Delta Air Lines 1Q17 Earnings Call Notes

Ed Bastian – Chief Executive Officer

Glen Hauenstein

Pace of recovery a little slower than anticipated but seeing improvement

” while the pace of the revenue recovery was a bit slower than what we had originally anticipated, we are continuing to see improvement in revenue trends across our network. Quickly recapping our top line performance, we reported total revenues down 1% on slight declines in passenger and cargo revenues. Our passenger revenue declined $74 million, including $20 million of lower hedge gains. Passenger unit revenues for the quarter came in essentially flat and we were better sequentially each month. In March, system PRASM turned positive marking the first year-over-year improvement since November 2015″

British economy has held up better than anticipated post-Brexit

“And as you know, the British economy so far has held up better than anticipated post-Brexit. While we have heard a lot of noise about people moving and we respond to the demand, and I think we have a lot of levers should we actually see that materialize, but given that we haven’t really seen demand declines yet, I think it would be premature for us to announce what we might do if demand declined. And I think what we have seen is, it’s never been a better time to go to the UK or it’s never been a better time to go to Europe for U.S. travelers. And we have seen an offset of UK point of origin, the U.S. point of origin has more than offset the decline in the existing UK weakness.”

Robust US demand to Europe

“we are seeing very robust U.S. point of sale demand to Europe for the peak summer. And we are believing that for at least from our perspective that most of that will be absorbed by that higher demand. I can’t speak for other carriers.”

Robust leisure demand could lead to capacity growth in excess of GDP

“This cycle we have seen really robust leisure demand. So I think what you will see in the industry, this is just a forecast of when you get to third and fourth quarter, you will see that it’s actually probably going a little bit faster than GDP, because the customers are – the customer base has grown and the fares required to now translate that into RASM are very nominal.”

Paul Jacobson

Fuel presenting a challenge

fuel presented us with our greatest challenge in the March quarter as our fuel expense increased by 26% or $325 million from the prior year. Our all-in fuel price of $1.71 per gallon was up almost 30% as crude prices climbed roughly $20 per barrel from the first quarter ‘16 low levels. Our fuel price also includes $0.09 per gallon of losses from our legacy hedge book during the quarter.

Also had pressure from non-fuel costs

“While fuel was the biggest headwind in the first quarter, we also faced some pressures in non-fuel costs, which drove our CASM ex-fuel up 3.6% higher year-on-year. This was driven by the timing of our maintenance spend, various products investments, employee pay increases as well as pressure from lower capacity during the quarter. “