy with continued preference for our premium offerings. Our recent corporate survey indicates a positive outlook for business demand, with 85% of respondents indicating they expect their travel spend to grow in 2025. For the December quarter, we expect total revenue to increase 2% to 4% over the prior year on a 3% to 4% higher capacity level. The improved unit revenue trends we saw in the month of September are continuing into the December quarter with healthy bookings for the holiday. As we've seen historically, domestic travel demand is impacted in the weeks surrounding the election, resulting in an expected 1-point impact to system unit revenue for the quarter. With favorable industry capacity dynamics and a strong demand set, we are well-positioned as we close out the year and head into 2025. Our industry leadership and differentiation has never been greater, creating the foundation for us to unlock the value of our trusted customer brand and further diversify our revenue base. In closing, I'm excited about our opportunities ahead, and I look forward to sharing more with you at our Investor Day next month. With that, let me turn it over to Dan.

Thank you, Glen, and good morning to everyone. Operationally, our teams delivered through a busy summer travel season. Year-to-date, Delta has achieved 60 days of zero cancellations, nearly twice all of last year. Today, we reported another quarter of strong financial performance with $1.3 billion of pretax income for the September quarter. On non-fuel unit costs, performance was in line with our expectations. Unit costs grew 5.7%, including a 3.2 point impact from the CrowdStrike-caused outage and a 0.5 point impact from the decision to reward employees with travel passes for their hard work through the summer. Now fuel prices declined 9% over prior year, averaging $2.53 per gallon for the quarter, including a $0.03 loss from the refinery. Fuel efficiency improved approximately 1% year-over-year. During the quarter, we took delivery of nine next-gen Airbus aircraft and retired six aircraft. We continue to expect our fleet growth to be less than 2% this year with 20 net aircraft additions as half of our new deliveries are replacements. Operating cash flow year-to-date was $6.2 billion. After reinvesting $3.6 billion back into the business, we generated free cash flow of $2.7 billion. Strong cash generation has supported debt repayment of $2.4 billion year-to-date, including $900 million of early repayments. Gross leverage ended the quarter at 2.9 times. For the year, we expect to repay nearly $4 billion of debt, bringing our cumulative debt paydown to more than $12 billion over the last three years. As we retire secured debt and pay cash for our aircraft, our unencumbered asset base is expected to grow to $30 billion by year-end. Our financial foundation continues to strengthen. We achieved a meaningful milestone during the quarter with our balance sheet receiving an upgrade to investment grade from Fitch. Delta is now investment grade rated at Moody's and Fitch and one notch away at S&P with a positive outlook. Now moving to guidance. For the December quarter, we expect to deliver 2 points of margin, operating margin expansion, and earnings growth of 30% compared to the prior year. Fuel prices are expected to be $2.20 to $2.40 per gallon, more than 20% lower year-over-year, including a few cents impact from a modest loss at the refinery. Unit costs are expected to be up 3% from last year as capacity growth moderates to 3% to 4%, keeping our full-year outlook for non-fuel costs in line with our initial guidance of up low-single digits. With hiring and training normalizing, we are growing into our resources and gaining traction on efficiency initiatives, helping fund continued investments in our people and brand. December quarter earnings are expected to be $1.60 to $1.85 per share on 11% to 13% operating margins. We are focused on finishing the year strong, delivering industry-leading performance with a return to earnings growth and margin expansion, positioning us well as we head into 2025. Delta's differentiation has never been greater. Our brand and financial performance are transcending the industry, and we are generating a return on invested capital that is 5 points ahead of our cost of capital and better than half of the S&P 500. Looking forward, we remain focused on delivering durable earnings and cash generation that enable us to further strengthen our balance sheet and create long-term value for our shareholders. I look forward to sharing more details with you at our Investor Day next month. In closing, our performance is a result of the hard work of our employees. I want to thank the Delta people for continuing to go above and beyond for our customers and each other every day. Now, with that, I'll turn it back to Julie for Q&A.

Thanks, Dan. Matthew, can you please go to the first analyst question?

Certainly, at this time, we will be conducting a question-and-answer session. Your first question is coming from David Vernon from Bernstein. Your line is live.

So Glen, first question for you on the election. Can you just help us get comfortable with how you're separating out that impact from what you're seeing internally? And maybe talk to what gives you confidence that this isn't just a weakness in the consumer that's showing up in some of the forward revenue data? Thanks.

Absolutely. If you look at our internal numbers, you can clearly see the trends where certain markets are performing exceptionally well with positive momentum in October. Then, following the election week and into December and January, there’s a noticeable drop-off from those trends. The data shows that those two weeks are significantly underperforming compared to the trends before and after them, and this is evident not just in domestic markets but also in short-haul Latin markets.

Okay. And then maybe just, Ed, can you talk at a high level about how Delta is thinking about domestic capacity kind of going forward, lower-cost airlines cutting capacity? Does that make you think about share any differently here?

Well, David, that's a great prelude into next month's Investor Day, where we'll be giving you our perspective on that. We did file our summer schedule last week, and Atlanta is one of the markets where we are finally at a position to be at, if not better, than pre-COVID levels in capacity. So very excited about that.

Thank you. Your next question is coming from Jamie Baker from JPMorgan. Your line is live.

Thanks and good morning, everyone. A couple for Glen. So Glen, when I think about the phenomenon of tightening domestic capacity, my assumption has always been that the first routes that are culled provide the greatest uplift to RASM, and from there RASM benefits still accrue over time, but at sort of a declining rate of improvement. Is that the right way to be thinking about it, that the benefits are front-end loaded or is the reality of something different?

Well, Jamie, I'm trying to understand whose perspective you're looking at that from? Are you looking at it from the perspective of the people who are cutting the capacity or the people who are the beneficiary of those capacity cuts?

The latter, the beneficiary, so Delta in this case.

I would say, if you think about how it was just normal course of business, and this is just hypothetical, that if you're cutting capacity, you're cutting your worse routes first, so the upside accrual from that to the remaining capacity is actually the least. And as you move through and go up to better and better capacity cuts that more and more accrues to the remaining capacity.

Okay. All right. That's very helpful. And then second, on corporate demand, I'm curious what sort of recovery you're thinking about for 2025? But more importantly, does it influence how you think about the network? I mean, hypothetically, I'm not arguing that this would happen. But if we saw a full restoration to where corporate trends would be had COVID not occurred, would you need to rebalance the network much or would it simply be an exercise of potentially allocating less capacity to lower fare buckets? Thanks.

Yeah. I would suggest it's the latter.

Okay.

As we pointed out, premium products are really doing much better currently than coach. And as we move through the next couple of schedule changes and adjustments heading into the tail end of the year, we expect that momentum to pick up as the carriers that have primarily coach products begin rationalizing capacity. So I think we always have room for our business customers onboard our network. And clearly, if certain companies pick up business or start new factories, we're always talking to our clients to see where they might need additional capacity. But generally, I think we're in a very good spot.

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

Hey. Good morning, everyone. Glen, I was wondering, if you could give a little bit more color on how you're thinking about kind of the unit revenue projection in the fourth quarter by entities and just the kind of the trends beyond the elections?

Yeah. I got – something is wrong with your phone there. So you're asking about trends after the election by entity?

What your expectations are?

Right. I think we certainly said that domestic and transatlantic are leading the way, and I think that will continue as we head into the back half of the year. Actually, I'm most excited about this winter in the transatlantic where we've done some capacity adjustments and underperforming capacity last year, and we see really encouraging signs of where we've allocated that capacity along with robust demand in the off-season. So we're really looking forward to the transatlantic results. Pacific, we had some additional capacity. As we head out of this year, I think Japan looks strong, the South Pacific looks strong. China is looking stronger as we lapse the big increase in capacity last year. We're seeing a little weakness in South Korea, but nothing major, and so we'll keep an eye on that. Latin is continuing its improvement as we move through the quarter. I think we're sitting in a pretty good spot with all entities as we head out of this year and into 2025 and very encouraged by the trends when you look beyond the election.

Very helpful. Thank you. And if I might, just on the follow-up on the Hurricane Helene impact. You called out the impact of $0.03. I know it's really early days. I was just kind of curious if you have kind of the impact of Hurricane Milton in your guidance and how you're thinking about it?

It's too early to give you that, Savi. We'll have to see what happens. If we're fortunate and it's moved out quickly, it will be modest, but we really have to see.

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

Hey, Glen. I remember in either the last conference call or at a conference where you were asked about organic demand in relation to the 7% to 8% increase in demand we saw during the summer. You mentioned that much of that was driven by promotions, and that organic demand was more around 4% domestically. In your recent comments, you noted that domestic supply and demand seem to be in sync now. Looking at the current domestic supply, it’s about 1.5% to 2%. Are you suggesting that organic domestic demand is around 2%, or are we seeing slightly better performance? Can you provide some additional insights on this?

I think we haven't reached that point yet, so it's difficult for me to provide a definitive answer. However, I believe we are still hovering around the 4% mark. We'll see if capacity increases by 1.5% or 2% in the upcoming months, along with continued positive momentum in yield, which will provide more clarity. That's what gives us encouragement and excitement as we approach the end of the year, as we believe this balance has not been this favorable in a long time.

Great. My second question is about distribution. It seems that you may have recently renewed your agreements with all of the GDSs. I know you have been moving towards NDC for distribution. How should we view your distribution costs? Could this be a potential advantage as we approach 2025? Thanks for addressing my question.

I believe our strategy focuses on meeting customers where they prefer to be. If they choose to use OTAs or GDS, we aim to offer the best range of products in each category. Over time, we've noticed a decline in distribution costs, and whether that trend will persist remains uncertain, as it largely depends on consumer preferences. Our responsibility is to ensure we provide top-quality products at all our distribution partners.

Thank you. Your next question is coming from Conor Cunningham from Melius Research. Your line is live.

Hi, everyone. Thank you. Aside from you and United, the industry is working to reinvent itself through changes in product and network. Considering the opportunities this creates for you, how aggressive do you envision being in light of the challenges faced by others? I'm trying to gauge how deep your competitive advantage can grow from here. Thanks.

First, I think we'll have much more to talk about that at Investor Day because that really goes to the strategy in the next three years. Our strategy is consistent to develop free cash flow, pay down our debt, and that to be a great moat in the long-term. So maybe I'll turn it over to Dan to talk about that.

I think we want to build off of our success. If you look at it even over the last decade, and particularly the last 18 months, our earnings have shown durability, staying in double digits while the industry has faced challenges, and we've maintained double-digit margins during this time. This highlights the strength of our franchise and our capability to generate both profitability and cash flow. Glen mentioned the word consistency, and you can expect to see us consistently deliver results, whether it's in our commercial execution, our aircraft deployment, the number of aircraft we acquire, or our investments back into the business. Consistency in executing our strategy has always been central to Delta and will continue to be so.

Okay. That's helpful. And then we're starting to hear a little bit more or see the products that the domestic leisure carriers are offering. And when you look at Delta Comfort+ in that offering and compare it to what the industry is announcing, you talked a little bit about Delta Sync, but what else is there to kind of widen that gap to the new products that are already out there or that are being announced, I should say? Thank you.

I hope you're available in November to come to our Investor Day because I think we'll have a lot of exciting things for you to take a look at.

Coming out theme today.

Hey, Conor. This is Ed. Glen is right. We'll be spending a lot of time talking about that next month. But this is a platform we've been on for 15 years, right? I understand how others are now looking to adapt. It's really hard to change course and to try to catch what is a train that's moving at a pretty good speed. I should say, a plane really moving at a pretty good speed. Whether it's the investment in the lounges that you're seeing, the Delta One experience, the free Wi-Fi, and I know everybody wants to do free Wi-Fi now. We’ve been out on this for years. We’ll continue on the pace we’re on. We’re not going to change course. If anything, we’re just going to continue to accelerate.

Thank you. Your next question is coming from Duane Pfennigwerth from Evercore ISI. Your line is live.

Hey, thanks. Good morning. Just on seasonality, obviously, there's a lot of or a bit of noise right now in the baseline with hurricane impacts and with holiday shifts here in October. But as we look at volume growth for the industry, it looks like trends are following much more 2019 baseline than they are really last year. And so I wanted to ask you, do you see seasonality changing on the leisure side or on the corporate travel side, and was there anything about this time last year that was an anomaly?

Well, you mentioned one; it was the shift of the Jewish holidays into October for September, of course, the hurricanes. If you take a broader longer-term view, we have seen really, August, in particular, but to a slightly lesser extent, July become less peaky, particularly in long-haul international and that September and October are becoming prime travel months. I think that's something that will continue as schools continue to go back earlier in a lot of the country. The weather in Europe in August is really hot and that people who have choices when they can take their vacations are moving into, let's call it more temperate months. Corporate, we haven't seen much change year-over-year, but I think it's continuing to shift travel to Europe, in particular, from July and August peak to a September and October peak.

That's helpful. Thanks, Glen. For my follow-up, as you consider more modest fleet growth, reduced training investment, and lower maintenance investment, what inning are we in regarding productivity recovery at Delta, and what metrics should we be monitoring on that front? Thank you.

Thank you, Duane. We're still in the early stages of our progress, and if we look at how we finished last year and the past six months, we're up low-single digits this year. We expect non-fuel costs to be around 2% for the year, which you're starting to see. One indicator we've mentioned is that we've added workforce resources ahead of operations and growth, leading to improved efficiency. For example, in the third quarter, the workforce is up 1.5% year-over-year, while the network has grown over 5%. This shows we're starting to effectively utilize these resources. Different parts of our operations are at various stages, and we are just beginning this journey. We made an additional investment in maintenance of $350 million, which has already led to a 75% reduction in maintenance cancellations compared to last year. As we move into next year and beyond, we expect to see productivity improvements from this investment. We're already seeing positive outcomes in airport operations and customer care teams, with further efficiencies expected next year. Additionally, we will benefit from a full year of restored core hubs, which will become more effective next year. We will also optimize fleet utilization, particularly with regional aircraft restored by next summer and improved use of wide-body planes as we expand our flying schedule. The initiatives we've started now will be important topics at our Investor Day, and we expect them to support our growth into 2025 and 2026.

Duane, technology also plays a big role in that continued productivity opportunity. We now have our team fully up to speed and the development, the experience set where we want it to be, and we'll be able to leverage those tools a little better going forward.

Great. Appreciate the thoughts.

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

Hey, thanks. Good morning. So I know, Glen, you don't typically talk much about monthly trends, but just directionally, just so we understand, can you maybe give some color, like, is October in your view of December, right? If we eliminate the November and the elections, are October and December positive on unit revenue?

Yeah. We're not going to give that level of detail, but I would say that October and December are significantly better than November.

I'd say building off of the previous question, and we will share more at Investor Day. But the context is, again, consistency. Things that you saw this year, we’re going to continue to invest back into our workforce, continue to invest back into our brand. You’re going to see those consistently. But at the same time, you’re going to have the benefits of efficiency growing into that workforce. You’ve got elements with maintenance. We put the incremental investment in; we’ll start to get those elements back — the crew, the other components associated with that. You know this year, we made an incremental investment in maintenance that we talked about, the $350 million, that’s having the impact that we wanted, maintenance cancels are down 75% year-to-date year-over-year.

All right. Thank you, guys.

Thank you.

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

Hey, good morning, and thanks for taking my questions. So Ed or Glen, you guys did volunteer, so maybe I'll try to provide a little bit of a preview of Investor Day out of here. But you did talk about Atlanta being up in the summer schedule next year. I think you even have a news article saying flights could be up high-single digit levels. Can you maybe specifically speak to that aspect of the strategy as you look forward without maybe giving too much away?

Sure. We really wanted to solidify our positions in the coastal cities as we emerged from COVID. Today, we are clearly the leader in Boston and assert ourselves as the leader in New York. We've made incremental improvements in Seattle and widened our lead in Los Angeles, so I feel confident about those markets. However, this has been to the detriment of our core hubs, as we didn’t have enough resources to manage everything simultaneously. We're very focused and will provide more details on this next week. Next year will involve some key incremental additions essential for continuing our growth in the coastal gateways, with most of this investment returning to our core hubs as regional jets regain full utilization. If we look at Atlanta in a long-term perspective—not just the past year or the year before—it’s about enhancing efficiency in our core hub, which contributes approximately 30% to 35% of our total unit revenues. We’re improving efficiency with larger aircraft while operating fewer flights than in 2019, but with more available seats. We are excited about our direction for next year and will share more details next month, and we’re very enthusiastic about where we're headed for 2025.

Really appreciate that, Glen. And then, Dan, maybe just as a quick follow-up on that. I mean does this have broader implications for your airport costs because those seem to be part of the inflationary pressures here on the industry as a whole? Going back to your core hubs, does that have a positive impact looking ahead?

Yeah. When you look at that airport line, you see it in the SEC filings; right, for the quarter and year-to-date, it's up over 20%. A third of that is these investments that we're making in these generational assets. As Glen always reminds me, they're always the most expensive on day one, and you grow into them over time. The opportunity in front of us is to grow in and get better utilization out of those assets that we've invested in over this period of time. You see it throughout the network. It's all the places that Glen talked about in regards to the New York markets with both LaGuardia, JFK, LA, Salt Lake City, but also the investment we consistently make year-in and year-out through Atlanta and continue to make that the flagship of Delta. It will give us continued leverage.

The thing I would add, Brandon, is that the bulk of those investments are behind us. As we see what's going on in the industry, we know there's other airports, not necessarily Delta core hubs that still have work to go. This is something that we're going to be able to leverage over the next few years, having made the investment and starting to drive better efficiency. I think it will be a unique opportunity for us.

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

Thanks very much for the time. This past summer, United launched an advertising network. Depending on the success of that, is that something you'd look to be a fast follower on?

This is Ed. We'll have to see what it is. There's a lot of advertising and promotion being talked about. There's not a lot of doing on that front. We're very comfortable with where we sit in that space with the free Wi-Fi, Delta Sync and the continued investment in personalization. We're not looking to push ads or try to monetize our customers as much as provide greater value to them. I think that's the sustainable strategy over time.

Thank you very much. If I could ask a quick modeling question, does your fuel guide account for a refinery benefit or a refinery headwind? Thank you again for your time, everyone.

Yes, Tom. It has a few cents loss, so a headwind as it relates to the guide.

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

Great. Thanks. Good morning, everyone. You guys were pretty vocal on the 2Q call that the industry had to take out capacity in 3Q and 4Q. From where you sit right now, looking at 1Q capacity, how do you feel about that? Do you feel like it's in a good spot or maybe there's more to come out or kind of how does that evolve?

I don't think we want to comment about any individual. But in aggregate, I think we're encouraged by where the industry is finishing this year and likely that the way things have been loading into the schedule availability tapes, that there's probably more to come out of the first quarter, but that's a hypothesis, not a fact.

Understood. And maybe just a follow-up for Dan. Congrats on the investment grade here. Obviously, kind of big change from the pandemic time. Where does that lead the balance sheet kind of going into '25 and how do you think about continued debt paydown versus cash return?

Yeah. That's another one we'll spend time on next month, so stay tuned on that. Again, back to consistency, we're going to be continuing to be focused on cash generation, consistent reinvestment back into the business and with a primary focus on debt and debt paydown, continue to strengthen the balance sheet, and effectively returning capital that way to investors through the accretion of the equity value of enterprise value.

Understood. Lots went back next month looking forward to it.

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

Hi. Good morning, Ed, Glen, Dan. Maybe two questions on premium. So if you look at premium cabin, it's outperformed main cabin by 9 points over the past two quarters versus the previous trend of about 5 points. So first, I guess, can we talk about the spread? How long does that continue? Does main cabin catch up or does premium have more to go?

I believe it's a combination of factors. The main cabin has been underperforming, which has prompted the industry to rationalize capacity. If the focus is solely on the main cabin, it's essential to adjust supply to boost unit revenues. We’re currently witnessing this adjustment and expect further capacity cuts to take effect by the end of the year. I anticipate that the main cabin will begin to show improvement as we close out this year, but we also see potential for continued growth in premium products. While I don’t want to dwell on it too much, we have significant plans to explain how we believe these areas can continue to evolve positively over the medium and long term.

Yes. I agree with both.

Maybe the second question on that same topic. How do we think about the margin implications of the benefit in the main cabin catch-up, which is clearly underperforming? Does it have a lesser impact on margins as we head into '25, or do you see premium and main continuing to grow at the same rate?

I think, yeah, I think that's hard to say that we parse that out at this point in time. But I think what we're seeing is a much more constructive backdrop in both, whether or not it's the continued increase in business travel as well as better distribution of our products and services in the premium cabins or whether or not it's the better supply/demand balance and coach. All of those are coming into play as we head towards the end of this year.

Yes.

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

Hey. Good morning, everyone. Most of my questions have already been asked. But I know I've kind of asked this on some past calls, but as we prepare for Investor Day next month, and we think about the long-term free cash flow generation potential at Delta. Dan, can you just give us a sense of kind of when you become a cash taxpayer? I think when you were a cash taxpayer pre-pandemic, your cash tax rate was in the low to mid-teens. Does that still hold? Any color around that would be helpful. Thank you.

I’m glad to discuss cash taxes. It’s great to be in a position where we expect to become a cash taxpayer. We anticipate starting to pay cash taxes next year as we utilize our deferred tax assets, and this will continue over the next three years. Regarding the stabilized cash tax rate, it largely depends on the direction of tax policy and legislation, but we expect it to reach the high-teens or possibly low 20s in the future, although we have several years ahead of us on this matter.

Got it. That's helpful. And then maybe just a second question for Glen. The commentary on transatlantic matters seems very positive. It looks like the competitive capacity there appears to be quite favorable based on what we can see in schedules. How would you assess the potential for generating revenue from transatlantic operations compared to all of your entities as we approach 2025? Thank you.

Yeah. I think domestic is going to be quite strong given the capacity levels that we're exiting the year from, and I think transatlantic will follow right behind. We have a lot of lapsing in Pacific in terms of capacity that we've added up this year that I think will be better next year. So we have some uplift there. There's also been — again, we haven't talked about it much on this call, but there's been a significant amount of capacity rationalization in the leisure markets in Latin America, which I think should serve us well. Hopefully, we're looking at all of them turning into positives sometime next year, but I'd say probably domestic and transatlantic being the strongest of the two.

Thank you. Your next question is coming from Stephen Trent from Citi. Your line is live.

Good morning, everyone, and thank you for taking my question. I wanted to explore further regarding your technology investments. I believe I saw that Delta TechOps is utilizing drones for equipment inspections. Can you share how you are considering deploying innovative solutions across your business? Thank you.

Sure, Stephen. We will discuss this further next month. I believe we have great opportunities with the technology foundation we've established. We are just beginning to explore the potential of AI for our business, and there are certainly some intriguing applications that could enhance our predictive modeling and create new opportunities, both in terms of revenue and efficiency. It's important to ensure that as we scale AI, our foundational systems are clean and reliable. That's what we've been focusing on, so there are significant opportunities ahead, so stay tuned.

Super. Well, I'm looking forward to November and thank you very much for the time.

That will wrap the analyst portion of the call. I'll now turn it over to Tim Mapes to start the media questions.

Thank you, Julie. Matthew, if you don't mind, while we transition from the analysts to members of the media, if we could repeat the instructions and for the call queue, please.

Certainly. At this time, we will be conducting a Q&A session for media questions. Your first question is coming from Leslie Josephs from CNBC. Your line is live.

Good morning, everyone. Thanks for taking my question. Just curious on the shoulder season, you mentioned, Glen, I just wanted to clarify, you said that September and October are more like the previous July and August because of the weather changes. And then, I also wanted to ask about your premium product offerings. You've been investing a lot, obviously, the LA and New York Delta One Lounges and just lounges in general. What are you thinking about for hard products, specifically Delta One? And what are some of the features that customers are asking for that maybe you're not offering now or what are some of the areas that you'd like to improve there in the cabin? Thanks.

Well, Leslie, I think what I said was, October and December are the better months in November is the one that's off trend because of the election. So I think that's what I said on the earlier call. Yeah, September too. And October looked a lot like September.

Okay. I thought you mentioned talking about the heat in Europe. I wasn't sure if that's like a permanent shift.

The transatlantic demand profile is shifting from July and August being extremely busy to not seeing as much peak demand in those months and instead seeing increased travel in September and October. This represents an interesting change.

Got it. It's hot. Regarding the hard product, what are your thoughts on that, particularly for the unclear part?

I think you have the whole Investor Day next month that we want to talk about it. I don't think we want to unveil it here on this call, but hopefully, you have time to join us, and we'll talk a lot about where we want to take premium products in the next four to five years at that meeting.

Okay. Thanks.

Thank you. Your next question is coming from Alison Sider from Wall Street Journal. Your line is live.

Thanks so much. Curious, I had an air traffic control airspace question. Curious, what you're seeing in New York, if the shift to Philadelphia is kind of how that's working out for your other New York operations, if you're seeing the hope for benefits or if you've had any problems there?

Hey, Ali. It's Peter Carter. We were with the FAA about a week ago talking about all of this. What I would say is that the N90s shift seems to have gone well, but we still have the same constraints in the New York aerospace that we've had for the last couple of years. We all know there's a shortage of air traffic controllers, and the FAA is obviously engaged in trying to solve that, but it's going to take some time.

Is New York still the main bottleneck in the system? How much does that affect the rest of the country?

It's New York and Florida, where we are experiencing some challenges as well.

Thanks, Ali. Matthew, we have time for one final question, please.

Certainly. Your next question is coming from Mary Schlangenstein from Bloomberg News. Your line is live.

Thank you. Earlier when you were talking about the rebuilding of the core hubs, and you made a reference to getting all of your regional feedback up, can you give just sort of an overview of what happened with your regional feed since the pandemic and how that, like, maybe what level it dropped to and how it's rebuilt?

Certainly, as you know, pilot constraints as the majors were hiring early in the recovery period put a lot of strain on availability of pilot crews for the regional carriers, all of them. We've been working very closely with them. Now that the industry growth patterns are back to more normalized requirements, we think the industry will generate about 5,000 new pilot jobs, which is about what it did in 2019. The dearth of capacity in terms of pilots available for regionals is dissipating very quickly. In the beginning, we probably had only 35% to 40% of our capacity available. Most recently, this past year, it’s been more like 65% to 70%. By next summer, we think that will be back to 100% of the capacity that we had available in 2019.

Thank you.

Thank you, Mary. Matthew, that will wrap us up on the media questions, please.

Certainly.

Thank you for joining the call today, and we look forward to talking to you again in January. I think many of you next month at our Investor Day. Thank you very much.

That concludes today's conference. Thank you for your participation today.