Q3 2025 Earnings Call Transcript

Good morning, everyone, and welcome to the Delta Air Lines September Quarter 2025 Financial Results Conference Call. My name is Matthew, and I'll be your coordinator. At this time, all participants are on a listen-only mode until we conduct a question and answer session following the presentation. As a reminder, today's call is being recorded.

If you have any questions or comments during the presentation, you may press 1 on your phone to enter the question queue at any time. I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations and Corporate Development. Please go ahead.

Thank you, Matthew. Good morning, and thank you for joining us for the September 2025 earnings call. Joining us today from Atlanta are our CEO, Ed Bastian, our President, Glen Hauenstein, and our CFO, Dan Janki. Ed will open the call with an overview of Delta Air Lines' 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 you to please limit yourself to one question and a brief follow-up so we can get to as many of you as possible. After the analyst Q&A, we will move to our media questions. As a reminder, 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 Air Lines' SEC filings. We'll also discuss non-GAAP financial measures, and all results exclude special items unless otherwise noted. And with that, I'll turn it over to Ed.

Thank you, Julie. Good morning, everyone. We appreciate you joining us today. This quarter's results reinforce that Delta Air Lines' competitive advantages and differentiation have never been more evident.

In September, Delta Air Lines' revenue growth and earnings came in at the top end of our expectations, delivering performance that we anticipate will lead the industry across all key financial measures. Revenue grew 4%, led by premium, corporate, and loyalty, reflecting the power of Delta Air Lines' brand, the financial strength of our customer base, and improving industry fundamentals. We reported pretax income of $1.5 billion and earnings of $1.71 per share, an 11.2% operating margin. Free cash was $830 million, bringing our year-to-date free cash flow to $2.8 billion.

We generated a return on invested capital of 13%, five points above our cost of capital in the top half of the S&P 500. Operationally, Delta Air Lines once again led the industry on reliability and customer experience. Through a busy summer, our teams delivered for our customers, and I want to thank them for their outstanding work and dedication. Professionalism and care create the trust consumers have in the Delta Air Lines brand. Sharing success with our people is core to our culture.

We've accrued nearly $1 billion year-to-date towards next February's profit sharing because when Delta Air Lines succeeds, so should our people. I also want to recognize the essential aviation work of the controllers, TSA officers, federal air marshals, and many others who are keeping our system safe and secure during the ongoing government shutdown. Thank you for your professionalism and your commitment to the traveling public. We're hopeful that Congress will act to reopen the government as soon as possible.

Now turning to our outlook, fundamentals are improving, and the positive momentum is continuing. Since July, travel demand has strengthened, led by a rebound in business travel, which was up high single digits in the quarter. The US economy remains on solid footing, and our customer base is financially strong. Rising preference for premium products and services, SkyMiles membership is expanding, particularly among younger consumers, and engagement is strong across all cohorts.

Spending on the Delta Air Lines Amex co-brand card is up double digits year-to-date, with a recent acceleration in travel and entertainment that mirrors the improvement that we're seeing in bookings. Premium revenue growth remains robust. The main cabin trends are improving. Structural change has taken hold across the industry.

As unprofitable flying is rationalized, and carriers not earning their cost of capital adjust strategies to prioritize returns. Against this backdrop, we expect to deliver a double-digit operating margin again in December, with earnings comparable to what we earned in September. This would be at or above our all-time fourth-quarter earnings performance. This brings our outlook for full-year earnings to approximately $6 per share, which is in the upper half of our July guidance range.

Free cash generation remains a key differentiator for Delta Air Lines, and we are updating our full-year outlook to $3.5 billion to $4 billion, growing our cash generation over last year and consistent with our long-term framework as we build a fortress balance sheet. At the heart of our position of industry leadership is a relentless focus on elevating the customer experience. We're investing across every phase of the journey to make travel with Delta Air Lines more seamless, personalized, and premium, growing our value proposition to customers. On the ground, we're harvesting the benefits of generational investments in our airport infrastructure.

This includes upgraded airport facilities, modernized sky clubs, and the launch of Delta One lounges in JFK, LAX, Boston, and Seattle. By year-end, Delta One check-in will be available across all of our hubs. We've also partnered with Uber to begin streamlining the airport pickup and drop-off experiences, enhancing convenience from curb to gate. In the air, we're continuing to expand premium seating and enhanced service offerings, ensuring more customers can experience our most elevated products.

Digitally, delivering a connected experience for SkyMiles members, with nearly 1,000 aircraft equipped with fast, free Wi-Fi, well more than all of our US competitors combined, our integrated platform is setting the standard for in-flight connectivity and personalization. Exclusive partnerships with American Express, Uber, and most recently, YouTube, extend SkyMiles further into our members' daily activities, deepening engagement and preference for the Delta Air Lines brand beyond the flight. It's all powered by our people, delivering welcomed, elevated, and caring service that reinforces our industry leadership, sustains our durable revenue premium, and underpins our strong financial foundation.

In closing, our financial focus remains on profitable growth, margin expansion, and disciplined capital allocation, all aligned with the three to five-year framework that we shared last November. As we enter the final stretch of our centennial year, I'm more optimistic than ever about Delta Air Lines' future. Thank you for joining us today. And with that, I'll hand it over to Glen to discuss our commercial trends and demand, followed by Dan with the financial details.

Thank you, Ed, and good morning. I want to begin by thanking the Delta Air Lines team for their outstanding commitment throughout the busy summer season and to our customers for their continued loyalty to Delta Air Lines. For September, revenue increased 4.1% year-over-year to $15.2 billion, a third-quarter record and ahead of our guidance as momentum built through the quarter. Trends across our business are improving, and customer preference for the Delta Air Lines brand is showing up in our results.

Total unit revenue improved by 0.3% over last year. Importantly, domestic unit revenue turned positive, with sequential improvement as the quarter progressed. This was supported by a main cabin inflection as industry supply moderated and demand improved, materializing earlier than our initial expectations. Internationally, profitability across all entities was strong, with premium continuing to bolster results.

Corporate sales trended positively throughout the quarter, up 8% over the prior year, with sequential improvement across all sectors. Domestic corporate sales grew double digits, including mid-teens growth in our coastal hubs. We see opportunities for further growth as corporate confidence rebuilds, reinforced by 90% of our most recent corporate survey respondents anticipating that their 2026 travel volumes will increase or remain steady year-over-year. Diverse high-margin revenue streams grew double digits year-over-year and contributed 60% of total revenue.

Within that, premium revenue grew 9% with improvement across all products driven by strong demand and consistent investment in premium offerings. Loyalty revenue improved 9%, and travel-adjacent products grew mid-teens as SkyMiles members engaged beyond the flight and throughout our loyalty ecosystem. Cargo revenues increased 19% driven by the Pacific, Maintenance, repair, and overhaul revenue grew more than 60% on higher volumes and timing of shipments. Delta Air Lines' loyalty ecosystem continues to be a powerful driver of enterprise value.

Anchored by the attractiveness of the SkyMiles program, a financially healthy, highly engaged member base, and our exclusive co-brand partnership with American Express. Co-brand holders are among our most valuable customers, traveling more often and spending more on Delta Air Lines. While roughly one-third of active SkyMiles members hold a co-brand card today, we have further runway as both engagement and member penetration continue to rise. A key proof point is the sustained momentum on spend growth, which has outpaced other consumer credit cards by 2x over the last few years.

During the quarter, spend grew at a double-digit pace, with new card acquisitions up year-over-year and a record mix of customers choosing the premium cards. With that, remuneration from American Express increased 12% over the prior year to $2 billion in the quarter, keeping us on track to deliver over $8 billion this year and advancing towards our long-term goal of $10 billion within the next few years. Turning to the outlook, the environment continues to improve. Over the past six weeks, sales trends have accelerated across all geographies and in every advanced purchase window, positioning Delta Air Lines to close the year from a position of strength.

While we are monitoring potential impacts from the US government shutdown, we have not seen a material effect to date. For December, we expect total revenue to grow 2% to 4% year-over-year on top of last year's record performance with solidly profitable unit revenues. Passenger RASM is showing healthy improvement sequentially, reflecting continued strength in domestic and a step-change improvement in the transatlantic, on firmer main cabin trends and corporate demand. At the same time, financial divergence across the industry has never been greater.

As carriers prioritize earnings over their cost of capital, eliminate unprofitable flying, competitive capacity in our hubs is down year-over-year, and we expect a very healthy supply-demand balance across the industry into 2026. In closing, I'm very optimistic as we enter the final quarter, building our momentum and positioning Delta Air Lines for continued top-line growth and margin expansion into 2026. And with that, I'll turn it over to Dan to cover the financials.

Thank you, Glen, and good morning to everyone. Delta Air Lines' competitive advantages drove another strong quarter as we continue to set the pace for the industry. Our teams are delivering operationally for our customers and driving efficiency. Year-to-date, we are outperforming the industry across on-time performance, completion factor, and net promoter score.

Our premium offerings, industry-leading loyalty programs, and elevated experiences we provide across the entire travel journey are driving increased customer preference for flying Delta Air Lines and underpinning our differentiated financial results. In September, we delivered record third-quarter revenue of $15.2 billion with an operating margin of 11.2% and earnings of $1.71 per share. Non-fuel unit cost growth was approximately flat to the prior year, bringing the year-to-date non-fuel unit cost growth to less than 2%, consistent with our low single-digit guidance at the start of the year, even as we've reduced capacity after the summer peak to align with demand.

I want to thank the entire Delta Air Lines team for their hard work to achieve these results. Delta Air Lines generated third-quarter operating cash flow of $1.8 billion, and after reinvesting $1.1 billion into the business, we generated free cash flow of $830 million. On our capital structure, we continue to take an opportunistic approach. Last month, we successfully repriced our SkyMiles term loan, reducing the rate by 225 basis points.

This demonstrates the strength of our balance sheet and the attractiveness of Delta Air Lines' credit. Strong cash generation has enabled debt paydown of nearly $2 billion year-to-date, with gross leverage ending the quarter at 2.4 times. Now turning to the outlook, for December, as Glen shared, we expect revenue growth of 2% to 4% year-over-year with positive unit revenue. On the cost side, disciplined execution supports non-fuel unit cost growth in low single digits in line with our full-year guidance.

With that, we expect fourth-quarter earnings of $1.6 to $1.9 per share and an operating margin of 10.5% to 12%. For the full year, this brings earnings per share of approximately $6 in the upper half of our guidance range we provided in July. On free cash flow, we are updating our guidance to $3.5 to $4 billion. This outlook is within our long-term target range and enables us to pay down debt while returning cash to shareholders.

Our capital allocation priorities remain unchanged: reinvesting where returns are strong, reducing debt, and maintaining our fortress investment-grade balance sheet, which was recently recognized by Fitch with a revised outlook from stable to positive during the quarter. Our investments are focused on the customer experience, as Ed and Glen spoke about, and on driving efficiency through technology and our fleet. We continue to advance our fleet renewal strategy with approximately 40 aircraft deliveries this year and next. These additions drive meaningful value for our customers through expanded premium seating and for our shareholders through increased efficiency and greater scale among our key fleets.

Looking into 2026 and beyond, our focus is on profitable growth and delivering long-term financial targets outlined at our Investor Day last November, including earnings growth, durable free cash flow, and debt repayment to drive sustained value for our shareholders. In closing, I want to extend my sincere thanks to the entire Delta Air Lines team for their commitment to one another and to our customers. And with that, I'll turn it back to Julie for Q&A.

Thank you, Dan. Matthew, can you please remind the analysts how to enter the call queue and go to our first question from Duane Pfennigwerth of Evercore ISI?

Certainly. Everyone, at this time, we will be conducting a question and answer session. Your first question is coming from Duane Pfennigwerth from Evercore ISI. Your line is live.

Hey. Hey. Thank you. Good morning. With respect to the strong improvement in cash flow year-over-year and operating cash flow, can you just expand on the drivers of that improvement? How much of that is just the working capital benefit of maybe the booking curve normalizing versus earlier in the year? Maybe there's dynamics around MRO. Any thoughts you have would be helpful.

Yes, certainly. Duane, thank you for the question. Year-to-date, we're on track to where we were last year on similar earnings. And that's even with actually a headwind as it relates to the booking curve.

As we talked about over the summer, that spring and summer that compressed. It's starting to expand. We haven't yet gotten all that back. We expect more of that to materialize here in the fourth quarter.

And the underlying improvement to offset that is coming out of working capital. We built up, you know, a lot of just I won't call it inefficiencies, but excesses. We are rebuilding the airline, and now's our time as we drive efficiency to work that off, and you're seeing that in working capital.

Thanks. And then maybe, Glen, for my follow-up. One of the questions we got from a general this morning was, can you put the corporate recovery in context, excluding any benefit from a CrowdStrike comp? In other words, are we fully back? How would you put this corporate recovery in context? Thank you.

Yes. I think we're beyond where the CrowdStrike impact was from last year, and we're seeing similar results to what we disclosed in the third-quarter earnings moving to the 4Q. And I'd just remind you and other people on the call that while corporate revenues have recovered to 2019 levels and are slightly above those now, the number of passengers that are booking because fares are higher are still in the high seventies. We think as business continues to normalize, we have a lot of runway to continue to expand the corporate demand.

Thank you.

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

Hi, everyone. Thanks very much for the time. I was wondering if you could unpack the improvements you're seeing in the domestic market and how much that might be unique to you just given your exposure to higher-income households?

Well, certainly, I think their exposure to higher household income cohort has enhanced our relative position versus carriers that are catering to a more stressed lower to middle-income environment. So we'll see as everybody else reports. I can only speak for Delta Air Lines, and the strength that we've seen is continuing to accelerate as we head into the fourth quarter.

Okay. That's really helpful. And then just kind of on the same topic, I was wondering if you could unpack some of the mix shift benefit that you might see as we move into 2026 and 2027, as you take on delivery of new aircraft? Thanks again for the time.

We continue to invest in the higher-end products, whether or not that's opening up new Delta One lounges or check-in areas. And so as we continue to take delivery, they come with a higher mix of premium products. And if you look next year, well, we haven't given any guidance, but most of our growth, if not almost all of it, will be in the premium sectors.

Your next question is coming from Catherine O'Brien from Goldman Sachs. Your line is live.

Hey. Good morning, team. Thanks for the time. Maybe one for Dan. You know, not asking for 2026 guidance, but this year, your unit cost performance benefited from efficiency gains and growing into your workforce and your fleet and your airport assets. I guess, what inning are we in that efficiency growth, and are there further tailwinds from this into next year?

Yeah. We talked a bunch about this at the Investor Day last November, and all those trends are intact. Certainly, we are still in the early to middle innings where we believe over the term we can continue to drive efficiency by growing into that workforce, continue to get growth in the generational airports that we've built that are actually in our run rate. The investment that we've made in fleet, as we get scale and efficiency as we continue on the fleet renewal.

And then the other element that we talked about is just the role of technology. And that it will have in regards to enabling our workforce and giving them tools and transparency to just be more efficient. And we think that is certainly in the very, very early innings of the unlock, and we have years of that in front of us.

Yeah. That's great. And then my second one is actually a bit of a follow-up to Tom's. I wanted to dig in a bit on domestic main cabin turning positive specifically.

Can you give a little more color there? I know one driver of that is that domestic main cabin seats for Delta Air Lines are down year-over-year. Can you tell us by how much? And then maybe the converse of that, I know back in August when I was in Atlanta, we spoke about how you're adding you're doing some retrofits to add incremental Delta Comfort seats this year.

What is this year's retrofits do for premium seat mix into next year? I know you said most of next year's growth driven by premium seats, but just wondering specifically how the retrofits contribute to that as well. Thanks so much.

Right. Certainly, as we continue to the premiumization, if you will, of the Delta Air Lines ecosystem is really dependent on two things. One is the retrofits, which you mentioned, which accounts for probably about 25% to 30% of the incremental premium seats. Then new aircraft deliveries that are continuing to come with a higher mix of premium as they roll out of the factory.

Both those contributing to the continuation of improving the experience for our customers. And then lastly, on main cabin demand, we have seen an inflection. Our main cabin seats are down slightly. They're not down significantly from last year.

So relatively flat. What we have seen is a rationalization of capacity in many of our hubs. As a matter of fact, if you look forward through November, capacity in almost all of our hubs is down year-over-year from competitive sets. This is allowing us to rationalize the seats that are there and continue to drive unit revenues up.

Very helpful. Thank you.

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

So for Glen, premium revenue growth exceeded that of the main cabin by 13 points. That's obviously a new record. And I guess my question is a bit of a follow-up to Katie's. I mean, obviously, the outcome is driven by weakness in oil and consumer, but can you drill down a bit deeper into actual changes in consumer behavior?

So if, for example, if you looked at SkyMiles member behavior, how much premium growth is driven by your more affluent members taking more trips, versus maybe less affluent flyers trading up to a better experience? You know, there seem to be so many moving pieces to explain the 9% rise in premium, the 4% contraction in the main cabin. We obviously know the outcome is great, but any further comment on the specific building blocks would be helpful.

Well, Jamie, I think you know, we've been outlining this for many years that we think that premium still has a long runway. And, you know, as you know, following this industry for a long time, we were not selling premium seats ten or fifteen years ago. We were giving them away. And, you know, the reengineering of the whole purchase process where we made them much more affordable and much more attainable has allowed people to buy up into those categories.

And, you know, we've always said that we aren't really at the end state in terms of getting the distribution systems where we need them to be. To make sure that those products are being displayed to consumers or agencies in a way that they need to be, and that's been a long journey too. So, yes, it's been a transformation, and, yes, all of the above are true that people are attaching to these products, and then their repeat rate on them is incredibly high. And in previous calls, I've equated it to the car that you drive today.

Is it better than the first car you had? The answer is probably yes, and you don't see many people going back to cars that are worse. And I think once people get used to traveling in a certain product, whether it's Comfort Plus, Delta Premium Select, or Delta One, they tend not to go back. Their retention rate's in the mid-eighties.

And so the intent to repurchase is very high, continuing to expand the availability of the products, the price points on the products, and this is a journey, a long journey we're on. So I think it's a great question. And I think we see that there are many, many more opportunities in premium in the coming years.

Appreciate it. So, Jamie, if I could add to that. A couple of things. There's also you need to look at the geographies.

Right? Look at the investment we've made in LA and Boston and New York, you know, the coastal that's in Seattle. That's where a considerable amount of premium lives. And Delta Air Lines historically wasn't as big in those markets as we are now.

Not only have we moved in there, but we've also built generational experiences, you know, through the airports, the Delta One lounges. Corporate travel is our bread and butter. We are the very best at it. Very we're best serving it.

Corporate travel is premium. Right? And so, you know, all of these things go in, as you said in your question, there's a lot to that. But we see a considerable amount of continued momentum forward in premium.

And, you know, the question we get from customers all the time is can we get more?

Well, thanks for that, gentlemen. And that actually leads to my follow-up. What does the Venn diagram look like between premium and corporate? So if JPMorgan buys me a main cabin ticket to Miami, that's clearly gonna show up as corporate for you. You know, it's gonna be on our discount. But if JPMorgan buys me Delta One to Los Angeles, I guess that counts as both corporate and premium.

Yes.

Of course, could you quantify sort of what that overlap is? What percentage of premium is corporate?

Yeah. It's probably 30% to 40%. We can get the exact number.

Okay. Good. More and more and more and more, and I think this is the exciting part for us. If you think about one of the issues we had many years back, the difference in yields on corporate and high-yield leisure were very, very different.

And so it was a steep cliff if you weren't filling your planes with corporate. On what you had to fill them with. And now those adverts, in some cases, corporate personal leisure is higher than corporate these days. So it's given us a really nice ability to manage.

And one of the issues we've had with our team that we've been working on is sometimes we run out of seats for corporate, and we have to go and put more seats in the market because corporate was getting squeezed out by higher-yielding leisure.

Excellent. And if I could just squeeze in a third follow-up, just because you brought that point up. You had said 2027 was the year in which premium would overtake the main cabin. Is there any reason we wouldn't see that occur in a quarter or two next year?

Oh, I think you will.

Okay. Thank you very much, everybody.

Thank you, Jamie.

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

Hi, everyone. Thank you. Glen, you had a chance to talk about your first car. I think it was the Ram I think you referenced that a couple of times. I remember.

A regular classic. Maybe weekends. High school.

Maybe we can stick with the premium discussion because there still seems to be a fair underappreciation for what's going on here. I think, out there. So, like, obviously, the revenue growth on premium versus the main cabin has been very, very strong for quite some time. But I was hoping you could talk about the profitability of the segments of the cabin.

I think that the I mean, should we look at the gap in just the terms of the growth overall as a good benchmark for the differences in overall contribution? I just it just there seems to be another step function change coming on seat mix. So it just seems like there's a further step function change coming on profitability as well. So if you could just talk about the segments on the profitability side, standpoint, that would be helpful.

I just think that when you think about what's different and what's changed over the last ten or fifteen years, the premium products used to be loss leaders, and now they're the highest margin products. That's really the headline. And really in descending order of their premium versus their margin. So the best margins are in the most premium products, and you just work your way down.

Now we've had some convergence on Delta Premium Select, which has actually been so popular as we've introduced it. That the margins are starting to converge with Delta One, and we're working on separating those back out again. But, you know, really exciting opportunities. These are relatively new products for the airlines.

We've only had them, and we've only been selling them. And we've only been selling them in widely available distribution for less than ten years.

Interesting. Great. Maybe on corporate, just to follow-up to Dwayne's question. General.

I got I got a similar question as well. Like, it's so I know that there's some CrowdStrike noise within it, but the 8% number is a lot. If you look at, you know, some of the other travel industries out there, they're not calling out a gain like that. So to me, it kind of it seems like you're driving additional share gains or maybe you could just talk about how the overall market is expanding in general and how you're continuing to drive share within it.

Thank you.

Well, first of all, I'd like to call out our sales team. They're the best sales team in the industry. They're doing an amazing job for us. And, clearly, we are continuing to take share on a margin.

So, you know, we monitor our share, and then we reconcile it later. But I think, you know, we're seeing mild gains in total share and certainly higher gains in revenue share. But there's a lot of opportunity to as we look forward here is that, you know, corporations are still not traveling in the volumes they did pre-pandemic. And so as that travel continues to come back, and I think we could look at third-quarter sales and, yeah, take the CrowdStrike out of it.

We're still in the double digits.

I think what I'd add on corporate because I've heard it a couple of times that somehow it might be driven by CrowdStrike. Actually, that 8%, September was higher than eight. It was 9%. Right. And that didn't have CrowdStrike, so I get it. So I think that's the there's real momentum here with corporate. It's across all the segments. This hasn't anything to do with the technology outage.

Yeah. One other thing, Conor, I'd add. Is corporate suspended travel in the early part of the year. So there is also what was some level of pent-up demand to get back out, and I don't think you can underestimate that.

I don't see that stopping, by the way, because, you know, our outlook when we ask the corporates that are gonna continue to grow. But there was clearly for four or five months, this spring, we were not seeing any corporate growth, and then they all they all got back on the road together at the same time. So yeah. Awesome.

Thank you. Sales up into this week are staying at or above the numbers we just posted with them.

Awesome. Thank you.

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

Good morning, everyone. Maybe, Glen, maybe switching gears a little bit and speaking about Atlantic here. Obviously, RASM down 7% in 3Q. I know you spoke about a step function change happening here, but I doubt you're expecting to get back to flat in 4Q.

But maybe could you speak to how Atlantic performed throughout 3Q and kind of what you need to see in order for that entity to climb back to flat unit revenue?

Well, yeah, I think third quarter was clearly disappointing, and I think it was a host of things. Some of it might have been our fault in terms of where we thought the booking curve would be and how we held out for higher fares, and next year, we're gonna be much more aggressive in building a solid book earlier in the year. I think the other thing was the booking as Ed refers to it as the spring swoon. When the spring swoon was happening and everybody got a little nervous when tariffs were introduced, that was the booking window for the latter part of the summer.

So that had some impact on the main cabin as well. And then finally, I think we've discussed earlier is that given that the cohort on the premium products is really it's in their sixties. That the fall has become a relatively more attractive period than the summer in terms of high-yield leisure. So it's a combination of all three.

So we're gonna attack it multifaceted next year. I think, you know, we're gonna hopefully not have any kind of swoon in the whole demand set. We're going to be a little bit more aggressive in terms of the main cabin and filling up those cabins earlier in the booking curve. And then we're gonna adjust our capacity to make sure that we're not creating the church for Easter Sunday in July and August, gonna flatten that out more for the summer season to have a better distribution of capacity.

That's interesting. Thank you. And then, Glen, since you spoke about kind of margins within the cabin, curious if you'd be willing to rank your geographies by margin performance thus far in 2025 and, you know, maybe how you expect that change, if at all, heading into 4Q in 2026. Thank you.

Historically, we had a domestic premium and an international, and I'm not gonna go beyond the international as a whole. But this year, they're relatively similar. They've converged on each other, and we're gonna have a race. We've got our domestic for '26. Our domestic improvement versus our international improvement, and we'll we're gonna compete them against each other and see which one can generate the higher returns next year.

Great. Thank you.

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

Yes. Hey, good morning, everyone. Hey, Glen, back to the government shutdown. If you sort of think back to 2018, 2019, when did it start to bite? I mean, we're day nine in, and what can you recall what that financial impact was to Delta Air Lines?

We said at the time it was a little bit less than about a million dollars a day. Now it's less than a million dollars a day for various reasons. One is that DCA travel was off even before. So, you know, DCA has not been a real driver in terms of revenue improvement this year. So less than a million dollars a day in now, and it was about a million dollars a day previously.

Great. And then just a second quick one here. Thought it was interesting you called out Austin in your release. Clearly, non-hub flying historically. Non-hub flying tended to be lower margin RASM dilutive. What's changed? What makes the Delta Air Lines product Oh, maybe I'm answering the question. I'll leave it to you. Why is it different this time? Thank you.

I think, you know, we used to look at the airline at a route level. But that wasn't really thinking about what's inside the minds of customers. And, you know, what makes customers choose Delta Air Lines over a different carrier? And I think the answer is relevance.

Right? If we don't if we're not relevant, we cannot acquire the SkyMiles. We cannot acquire the frequent flyer, the credit cards. And so the ecosystem has to have relevance.

And that's why it's important for us to have focused cities. Yeah. And those focused cities have been quite profitable for us. You know, sometimes exceeding that of the hubs.

And so we're continuing to invest in focus cities. You know, we don't have a lot of them, but the ones we do have, we've chosen for specific reasons. And let's say Austin, we've chosen because we don't have a Texas hub. Everybody else who everybody else has a Texas hub except Delta Air Lines.

As you know, Texas is a in and of itself, is a huge revenue market. So, you know, it's seeing those opportunities, looking at the demographics, looking at the GDP of generation for these cities and saying, where do we need to have a relevant offer so that people will join our SkyMiles program. They will join our and get our credit cards, and we can produce relevance.

Very good. Thank you.

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

Good morning, guys, and thank you for the time. I want to maybe follow-up on the Atlantic comments. So two questions there. Know, how do we think about Atlantic capacity next year?

Glen, you mentioned more evenly dispersed I guess, how are you thinking about that? And maybe secondly, given your competitor just announced some new additions, how are you thinking about competitive capacity, your own network planning, as well as the A330, A350?

Well, I think our product is best in class in the Transatlantic. We continue to monitor our relative performance in terms of net promoter scores, and I think it's leading right now, and it's going to get much better as we continue to deliver new airplanes with Delta One suites and with the enhanced Delta Premium Select and larger Delta Comfort Plus cabin. So I'm really excited about the product that we're putting in the market. We've chosen not to fly narrow bodies in the Transatlantic because of product and brand issues.

And so we're not gonna go in that direction. But next year's capacity, I don't know. I mean, I think it's early in the game. Not everybody's announced what they're gonna fly.

And, usually, everybody announces what they're gonna fly, not what they're not going to fly. And so that usually follows after what we're going to fly next year. So we'll see how it all shakes out. I think it's gonna be probably low single digits.

As far as our summer, we'll be probably in a very, very low single digits if growth at all and very peak months of July and August. With a slightly higher shoulder season, which is becoming more peaky.

Great. Thank you.

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

Hey. Good morning. I wonder if you could share what you're seeing on the Latin America side, perhaps broken out by near international and long haul.

Latin America long haul, short haul. Yeah. Long haul has been very solid for us. It comes into season in the winter. It's looking for a very good strong winter season. Short haul has been a mixed bag. The Caribbean is doing well. Mexican beach is under a little pressure, but all still very profitable for us. So continuing to make investments in those regions.

That's helpful. And if I might, on the management side, Dan Community have Do you expect 2026 to be above or below in terms of heavy maintenance events? And setting that aside, like, what are you seeing in terms of inflation on maintenance and parts? Is that getting better?

Savi, we apologize. We weren't able to hear you clearly on this side. Know it related to 2026, but I couldn't hear the context of the question. Could you repeat it?

Yeah. Sorry about that. I was just on the maintenance side, do you expect 2026 to have more or less heavy maintenance events? And beyond the events, just on inflation, just what are you seeing on the maintenance and parts? I mean, is there is that improving from kinda heavy levels?

Yeah. We're still in the early stages of our planning for 2026, so we haven't worked through all our capacity and maintenance. More to come on that as we work through the fall here. As it relates to inflation, yes, you know, I think that's still one part of the supply chain.

Both as it relates to material availability to repair, components, all those have had inflation above the normal. They're coming more in line as the industry continues to get better, but it's got a long ways to go. We've kinda said that that part of the supply chain is multiyear in nature as it relates to the opportunities in front of it. Any aspect of it, can look at the turn times and performance are still not at levels that we experienced in that seventeen, eighteen, perspective.

And as those come more in line, get healthier, you're gonna see greater efficiency out of that.

Understood. Thank you.

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

Hey. Thanks. Good morning. So the fourth-quarter earnings guidance is basically the same as Q3 earnings.

And we've never really seen that before. I guess, you exclude CrowdStrike last year. I guess I'm trying to understand, do you think this is just the new seasonality that makes Q4 a lot stronger? Or would you say maybe that you under-earned in Q3, and maybe it's some of both?

I'm thinking the implications for how to think about next year would be different based on how you think about that dynamic.

Yeah. Fourth quarter it's actually at or slightly better than the third quarter. And I think it's being driven by strong premium demands and corporate travel in season. So we have a nice long season.

If you remember last year, we had the election, and in the October period, we had the country kind of froze right before the election, and unlocked a little bit after the election, but we had that period also have, you know, some favorability in terms of the calendar. So I think the fourth quarter is, as long as business is traveling, is a very strong quarter for us. And I think in the third quarter, particularly in the Transatlantic, we are going to strive to do better in next year's third quarter because we think we have some opportunity should we have to re if we had to replay that to improve our results on the margin.

Okay. So maybe some of both. And then about a point of the revenue growth in Q3 was from MRO, maybe a little help from cargo. Is that sort of sustainable into Q4? And going forward, that MRO strength?

The MRO over the long term, yes. You're gonna see it. You won't see it every quarter at 60% plus. I'd say both the second and third quarters were quite strong as it related to MRO.

For the year, you think of it more in that 20% to 30% range. But we would like to see many years of MRO growth well above the growth of the core airline. And being double-digit. But you won't see it at those levels.

You'll see much actually, I think as you fourth quarter, it's probably closer to flat year-over-year. And on cargo, great third quarter. And a shout out to our cargo team. I think they did a fabulous job.

We have seen some I'd say, choppiness as we enter the fourth quarter, and we'll see how the final result is. But I wouldn't expect that the 19% would be sustainable into 4Q. It's probably gonna come down from there. And we'll see if it still probably grows in the cargo.

You, guys. Very helpful.

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

Great. Good morning, everyone. Glen, maybe a couple of follow-ups to your earlier comments, kind of specifically focused on 1Q. Can you help us understand how you're thinking about 1Q network planning just given all the continual noise that continues to be out there?

And also what happened last year with the kind of close-in weakness and corporate and everything else? Are you treating last year as a one-off? Or are you kind of being more cautious going into next year because of that?

I think we're going to head into 1Q the same way we're exiting April, which is with a very strong backdrop. And, you know, the quarter we know the most about is the quarter we're in, and the quarter we know the least about is the fourth quarter of next year. But as the first quarter comes into focus, the demand is looking quite robust. And so let's hope that that spring swoon doesn't occur again next year.

Understood. And just on that topic of 1Q and get focusing on Transatlantic, you guys have been talking about that shoulder season strength for some time now clearly manifesting right now. Last year in December, you said that 1Q of 25 in Transatlantic was setting up for one of the strongest years you've ever seen. And part of that was driven by a favorable US dollar.

The dollar is not as favorable right now. But are you from what you can see right now, do you see European strength continuing into 1Q 26 similar to what you saw coming into this?

Yes.

Easy enough. 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 the question. Maybe this one's for Ed or Dan, but you guys think, in your prepared comments talked about your long-term goals of margin improvement. I think everyone would agree on this call that airline stocks could be viewed pretty cheap, but maybe margin growth would really be welcomed for investors. So I guess in that context, what is in your control here as you look into 2026?

I'm not necessarily looking for guidance, but does it just have to be a market that's growing capacity a lot less than we have in the past few years? Or it all these things that we're talking about on the commercial side that just gain more momentum? And what can you do on the cost side as well? I think Dan was just hinting at efficiencies there too.

Thank you.

Yeah. No. Cool. You know, I think I'd point you back Thanks for the question.

To a lot that we talked about last November. There were a lot of things in there that we talked about that were Delta Air Lines specific as it related to things that are in our control as we look forward and we want to drive. We run the company for margins. We want to drive margins up into the mid-teens.

As we laid out. And we feel that the playbook and strategies and priorities in front of us enable us to do that. Starts with those growing up high-margin, revenue streams faster than the core, premiums at the core of that. We talked about premium seats.

Growing. Main cabin outpacing the main cabin. So you have more product out there continue to grow the Amex relationship and loyalty faster. So those are things that help you as it relates to the top line, the fleet renewal, supports that.

And then you look at the things that we want to do that and still drive good cost performance of low single digit. And, again, it goes back to the growing into the airports, that are already in our run rate. It goes into the fleet actions that we've been growing and simplifying the fleet and getting scale out of it. Associated with it.

And then long term continue to grow in get more efficiency, out of not only our workforce, but the entire supply base but also the benefits that technology bring to it. So we want a steady march over time of doing that. Now, certainly, the industry backdrop is we could be beneficial to that. Supply and demand stay in balance.

There's real opportunity for that also. To support additional margin growth excess of the things that are Delta Air Lines specific and controlled.

Well, and just maybe as a really quick follow-up, I think you guys said co-brand spend was up 12%. I might be off on that, but you talk to some of the loyalty drivers right now and how sustainable it is? Looking into next year?

Well, I think it's been driven by two things. One is the premiumization of the card itself. So we've been acquiring a record number of premium cardholders. And their spend is multiple of what our base member card spend is.

So while you look at the total acquisition numbers and say, I think this is our seventh year of a million or more acquisitions, that the mix of those acquisitions is skewing higher and higher in terms of getting reaching a more premium audience. And those customers have better credit scores, so they get approved more often and they spend more on their cards. So that's been really one of the key drivers for us is not only in the total volume, but the number of premium cards we've been able to acquire. And that's driven versus our 2x versus growth versus total card spend.

And that's been year after year that we've been able to do that. And looking to continue to do that through '26. And as the more attractive and the more if you think about the question that was preceded about why Austin or why Raleigh? Well, these are high-income growth areas. These are places that we've acquired a lot of cards in.

And trying to understand the interaction between the airline and the card and how to maximize both of those together as opposed to just looking at an individual route.

Thank you, Glen. Thanks, Dan.

Thank you. Your next question is coming from Tom Wadewitz from UBS. Your line is live.

Yes. Good morning, and thanks for the question. Wanted to see if you could give maybe a little bit of additional sense of the you know, looking at 26, you know, you're saying that you'll be in line with the multiyear view. So, let's say, 10% earnings growth, something like that.

Do you assume that you get to revenue growth, low single-digit revenue growth, some kind of revenue growth in the main cabin? Or should we think about this where you really get there with the good visibility you have on the premium and card and other things? And that's you know, you kinda get to that multiyear growth without a meaningful, swing up in the main cabin.

Well, I think we've already seen an inflection in the main cabin, which is very exciting to us. And, you know, the trends that we see today are probably the trends that are gonna carry us at least through the beginning part of 2026. So I would expect that the main cabin does have improvement as part of our base as part of our base revenue assumptions for '26. And on top of that, the continued growth of the premium products and the card spend as well. So yeah, I'm excited about the fact that we have finally inflected in the main cabin.

Okay. But you wouldn't necessarily see that as upside. That's kind of assumed within getting to what, you know, what the multiyear is.

We haven't given any guidance on that yet. So Yeah. Stay tuned.

Okay. No. I appreciate that. That's fair enough.

The improvement in the main cabin, do you think that that's, like, you know, I think the consumer and especially kinda lower-end consumer is you know, it's unclear whether how optimistic you should be. So do you think that what you've seen in the sales trend that's been favorable is that consumers flying more? Do you think it's just Delta Air Lines' share in kind of industry capacity rationalization that's been beneficial? Or what do you think the kind of bigger driver would be of that improvement you see in 4Q and carrying into '26?

At the low end of the industry, there's been a lot of seats removed. And that's allowed us to get a footing on fares. I think when you think about the financial performance of the carriers that are catering to the lower-income customers have not been good. Know, someone had to declare bankruptcy.

And know, it's the restructurings that they're going through and having to get higher fares. They can't they need they need more money to survive. And so, you know, we had one of our competitors say something, but it's just math. Well, it is just math.

That's it. They have to get their fares higher. In terms of and that helps us get a footing on our main cabin as well.

Matthew, we'll now go to our final analyst question.

Certainly. Your last question is coming from David Vernon from Bernstein. Your line is live.

Good morning team and thanks for fitting me in here. So Glen, maybe just a quick micro question for you in terms of the competitive capacity being down in Delta Air Lines hubs year-over-year. I'm wondering if you're seeing any kind of difference in domestic revenue trends in your hubs versus some of the point-to-point leisure markets? I'm trying to get a lot of questions about whether kinda what you're seeing in the main cabin is gonna be an industry-wide thing or more of a Delta Air Lines specific thing.

Well, we have three categories. We have coastal gateways, we have core hubs, and then we have focus cities. And they've all been behaving well. I'd say the biggest improvements have been in the coastal cities where we've seen a big uptick, and these are also the biggest and wealthiest cities in the country, the New York, the LAs, the Boston, Seattle.

Where corporate travel is significantly improving year-over-year and our share is improving. So that's really been a big driver of it. And the hubs have been performing very, very well. And our focus cities, the ones that we're investing in are as expected.

So yeah, I think it's a broad brush improvement from where we were just, you know, ninety days ago.

Excellent. Thanks for that. And then maybe just if we kinda step back for a second, coming back to the commentary around earnings consistent with a long-term financial framework. You know, given the weakness and the know, the weirdness of, frankly, of 2025 with the second-quarter slowdown, some of the irregular ops days.

I mean, if we don't have something like that repeat is there any reason to think that we shouldn't be at the upper end of the framework you guys have laid out in past. I'm just thinking just the comps are just gonna be so much easier in for a big part of next year that maybe we shouldn't be thinking that I'm wondering if there's a reason we shouldn't be thinking it would be at the higher end of your longer-term financial framework.

Hi, David. This is Ed. I'll take that. We haven't given 26 specific insights yet nor have we completed our planning process, so we'll probably be better equipped to talk about that towards the end of this year or early next year.

But no question, we saw some pretty strong headwinds that came quite abruptly hit us in late January, early February. You know, we had the aircraft incidents which certainly hurt revenue growth in some important markets. Had a lot of the trade uncertainties while consumer confidence plummeting. And to the point where Delta Air Lines, as you recall, we wound up pulling our guide.

There was so much uncertainty for a short period of time. So no question if we have some tailwinds as we look forward into the New Year. And if today's environment projects into '26, I think '20 can be a really strong year.

That's very helpful. Thank you very much for the time.

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

Thank you, Julie. Matthew, as we transition from the analysts to members of the media, if you wouldn't mind please, describing how best to enter into the call queue and the process for one follow-up, please.

Certainly. At this time, we will be conducting a Q&A session for media questions. Please hold while we poll for questions. Thank you. And once again, everyone, if you have any questions or comments, please press star then 1 on your phone. Please hold while we poll for questions. Your first question is coming from Leslie Josephs. Your line is live.

Hi, everyone. We've seen Amex, Chase, and some others raise credit card fees. Just wondering if you see any pushback from customers in terms of acquisitions on your end, if you think that credit card annual fees at least can keep going up. And then my second question, also seeing really long upgrade lists, which I guess would be good for you guys because you have a lot of elites.

Not just on your airline, but others. And curious how you're managing that and if the percentage of paid seats in premium has gone up since the last time you've updated everybody. Thanks.

Card fees, but we also injected a lot of value for customers, and we had a record acquisition this year. And so very pleased with the results. I can't really comment on the results of Amex or Chase. But I would say as long as you're providing more value to the customers, it seems like a pretty safe bet that there's gonna be strong demand for those premium products across the spectrum.

And in terms of our standby list, yes, there's a long standby list, and we have a lot of premium customers. And that's one of the reasons we've expanded our Comfort Plus offerings because our most elite customers are allowed to upgrade into those products at the time of booking. And we didn't have enough of those. If you look across the spectrum, we were generally sold out of Comfort Plus early in the booking curve and now being able to increase that so we can accommodate more of our most premium customers with premium offerings at the time of booking.

Okay.

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

Hi. Good morning. In your forecast for Transatlantic travel, I'm wondering if you still expect that to be mostly driven by US point of sale do you see a rebound from non-US based customers?

You know, it's always been US point of sale, rather. And so the question is how US point of sale will it be? Know, and our point of sale revenue on a revenue we're approaching 80% US point of origin. So yes.

We hope that there's going to be more. The dollar, of course, has strengthened. That makes coming to America more of a bargain for customers. And so, hopefully, we see that translate into a little bit higher European point of sale.

But we are mostly a US point of origin-driven company.

And what are some of the other factors that are ongoing that you see constricting non-US point of sale? Is it still some of the, like, concerns over immigration policies, things like that?

There's clearly safety concerns. There's a whole host of concerns of travel to the US, but I think, you know, we still have a great product here, and we have great cities, and we have people with relatives and friends and family. And so there's gonna be demand. The question is how much demand?

And the good news for us is we're not totally dependent on that. It's not our core business. But I would expect, hopefully, that next year is a little bit better than this year for European point of sale. For nothing else is that the appreciation of the euro has made European fares look relatively more attractive.

And, Mary, this is Ed. You know, the conversation, it's also on the margins. Right? It isn't as if Europeans stopped traveling. They're still traveling at large numbers. The numbers may be down. 5%, 7% in some of the markets. You know, we're long-term, think our business model is very healthy for global expansion, and you're gonna continue to see us pursue that.

Great. Thank you very much.

Thanks, Mary, and congratulations. Matthew, let's squeeze one more in, please.

Certainly. Your last question is coming from Niraj Chokshi from New York Times. Your line is live.

Hey. Thank you. I was just curious. You know, there's some talk about the industry sort of bifurcating, you know, Delta Air Lines and United on one side doing very well and then sort of the rest. And, you know, I guess, do you agree with that assessment? And then if so, is it structural? Is it an industry phase? Just sort of curious to get your sort of sense of what's happening.

It's clearly happening. If you look at the results this quarter, as I mentioned on CNBC this morning, we expect 60% of the overall industry profits to be driven by Delta Air Lines. Expect the rest of it probably to be driven by United. Largely.

And then you have everybody else, and this is not a new phenomenon. This has been happening really since COVID hit over the last four or five years. Know, there's a lot about the industry fundamentals that have changed. That we at Delta Air Lines are driving a much higher level of quality experience, whether it's reliability, whether it's the product and services that we offer, whether it's the partners we're bringing to the table, whether it's the expansion internationally.

And if you are in a category that is, you know, seen as more of a commodity, purchase. That they're having a very difficult time. You know, their cost structures have increased. As labor costs have gone up.

Been very difficult to get airplanes to get supply growth, those lower-end models depend on high growth. And there's a lot of congestion in the US marketplace in terms of the sky. So I think the bifurcation you're seeing is gonna continue. And eventually, there'll need to be rationalization to enable the lower end of the price spectrum to continue to sustain itself, to be able to continue to attract capital.

And I think we're seeing this all play out right in front of our eyes.

Thank you.

Matthew, that will wrap this up, please.

Certainly. Ladies and gentlemen, that concludes today's conference. Thank you for your participation today.