Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I am here in Atlanta, Georgia with the CEO of
Speaker 2: Delta ed Bastard here alongside me. After that earning support
Speaker 2: yesterday and that projection of twenty percent earnings per share
Speaker 2: growth in twenty twenty six. Now that you've had a
Speaker 2: day to suggest, have you been surprised by the market's
Speaker 2: reaction and frankly by the lines of inquiry that you
Speaker 2: got yesterday.
Speaker 3: No, really, First of all, thank you for coming down.
Speaker 3: It's great to have you on our campus down here
Speaker 3: in Atlanta. There were a lot of expectations. We have
Speaker 3: a lot of momentum in our business, and as we're
Speaker 3: going into the year, we've seen the first part of
Speaker 3: the year, the momentum picked up yet again in the
Speaker 3: early early days of January, and so as a result
Speaker 3: of that, I think our our investor base was curious
Speaker 3: as to whether they see that momentum continuing to build,
Speaker 3: continue to the flatline to bop around a little bit.
Speaker 3: And we just finished a year where we saw some
Speaker 3: pretty significant challenges, whether it was the Liberation Day impact
Speaker 3: on consumer sentiment and shutdown of the government and the
Speaker 3: airspace and the latter part of the year, so we
Speaker 3: wanted to make certain we had a little bit of
Speaker 3: wiggle room, some caution as to how we thought about
Speaker 3: projecting the year out. And so I think there was
Speaker 3: more inquiries to just how much caution is there and
Speaker 3: what couldt look like?
Speaker 1: Right, And so I think that's more of what we saw.
Speaker 2: So we'll get into what great could look like. Let's
Speaker 2: get into the caution and some of the things that
Speaker 2: are less foreseeable, including a proposed ten percent cap on
Speaker 2: credit card rates. And it raises this question about the
Speaker 2: loyalty program at Delta, considering the fact that American Express
Speaker 2: and the partnership there contributed something like fourteen percent according
Speaker 2: to my calculations of the revenue growth over the past year.
Speaker 2: I'm just wondering how big of a hit is this.
Speaker 2: Have you started to map that out at all?
Speaker 3: I think it's early. I think it's premature. Listen, that's
Speaker 3: not our business. As the financial services world and the
Speaker 3: bank and climate. I think the banks that have already
Speaker 3: come out and spoken about it are expressing a tremendous
Speaker 3: amount of concern. So I understand it would require legislation,
Speaker 3: is what I'm told, And we know the challenges of
Speaker 3: getting anything through Congress these days. I also think the
Speaker 3: knock on effects are pretty significant. When you think about,
Speaker 3: you know, what seems to be maybe a good idea
Speaker 3: to help the lower income strata given some income tax
Speaker 3: or tex some interest rate relief, The reality is is
Speaker 3: going to eliminate their ability for credit and it's going
Speaker 3: to freeze up, you know, tremendous amount of credit lines
Speaker 3: that the banks aren't gonna be able to afford to provide.
Speaker 3: So I'm not it's not my business. Of course, we're
Speaker 3: going to work closely with America Express. The second factor
Speaker 3: is is that Amex is a premium card provider, so
Speaker 3: that's really not the income level that we focus on
Speaker 3: in our business.
Speaker 2: At the same time, there is a sense that's a
Speaker 2: growing part of the revenues. We saw an eleven percent
Speaker 2: increase in the contribution that this particular aspect made to
Speaker 2: to Delta's revenue. So I just wonder how much do
Speaker 2: you expect that to grow? All things being.
Speaker 3: Equal, we're expecting high single digit growth in the current year.
Speaker 3: We've been seeing double digit growth for the last several years,
Speaker 3: and it's a really important part of our business model.
Speaker 3: But I don't think it's something that we look back
Speaker 3: and start getting concerned. I think this idea has a
Speaker 3: lot of roadblocks and obstacles ahead of it.
Speaker 2: One thing that you said in an interview with the
Speaker 2: colleague talking about what could great look like is that
Speaker 2: effectively all the growth that you've seen so far has
Speaker 2: been from the premium cabin not from the main cabin.
Speaker 1: Why do you think that is.
Speaker 2: Is it because of just incredible strength at the premium end,
Speaker 2: or is it because of weakness in the main cabin I.
Speaker 3: Think the main reason is the demand set for the
Speaker 3: premium seats and the premium product that we offer is
Speaker 3: a continues to.
Speaker 1: Be at a record high.
Speaker 3: The more we look at the health of the consumer,
Speaker 3: we talk about the K, we're at the top.
Speaker 1: End of that K in terms of who our consumer is.
Speaker 3: And when you have a high demand set, that's what
Speaker 3: drives pricing strength, and that's what drives the growth that
Speaker 3: we've seen the last several years. That said, on the
Speaker 3: main cabinet, it's still a big part of our business.
Speaker 3: It's what pays the bills i'd like to think of,
Speaker 3: and as we see some of the rationalization that's occurring
Speaker 3: because you have a lot of lower end airlines with
Speaker 3: low end seats, too many seats chasing still enough low
Speaker 3: end consumer demand. That space is where a lot of
Speaker 3: the rationalization and you see it in the industry currently.
Speaker 3: As that backdrop continues to get into a healthier environment
Speaker 3: because all those airlines have to find a way to
Speaker 3: earn their cost of capital, they're not going to be
Speaker 3: around and so as a result of that, whatever happens there,
Speaker 3: we will benefit from that and we'll keep that premium
Speaker 3: demand set growing.
Speaker 1: So well, we're not growing in that.
Speaker 3: Space, but it will still be a good one for
Speaker 3: us in terms of improvement.
Speaker 2: You've talked about consolidation in the lower end of the
Speaker 2: industry and how you expect this to be a pretty
Speaker 2: big year of that as people try to justify their
Speaker 2: existence and survive. Would you play in that and anyway
Speaker 2: would you make any acquisitions.
Speaker 3: We're not going to comment on that question, but you know,
Speaker 3: when you look at who Delta is, you can answer
Speaker 3: that question for yourself.
Speaker 2: Well, I guess the other question is how much is
Speaker 2: the growth going to come from organic versus inorganic? Is
Speaker 2: there sort of a plan, especially given how much you've
Speaker 2: reduced leverage to really increase by acquisition some of your capacity.
Speaker 1: Well, when we look at that growth for US, international.
Speaker 3: Is a big part of our growth strategy, and we
Speaker 3: announced yesterday a big new order for the blowing Dreamliner.
Speaker 3: We're very happy about that, excited about that. People think
Speaker 3: about our industry, they come to me, they say, where's
Speaker 3: the future for travel going to?
Speaker 1: Come? From? One hundred years old? It is international.
Speaker 3: When you think about only one in five people in
Speaker 3: the world have ever stepped foot on an airplane.
Speaker 1: That means you have to go new places.
Speaker 3: You have to find new opportunities to grow and expand,
Speaker 3: and that's going to be the statement of the second
Speaker 3: century of flight. I believe it's about making the world
Speaker 3: a much more connected place than it is today.
Speaker 2: You know this comes at a time the international travel
Speaker 2: growth that the rhetoric between trees has been incredibly heated
Speaker 2: and more about putting up walls. Are you concerned that
Speaker 2: that could have consequences and put barriers When you talk
Speaker 2: about the international travel and the growth that you're seeing
Speaker 2: in that sector, there.
Speaker 1: Have always been walls. There's always been in politics, there
Speaker 1: are sailings. What we look at the world today.
Speaker 3: We know the one thing that really does unite the
Speaker 3: world is when you can actually travel and see and
Speaker 3: experience and get to know people, and you bring the
Speaker 3: countries physically closer together. So yes, it's not going to
Speaker 3: be a straight line up in this business. We know
Speaker 3: there's a lot of terribulence in the sky, not just
Speaker 3: in the business models sometimes, but when we actually do
Speaker 3: physically get connected back together and the world come a
Speaker 3: closer place, that's where real opportunity.
Speaker 2: Since you're talking about the demand so far this year,
Speaker 2: and you've seen I believe, record demand so far in
Speaker 2: the first week and a half of January, I'm just wondering,
Speaker 2: is it mostly still coming from premium? Is it equal
Speaker 2: across all tiers? Is it also an economy to the
Speaker 2: same degree that you're seeing in terms of the robust
Speaker 2: interest at the top.
Speaker 3: End, It continues to be at the top end, it
Speaker 3: continues to be in business. We're seeing double digit growth
Speaker 3: in business at the start of the year. We had
Speaker 3: our largest weekly sales in our history just last week,
Speaker 3: up double digits over the same week a year ago.
Speaker 3: So if this demandset continues, we're going to have a
Speaker 3: great year.
Speaker 2: So I have to end with this because my colleagues
Speaker 2: asked me to do this. The lounges, the regular lounges.
Speaker 1: Not the Delta one.
Speaker 2: They're getting really crowded. How are you going to manage
Speaker 2: that considering that a lot of people have complaints about that.
Speaker 3: Well, we've been experiencing that for the last handful of years,
Speaker 3: and it's a problem. What no good deed goes unpunished.
Speaker 3: You know, you build something great and everybody wants to
Speaker 3: be in there, and it's doesn't feel as exclusive any longer.
Speaker 3: We've been working through that for the last several years.
Speaker 3: American Express is our close partner on that expresses building lounges.
Speaker 3: We're building new lounges where you've got the Delta one
Speaker 3: lounges that are coming. We're going to continue to build
Speaker 3: more supply and more capacity to take care of all
Speaker 3: of our great customers.
Speaker 2: Ed Bastin, thank you so much for being with us today.
Speaker 2: Really appreciates speaking with you.