Good morning everyone. Welcome to the Delta Air Lines March Quarter 2016 Financial Results Conference. My name is Kelly Ann and I will be your coordinator for today. At this time, all participants are in a listen-only mode until we conduct a question-and-answer session following today's presentation. [Operator Instructions]. As a reminder, today's call is being recorded. I would now like to turn the conference over to Miss. Jill Sullivan Greer, Vice President of Investor Relations. Please go ahead, Jill.

Thanks, Kelly Ann. Good morning everyone and thanks for joining us for our March quarter call. Joining us from Atlanta today are Ed Bastian, our incoming CEO, Glen Hauenstein, our incoming President and Paul Jacobson our CFO. We also have the entire leadership team with us in the room for Q&A. Ed will open the call, Glen will then address our revenue performance, and Paul will follow and discuss cost performance and cash flow. To get in as many questions as possible during the Q&A, please limit yourself to one question and a brief follow-up. 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. All results exclude special items unless otherwise noted. You can find the reconciliation of our non-GAAP measures on the Investor Relations page at ir.delta.com. And with that, I'll turn it over to Ed.

Thanks, Jill. Good morning and thanks to everyone for joining us. This morning we reported a $1.56 billion pre-tax profit, our 12th consecutive record quarterly result as the business continues to benefit from low fuel prices and solid demand. We held our top line roughly flat, and realized substantial fuel savings which allowed us to expand operating margins by nearly 10 points to 18.5% and generate $1.4 billion in operating cash flows. These are nothing short of outstanding results and what is typically our seasonally weakest quarter of the year, where we also saw additional pressure from the tragic events that occurred in Brussels in late March. Operationally, we again led the global industry with a 99.4% completion factor and a non time arrival rate of 86.5%. We have 49 perfect main line completion days and six additional days where the only cancelled flights in our network were to Brussels. It’s now more rare to have a day with the cancellation than not on our mainline product. We also had eight days of no cancellations across the entire Delta system, both mainline and regional carriers what we call brand perfect days and we are focussing more and more on the system level performance and working hard to improve on this basis. With these results, the Delta team proved yet again they are the very best in the industry. I am proud to announce we accrued $272 million in profit sharing this quarter on top of the $23 million in shared rewards they earned. I want to thank the Delta team for a terrific quarter. It’s an honour to be able to lead this great company and serve all of you. I would like to take a moment to thank Richard for his leadership and vision in transforming Delta. Richard has…

Thank you, Ed and good morning everyone. I would like to start by expressing my deep gratitude to the Delta team for all of their hard work. Taking great care of our customers everyday has resulted in another record quarterly performance. I am honoured and humble to be taking on the role of President at this very exciting time for our company. There are enormous opportunities ahead for our business and I look forward to driving our continued success together. Our revenues for the quarter were roughly flat to last year, including $125 million headwind from currency and a $5 million impact from the recent events in Brussels. We also maintain our top line performance despite a 40% decline in market field prices. Our corporate demand remains solid with volume growth of 2% this quarter, so our increases across most sectors including healthcare, financial services and technology, however the improvement in volumes is being more than offset by lower yields. The outlook for corporate demand remains favourable with 82% of respondents to our latest corporate travel manager survey rejecting their overall travel spend will be maintained or increased for the rest of the year. This is consistent with outlooks from previous surveys. We continue to see good performance with our branded fare initiatives. Total merchandising revenues grew over 30% for the quarter led by Comfort+ growth at 45% and first class revenue growth of 12%. Basic economy drove roughly $20 million in incremental revenue and we began our broad city level expansion initiative during the quarter. Our partnership with American Express produced $80 million in incremental value this quarter and we expect $265 million in incremental value for the year. Year-to-date new card acquisitions are at record levels and up substancially from 2015. Spend on our cards is up double…

Thanks, Glen, and good morning everyone and thank you for joining us today. While lower fuel cost are providing huge benefits for our business, there is a lot of uncertainty in the global environment and we know fuel won’t stay low permanently. As a result, we remained focussed on staying disciplined with our cost. Total operating expenses for the quarter however were down more than $1 billion as this decline in fuel cost offset wage increases as well as higher profit sharing expense which doubled versus last year at this quarter. Non-fuel CASM increased 4.5% including profit sharing, better than our initial expectation with roughly half of that increase coming from higher profit sharing in the quarter. As you may recall, our cost growth is more weighted towards the front half of the year given the timing of last year’s wage increases and this quarter is the peak. During the quarter, we retired ten older main line aircraft including nine 757 and one 767-300 we removed six 50 seaters from our schedule also during the quarter. We continue to expect our re-fleeting efforts to drive another $350 million of savings in 2016. Our maintenance initiatives benefited us by $90 million in the quarter and we continue to target a $400 million benefit for the full year. For the second quarter we expect non fuel CASM including profit sharing to increase roughly 2% as our productivity and other cost of initiatives help offset higher wages and product and service investments. CASM growth in the second quarter will be well below 1Q levels as we -- last years April 1st wage increase. We remain on track to keep non fuel cost ex-profit sharing below 2% for the full year. Moving onto fuel, our total fuel expense declined by $1.5 billion due to…

Kelly Ann, we are now ready for questions from the analysts, if you could give instructions.

[Operator Instructions] We’ll move first to Duane Pfennigwerth with Evercore ISI

Hey guys, good morning. Thanks for the time.

Good morning, Duane.

As we look towards the inflection to positive revenue later this year and you touched on some of this, can you just expand your thoughts on kind of domestic versus international? And which international region you might expect that first, specifically Latin America there's been a lot of capacity cuts. Are you any more instructive on getting back to positive unit revenue in that region?

Duane, this is Glen. I think we are very constructive because the not only do we have some positive chutes in Brazil, both first time in many years our close in bookings have actually provided positive momentum as it closed to -- negative momentum. We are coming off of a very low base in Brazil and as we start to lapse the currency changes I think we are pushing well with the capacity down towards and inflection point later this year.

And so would that be your guess in terms of getting back deposit RASM first?

No. I think we are already in positive RASM to already in some of our entities including Mexico now in Japan and domestic I think we have a good line of site for peak summer. So I think we have a lot of the network that’s doing better, that’s being also advised some very dramatic decreases in certain geographic areas including Brazil.

Thanks for that color. And then, Paul, could you update us on your latest thinking regarding CapEx for this year and next? How do we think about your narrow body re-fleeting needs relative to kind of that $3 billion core CapEx level that you've outlined?

Good morning, Duane. I think as we've talked about we're looking at balancing capital against our cash flows and approximately $3 billion remains our goal. We've got needs over the next five to seven years as we think about older narrow bodies, particularly MD-88s and we remained committed to doing that while achieving our EPS goals, achieving our cash flow goal and our balanced capital allocation.

Good morning. This is Ed. Let me add a little more to Paul's comments. Our 2016 CapEx guidance remains in line with what we gave you an expectations, there's no changes there. We are in good shape as we look out on our international wide bodies, so there's nothing on that horizon that's changing. The focus we're in the midst of currently is the domestic fleet renewal over the next five years. It's not a short-term need. It's a medium term need, because MD-88s do need to retire. We have roughly 115 of them currently. And we also need to continue to up gauge our regional flying to the main line which we've had a lot of success in and there is much more to go. And I think we can do it cost effectively. There's been a lot of media reports. We have nothing to report at this time. There are no decisions taken, so I will not comment on any media reports. What I do hope is that we'll have more information to report and give you that medium term outlook when we meet together next month in New York at the Spring Analyst Meeting, but the one thing you can remain convinced of here at Deltas that we will stay disciplined on capital deployment as always. That will never change.

Thanks very much.

We'll hear next from Savi Syth with Raymond James.

Hey, good morning.

Good morning.

Just on the domestic capacity, I know in the first quarter you had the increased related to the extra day, but its still about 5.5%, 6% and then if you look at second quarter and I might be reading the schedules wrong, but it showing maybe 4 to 5. So I was wondering does that -- are you still kind of thinking 1% to 3% growth for domestic market in which case maybe second half did you see in the growth is like 1% to 2%. Is that the still the thinking?

That is still the thinking and we do deceleration of that growth throughout the year. Thanks to Gil and the team one of the other good benefits we have in the first quarter with a much higher completion factor than we have preview. That was included in the higher number of spend for this quarter as well as the Leap Day. So we do see that number decelerating throughout the year.

Understood. And then just on the fleet question, Just wondering if you're still finding attractive rates for aircraft to part out and even in midlife aircraft replacement or as you look to your narrow value replacement, are you focusing more on newer aircraft to kind of keep that barbell average age going?

Savi, as we said, we have nothing to report on any speculation in the media and we'll wait till we have something to tell, so we can layout what we're doing. But yes, absolutely, we continue to see good opportunities in the part out space and Gill and his team have created a new entity called Delta Material Services where we're going in and saving literally hundreds of millions of dollars in our tech ops and maintenance cost.

All right. Great. Thank you.

And from Cowan & Company we'll move to Helane Becker.

Thanks very much, operator. Hi, everybody. Thank you for the time. So, I was wondering if you could explain a little more, flush out a little more the trans-Atlantic to comment about over capacity in the market. And I'm asking that within the context of the fact that there are three large JVs that seem to be able to adjust capacity. So, are you seeing other entities outside of the JVs, increase capacity in those part that are you seeing than back selling what you are taking out. So maybe you could just kind of flush that out a little more for me?

Helane, its Glen. One of the big contributors of course are the ME3, because they are included in our trans-Atlantic capacity. So for example here in Atlanta we have Turkish Airline starting non-stop services into Istanbul this spring. We also have Qatar flying from here to Doha this spring. And the Atlanta to Doha market is less people a day, so they're going to need to fill up on some flow. We don't they'll be successful, but those are capacity that we faced here locally that I think describe type of capacity that's in the trans-Atlantic. And on the other side in Europe itself you have some of the growth from the ultra low cost carriers that are attempting now to fly in the trans-Atlantic such as Norwegian, as well as some of the majors like Air Canada. So when you add all that together we get a trans-Atlantic capacity increase is in the high single digit, low double digit through peak summer season given the economic outlook for the United States and for Europe, we think demand will grow in the 4%, 5% range and so there is more capacity can be absorb by the increase in natural demand.

So, just a follow-up on that, are you seeing that pricing being more aggressive in that market and are you concern that if oil prices continue to move up it will pressure margins?

I think those are always are concerns. I think that the demand that is strong particularly ex U.S. and it's been little bit weaker ex Europe. But if these elevated level stay and fuel goes up and economies don't grow, I think that would be an indication that industry would need to full capacity in order to maintain margins.

Okay. Thank you, Glen. I appreciate your help.

Thank you.

We'll move next to Joseph Denardi with Stifel.

Thanks. Good morning. Glen, just on the domestic side kind of given the slowdown in capacity expected throughout the year. Where are the investments being made now and what market is going to fund the capacity reduction through the year?

Well, I don't think it's necessarily capacity reduction, but it’s a lapsing of the investments we made last year. So, as we get through the year our capacity in Seattle grew dramatically last year. Our capacity in the Europe grew significantly last year. As we get to that second half of the year those capacity additions start lapping each other.

Okay. Thanks. And then Paul, just on some of the deferral and acceleration transactions you've made with the hedge book, I think that's kind of complicated the cash flows this year and into next year, so I'm just wondering if you kind of where the book stands right now, but what the net cash flows and outflows are this year and next?

Hey, good morning Joe. What we talked about was if you recall at Investor Day – I'm sorry on the first quarter call that we had locked out the book that's where we sit right now, our expense recognition mirrors those cash flows. So we would expect about $200 million a quarter. We do have some modest quarterly impact in 2017, but it's rather immaterial, the crux about though is like we said the book remains flat and there is no participation, right now, it just sitting there.

Okay. Thank you.

And Jamie Baker with JPMorgan has our next question.

Hey, good morning everybody.

Hi, Jamie.

First one for whoever might want to take it. The second quarter margin guide is healthy, no question about that. But whether or not we include fuel, you know there's traditionally been more improvement from the first quarter to the second, historically for Delta anywhere from call it 500 to 800 basis points. So today's guide is obviously below that range. Shouldn't the consolidated industry be showing a little bit more seasonality, not less as we move into peak periods? Any idea what might be contributing to this?

Hey, Jamie, it's Paul. I'll start and let anybody else chime in that wants to. I think when you look at just where we are in this particular quarter to quarter you've got a move in fuel that, if you just look at our mid point of our guide for 2Q against our 1Q actually is moved up almost $200 million for that impact and while RASM is improving sequentially its not keeping up with that pace in the very, very short term. I don't think that's a judgement on consolidation. I think it just on the volatility of where we are. Despite that move in fuel we're sitting roughly at where ended up at year end. So I think there's a little bit of intraquarter noise movement going on with the market generation.

Okay. That's helpful. Second for Glen, I'm trying to better understand what happened in the last couple of weeks with multisegment, itinerary construction domestically. Its unclear whether or not Delta led the effort, I guess that actually doesn't really matter as much as it seems that the reconstruction is potentially driving firmer RASM on multisegment fares, the type that I would often use if I would jump it around the country on Delta. Can you share any background on this?

Jamie, as always we don't really comment on fares on this call, so I would like to just – if you have another question we could answer?

No. But I'll end with this. We are with and believing you should be comped against high quality industrial transports, but you listen to the earnings calls from those companies this quarter or any other, most of them are going talk openly about pricing revenue. So high quality industrial transports don't duck and weave in this topic. So just something I would point out I'll pass to mic somebody else?

Thank you, Jamie.

And from Wolf Research we'll go to Hunter Keay.

Thank you very much. I appreciate it. Ed, I', curious to know what you expect from Richard as his level of involvement of Chairman, you know, how much is enough, how much is too much I should say and how much is not enough and what are your expecting from him and how much are you guys going to communicate maybe between board meetings?

Well, Hunter, I don't mean to speak for Richard, but Richard is going to become the Chairman of our Board in a few weeks. And I expect Richard to fulfil the same function enrol that our current Chairman Dan Carp has done very ably for the last seven or eight years. Richard and I obviously very close and we speak a lot. And I would leave it at that.

Okay. And Glen, does you on time performance give you the opportunity that maybe tighten some blocks times in order to facilitate maybe some more connecting volumes and maybe this question for you or maybe for Paul, maybe for Gil, he is there, but if you do have some potential CASM pressures in the event that you trim some capacity. How much of that can be offset by tightening some of those block times? Thanks for all time. I appreciated.

This is Gil. Thanks for the question. I mean there's a number of variables that drive on-time. I would argue that execution is biggest of those wholly focused around that. Block time plays a role in it, of course the ground time also play a role. We run the tightest ground times in the industry and we try to bias ground time to the tightest for a number of reasons and block more or less average now with the industry maybe a little bit higher. But we also try to not just blanket block time, we're more surgical about it, I think that's a next level that we continue to drive. But our connections are also a metric and variable that we look at, we run less than a 1% misconnect rate as well, while balancing all of that.

And Hunter, this is Paul. I'll just add there. We're not going to degrade the customer experience, put the customer experience at risk in chasing after CASM goal, nor we're going to add capacity to manage cost, capacity is responsibility of the commercial organization to match the demand and where we see that opportunity. CASM has to be driven by productivity and we're going to continue to do that and if we're successful with that its not going to impact the customer, only enhance their experience.

Thank you very much.

We'll move to next to Darryl Genovesi with UBS.

Hi, everyone. Thanks for the time.

Hi, Darryl.

Not to be the dead horse on CapEx, but I saw Paul mentioned a $3 billion number and I just wanted to be perfectly clear on one point and is that -- are you recommitting to your $3 billion stated upper limit on CapEx regardless of which way the MD-80 replacement decision goes?

Darryl we talked about CapEx for 2016 and long-term we mentioned that we've got some domestic fleet renewal needs and we don't have any updates to that number, but I think you need to wait and to see if we make decision along that line and we'll keep you posted.

Okay. Thanks. And then bigger picture question for Ed or Glen, I appreciate and I'm sure most equity investors on this call probably appreciate your admiral goal of getting back to positive year-over-year unit revenue growth. I guess what I'm less certain of is whether sustain unit revenue growth is actually achievable over the next few years with returns running as high as there across the industry, which to me what appear likely to drive continued at least mid single digit supply growth which is kind of what we've been seeing. So, just wondering and maybe perhaps just focusing on the domestic market assuming the current status flow of kind of low single digit GDP growth, fuel and kind of the low to mid 40s per barrel, and then continued mid single digit, domestic supply growth across the industry, how do you really establish any confidence that, you know, that you can get this sustain unit revenue growth and understandably demand is going to kind of ebb and flow and maybe you can get there for a quarter or two, but just any color on sort of how you can get there and sustain there given the return profile across the industry? Thank you.

You know If you look back over the last several years we had seven years of unit revenue expansion all of by it looks like about two years of contraction. It will be that two years of contraction which were caused really by fuel price being cut in less than half. And I think if you look at the coloration to fuel and unit revenues over time you'll see a very tight coloration in the longer term. So depending on what your fuel assumption is if you see fuel bottoming at $27 in the December time period and then you see a gradual improvement. Although longer, lower for longer I think that ultimately will be reflected in ticket prices and that's one of the reasons I think we're relatively confident that we will get to our unit revenue in the back half of the year than we did in the first half of the year. We coupled that was the foreign exchanges moving from a negative to positive, and I think that shows where we can get to. Back to the domestic arena I do think that most of this decline has been cost by the decrease in fuel.

Okay. Maybe just to play devil's advocate, understanding all the historical metrics that you just laid out, I don't think -- we've really ever seen a period of – sustain period of time where the Airline industry was putting up a roughly 20% on levered return like it is today, right. So, I think most would agree that's well above the industry's capital and looking across other industries that with that type of excess return would typically lead to outsize growth, right. So I guess I have a little trouble understanding how the industry goes about getting price and how Delta goes about getting price with that kind of return backdrop and the likely supply trends that it would drive?

I just would comment, I think we have the very best revenue team in the business and I think that we are very confident that we have a path forward and there is more revenue for us to garner from particularly corporate as we continue to separate ourselves from the pack in terms of our products and services. And really that's what our futures about; it's about getting pay for the high quality of services that buy in this national transportation network. So, if you spend some time I will walk you through some of the initiatives in more great detail, but we really do thing that we are poised to separate from the pack here.

And Darryl, this is Ed. Just to what Glen was saying. This is a different business and this is a different company and you also have to keep in to account the level of cash that we're generation and putting back into product and services and producing a product that customers want to buy and investing in segmentation technologies and merchandizing opportunities in corporate volume and volumes have stayed strong throughout this period. So, I'm optimistic we'll continue to produce the results that we talk about and we'll have – it’s a good question, we'll talk more in the spring meeting about that.

Great. Thanks very much guys.

We'll move next to Dan McKenzie with Buckingham Research.

Hey, good morning. Thanks. Looking out this summer, Europe really strikes me as a wild card, the best case scenario under our Brexit looks pretty deem, so I'm guessing the unit revenue outlook for the second quarter doesn't factoring Brexit, but I believe the demand trends were weaken even before the Brussels attack. So I'm wondering if you can provide some additional color about what's factored into the outlook exactly on this entity, so perhaps a trend line of continued decay, and then just remind what percent of the revenue is tied to the U.K. specifically?

U.K. specifically is probably for us less than 3%, but demand trends for the summer demand itself is strong, yields are relatively weak and lot of that was because of the currency devaluation, but now we are lapping that. So as we move forward from this point we should see actually a tailwind from the euro exchange rate. So, your question kind of indicates doom and gloom. We will confidently say that we have record profits in the trans-Atlantic this summer that's with the high degree of confidence that our profits will be at historic highs trans-Atlantic this summer. And as we get to June and as we usually do we'll assess what demand trends we see it for the off season and then we will take the appropriate adjustments if necessary to ensure that we have the right level of capacity in for the fall and winter.

That's good color. Thanks, Glen. Following up, the GBTA forecast for corporate travel spends was revised downward this week. So I'm wondering if you can provide some color around this revenue bucket for Delta. Is the spend deteriorated somewhat, or are you expecting spend to perhaps trend a little bit more strongly this year? Just wondering what color you can share along those lines.

Dan, this is Ed. The GBTA report as I recall, I'd look at quickly the other night indicated that demand continues to grow, volume continues to grow and that's what we're seeing in our corporate space, our volumes were up in Q1 and our forecast through the summer and rest of the year for volumes still continue to grow. I think the numbers that they've revised down was more reflective of the current pricing environment in which fares our lower than were previously anticipated in the closing space. And I think – but we're not seeing any trend lines to give as pause.

Very good. Thanks guys.

From Stephens, we'll hear from Jack Atkins.

Good morning guys. Thanks for -

Welcome.

As it relates to rising fuel prices, I was just curious how quickly may you'll be able to pass that through higher fares. What sort of lag before that's reflected RASM?

Jack, you're breaking up, we're having real hard time hearing your question.

Sorry about that, is that any better?

Yes, it is.

Okay, great. So as it relates to rising fuel prices, I'm curious how quickly you would be able to pass that through via higher PRASM. What sort of lag would you anticipate with as fuel goes up before you'll be able to pass that through via PRASM?

That's hard to speculate on. Historically there's been a like and I think its anywhere from one to two quarters before RASM and volume adjustments get made to keep track of rising fuel price itself. Current environment is different than anything we've seen before at the same time, so it would be hard to speculate.

Okay. Then specifically with regard to the second quarter PRASM guide, what sort of FX impact is baked in there? If you could share that, that would be helpful.

I think its one point.

Okay. Thank you.

And Rajeev Lalwan with Morgan Stanley has our next question.

Hi, gentlemen, thanks for the time. Just as it relates to the June guide are you assuming the margin environment carries forward? And then just coming back to business travel, have you noticed any changes as far as policy shifts on the corporate side?

On the policy side, no, we're not seeing any significant shifts. And I'd say the Q2 guide is roughly in line with the trend lines that we closed out the first quarter at.

Okay. And then just one other quick one, I think Glen you mentioned earlier that you're seeing some encouraging trends on the domestic front; can you just talk a little bit more about what exactly that was and implications for it?

Well, for many months and quarters now we've had advanced domestic yields and as they sit on the books for the out months in negative territory and as we get to summer of this year, peak summer of this year for the first time and quite a while the advanced bookings and advanced yield trends are favourable to the baseline Europe 12 months ago. So, that is optimistic and now we have to do is get through that whole booking cycle all the way down the day of departure and keep in the positive territory. When you're sitting out at 30, 60, 90 days with the minus three or minus four it's harder to make it up inside that. So that's kind of the trajectory we're on and seeing a much more favourable advanced book than we've had in the past.

Okay. Thanks for the time and congrats on all the new roles.

Thank you.

And from Deutsche Bank, Mike Linenberg.

Hey, everyone. Its actually Richa Talwar on behalf of Mike. Good morning.

Good morning.

So first, we would be curious to hear Delta's stance on slot restrictions at Newark airport being lifted in October. Does that represent a growth opportunity for you? And how do you think it will impact the New York market maybe more broadly and fit into your New York strategy?

New York is a very congested area in terms of capabilities, in terms of aerospace and it’s a very complex and incredibly expensive environment to operate in. And so, well, we are enthusiastic about Newark's slot restrictions being lifted. We are also realistic that their airport does not have an infinite number of or infinite capability to handle traffic. So we will examine the options very carefully and see what it is we do to improve our position in Newark, but I don't see a significant amount for us in Newark.

Okay, great. Thanks. And then second, regarding the financial difficulties your Brazilian Partner is going through, we know GOL has a number of fairly young aircraft that it's looking to restructure with lessons. And it's been reported that Delta is in the market right now, as you've commented multiple times for narrow body jets. So is there a happy harmony on the table where you consider using some of their lift? Is that an outcome you would consider? Or are you really just opting for new aircraft or a different avenue as you consider your replacement needs?

This is Ed. We are working very closely with our good partners down in Brazil and they are certainly through a reduction of their fleet. We haven't made any decisions yet as to whether there would be some of the aircraft that we would take either through addition into our fleet or to part out opportunities, but we're dialogue with them. We're not the only individuals at the table because there's number of lessors are also talking about sending aircraft back to.

Okay. Thanks for that color.

And we got time for one more question from the analyst.

Okay. That will be from Julie Yates with Credit Suisse.

Good morning. Thanks for taking my question.

Good morning, Julie.

Glen, is there any color you can provide geographically on domestic RASM, pockets of strength and weakness? I think last year you called out three specific markets as driving the bulk of the weakness. Is it still a similar story, or was the weakness in Q1 more widespread?

I would say that we saw a deepening of the number of markets that were impacted by lower close-in-fares.

Okay, great. Can you quantify that just in terms like the number of top 10 markets that are affected or?

I think what we can do is we can get back to you on that in terms of more specifics, because it is a much more widespread phenomenon than it was. Last year was really just in some key business markets and now it has broader implications. The good news is that the numbers haven't gotten worst so they tend to balance out in demand, but it is different than it was a year ago.

Okay. And then just on the Q2 unit revenue guide of down 2.5% to down 4.5%, what's the underlying assumption for domestic versus international? And I'm curious if the sequential improvement is mostly a function of lapping the international headwinds like FX and surcharges, or if you expect domestic to materially improve from the down 4.8% given the comments you made on advanced bookings?

As we get through the peak summer we do expect domestic to improve from where we are sitting in March. May maybe a choppy month, but I think June and July will be very solid, and we do get one point reduction or point and a half on the currency headwinds as well. So I think we have some good visibility to peak summer, second quarter isn't the peak for domestic. July is really peak, and that's really where we headed to try and get a positive RASM in domestic, we'll see if we can get there.

Okay, great. Thanks for fitting me in.

Thanks Julie.

Thanks, Julie. And that is going to conclude the analyst portion of the call. I'll hand it over to Kevin Shinkle, our Chief Communications Officer.

Welcome everybody. We've about 10 minutes to take questions from journalists, so please limit yourself to one question and one follow-up. Kelly Anne if you could provide the instruction again on how to register to ask the question.

[Operator Instructions] We'll move to Dennis Schaal with Skift.

Hello, everyone. I was wondering if you see any challenges for Delta in Alaska Air's merger with Virgin America? And also, JetBlue announced this week that they are expanding Mint service into Seattle. How will these changes impact Delta?

Your question was high, I didn't fully hear your question, its high, how does the Alaska/Virgin proposed merger impact Delta?

Yes. Yes, as well as JetBlue expanding Mint service into Seattle.

Seattle we're doing quite well. We continue to grow there. We had a very good margin in the first quarter and I think our outlook is strong there. We're not going to comment on proposed transaction. We'll react when we see what happens in the marketplace.

Okay, thanks.

On the Mint product between Seattle and JFK and Boston, we currently have flatbeds on a single flight between our two flights between New York and Seattle. We had already in the plans to make sure that we had a consistent product in terms of flatbeds seats in key time channels between the two markets. That's not all time channels, but on the red eye, certainly we will have flatbed product in Seattle to New York.

Great.

We hosting our plans before Mint announced this.

Got it. The other question was on basic economy. I think you said that it drove $20 million in incremental revenue in the quarter. Are you happy with that number? And are you not seeing significant dilution from passengers who would have otherwise purchased higher fares?

You know basic economy is really design for customers who solely are purchasing on price and I think our value proposition relative to the ultra low cost carriers is very, very strong. We have great customers, great operational reliability, great baggage delivery and we already have a lot of things that on other ultra low cost carriers are not free like. We don't charge for space in overhead bins. So if you're stopping for just solely price we want to have a product that can compete effectively and provide the best services against carriers who are providing a much lower quality of service. And I think that's what this is design for. And what we're seeing is when presented with the options and the really the way we get to the $20 million value is those customers when they were informed of what those product was show something else. And that's really how we get to that $20 million value. Remember it's really only in about 400 to 500 markets, now we have over 20,000 domestic markets. So our plan is over the next weeks and months we continue to roll it out. So we do have a great value proposition for people who are just looking for lowest possible fare.

Thanks a lot.

And from the Wall Street Journal we hear from Susan Carey.

Good morning gentlemen. Could you remind what your operating margin was in the end in the first quarter?

The first quarter it was 18.5% Susan.

Thank you. And secondly, there's a little tussle going on between the EU and the U.S. and Canada about possibly ending the visa waiver program. Apparently it's not settled yet, but are you thinking ahead to a possible negative impact if U.S. citizens have to apply for visas to go to France or something?

We're not anticipating that Susan.

You think it will be solved then.

We don't have enough information, we don't have an informed opinion at this point, so I'd say, we're not making any plans.

Okay. Thank you.

We'll move next to David Koenig with the Associated Press.

Really you answered the question I was going to ask, which was about basic economy. Just one other thing is the entry of American and United into that market this year, how is that going to -- do you expect how that will affect you?

We really don't have the details yet on what American and United product is, but I think we are consistent in saying whatever that product is, we want to have the best in class for it and we will make adjustments as necessary to make sure that for people who are just travelling on price as the only decision maker that Delta always offers the best product offering.

I guess what I’m getting at. Let’s assume for argument sake that American and United do something similar to what you’ve done, you know it doesn’t that you just kind of divide up whatever that market is and might that 20 million in incremental revenue you saw in the first quarter be a high water mark?

I don’t think that’s the case, so we can take that offline and discuss it with you but I think it might be the opposite.

Okay. Thanks.

And Michael Sasso with Bloomberg News has our next question.

Yeah, good morning. Could you just elaborate a little bit on your discussions with GOL particularly you were talking about doing you know maybe taking back some jets from them, what exactly, what are the range of options that Delta is considering regarding GOL and its aircraft.

Well Michael there is no decisions taken yet because GOL is still working through the impact with its -- and creditors down there but GOL has been public that there is a considerable amount of their capacity that they are reducing. And we as a number of stakeholders in GOL are looking at it whether there are some opportunities to take from used aircraft and either to enter into service and then induct or to part out those opportunities in both spaces.

Any specific types of aircraft you might look at?

There are only five 737 so …

All right.

And from TheStreet we’ll move to Ted Reed.

Thank you. Glen, did you say that between Atlanta and Doha, there is only five O&D passengers a day, so and I think you said that, so do you have any routes like that. And secondly, do you guys feel there is a resolution coming in this dispute with the mid east carriers?

Well Ted you know I would -- we don’t have any markets that we buy half way across the world, they had less than 10 people and I don’t think you will find many carriers in the world. So I don’t know what the latest is, maybe I’ll turn that over to Peter and he will inform you on what the latest is…

I will tell you, this is Peter. This is our number one priority in Washington. We have reason to believe that the U.S. government is going to do the right thing and having said that because this is fundamentally a diplomatic process it will take some time.

So nothing came in from the U.S. government? Nothing we are aware of.

Nothing we are aware and Ted we do have some markets that we have four or five passengers and we call that Delta private jets.

All right. Thank you.

Thanks Ted.

And Kelly Yamanouchi with the Atlanta Journal Constitution has our next question.

Hi there, I was just interested in finding out how the current environment in your outlook as it stands effective, how does contract negotiations as you go into mediation and any time frame that you might have for reaching a deal there?

We are not going to comment publicly fairly on the status of the negotiations were. At the table we are working hard, our pilots are the best and we want our pilots to be paid the best and that’s our commitment to them.

Okay, thank you.

And from Reuters we’ll move to Jeffrey Dastin.

Thanks very much. Has Delta considered starting direct flights into China’s interior now that more of its customers are travelling beyond Beijing and Shanghai?

You know we have some great partners in China with China Eastern and China Southern and similar to how we transfer customers to our European Partners, AFKL and AZ, we think that the next few years is about continuing to develop those primary gateways in Beijing and Shanghai. And as you may know we’ve applied to our new services during this December from Los Angeles to Beijing and that’s going to be our focus for 2016 and 2017 as to our work to get that route and initiate it successfully.

Thank you. And a brief follow up regarding the region. Does Delta have an update on talks to strengthen its partnership with Korean Air?

We are always in discussions with our partners to strengthen and Korean Air is no exception. And as the landscape in the Pacific continues to evolve and the geographies change, we think Korean is a very very important partner for our success in that region in the future and I know they feel the same way about Delta.

Thank you very much.

And we have time for one more question.

And that will be from Edward Russell with Flightglobal.

Hi yes, could you comment on the Haneda day time slots and does Delta plan to seek all of them if they are available in the proceeding later this year?

As you may know there are five daylight frequencies available to U.S. carriers. We are in the process of filing our route case and that will become public here in the next couple of week, but before that happens we probably would refrain from commenting on it.

Okay, one follow up. What was the opening -- due to your Narita hub considering your earlier comments on playing down Narita?

You know we have continued to de-emphasize Narita over the last several years and we will continue on that process. Haneda probably accelerates that process by a little bit as we look through the fall of scheduled period.

Thank you.

Thank you. And with that we’ll conclude our earnings conference call. Thanks to everyone for listening.

Again, that will conclude today’s conference. We thank you all for joining us.