Shannon Doherty

Shannon Doherty of Deutsche Bank asked about the implications of dropping the lawsuit in Chicago for the airline's schedule and inquired about the potential impact of the Embraer tariff on aircraft deliveries.

Answer

CEO Robert Isom described Chicago as a major growth opportunity, stating they have the necessary gate capacity to increase peak departures to over 500 next year. Regarding Embraer, he expressed confidence that any tariff issues will be resolved through government and company negotiations, calling the E175 an exceptional aircraft and noting he does not anticipate long-term delivery problems.

Shannon Doherty from Deutsche Bank asked about demand trends in international markets beyond the U.S., such as Central and South America, and requested the number of grounded aircraft in Q2 and the full-year outlook for GTF engine issues.

Answer

EVP Holger Blankenstein confirmed that recovery trends are visible in both transborder and domestic markets, with close-in bookings enabling yield improvements. CFO Jaime Esteban Pous Fernández stated there were 36 grounded aircraft in Q2, a number expected to remain stable for the rest of the year, describing it as the 'new normal'.

Shannon Doherty, on behalf of Michael Linenberg at Deutsche Bank, asked about demand trends in international markets beyond the U.S., such as Central and South America, and requested a repeat of the number of grounded aircraft in Q2 and the outlook for the full year.

Answer

Holger Blankenstein, EVP of Airline Commercial & Operations, noted that recovery trends are visible in both transborder and domestic markets, with close-in bookings enabling yield improvements. CFO Jaime Esteban Pous Fernández confirmed there were 36 grounded aircraft in Q2, with a similar number expected for the rest of the year. He emphasized that this is the 'new normal' and the focus should be on ASM growth, which the company is managing effectively.

Shannon Doherty asked if the RASM gap between premium and main cabin could remain stable despite growing premium seat mix and inquired about the potential impact of a later Easter on travel patterns in the March and June quarters.

Answer

President Glen Hauenstein confirmed that Delta's 2025 plan assumes a continued premium revenue growth trajectory, with potential upside coming from an acceleration in main cabin performance. Regarding the calendar, he noted a later Easter is generally positive for the overall spring season as it lengthens the peak travel period.

Shannon Doherty from Deutsche Bank asked for specific drivers of the $150 million cost savings program and which revenue initiative management is most bullish on for achieving its 10-14% pre-tax margin target.

Answer

CFO Mark Mitchell identified the key cost-saving drivers as network simplification to over 80% out-and-back flying, crew base footprint optimization, aggressive headcount management, and automation. CEO Barry Biffle stated that while network maturity is the single largest contributor to reaching margin goals, he is most excited about the long-term potential of premium products and loyalty. He noted that loyalty revenue is currently just a few dollars per passenger, representing a massive untapped opportunity compared to industry peers.

Shannon Doherty of Deutsche Bank inquired about the reasons for E-Jet utilization remaining under six hours despite improvements in pilot attrition. She also asked about the potential for Mesa to return to mid-teen operating margins and what steps would be necessary to achieve pre-pandemic profitability levels.

Answer

Chairman and CEO Jonathan Ornstein explained that the low utilization is a temporary issue related to the time required to ramp up pilot training, which takes three to four months. He highlighted that pilot attrition is at a record low and training output is now producing a net gain of nearly 40 pilots per month. Regarding profitability, Ornstein stated that once the fleet reaches full utilization of over 10-10.5 hours per day, the company believes it can achieve consistent operating margins between 5% and 8%. He noted this could take another year to achieve and that there may be further cost-saving opportunities once operations stabilize.