Delta Air Lines, Inc. (NYSE:DAL) Q2 2023 Earnings Call Transcript

Ed Bastian: Yes. We’ve already just increased the current year guide. We will most likely some point next year, hopefully the first half of the year, have our updated long-term plan conversation where we can talk about where we see the long-term financial targets for the company going. But right now, we want to focus on — we’re in a very busy part of the year. We want to deliver a great operation for our customers. And we’ll talk more over the course of the next 12 months as to how far the EPS can get.

Operator: Your next question is coming from Catie O’Brien from Goldman Sachs.

Catherine O’Brien : So yesterday we had a pretty sizable month-over-month step-down in airfare CPI. I did some quick analysis that shows that, that data isn’t very correlated to the industry’s RASM or yield historically, but it doesn’t feel quite right to fully ignore a data point like that. I guess did you see anything similar to that step down in your own data, maybe on domestic or lower end of the field – fare spectrum? I know you’re guiding to a decel in 3Q versus 2Q better than what myself and the Street was forecasting but a deceleration, is it as simple as that? Or are there flaws on how that CPI data is calculated where it’s relevant to Delta?

Glen Hauenstein : Well, the methodology is a sample of a sample. And so we’re not seeing the same. And it’s a different data point than what we have and what we’re seeing. So I’ll leave it to that. If you want the definition which I think explains why there may be a big variance to what you’re seeing, we can forward that to you.

Ed Bastian : Yes. One thing for the call because I know a lot of people have this question. Just think about where we were last May and June, demand had just turned on in a crazy hot way. Supply was really low. People didn’t care where they were going or how much they spent, they just wanted to go somewhere. And we’re seeing fares up 30%, 40%, 50%, particularly in a lot of the domestic markets where they could travel to. That’s obviously not sustainable. And that’s the comp set that you — it’s in the data that’s being compared to as well. So we’re now at a much more normalized level of stability in the fare environment, particularly domestically. And I think it’s a really poor comparison to try to draw what that one CPI print was off of a survey of the survey and how that relates to Delta for the future.

Catherine O’Brien : I very much agree. Maybe one more for Dan too. Dan, you’re well on your way on your $3 billion free cash flow target, I understand fuel has been volatile to see how the ATL shapes up in the back half of the year. But if your free cash flow was to come in better, would there be upside to that $4 billion plus debt paydown you spoke to? Is that at all capped by your level of prepayable debt? Or you’re happy to prepayment penalties that means you take down that interest cost burn faster and tee-up the business?

Dan Janki : Certainly. Any — as we’ve talked about paying down debt is a priority here, generating cash, paying down debt, those two are head-to-head. Any additional cash that we generate, we certainly would pay down debt with it. I think you’ll see us — even in the back half of this year, we will be over that $4 billion that I talked about of gross debt paydown. And our team has been Ken and the team out there have been really good about doing what we’ve done year-to-date. We’ve done actually through open market repurchase and other activities, and we’re just going to continue to work down the debt.

Operator: Your next question is coming from Mike Linenberg from Deutsche Bank.