Delta Air Lines Inc (DAL) — Q2 2023 Earnings Call Transcript

Thank you, Matthew. Good morning, everyone, and thanks for joining us for our June quarter 2023 earnings call. Joining us from Atlanta today are CEO, Ed Bastian; our President, Glen Hauenstein; our CFO, Dan Janki. Ed will open the call with an overview of Delta's performance and strategy. Glen will provide an update on the revenue environment, and Dan will discuss costs and our balance sheet. After the prepared remarks, we'll take analyst questions. We please ask that you limit yourself to one question and a brief follow-up, so we can get to as many of you as possible. And after the analyst Q&A, we will move to our media questions. 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. You can find a reconciliation of our non-GAAP measures on the Investor Relations page at ir.delta.com. And with that, I'll turn the call over to Ed.

Thanks, Julie. Good morning, everyone. We appreciate you joining us. Today, thanks to the great work of our team, we announced record revenue and earnings, reflecting the strength of demand for and momentum of Delta's differentiated brand. During the June quarter, we generated earnings of $2.68 per share, a 90% increase over last year. This marks the highest quarterly earnings result in our history, an achievement that moves Delta beyond recovery and firmly on a great path forward. Revenue was 19% above last year, and we achieved a 17% operating margin. This resulted in operating income of $2.5 billion bringing our operating profit over the last 12 months to $6 billion. We generated over $1 billion of free cash during the quarter, bringing our first half free cash flow to $3 billion. We continue to repay debt and we've reinstated the quarterly dividend, signifying strong execution on our three-year plan and creating value for our owners. At Delta, transportation is what we do, but experiences are what we deliver, and that's made possible by the exceptional service provided by the industry's best employees. The 90,000 Delta people continue to deliver for our customers during this busy summer season. Over the 4th of July weekend, our people delivered a great operation, completing over 21,000 flights with a 99.5% completion factor and industry-leading on-time performance. The Delta people continue to be recognized. During the quarter, Delta was ranked as the best U.S. airline for the fifth year in a row with consistently high scores for reliability, customer experience, network, and loyalty. Sharing our success with our team is core to Delta's culture, and we continue to maintain a position of industry leadership on pay. During the quarter, eligible employees received a 5% pay increase on the 1st of April. And year-to-date, we have accrued over $660 million in profit sharing, in fact, more than the total profit sharing paid out for the full year 2022. We expect our profit-sharing payout next February to continue to lead the industry by a wide margin. We will always be guided by our values of putting our people and our customers first. They are the driving force of our success. I want to thank our entire team for all they do for Delta and our customers. As I've recently noted, the industry backdrop remains constructive. Air travel demand is strong, and the consumer is in good financial shape, particularly the premium consumer base that we target. After years of spending on goods, consumers want to travel. It's their #1 big-ticket purchase priority, and they desire premium experiences. No one provides this better than Delta. At the same time, aviation infrastructure is still fragile, and the industry continues to face multiple constraints across the supply chain, aircraft delivery delays, and training needs. As a result, we see a significant gap between the supply that is in place and what demand could sustain. And we expect this gap will remain for an extended period. Turning to our outlook. With our first half performance and visibility into the back half of the year, we are raising our full year outlook and now expect earnings of $6 to $7 per share. For the September quarter, demand momentum continues. We expect to deliver double-digit revenue growth, a mid-teens operating margin, and earnings of $2.20 to $2.50 per share. Glen and Dan will provide more details on the components of our outlook. As we move to 2024 and beyond, our path forward is clear. The strategy that we shared at our Investor Day just a few weeks ago positions Delta incredibly well for the future. Our long-term priorities are to run the world's best airline, unlock the power of our brand, transform through digital, and deliver long-term shareholder value. Our strategy is underpinned by a commitment to financial performance, with a focus on free cash flow, return on invested capital, and earnings durability. We are currently executing ahead of our three-year financial plan and are well positioned to achieve our 2024 earnings target of over $7 per share. On free cash flow, we introduced a new goal to generate over $10 billion of free cash flow from 2023 to 2025. The strong cash generation will enable us to return our balance sheet to investment-grade metrics while consistently reinvesting in the business. In closing, thanks to the outstanding work of our people, Delta continues to set itself apart. We have unique opportunities to grow earnings by leveraging our powerful brand, extending our durable competitive advantages, and accelerating our digital transformation. One other point I'd like to add. While our team has been hard at work returning the level of excellence to the skies that our customers deserve, we have not let go of our commitments to our community. Our team was recently recognized as the #1 corporate blood drive donor with the American Red Cross for the sixth consecutive year with the record units of blood collected. To me, these types of achievements are as rewarding as the great financial and operational results that we are publishing today and what makes this company truly great. Thank you again. And with that, let me turn the call over to Glen and Dan to go through the details of the quarter.

Thank you, Ed, and good morning. I want to start by recognizing our people for their exceptional work during the always challenging peak summer travel period. Thank you. Delta produced record June quarter revenue of $14.6 billion, up 19% over last year. Revenues were ahead of our initial expectations with momentum in June. June 30 was a new record for industry volume and our highest summer revenue day in history. Total unit revenues were up 1.3% over prior year on improved yield and load factor. Consumer demand strength continues to be the primary driver of our revenue growth. Business travel in the quarter improved year-over-year, primarily driven by international. Overall, international passenger revenue grew 61%, led by the TransAtlantic and Latin America. Domestic passenger revenue was 8% higher on a similar capacity increase. Premium revenue grew 25%, supporting growth in unit revenues and continuing to outperform main cabin. Delta Premium Select is now offered on over 80% of our wide-body fleet, and customer response to the product has been terrific with returns outpacing our expectations. Total loyalty revenue was up 20% versus last year, with continued momentum in our American Express co-brand portfolio. Remuneration of $1.7 billion was 22% higher year-over-year with $3.4 billion through the first half. We are firmly on track to exceed the $6.5 billion target for this year and focused on reaching our new long-term goal of $10 billion. Turning to the outlook. For September quarter, we expect total revenue to be similar to 2Q, increasing 11% to 14% year-over-year. On capacity outlook of 16% growth, unit revenues are expected to be 2% to 4% lower. While a deceleration from the June quarter, this is consistent with historic performance between 2Q and 3Q when factoring in the holiday shifts and tougher international comps as we lap the removal of restrictions. Domestically, demand remains robust, and our core hub rebuild is advancing with growth focused in Atlanta. In our coastal hubs, we are leveraging facility investments and progressively improving margins. On international, demand strength is continuing, and we are confident in delivering record profitability and margins across all three international entities. System bookings for travel beyond Labor Day are encouraging into the fall. On corporate, we expect steady improvement in demand. Our recent corporate survey shows businesses expect to increase travel in the second half, with several of the least recovered sectors conveying optimism for increased travel in the fall. Similar optimism was reflected in Morgan Stanley's recent global corporate travel survey, where respondents indicated travel was expected to grow 9% year-over-year in the second half and 8% into 2024. Delta's capacity growth will normalize to mid-single digits in 2024, enabling us to further improve reliability, optimize the network, and drive efficiency to reduce unit costs and support margin expansion. With an integrated and proven commercial strategy and the best people in the industry, we have significant opportunity ahead. In closing, I'm so proud of the team for delivering a great first half of the year and excited about the momentum we are building.

Great. Thank you, Glen, and good morning to everyone. In the June quarter, we delivered earnings of $2.68 per share and an operating margin of 17%, ahead of our guidance and a significant improvement over last year. Our nonfuel unit costs were up 2.4% year-over-year. Fuel prices for the quarter averaged $2.52 per gallon, including a refinery benefit of $0.04. We generated operating cash flow of $2.6 billion. And after reinvesting $1.6 billion into the business, free cash flow was $1.1 billion. Liquidity ended the quarter at $8.8 billion, with adjusted net debt of $19.8 billion. During the first half of 2023, we repaid $3 billion of debt, including $1.4 billion of early repayments with a focus on our high-cost debt. For the year, we expect to repay over $4 billion of gross debt resulting in interest costs over $100 million lower than our initial expectations. Our leverage ratio improved to 3.2x on a trailing 12-month basis, down from 5x at the end of the year. During the quarter, we announced the reinstatement of a quarterly dividend, opening the shareholder base to yield-focused investors. Now moving on to guidance for the September quarter and full year. We expect mid-teen operating margins and earnings of $2.20 to $2.50 per share in the September quarter. Nonfuel unit costs have reached an important inflection point. We expect nonfuel unit costs to decline 1% to 3% year-over-year in the September quarter. This is consistent with our expectations for a low single-digit decline in the second half of 2023. Rebuild costs are substantially behind us and capacity is returning through our most efficient core hubs. July marks our peak ASM production for the year with capacity seasonally declining in the fall and winter. As our capacity growth normalizes, it enables our operating teams to drive efficiency. We have over $1 billion opportunity from initiatives across the enterprise as hiring and training slow and our workforce gains experience. Improving our nonfuel unit cost is an enterprise-wide priority and remains within our control. On fuel, we expect the September quarter fuel price to be between $2.50 to $2.70 per gallon. This includes a $0.04 refinery benefit. As part of our routine maintenance done once every five years, the refinery will undergo a turnaround in mid-September that will continue through November. With production offline during this period, we expect the refinery to breakeven during the second half of the year. With our second quarter performance and our third quarter outlook, we now expect full year earnings to be $6 to $7 per share and an operating margin greater than 12% and free cash flow of $3 billion. Delivering these financial results also positions us to reduce our leverage ratio to 3x by the end of the year and significantly improve our return on invested capital. For the full year, we expect our return on invested capital to be approximately 14%, a 6-point improvement versus last year. In closing, we're ahead of plan in 2023. And in 2024, we remain confident in delivering earnings per share of over $7 a share while generating over $4 billion of free cash flow and achieving our investment-grade metrics. As we shared at Investor Day, we see significant opportunities beyond 2024 as we build on the strength of the core airline, leverage our existing capital base to grow high-margin revenue streams, and deliver durable earnings through a full economic cycle. We couldn't do this without the hard work of our employees who are delivering for our customers every day. I'd like to thank the Delta people for all they do. Now with that, I'd like to turn it back to Julie for Q&A.

Matthew, can you please remind the analysts how to queue up for questions?

I just have a point of clarification and then my question. The point of clarification is, Dan, did you just say that you're going to do more than $4 billion in free cash flow for this year, and is that an official guidance update? And then my question really has to do with as you think about your digital footprint and the technology investments that you have to make, how are you thinking about what's customer-facing versus what's back office and the cost to invest in both?

I'll start with the first one. And as it relates to free cash flow for this year, 2023, at Investor Day, we raised our guidance from $2 billion to $3 billion. $3 billion is the number for this year. And we expect as part of our three-year plan, we said that we'd be at $4 billion or greater in 2024. And Ed talked about the three-year collective plan that we're working towards, which is over $10 billion for the cumulative period of '23 through '25.

Helane, in response to your question about digital, I previously mentioned at our Investor Day that I view this as one of the most crucial areas of focus and investment for the company. We have made considerable progress, having been engaged in this for some time, but there is still much work ahead of us. Most of our current efforts fall within the existing run rate or capital expenditure run rate, and I do not foresee any increase in capital as a result. In fact, much of the work should begin to wind down by the end of 2024 as we transition our infrastructure to the cloud, which will create additional capacity within our current spending level for digital initiatives.

Glen, you commented on the fall. Any chance you can expand on those comments a little bit more, especially U.S. domestic? I think you spoke about corporate a little bit. I think most folks are focused on what the demand looks like beyond the summer, which is obviously very, very strong right now.

Right. We see strong demand both domestically and internationally as far as we can see. And we can see internationally, probably to the end of summer, IATA in October and see very, very strong results there. And domestically, we've seen some very positive trends. I think that was one of our increases in the June quarter, we’ve talked about in the earnings, and we've seen some inflection in terms of closing build where it's starting to look better as we move later in the summer, and we're very encouraged with those trends as well.

Great. And as a follow-up, maybe to Ed or Dan, kind of you're going to hit your long-term EPS target of $7 at the high end of your guide this year, which obviously is very, very impressive. But I think what's the next bar here, what's the next step? Are you looking at $10? And obviously, just give us kind of the long-term outlook and the beyond Analyst Day in terms of the initiatives out there. But what are we thinking in terms of kind of financial targets for the long term?

Hi, Ravi. We need to reach $7 first before we discuss what's next. And…

We're only halfway through a three year plan.

Yes. We have already raised our guidance for the current year. Next year, hopefully in the first half, we will discuss our updated long-term plan and the long-term financial targets for the company. Right now, our focus is on delivering a great operation for our customers during this busy time of year. Over the next 12 months, we will provide more details on how high the EPS can reach.

So yesterday we had a pretty sizable month-over-month step-down in airfare CPI. I did some quick analysis that shows that, that data isn't very correlated to the industry's RASM or yield historically, but it doesn't feel quite right to fully ignore a data point like that. I guess, did you see anything similar to that step down in your own data, maybe on domestic or lower end of the fare spectrum? I know you're guiding to a deceleration in 3Q versus 2Q better than what myself and the Street was forecasting but a deceleration, is it as simple as that? Or are there flaws on how that CPI data is calculated where it's relevant to Delta?

Well, the methodology is a sample of a sample. And so we're not seeing the same. And it's a different data point than what we have and what we're seeing. So I'll leave it to that. If you want the definition which I think explains why there may be a big variance to what you're seeing, we can forward that to you.

Yes. One thing to mention for the call because I know many people are curious about this. Consider where we were last May and June; demand surged significantly while supply remained very low. People were willing to overlook their destination or spending limits as they just wanted to travel. We observed fares increasing by 30%, 40%, or even 50%, especially in various domestic markets. That's certainly not sustainable. This forms the comparison in the data as well. Currently, we are at a much more stable and normalized fare environment, particularly domestically. I believe it's not a valid comparison to link that one CPI reading from a survey to Delta's future performance.

I very much agree. Maybe one more for Dan too. Dan, you're well on your way on your $3 billion free cash flow target. I understand fuel has been volatile to see how the ATL shapes up in the back half of the year. But if your free cash flow was to come in better, would there be upside to that $4 billion plus debt paydown you spoke to? Is that at all capped by your level of prepayable debt? Or you're happy to prepayment penalties that means you take down that interest cost burn faster and tee up the business?

Certainly. As we've mentioned, reducing debt is a priority for us along with generating cash, and these two objectives are equally important. Any extra cash we generate will definitely be used to pay down debt. You can expect that by the second half of this year, we will exceed the $4 billion in gross debt paydown that I referred to. Our team, including Ken, has done an excellent job with our year-to-date efforts, including open market repurchases and other initiatives. We will continue to focus on reducing our debt.

Yes. I want to revisit a point that Ed mentioned about the strong summer season, and Glen added that the international market has also remained robust into the fall. I've noticed that for many of your seasonal European markets, the season appears to have extended into November and December, rather than starting back up in April and May. It seems like these markets might be returning as early as March or even February. Is there a broader trend here indicating that you're capturing more international business with a longer season? Are these markets maturing? Additionally, regarding your domestic operations, what impact does international travel have on your load factor? Are we talking about a 5-point or 8-point increase in load factor from connecting itineraries?

Sure. On the seasonality, we have extended a lot of those seasonal deferrals because of the way we did maintenance in the past, and we're adjusting that. I think what we want to accomplish for most of our markets is at least a full season of summer IATA, which is, of course. And so you've seen a lot of extensions into that period. We've seen travel patterns emerging post-pandemic to Europe that tend to see that Southern Europe has a longer season than it has had historically. And so we're taking advantage of that, while Northern Europe does have a much shorter season. And so trying to work both of those issues to create a network that produces the best returns on a year-round basis. And we have a lot of improvement. We're going to have a really great summer, and our goal is to have a great winter as well. And so that's what we are doing. And on the domestic portion of international journey, I think in the last call, we said it was about 10. And I think that's about where it's staying. And again, that depends whether you call domestic portion of international journey to the long hauls or to the short haul, including the Caribbean and Mexico. And so the number I'm giving you includes the Caribbean and Mexico, which is really part of North America. If you took the truly long hauls out of that, it would be a lower number.

You have raised the margin guidance for the year for 12% for 2023, that implies 100 basis points of improvement in the second half. How much of that is coming from fuel and nonfuel cost? You mentioned that down to 1 to 3 points. Is it all just cost benefits? Or are you assuming some continued yield strength in the Atlantic like we were just talking about and benefit from domestic hub restoration?

Yes. When you think about it, first half to second half, a couple of things to think about, certainly nonfuel is the biggest driver there. We were up in the first half, going to be down low single digits in the back half. That's your real benefit related to that on that basis. The other benefit you have is when you think about the halves, you really have a second quarter, pretty similar when you have a fourth quarter versus a first quarter performance in that half performance. And when you put all that together, that also drives that margin performance first half versus second half.

Glen, you mentioned that the third quarter RASM would align with seasonality with a few adjustments. Could you provide some details on the adjustments you have in mind? Also, could you share the expectations for domestic versus international RASM for the third quarter?

Yes. Regarding the seasonality between the second and third quarters, we experienced some shift in days. The outbound Fourth of July fell in the second quarter, which typically includes some of the peak days of the summer. When adjusting for that, we are roughly one point below the normal expectation, and we hope to recover that in the next quarter. However, comparing to last year is more significant, particularly given the drop from one to a midpoint of minus three. Last year, the international RASM between the second and third quarters increased by 16 points as travel restrictions were lifted in the second quarter, resulting in a significant surge in demand with limited capacity. Therefore, we see the transition from the second to the third quarter aligning closely with our expectations for seasonal norms.

Okay. That's helpful. Dan, I might be a bit premature in my thinking, but when I consider the change in CASM for the latter part of this year, that's still with a pilot deal. Looking forward to next year, I know you mentioned low single digits, but do you believe the first half will perform better than that?

Well, the pilot deal you have throughout this year. And as we've talked about, you have every quarter, and it's about 4 points along with the wage increase overall for the entire Delta workforce that came through for the year. When you think about next year and you think about what we talked about, is low single digits, really, we've out there with mid-single-digit capacity growth. You get that benefit. And then as you get into the scale and efficiency and rebuild, that is another element that we'll benefit from. So we get efficiency. You won't have the repeat of the rebuild that we had this year. And then the offset to that is the continued movement as it relates to a couple of points when you think about pilots and wages into next year. And that's what gets you to low single digits is the general framework associated with the drivers there.

So Glen, does your third quarter RASM guide assume any share pickup at the expense of any competitors that may be alternating their distribution strategy or rethinking their Northeast footprint?

There are two questions. Firstly, I believe our outlook for the third quarter is based on our observations from the second quarter and looking ahead, and there haven't been any changes to our distribution strategies this quarter. So, I can share that it reflects what we see today as we move forward. Regarding the cessation of the NEA, we have been successful in New York for a long time, and we are confident that as the situation evolves, we will continue to thrive there. This has been our long-term strategy for the past decade, and we are staying committed to it.

And on the corporate survey work, any shifts in how individual sectors are responding? For example, is the messaging from your tech customers unchanged from what it's been, that sort of thing?

I believe we highlighted that the slower performers are the ones feeling the most optimistic as we approach the fall. Ed has consistently mentioned, and I completely agree, that the tendency to travel correlates with whether people are working in the office. As more offices reopen and companies encourage employees to return, I see this as a very positive environment for us as we move into the fall and the period after Labor Day.

I would like to add one more point. All these comparisons regarding corporate travel are still benchmarked against 2019. We must remember that our economy is approximately 20% larger than it was in 2019. This suggests that there is significant potential for improvement in corporate travel. This is part of the reason we expect to see steady improvement this fall, and travel managers have been echoing this sentiment.

Just to follow up on Jamie's question, you seem more optimistic about the recovery in corporate travel for the second half of the year. I want to clarify whether that recovery is included in your guidance or if it represents additional potential if things perform better than expected.

We have a continued slow and steady build in our guide. If it was to accelerate beyond what it's been doing, that would be upside.

Okay. That's helpful. And then just on the domestic RASM, I think you guys are going to be one of the best in the industry, if not the best. I was just curious if you could unpack what was the outperformance? Is that purely just your core hub rebuild and coastal investment kind of coming in at higher unit revenues? Just trying to understand maybe back to Catie's question, the differences between regular economy seats and what Delta kind of offers out there?

We mentioned that our growth continues to be driven by premium products and services. Our domestic recovery has focused initially on the coastal gateways and is now shifting back into the core markets. The investments we've made in the coastal gateways following COVID are now yielding significant returns, along with our investments in the core, which generate higher unit revenues. Therefore, it's a combination of these two factors working together.

Just curious on the international capacity. It's been growing at a faster pace than domestic given that that's where the restoration has been to a greater degree. I was curious how long you expect international capacity growth to continue to outpace domestic here?

Well, as capacity trends down, as we head out of restoration into a more normal growth cycle, I think you will see a pretty even distribution between domestic and international as we head into 2024. We really haven't given any guidance on that yet. And internally, we haven't even completed our 2024 plan yet, but I would expect it to be a very similar split between domestic and international.

Got it. And if I might just ask on the Latin entity, Glen, just could you provide a little bit more color on what you're seeing, especially broken out between kind of near international, which recovered first in kind of the South America markets?

Yes, we are very pleased with the results in Latin America and the growth in our South America revenue. The region is progressing well, and the short and medium-haul markets in Latin America were among the first to rebound and continue to perform strongly, although they are no longer posting the large gains seen in the initial phase of recovery.

On your TransAtlantic JV, I just wondered if there's any new approaches, maybe any learnings through the pandemic that will change the way you operate going forward versus maybe what you've done in the past? How much each side flies, things like that?

We have a strong TransAtlantic joint venture, which is the first of its kind and the most integrated. We believe it offers significant benefits to our customers and is consistently evolving. Our partners are eager for it to continue developing, and we are actively assessing our approach to the marketplace together. Recently, you may have noticed some changes in our flight offerings, with our partners taking over certain routes we previously operated. While there aren't any major changes to report, the venture is always progressing.

Okay. And then maybe just for my follow-up on seasonally shaping capacity. It looks like nominally ASMs peak in July. They stepped down a little bit in August and then stepped down a little bit again in September, which seems to make some sense. Not all your peers are kind of taking that approach. In some cases, August is bigger than July, et cetera. So is this just getting back to kind of your view on normal seasonality? Or is this more operationally driven?

No, absolutely. It's more normal seasonality. Of course, in the South, you have the schools going back earlier and earlier. This year, for example, schools go back in Georgia, the 1st of August. And so we're through the summer travel period in the South, where the North tends to go back after Labor Day. So if you look more granularly, you'd see the Southern, the Atlanta hub and the South trends down in the second half of August, and we keep the Northern tier operating a little bit longer and then pull that down after Labor Day. So we are actually getting much more back to where we want to be as we say we come out of restoration to a much more normal seasonality.

We'll now go to our final analyst question.

Glen, while we’re not providing guidance for the fourth quarter, the implied revenue for that period seems to be a bit softer compared to the third quarter based on your full-year guidance. Is this a reflection of a cautious approach regarding the off-peak periods we discussed in the first quarter, particularly concerning changing booking trends and the impact of cancelation fees—or the absence of them—on consumer behavior?

I just think we know the least about 4Q right now. And so as we get towards the end of this quarter, I think we'll have a much better view that we could share with you on the October call.

Okay. I appreciate that. But I guess can you talk maybe structurally, how are you approaching the off-peak period differently than earlier this year?

I believe we still have some important moments left this year. We need to get through Labor Day, which we have good visibility for. Following that, October is typically a robust month for business travel, so we'll see how that develops. Then we move into the holidays, which are the busiest times of the year. We have strong bookings for the holiday season, and we feel confident about that. Ultimately, the outcome will depend on whether business travel rebounds more than expected. If it does, we could see significant growth in the latter half of the year; if not, we may continue on the current trend.

We'll wrap up the analyst portion of the call. I'll now turn it over to Tim Mapes to start the media questions.

Thank you, Julie. Matthew, if you would please just remind the members of the media about queuing up for the call? And we'll jump in with members of the media.

I wanted to ask about Viasat's recent report of a deployment issue with its newly launched satellite. I'm curious if this could create any potential problems for Delta's free WiFi plans, both for the current services in place and for future rollouts, and if you need to consider any alternatives.

Obviously, we were disappointed as Viasat was with the news yesterday, but we're committed long term and they will get through this. We see no meaningful impact to where we stand currently with our domestic capacity, and we're working closely with them to make sure the domestic performance maintains what we've been seeing, which has been great. I think if anything, it may cause a delayed rollout on some of the international markets. But it's too early to tell.

And I also wanted to see if Delta has any view on some of the proposals that Congress is considering around simulator training counting towards pilot experience hours? Is that something you do favorably or if Delta would have any plans to offer a training program of its own if the Senate proposal goes through or how you're thinking about that?

Alison, it's Peter. Delta has not weighed in on those particular proposals. We think the way pilots are trained is obviously incredibly effective, and it's important to maintain those type of training requirements.

Also wondering if Delta has any view on raising the pilot age potentially to 67, if not beyond that, at some point? And then also with the affirmative action ruling from last month, is Delta reviewing or looking at its current DEI policies and you're expecting any changes that has to make?

Leslie, I'll take the first. No, we don't have a point of view on that. I think that's something that within the pilot community, there's a lot of different opinions around. So we'll stand by and observe and watch how that discussion unfolds. Peter will touch on the affirmative action.

Yes. Hello, Leslie. I will tell you at Delta, we continue to be fully committed to our DE&I objectives. And also, we don't have an affirmative action for it in Delta. We always hire the very best.

With your expectation that the corporate travel recovery is going to slowly continue during the fall, will that step up enough that it will make up for any decline in leisure travel after schools return? Or do you not expect to see that historical dip in leisure travel this fall?

I’ll provide you with our perspective on the current situation. We anticipate that domestic demand will emerge a bit later. However, for international travel after Labor Day, we are seeing strong leisure demand continuing through October. Additionally, we are optimistic about a potential increase in business travel, though we are not relying on any significant changes beyond what we observe now.

I wondered if Delta has any contingency planning or views surrounding the legislation, potentially affecting credit card fees and charges. I know that would probably have a significant impact on your MX revenue? Are you planning for if that works, it plays through? Or having a couple of that or anything else?

Hey, Dave, it’s Peter. Obviously that's a legislation that we're watching carefully. And if, in fact, it becomes the law, we will adjust accordingly. But we don't really think it has a good opportunity to be ultimately signed into law.

Thank you, David. Matthew, I think that will wrap it up for questions from members of the media.

All right. Well, thank you, everyone, for joining us, and I hope you have a great rest of your summer, and we'll talk to you in October.