Transcript: Delta Air Lines Q3 2026 Earnings Conference Call

Delta Air Lines (NYSE: DAL ) held its third-quarter earnings conference call on Friday. Below is the complete transcript from the call. This content is powered APIs. For comprehensive financial data and transcripts, visit The full earnings call is available at Summary Full Transcript Matthew, Operator Good morning, everyone, and welcome to the Delta Air Lines September quarter 2026 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 star one 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. Julie Stewart, Vice President of Investor Relations and Corporate Development Thank you, Matthew. Good morning, everyone, and thanks for joining us for our September quarter 2026 earnings call.

Joining us from Atlanta today are our CEO Ed Bastian, our Chief Operating Officer Dan Janki, our Chief Commercial Officer Joe Esposito, and our Chief Financial Officer Erik Snell. Ed will open the call with an overview of Delta's performance and strategy. Dan will cover the operation, Joe will provide an update on the revenue environment, and Erik will discuss costs and our balance sheet. After the prepared remarks, we'll take analyst questions.

We ask you please limit yourself to one question and a brief follow-up so we can get to as many of you as possible. 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's SEC filings.

We'll also discuss non-GAAP financial measures, and all results exclude special items unless otherwise noted. com. And with that, I'll turn the call over to Ed. Ed Bastian, Chief Executive Officer Thank you, Julie.

Good morning, everyone. We appreciate you joining us today. Our results demonstrate the structural durability that we have built and the strategic decisions that we have made over many years to reduce earnings volatility and enable us to navigate today's high fuel costs. 6 billion of higher fuel costs.

4%. Our earnings are continuing to translate into strong cash generation and attractive returns for our shareholders. 9 billion of free cash, and our return on invested capital is 11%, well above our cost of capital. These results reflect disciplined capital allocation and the durability of our business model.

Operationally, Delta delivered another quarter of industry-leading performance across key metrics, including on-time and customer satisfaction. We continue to strengthen the resilience of our operation with good progress on weather recovery. Despite a challenging operating environment this summer, we expect to further improve recovery performance through the end of the year and into 2027. I want to thank the 100,000 members of the Delta team.

They remain our greatest strength and deservedly are the most awarded aviation professionals in the world. Most recently, their efforts were recognized by the Skytrax World Airline Awards, where customers named Delta the best airline staff in North America for the fifth consecutive year. And consistent with our philosophy of sharing our success, we've now accrued $900 million towards next year's employee profit-sharing payout. Looking at the current environment, demand remains strong, supported by a secular shift in consumer behavior.

S. households, which make up the majority of Delta's customer base, are nearly $40 trillion wealthier than they were just a few years ago and increasingly prioritizing experiences, including travel. At the same time, air travel remains one of the best values in the consumer economy, with airfare still well below cumulative inflation over the last several years. That demand is evident across leisure and business travel and across all cabins.

Premium growth remains robust, and Main Cabin trends are continuing to improve. Reflecting our measured approach to growth and broader industry actions to reduce unprofitable capacity, this year's fuel spike has accelerated change across the industry. Resilient demand and greater focus on profitability are enabling the industry to recover higher fuel costs more quickly, even when fuel prices eventually moderate. And they will.

We believe our underlying revenue strength is sustainable, given strong preference for the Delta brand and the diversity of our high-value revenue streams. S. airline industry will continue, with many carriers struggling to earn their cost of capital well before the run-up in fuel. Against this backdrop, Delta is operating from a position of strength.

2 billion, even with fuel prices expected to double over last year. 5 billion, fairly close to last year's profitability, even with our fuel bill expected to increase by 60% or $6 billion. That's a picture of structural durability you have not seen in prior cycles or fuel spikes within this industry. 5 billion of free cash flow, funding more than $2 billion of debt reduction and bringing our three-year cumulative free cash generation to over $10 billion.

These results are expected to lead the industry by a good margin. The consistent strength of our financial performance allows us to keep investing in our people, products, and partnerships, compounding Delta's differentiation and extending our lead. Our growing loyalty ecosystem is one of the most important drivers of our structural durability. The Delta American Express partnership continues to deliver strong momentum, and we now expect remuneration of more than $9 billion this year on the way to $10 billion.

D. Power's customer satisfaction survey last week of all airline co-brand cards, where the Delta American Express SkyMiles cards swept the top three positions, with our Reserve card ranking number one. Hats off to our collective teams. What a remarkable achievement.

We are also bringing more value to our customers through partnerships with leading brands. During the quarter, we announced a new strategic relationship with Hyatt, bringing together two leading premium brands. Customer response has been strong ahead of the launch later this year. At the same time, we're investing to extend the reach of the Delta brand through the global network.

S. gateways. Our investments are elevating the customer experience throughout the travel journey, with connectivity an important point of differentiation. Delta pioneered fast, free Wi—Fi on a global scale four years ago and established it as the standard that the industry has been required to adopt.

Today, fast, free Wi—Fi is available across virtually our entire fleet, far more than any other airline currently offers. We continue to work closely with Viasat and Hughes on meaningful enhancements to service, which we will see this quarter, and are excited to launch Amazon LEO beginning in 2028. In closing, the durability that we've built is differentiated and difficult to replicate. We are delivering industry-leading returns today and are confident in our ability to deliver strong growth in earnings and cash flow in the coming year.

Now I'll turn it over to Joe to cover our commercial performance and outlook. Joe Esposito, Senior Vice President Thank you, Ed. September quarter results demonstrated sustained demand strength, clear preference for the Delta brand, and the benefits of our measured approach to capacity. 4 billion, up approximately 16% over prior year on flat capacity.

4% accelerated 3 points from the June quarter, with gains in domestic and international. A key highlight was Main Cabin, where unit revenue grew high teens, marking the third consecutive quarter of improvement. Domestic unit revenue grew 16% driven by healthy yield growth on load factors that were 1 point higher than last year. As we closely align our capacity growth with demand, international unit revenue grew 12%, led by growth of 22% in Latin.

Transatlantic unit revenue growth accelerated 4 points sequentially to 11%. Corporate sales were strong across all sectors, cabins, hubs, and entities, with each growing double digits over last year. The week after Labor Day was the highest corporate sales week in our history, underscoring the strength of business travel. Our diversified, high-margin revenue streams remain a defining strength of Delta, enhancing the quality and durability of our earnings.

Diverse revenue represented 61% of total revenue, with premium and loyalty each growing nearly 20% over prior year. Cargo and MRO revenue both grew nearly 30%. Our loyalty ecosystem is growing in scale and value. SkyMiles membership is growing faster than capacity, and members are engaging more with Delta in the air and beyond the flight.

That deeper engagement is driving growth across brand partnerships such as Uber and Starbucks in addition to travel products and our industry-leading co-brand card portfolio. Card acquisitions and spend both grew double digits, keeping us on track for a fifth consecutive year of 1 million new card acquisitions and double-digit growth in Amex remuneration this year. Now turning to outlook, demand remains strong and broad-based as we enter the final quarter of the year. That strength is reflected in forward cash sales, which grew nearly 20% during the September quarter, the highest quarterly growth since 2022.

These trends support our outlook for December quarter revenue growth of approximately 20% year over year on roughly 3% capacity growth, with seat growth below 2%, including a year-over-year reduction in Main Cabin seats. Our capacity positioning supports another sequential improvement in unit revenue growth as we continue to cover higher costs. This approach keeps our capacity decisions focused on margins, returns, and cash generation. Our results and outlook reflect an integrated commercial strategy that is extending our leadership.

Investments in our fleet, global network, customer experience, and loyalty ecosystems are strengthening our revenue premium, deepening engagement, and creating long-term value. Los Angeles is a clear example of our integrated strategy driving profitable growth over several years. We have built a leading position through investments across the airport, network, and customer experience. S.

markets. This has been enabled by generational airport investments at LAX to create a modern, connected complex with additional gate capacity and seamless access to the international terminal. We now have the most premium ground experience with a dedicated curb-to-lounge path for Delta One customers. Together with our leading position at LAX, Delta One lounges, and our award-winning Sky Club, these investments are strengthening customer preference in this high-value market and further opportunity ahead of the LA28 Olympics.

Now I'll hand it to Dan to discuss our operational results. Dan Janki, Chief Operating Officer Thank you, Joe. Running a great operation is foundational to Delta Air Lines' brand and I want to thank the Delta team for the outstanding service they provide our customers every day. With a culture of continuous improvement and our investment in data and technology, our people keep raising the bar, strengthening reliability and driving efficiency while delivering better outcomes for our customers.

Over the summer we widened our industry leadership in on-time performance and delivered record baggage results and better disruption recovery. Those results were meaningfully important given persistent weather and ATC delays that our people navigated during the quarter, more than twice the number of disruption days compared to historical averages. These targeted investments are strengthening our resilience and recovery. In September we delivered our best mainline completion factor month of the year and we expect further progress through the fourth quarter and into 2027.

We are scaling new technology and process improvements across the operation to strengthen reliability, accelerate recovery, and enhance the customer experience. Atlanta is an important example where these investments are driving record baggage performance, improving connections, and making our largest, most profitable hub even more reliable and efficient. The Delta people remain our most important differentiator. New tools and technology are giving them more time to do what they do best: care for our customers.

We are pairing these technology investments with new training that equips our people to deliver even more consistent and personalized service. S. carrier. Today, operational reliability, people, and technology deliver better outcomes for our customers and support Delta's leadership in net promoter score.

Domestic NPS continues to strengthen, driven by record interaction scores with our people, expanding digital capability, and more proactive customer communication, particularly during disruptions. During the quarter we further expanded self-service options in the Fly Delta app and completed the rollout of Delta Concierge to all SkyMiles members. Customer adoption is growing and new capabilities are scaling rapidly. Our operational expertise also creates value beyond the core airline.

I'm proud of the TechOps team for delivering a billion dollars of maintenance, repair, and overhaul revenue year to date, an increase of nearly 60% over last year, while expanding margins and growing our customer base. And over the next several years we are positioned to more than double MRO revenue while expanding margins. Now I'd like to turn it over to Eric to cover our financial performance. Erik Snell, EVP and Chief Financial Officer Thank you, Dan.

I want to start by recognizing the Delta people for their commitment to our customers through a busy summer travel season. 4%. 6 billion increase in fuel expense that was more than $500 million higher than guidance for the quarter. 61 per gallon, including a refinery benefit of 13 cents.

With our refinery now fully online following the temporary outage discussed on our July call, we expect a greater benefit in the December quarter at roughly three times the September quarter level. 3% over the prior year on flat capacity. The primary drivers were higher crew and revenue-related costs on capacity growth several points below our original plan and nearly one point of impact from the disruptions that Dan spoke about. 9 billion.

Our financial performance allows us to continue investing while making meaningful progress on debt reduction. 2x. Delta's balance sheet is a strategic asset. We are investment grade at all three credit rating agencies and recently received a Fitch upgrade to BBB flat.

We also ended the quarter with a $3 billion pension surplus and a substantial and growing base of unencumbered assets. 40 per gallon. With slightly higher capacity and continued operational efficiencies, we expect non-fuel unit cost growth to improve one to two points sequentially. Looking to next year, we remain on track for low single-digit unit cost growth as capacity normalizes, operational improvements continue, and we lap higher costs.

65 per share and an operating margin of 7% to 9%. 5 billion. Our outlook includes a refinery benefit of more than $700 million, underscoring its unique value.