1 00:00:02,520 --> 00:00:07,320 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,800 --> 00:00:10,880 Speaker 2: I am here in Atlanta, Georgia with the CEO of 3 00:00:11,000 --> 00:00:14,120 Speaker 2: Delta ed Bastard here alongside me. After that earning support 4 00:00:14,160 --> 00:00:16,799 Speaker 2: yesterday and that projection of twenty percent earnings per share 5 00:00:16,840 --> 00:00:19,919 Speaker 2: growth in twenty twenty six. Now that you've had a 6 00:00:20,000 --> 00:00:22,640 Speaker 2: day to suggest, have you been surprised by the market's 7 00:00:22,680 --> 00:00:25,280 Speaker 2: reaction and frankly by the lines of inquiry that you 8 00:00:25,280 --> 00:00:26,000 Speaker 2: got yesterday. 9 00:00:26,400 --> 00:00:28,240 Speaker 3: No, really, First of all, thank you for coming down. 10 00:00:28,280 --> 00:00:29,800 Speaker 3: It's great to have you on our campus down here 11 00:00:29,800 --> 00:00:33,120 Speaker 3: in Atlanta. There were a lot of expectations. We have 12 00:00:33,200 --> 00:00:36,000 Speaker 3: a lot of momentum in our business, and as we're 13 00:00:36,040 --> 00:00:38,000 Speaker 3: going into the year, we've seen the first part of 14 00:00:38,000 --> 00:00:40,199 Speaker 3: the year, the momentum picked up yet again in the 15 00:00:40,240 --> 00:00:43,320 Speaker 3: early early days of January, and so as a result 16 00:00:43,360 --> 00:00:46,519 Speaker 3: of that, I think our our investor base was curious 17 00:00:46,560 --> 00:00:49,440 Speaker 3: as to whether they see that momentum continuing to build, 18 00:00:49,720 --> 00:00:52,800 Speaker 3: continue to the flatline to bop around a little bit. 19 00:00:52,880 --> 00:00:55,360 Speaker 3: And we just finished a year where we saw some 20 00:00:55,400 --> 00:00:59,080 Speaker 3: pretty significant challenges, whether it was the Liberation Day impact 21 00:00:59,120 --> 00:01:02,440 Speaker 3: on consumer sentiment and shutdown of the government and the 22 00:01:02,480 --> 00:01:04,679 Speaker 3: airspace and the latter part of the year, so we 23 00:01:04,720 --> 00:01:06,360 Speaker 3: wanted to make certain we had a little bit of 24 00:01:06,440 --> 00:01:09,280 Speaker 3: wiggle room, some caution as to how we thought about 25 00:01:09,640 --> 00:01:12,560 Speaker 3: projecting the year out. And so I think there was 26 00:01:12,680 --> 00:01:16,880 Speaker 3: more inquiries to just how much caution is there and 27 00:01:17,160 --> 00:01:18,760 Speaker 3: what couldt look like? 28 00:01:19,080 --> 00:01:20,880 Speaker 1: Right, And so I think that's more of what we saw. 29 00:01:21,040 --> 00:01:23,880 Speaker 2: So we'll get into what great could look like. Let's 30 00:01:23,880 --> 00:01:25,480 Speaker 2: get into the caution and some of the things that 31 00:01:25,520 --> 00:01:29,440 Speaker 2: are less foreseeable, including a proposed ten percent cap on 32 00:01:29,840 --> 00:01:33,480 Speaker 2: credit card rates. And it raises this question about the 33 00:01:33,520 --> 00:01:36,760 Speaker 2: loyalty program at Delta, considering the fact that American Express 34 00:01:36,800 --> 00:01:41,639 Speaker 2: and the partnership there contributed something like fourteen percent according 35 00:01:41,680 --> 00:01:44,480 Speaker 2: to my calculations of the revenue growth over the past year. 36 00:01:44,520 --> 00:01:46,160 Speaker 2: I'm just wondering how big of a hit is this. 37 00:01:46,200 --> 00:01:48,160 Speaker 2: Have you started to map that out at all? 38 00:01:48,320 --> 00:01:51,400 Speaker 3: I think it's early. I think it's premature. Listen, that's 39 00:01:51,440 --> 00:01:54,200 Speaker 3: not our business. As the financial services world and the 40 00:01:54,240 --> 00:01:56,000 Speaker 3: bank and climate. I think the banks that have already 41 00:01:56,000 --> 00:01:59,080 Speaker 3: come out and spoken about it are expressing a tremendous 42 00:01:59,120 --> 00:02:03,040 Speaker 3: amount of concern. So I understand it would require legislation, 43 00:02:03,280 --> 00:02:06,200 Speaker 3: is what I'm told, And we know the challenges of 44 00:02:06,480 --> 00:02:09,919 Speaker 3: getting anything through Congress these days. I also think the 45 00:02:10,320 --> 00:02:13,920 Speaker 3: knock on effects are pretty significant. When you think about, 46 00:02:14,440 --> 00:02:16,840 Speaker 3: you know, what seems to be maybe a good idea 47 00:02:16,919 --> 00:02:20,120 Speaker 3: to help the lower income strata given some income tax 48 00:02:20,400 --> 00:02:24,400 Speaker 3: or tex some interest rate relief, The reality is is 49 00:02:24,480 --> 00:02:27,520 Speaker 3: going to eliminate their ability for credit and it's going 50 00:02:27,560 --> 00:02:30,160 Speaker 3: to freeze up, you know, tremendous amount of credit lines 51 00:02:30,200 --> 00:02:32,080 Speaker 3: that the banks aren't gonna be able to afford to provide. 52 00:02:32,120 --> 00:02:36,359 Speaker 3: So I'm not it's not my business. Of course, we're 53 00:02:36,360 --> 00:02:38,519 Speaker 3: going to work closely with America Express. The second factor 54 00:02:38,639 --> 00:02:41,919 Speaker 3: is is that Amex is a premium card provider, so 55 00:02:42,280 --> 00:02:45,480 Speaker 3: that's really not the income level that we focus on 56 00:02:45,600 --> 00:02:46,480 Speaker 3: in our business. 57 00:02:46,639 --> 00:02:49,000 Speaker 2: At the same time, there is a sense that's a 58 00:02:49,040 --> 00:02:51,400 Speaker 2: growing part of the revenues. We saw an eleven percent 59 00:02:51,480 --> 00:02:55,919 Speaker 2: increase in the contribution that this particular aspect made to 60 00:02:55,919 --> 00:02:59,280 Speaker 2: to Delta's revenue. So I just wonder how much do 61 00:02:59,360 --> 00:03:01,680 Speaker 2: you expect that to grow? All things being. 62 00:03:01,560 --> 00:03:05,680 Speaker 3: Equal, we're expecting high single digit growth in the current year. 63 00:03:05,720 --> 00:03:08,040 Speaker 3: We've been seeing double digit growth for the last several years, 64 00:03:08,080 --> 00:03:11,080 Speaker 3: and it's a really important part of our business model. 65 00:03:11,080 --> 00:03:13,519 Speaker 3: But I don't think it's something that we look back 66 00:03:13,560 --> 00:03:17,360 Speaker 3: and start getting concerned. I think this idea has a 67 00:03:17,360 --> 00:03:19,680 Speaker 3: lot of roadblocks and obstacles ahead of it. 68 00:03:20,040 --> 00:03:21,560 Speaker 2: One thing that you said in an interview with the 69 00:03:21,600 --> 00:03:24,160 Speaker 2: colleague talking about what could great look like is that 70 00:03:24,200 --> 00:03:26,120 Speaker 2: effectively all the growth that you've seen so far has 71 00:03:26,160 --> 00:03:29,280 Speaker 2: been from the premium cabin not from the main cabin. 72 00:03:29,440 --> 00:03:30,720 Speaker 1: Why do you think that is. 73 00:03:30,720 --> 00:03:33,200 Speaker 2: Is it because of just incredible strength at the premium end, 74 00:03:33,320 --> 00:03:36,320 Speaker 2: or is it because of weakness in the main cabin I. 75 00:03:36,320 --> 00:03:38,320 Speaker 3: Think the main reason is the demand set for the 76 00:03:38,360 --> 00:03:42,440 Speaker 3: premium seats and the premium product that we offer is 77 00:03:42,640 --> 00:03:43,840 Speaker 3: a continues to. 78 00:03:43,800 --> 00:03:45,320 Speaker 1: Be at a record high. 79 00:03:45,400 --> 00:03:48,040 Speaker 3: The more we look at the health of the consumer, 80 00:03:48,080 --> 00:03:50,680 Speaker 3: we talk about the K, we're at the top. 81 00:03:50,600 --> 00:03:53,080 Speaker 1: End of that K in terms of who our consumer is. 82 00:03:53,440 --> 00:03:55,840 Speaker 3: And when you have a high demand set, that's what 83 00:03:56,000 --> 00:03:58,920 Speaker 3: drives pricing strength, and that's what drives the growth that 84 00:03:59,000 --> 00:04:02,360 Speaker 3: we've seen the last several years. That said, on the 85 00:04:02,400 --> 00:04:04,600 Speaker 3: main cabinet, it's still a big part of our business. 86 00:04:04,600 --> 00:04:06,840 Speaker 3: It's what pays the bills i'd like to think of, 87 00:04:07,360 --> 00:04:11,680 Speaker 3: and as we see some of the rationalization that's occurring 88 00:04:11,720 --> 00:04:14,720 Speaker 3: because you have a lot of lower end airlines with 89 00:04:14,960 --> 00:04:19,400 Speaker 3: low end seats, too many seats chasing still enough low 90 00:04:19,480 --> 00:04:22,880 Speaker 3: end consumer demand. That space is where a lot of 91 00:04:22,920 --> 00:04:26,120 Speaker 3: the rationalization and you see it in the industry currently. 92 00:04:26,440 --> 00:04:31,240 Speaker 3: As that backdrop continues to get into a healthier environment 93 00:04:31,240 --> 00:04:34,160 Speaker 3: because all those airlines have to find a way to 94 00:04:34,160 --> 00:04:35,960 Speaker 3: earn their cost of capital, they're not going to be 95 00:04:36,040 --> 00:04:39,520 Speaker 3: around and so as a result of that, whatever happens there, 96 00:04:40,200 --> 00:04:43,000 Speaker 3: we will benefit from that and we'll keep that premium 97 00:04:43,040 --> 00:04:43,960 Speaker 3: demand set growing. 98 00:04:43,960 --> 00:04:45,160 Speaker 1: So well, we're not growing in that. 99 00:04:45,160 --> 00:04:47,520 Speaker 3: Space, but it will still be a good one for 100 00:04:47,600 --> 00:04:48,560 Speaker 3: us in terms of improvement. 101 00:04:48,600 --> 00:04:50,960 Speaker 2: You've talked about consolidation in the lower end of the 102 00:04:50,960 --> 00:04:53,239 Speaker 2: industry and how you expect this to be a pretty 103 00:04:53,240 --> 00:04:55,280 Speaker 2: big year of that as people try to justify their 104 00:04:55,279 --> 00:04:58,279 Speaker 2: existence and survive. Would you play in that and anyway 105 00:04:58,320 --> 00:04:59,680 Speaker 2: would you make any acquisitions. 106 00:05:00,040 --> 00:05:02,359 Speaker 3: We're not going to comment on that question, but you know, 107 00:05:02,480 --> 00:05:05,080 Speaker 3: when you look at who Delta is, you can answer 108 00:05:05,120 --> 00:05:06,080 Speaker 3: that question for yourself. 109 00:05:06,440 --> 00:05:09,600 Speaker 2: Well, I guess the other question is how much is 110 00:05:09,640 --> 00:05:12,520 Speaker 2: the growth going to come from organic versus inorganic? Is 111 00:05:12,520 --> 00:05:14,480 Speaker 2: there sort of a plan, especially given how much you've 112 00:05:14,520 --> 00:05:19,240 Speaker 2: reduced leverage to really increase by acquisition some of your capacity. 113 00:05:19,720 --> 00:05:22,640 Speaker 1: Well, when we look at that growth for US, international. 114 00:05:22,240 --> 00:05:24,880 Speaker 3: Is a big part of our growth strategy, and we 115 00:05:24,880 --> 00:05:28,400 Speaker 3: announced yesterday a big new order for the blowing Dreamliner. 116 00:05:28,480 --> 00:05:31,440 Speaker 3: We're very happy about that, excited about that. People think 117 00:05:31,520 --> 00:05:33,880 Speaker 3: about our industry, they come to me, they say, where's 118 00:05:33,880 --> 00:05:35,760 Speaker 3: the future for travel going to? 119 00:05:35,760 --> 00:05:38,480 Speaker 1: Come? From? One hundred years old? It is international. 120 00:05:38,640 --> 00:05:40,440 Speaker 3: When you think about only one in five people in 121 00:05:40,480 --> 00:05:42,479 Speaker 3: the world have ever stepped foot on an airplane. 122 00:05:42,839 --> 00:05:44,160 Speaker 1: That means you have to go new places. 123 00:05:44,200 --> 00:05:46,880 Speaker 3: You have to find new opportunities to grow and expand, 124 00:05:46,920 --> 00:05:49,240 Speaker 3: and that's going to be the statement of the second 125 00:05:49,240 --> 00:05:51,839 Speaker 3: century of flight. I believe it's about making the world 126 00:05:52,320 --> 00:05:54,440 Speaker 3: a much more connected place than it is today. 127 00:05:54,600 --> 00:05:57,240 Speaker 2: You know this comes at a time the international travel 128 00:05:57,240 --> 00:06:01,560 Speaker 2: growth that the rhetoric between trees has been incredibly heated 129 00:06:01,720 --> 00:06:04,880 Speaker 2: and more about putting up walls. Are you concerned that 130 00:06:04,880 --> 00:06:07,880 Speaker 2: that could have consequences and put barriers When you talk 131 00:06:07,920 --> 00:06:10,599 Speaker 2: about the international travel and the growth that you're seeing 132 00:06:10,640 --> 00:06:11,799 Speaker 2: in that sector, there. 133 00:06:11,600 --> 00:06:14,960 Speaker 1: Have always been walls. There's always been in politics, there 134 00:06:14,800 --> 00:06:18,000 Speaker 1: are sailings. What we look at the world today. 135 00:06:17,760 --> 00:06:20,600 Speaker 3: We know the one thing that really does unite the 136 00:06:20,600 --> 00:06:23,040 Speaker 3: world is when you can actually travel and see and 137 00:06:23,120 --> 00:06:25,719 Speaker 3: experience and get to know people, and you bring the 138 00:06:25,760 --> 00:06:30,200 Speaker 3: countries physically closer together. So yes, it's not going to 139 00:06:30,200 --> 00:06:33,200 Speaker 3: be a straight line up in this business. We know 140 00:06:33,279 --> 00:06:35,919 Speaker 3: there's a lot of terribulence in the sky, not just 141 00:06:35,960 --> 00:06:39,240 Speaker 3: in the business models sometimes, but when we actually do 142 00:06:39,360 --> 00:06:43,320 Speaker 3: physically get connected back together and the world come a 143 00:06:43,360 --> 00:06:45,440 Speaker 3: closer place, that's where real opportunity. 144 00:06:45,520 --> 00:06:48,240 Speaker 2: Since you're talking about the demand so far this year, 145 00:06:48,240 --> 00:06:50,600 Speaker 2: and you've seen I believe, record demand so far in 146 00:06:50,640 --> 00:06:53,760 Speaker 2: the first week and a half of January, I'm just wondering, 147 00:06:54,320 --> 00:06:57,040 Speaker 2: is it mostly still coming from premium? Is it equal 148 00:06:57,120 --> 00:06:59,800 Speaker 2: across all tiers? Is it also an economy to the 149 00:06:59,800 --> 00:07:02,280 Speaker 2: same degree that you're seeing in terms of the robust 150 00:07:02,320 --> 00:07:03,320 Speaker 2: interest at the top. 151 00:07:03,200 --> 00:07:05,120 Speaker 3: End, It continues to be at the top end, it 152 00:07:05,160 --> 00:07:07,840 Speaker 3: continues to be in business. We're seeing double digit growth 153 00:07:07,839 --> 00:07:10,240 Speaker 3: in business at the start of the year. We had 154 00:07:10,280 --> 00:07:14,240 Speaker 3: our largest weekly sales in our history just last week, 155 00:07:14,360 --> 00:07:16,480 Speaker 3: up double digits over the same week a year ago. 156 00:07:17,000 --> 00:07:19,600 Speaker 3: So if this demandset continues, we're going to have a 157 00:07:19,600 --> 00:07:20,040 Speaker 3: great year. 158 00:07:20,440 --> 00:07:22,400 Speaker 2: So I have to end with this because my colleagues 159 00:07:22,400 --> 00:07:26,400 Speaker 2: asked me to do this. The lounges, the regular lounges. 160 00:07:26,080 --> 00:07:26,840 Speaker 1: Not the Delta one. 161 00:07:27,040 --> 00:07:29,360 Speaker 2: They're getting really crowded. How are you going to manage 162 00:07:29,360 --> 00:07:31,480 Speaker 2: that considering that a lot of people have complaints about that. 163 00:07:31,840 --> 00:07:35,000 Speaker 3: Well, we've been experiencing that for the last handful of years, 164 00:07:35,040 --> 00:07:38,080 Speaker 3: and it's a problem. What no good deed goes unpunished. 165 00:07:38,120 --> 00:07:39,920 Speaker 3: You know, you build something great and everybody wants to 166 00:07:39,920 --> 00:07:43,000 Speaker 3: be in there, and it's doesn't feel as exclusive any longer. 167 00:07:43,440 --> 00:07:45,120 Speaker 3: We've been working through that for the last several years. 168 00:07:45,120 --> 00:07:49,040 Speaker 3: American Express is our close partner on that expresses building lounges. 169 00:07:49,080 --> 00:07:51,040 Speaker 3: We're building new lounges where you've got the Delta one 170 00:07:51,080 --> 00:07:53,240 Speaker 3: lounges that are coming. We're going to continue to build 171 00:07:53,280 --> 00:07:55,880 Speaker 3: more supply and more capacity to take care of all 172 00:07:55,920 --> 00:07:56,840 Speaker 3: of our great customers. 173 00:07:57,120 --> 00:07:59,040 Speaker 2: Ed Bastin, thank you so much for being with us today. 174 00:07:59,200 --> 00:08:00,480 Speaker 2: Really appreciates speaking with you.