WEBVTT - Delta President Peter Carter Talks Premium Travel

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>I am here in a Rio Degenario at iada's annual

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<v Speaker 2>meeting with Peter Carter. He is the president of Delta Airlines.

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<v Speaker 2>Thank you so much for being with us, Well.

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<v Speaker 3>Thank you for having me.

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<v Speaker 2>Good afternoon, Good afternoon. I want to start with the

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<v Speaker 2>question that is on a lot of people's minds about

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<v Speaker 2>consumer demand and how it's holding in given some of

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<v Speaker 2>the increases and prices, given some of the questions around stress,

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<v Speaker 2>howards all have consumer's been.

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<v Speaker 4>We are seeing very strong demand, Lisa, in every region,

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<v Speaker 4>every region.

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<v Speaker 1>In the world, which has been very, very great to see.

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<v Speaker 1>The consumer is strong. The economy is doing well.

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<v Speaker 4>It's one of the things that we pay very close

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<v Speaker 4>attention to. And whether it's the US economy, certain economies

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<v Speaker 4>in Europe are doing better.

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<v Speaker 3>We see that in our consumer.

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<v Speaker 2>Certain economies in Europe that actually flies against what some

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<v Speaker 2>people seem to think where you've seen sort of some

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<v Speaker 2>of the numbers fly down. Where are you seeing actually

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<v Speaker 2>growth in Europe there?

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<v Speaker 3>Well, the UK is an example.

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<v Speaker 4>They're doing a little better than they have in the past,

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<v Speaker 4>for sure. And I also think that that the EU

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<v Speaker 4>and light of their investment in defense. We're also seeing

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<v Speaker 4>some subsigns there.

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<v Speaker 2>So how have you be been able to pass along

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<v Speaker 2>the increases in price from fuel to consumers? I mean,

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<v Speaker 2>has it been pretty easy? Have you been surprised at

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<v Speaker 2>how little pushback you've gotten?

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<v Speaker 3>Our consumer is resilient.

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<v Speaker 4>You know, we really focus on the premium customer, and

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<v Speaker 4>you know, roughly forty to fifty percent of the increase

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<v Speaker 4>in fuel costs we've been able to recapture through price,

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<v Speaker 4>which really becomes about ten to fifteen percent on the

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<v Speaker 4>price of a ticket, so.

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<v Speaker 1>Fine is still affordable.

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<v Speaker 4>And again we've we've seen strong demand despite the need

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<v Speaker 4>to recover some of our costs.

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<v Speaker 3>We also have a refinery which.

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<v Speaker 4>Has been a terrificge for Delta through this because we

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<v Speaker 4>pay less for jet fuel than any airlight in the world.

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<v Speaker 2>Has there been any pushback at all higher prices?

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<v Speaker 4>We really have it, I think in part because we

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<v Speaker 4>haven't seen it. I think in part, Lisa, because when

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<v Speaker 4>you look at inflation since COVID, it's roughly been about

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<v Speaker 4>twenty five percent, But when you look at inflation around

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<v Speaker 4>the price of an airfare.

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<v Speaker 1>It hasn't been anywhere near twenty five percent.

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<v Speaker 4>Even with this increase to recover fuel, so it's still

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<v Speaker 4>very affordable and especially for the premium passengers, the premium

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<v Speaker 4>leisure traveler, the corporate customer that we really focus on.

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<v Speaker 4>So you know, this is going to be our busiest

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<v Speaker 4>summer in the Transatlantic. We are doubling down on our

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<v Speaker 4>global network and global expansion.

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<v Speaker 3>We already have the world's I.

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<v Speaker 4>Think, most connected network, but we're continuing to invest. We

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<v Speaker 4>just launched our Hong Kong route yesterday with I guess

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<v Speaker 4>today technically with our inaugural flight. So there's so many

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<v Speaker 4>exciting things happening, and again we follow demand. You know,

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<v Speaker 4>we launched seven new flights in Europe because our customers

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<v Speaker 4>are saying they want to go to places like Porto

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<v Speaker 4>and Malta and Sardinia, so we're taking.

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<v Speaker 3>Advantage of that.

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<v Speaker 2>How much are there certain places that you've identified that

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<v Speaker 2>you want to create roots to that are harder to

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<v Speaker 2>break into that might be really popular, but there are

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<v Speaker 2>obstacles that have kind of emerged.

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<v Speaker 3>Well.

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<v Speaker 4>I think the best example of that right now is

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<v Speaker 4>probably India because we cannot fly over Russian air space,

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<v Speaker 4>but as we all know, India, it's the fastest growing economy,

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<v Speaker 4>the biggest population, the largest democracy in the world, and

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<v Speaker 4>someday we will serve India, but it's very difficult to

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<v Speaker 4>serve India profitably without flying over Russian airspace.

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<v Speaker 2>I know that later this year you are planning to

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<v Speaker 2>launch a flight to reacdjetd.

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<v Speaker 1>Is that still planned for later this year?

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<v Speaker 4>It is planned for October twenty third. We're very excited.

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<v Speaker 4>We met with Riad earlier today. If they're a partner

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<v Speaker 4>in that region. We think that is such a strong

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<v Speaker 4>growth market. It's a country that's gone from the Middle

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<v Speaker 4>Ages to the Modern.

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<v Speaker 1>Age in about a handful of years.

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<v Speaker 4>Forty million people live in Saudi Arabia. It's a large

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<v Speaker 4>geographic area. They've got a lot of business travel. Obviously,

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<v Speaker 4>oil and gas is huge there.

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<v Speaker 1>So we're going to start that flight.

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<v Speaker 4>We know, obviously with what's happening in the Middle East

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<v Speaker 4>that folks in America may not see that that necessarily

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<v Speaker 4>is the place.

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<v Speaker 3>They want to go right away.

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<v Speaker 4>But as these new routes develop, it takes time, and

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<v Speaker 4>we want to be there for when the day comes

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<v Speaker 4>when they're ready to travel to Saudi Araia.

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<v Speaker 2>You believe that there will be sort of a rejuvenation

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<v Speaker 2>of some of the business demand and the business activity

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<v Speaker 2>in the region that will be at the same level

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<v Speaker 2>as before the war.

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<v Speaker 4>Not only will there be rejuvenation at the same.

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<v Speaker 1>Level, we think there'll be great growth.

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<v Speaker 4>Remember, one of the things that they do really well

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<v Speaker 4>in Saudi Arabia is they build things, and because of

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<v Speaker 4>the war and what's happened in that region, we think

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<v Speaker 4>there'll be tons of business flowing in to help rebuild

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<v Speaker 4>what has.

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<v Speaker 1>Been damaged during the conflict.

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<v Speaker 4>And then, of course when you look at what Saudi

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<v Speaker 4>Arabia is doing.

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<v Speaker 3>When I was there last year.

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<v Speaker 4>Looked out of my hotel room, I think I saw

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<v Speaker 4>fifty cranes. It's incredible what they're doing in that country,

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<v Speaker 4>and we want.

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<v Speaker 3>To be a part of that.

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<v Speaker 2>When you look around the world and you're looking at

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<v Speaker 2>expanding your roots, how much are you looking at partnerships?

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<v Speaker 2>Do you ever consider consolidation as well just an outright

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<v Speaker 2>merger and acquisition.

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<v Speaker 4>No, we're not in the consolidation business, but we have grown.

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<v Speaker 1>Through partnerships. One of our real core competency.

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<v Speaker 4>One of the things we do really well is we

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<v Speaker 4>form jvs with airlines around the world. We have the

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<v Speaker 4>best partners with the best brands and the best hubs,

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<v Speaker 4>complementary networks that we can connect our customers to, which

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<v Speaker 4>allows somebody to get on a flight anywhere in the

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<v Speaker 4>US and fly almost anywhere.

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<v Speaker 1>In the world that they would want to go.

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<v Speaker 3>Korean is a great example.

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<v Speaker 4>Korean is about to close their merger with Asiana. I

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<v Speaker 4>think December seventeenth they will have a single certificate. We

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<v Speaker 4>already have such a great joint venture with them across

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<v Speaker 4>the trans Pacific. We're going to continue to grow that

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<v Speaker 4>because with that merger there's going to be that much

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<v Speaker 4>more connectivity throughout Asia.

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<v Speaker 3>Very excited for that.

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<v Speaker 4>And in Sean I don't know if you've been there,

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<v Speaker 4>but it is I think among, if not the most

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<v Speaker 4>efficient connecting hub in the world.

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<v Speaker 3>Amazing experience.

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<v Speaker 2>How do you sort of plan forward when there are

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<v Speaker 2>these geopolitical concerns that keep coming to the fore. For example,

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<v Speaker 2>business travel from the US to China's fallen off a cliff,

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<v Speaker 2>a lot of tourist travel also, how do you plan

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<v Speaker 2>for growth given the uncertainties between these two countries.

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<v Speaker 3>I think we have belong view, Lisa.

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<v Speaker 4>I think we remain focused in discipline with respect to

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<v Speaker 4>our strategy, and we know that there will always be

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<v Speaker 4>geopolitical noise, and we are very I think disciplined about

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<v Speaker 4>trying to keep the noise out and continue to build forward,

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<v Speaker 4>continue to make sure that we know that demand will

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<v Speaker 4>come back to China someday, that some of the restrictions

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<v Speaker 4>that are in place will be lifted.

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<v Speaker 1>And we have the relationships there.

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<v Speaker 3>We have a great.

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<v Speaker 4>Partnership with China Eastern We saw them here as well,

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<v Speaker 4>So we're ready when that economy.

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<v Speaker 1>Is more open to you business and US business is.

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<v Speaker 3>More open to that economy.

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<v Speaker 4>This geopolitical i'll call it tension, or you said noise,

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<v Speaker 4>I think it will pass.

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<v Speaker 2>Well, it's noise, but not really noise.

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<v Speaker 1>I mean it's also a country.

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<v Speaker 2>It's real. I mean it's also sort of like the

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<v Speaker 2>Middle East. It's noise, but it's not noise at all.

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<v Speaker 2>It's conetically sure, And I just want to you know

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<v Speaker 2>that everyone who I talk to you here is very

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<v Speaker 2>worried about oil prices where they are. Do you have

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<v Speaker 2>contingency plans should things go up significantly higher? I mean,

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<v Speaker 2>what's your sort of scenario analysis?

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<v Speaker 4>So we are Delta is built for durable, sustainable growth

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<v Speaker 4>and part of that is we have the ability to

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<v Speaker 4>manage through oil costs.

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<v Speaker 1>We're very nimble, we have various tools available.

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<v Speaker 4>We're very much focused and discipline on using those tools.

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<v Speaker 4>And in many respects, when you have a strong balance

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<v Speaker 4>sheet as we do and we have a refinery, we

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<v Speaker 4>can do things like trim capacity off peak flying.

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<v Speaker 3>We can focus on flying as.

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<v Speaker 4>Efficiently as possible, right, that saves fuel.

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<v Speaker 3>Of course, we do all of.

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<v Speaker 4>The things we can do, and we're still expecting.

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<v Speaker 1>To make around a billion dollars this quarter.

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<v Speaker 4>So I think this is actually an opportunity for us

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<v Speaker 4>to show how durable our business model is, and it's.

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<v Speaker 3>A proof point.

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<v Speaker 2>I just want to finish up with premium. It's been

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<v Speaker 2>leading the charge for quite a while. I know that

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<v Speaker 2>Delta's really leaned into a Delta one, the Delta one lounges.

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<v Speaker 2>How far can that go? The idea of the demand

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<v Speaker 2>for premium products, So.

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<v Speaker 4>Lisa, we are finding that our consumer has an insatiable

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<v Speaker 4>appetite for premium experiences and everything that we have introduced

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<v Speaker 4>seems to just be truly inhaled by the consumer.

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<v Speaker 3>And so we haven't seen it.

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<v Speaker 4>And I'll give you a great example We opened a

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<v Speaker 4>Delta Lounge in lax just a couple of years ago,

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<v Speaker 4>and it's been wildly successful. And now we're building a

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<v Speaker 4>second Delta one lounge in la because it is again

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<v Speaker 4>one of these things where we underestimated how successful it

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<v Speaker 4>would be. So I think consumers are really excited about

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<v Speaker 4>spending money on premium experiences, and I feel very fortunate

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<v Speaker 4>that Delta and our people could provide those experiences to them.

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<v Speaker 2>I'm waiting for the super duper loyalty Delta one Extreme Lounge.

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<v Speaker 3>Is that coming next? Who knows? Peter?

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<v Speaker 2>Wonderful to speak with you, Peter Carter, the president of Delta.

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<v Speaker 1>Thank you so much.

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<v Speaker 3>Thank you, Lisa really appreciate it.