Good morning, everyone and welcome to the Delta Airlines September Quarter 2024 Financial Results Conference Call. My name is Matthew, and I will be your coordinator. At this time, all participants are in a listen-only mode, until we conduct a question-and-answer session following the presentation. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

Thank you, Matthew, and good morning, everyone. Thanks for joining us for our September quarter 2024 earnings call. Joining us from Atlanta today are our CEO, Ed Bastian; our President, Glen Hauenstein; and 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 ask that you please limit yourself to one question and a brief follow-up so that we can get to as many of you as possible. After the analyst Q&A, we will move to 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. Please note that Page 2 of the earnings release today outlines the impact of the CrowdStrike-caused outage on our Q3 profitability and unit metrics, consistent with our initial disclosure on August 8th. Now, I'll turn the call over to Ed.

Thank you, Julie. Good morning, everyone. We appreciate you joining us today. Before we begin, I want to provide a quick update on Hurricane Milton. Safety of our people, customers and communities is always paramount. And to that end, we've issued a fee waiver and implemented fair caps for those who need to change their travel plans or fly out of the storm's path. We've also added additional flights and up gauged aircraft into Florida this week to accommodate those evacuating the state. Between yesterday and today, we have canceled approximately 600 flights in total, but we'll have a better sense of the impact as we learn of how our airports fared overnight. Our hearts are with all those in the Southeast who have been affected during the storm season. Now turning to our earnings report. Earlier this morning, we reported our September quarter results, consistent with our latest guidance. On an earnings per share basis, our results would have been at the high end of initial guidance, excluding the $0.45 impact from the CrowdStrike caused outage. Delta continues to lead the industry, operationally and financially, while delivering on our 2024 plan. Year-to-date, our on-time performance is best in the industry, and our completion factor leads the network carriers even when including the impact of the outage. Financially, we have delivered double-digit operating margins with nearly $3 billion of free cash flow year-to-date. And following the Fitch upgrade in July, our balance sheet now has two investment-grade ratings and our dividend yield is in line with the S&P 500. Delta's year-to-date profitability is expected to represent 50% of the industry's total profits with a double-digit return on invested capital that is more than twice the industry average, reflecting the durability of our business model. I'm incredibly proud of the Delta…

Thank you, Ed, and good morning. I want to start by thanking all of our employees for their hard work during this busy summer travel season. They are the Delta difference. Delta delivered September quarter revenue consistent with our latest guidance despite the impact from Hurricane Helene. During the quarter, unit revenue improved sequentially in all geographic entities reflecting the strength in travel demand and an improving industry backdrop. In the month of September, unit revenue inflected to positive in both domestic and transatlantic. Domestic industry seat growth moderated significantly from the peak in June, with the industry now growing seats in line with demand. Transatlantic benefited from ongoing strength in U.S. point of sale and a rebound in Paris demand as soon as the Olympics ended. Corporate travel sales were up 7% during the quarter, led by double-digit growth in coastal hubs with broad-based strength across sectors. Delta is the clear industry leader in offering premium experiences and more choices for our customers with significant investment across the travel experience over the last 15 years. Our new Delta One Lounges in New York and LA with dedicated check-in and private TSA security truly differentiate Delta's premium offering in the two largest revenue markets in the United States. We also introduced Delta Premium Select on TransCon flights between JFK and LA and we'll expand this offering to all daily frequencies next month. Similar to our international rollout, the initial customer reception to Delta Premium Select has far exceeded our expectations. Consistently delivering elevated experience that customers value is driving outperformance in premium products across geographies. During the quarter, premium revenue growth outperformed the main cabin by 9 points. At the same time, Delta is growing SkyMiles membership and deepening our customer engagement. The success of our strategy is best illustrated…

Thank you, Glen, and good morning to everyone. Operationally, our teams delivered through a busy summer travel season. Year-to-date, Delta has achieved 60 days of zero cancellations, nearly twice all of last year. Today, we reported another quarter of strong financial performance with $1.3 billion of pretax income for the September quarter. On non-fuel unit costs, performance was in line with our expectations. Unit costs grew 5.7%, including a 3.2 point impact from the CrowdStrike caused outage and a 0.5 point impact from the decision to reward employees with travel passes for their hard work through the summer. Now fuel prices declined 9% over prior year, averaging $2.53 per gallon for the quarter, including a $0.03 loss from the refinery. Fuel efficiency improved approximately 1% year-over-year. During the quarter, we took delivery of nine next-gen Airbus aircraft and retired six aircraft. We continue to expect our fleet growth to be less than 2% this year with 20 net aircraft additions as half of our new deliveries are replacements. Operating cash flow year-to-date was $6.2 billion. After reinvesting $3.6 billion back into the business, we generated free cash flow of $2.7 billion. Strong cash generation has supported debt repayment of $2.4 billion year-to-date, including $900 million of early repayments. Gross leverage ended the quarter at 2.9 times. For the year, we expect to repay nearly $4 billion of debt, bringing our cumulative debt paydown to more than $12 billion over the last three years. As we retire secured debt, and pay cash for our aircraft, our unencumbered asset base is expected to grow to $30 billion by year end. Our financial foundation continues to strengthen. We achieved a meaningful milestone during the quarter with our balance sheet receiving an upgrade to investment grade from Fitch. Delta is now investment grade rated…

Thanks, Dan. Matthew, can you please go to the first analyst question?

Certainly, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Your first question is coming from David Vernon from Bernstein. Your line is live.

So Glen, first question for you on the election. Can you just help us get comfortable with how you're separating out that impact from what you're seeing internally? And maybe talk to what gives you confidence that this isn't just a weakness in the consumer that's showing up in some of the forward revenue data? Thanks.

Absolutely. I think it's -- if you were looking at our internal numbers, it's really obvious to see the trend lines where you have markets that are performing incredibly well with positive momentum in October. And then again, as soon as the week after the election is complete, and on into December and really all the way into January. So if you took a trend line, you would see these two weeks just being way off trend. And I think it's -- we said in the comments that it's domestic, but it's also short haul Latin. It's pretty much across the board that those two weeks are underperforming the trends before and after those weeks.

Okay. And then maybe just, Ed, can you talk at a high level about how Delta is thinking about domestic capacity kind of going forward, lower cost airlines cutting capacity? Does that make you think about share any differently here?

Well, David, that's a great prelude into next month's Investor Day, where we'll be giving you our perspective on that. We did, is file our summer schedule last week and Atlanta is one of the markets where we are finally at a position to be at, if not better, than pre-COVID levels in capacity. So very excited about that.

Thank you. Your next question is coming from Jamie Baker from JPMorgan. Your line is live.

Thanks and good morning, everyone. A couple for Glen. So Glen, when I think about the phenomenon of tightening domestic capacity, my assumption has always been that the first routes that are culled provide the greatest uplift to RASM and from there RASM benefits still accrue over time, but at sort of a declining rate of improvement. Is that the right way to be thinking about it that the benefits are front end loaded or is the reality of something different?

Well, Jamie, I'm trying to understand whose perspective you're looking at that from? Are you looking at it from the perspective of the people who are cutting the capacity or the people who are the beneficiary of those capacity cuts?

The latter, the beneficiary, so Delta in this case.

I would say, if you think about how it it was just normal course of business, and this is just hypothetical, that if you're cutting capacity, you're cutting your worse routes first, so the upside accrual from that to the remaining capacity is actually the least. And as you move through and go up to better and better capacity cuts that more and more accrues to the remaining capacity.

Okay. All right. That's very helpful. And then second, on corporate demand, I'm curious what sort of recovery you're thinking about for 2025? But more importantly, does it influence how you think about the network? I mean, hypothetically, I'm not arguing that this would happen. But if we saw a full restoration to where corporate trends would be had COVID not occurred would you need to rebalance the network much or would it simply be an exercise of potentially allocating less capacity to lower fare buckets? Thanks.

Yeah. I would suggest it's the latter.

Okay.

As we pointed out that premium products are really doing much better currently than coach. And as we move through the next couple of schedule changes and adjustments heading into the tail end of the year, we expect that momentum to pick up as the carriers that have primarily coach products begin rationalizing capacity. So I think we always have room for our business customers onboard our network. And clearly, if certain companies pick up business or start new factories, we're always talking to our clients to see where they might need additional capacity. But generally, I think we're in a very good spot.

Got it. Thank you very much.

Thank you. Your next question is coming from Savi Syth from Raymond James. Your line is live.

Hey. Good morning, everyone. Glen, I was wondering, if you could give a little bit more color on how you're thinking about kind of the unit revenue projection in the fourth quarter by entities and just the kind of the trends beyond the elections?

Yeah. I got -- something is wrong with your phone there. So you're asking about trends after the election by entity?

For unit revenue?

What your expectations are?

Right. I think, we certainly said that domestic and transatlantic are leading the way, and I think that will continue as we head into the back half of the year. Actually, I'm most excited about this winter in the transatlantic where we've done some capacity adjustments and underperforming capacity last year, and we see really encouraging signs of where we've allocated that capacity, along with robust demand in the off-season. So really looking forward to the transatlantic results. Pacific, we had some more -- some additional capacity. And as we head out of this year, I think it's -- Japan looks strong, the South Pacific looks strong. China is looking stronger as we lapse the big increase in capacity last year. And we're seeing a little weakness in South Korea, but nothing major, and so we'll keep an eye on that. And then Latin is continuing its improvement as we move through the quarter. And hopefully, we can inflect that into positive as we move into January and beyond. So I think we're sitting in a pretty good spot with all entities as we head out of this year and into 2025 and very encouraged by the trends when you look beyond the election.

Very helpful. Thank you. And if I might, just on the -- follow-up on the Hurricane Helene impact. You called out, the impact of $0.03. I know it's really early days. I was just kind of curious if you have kind of the impact of Hurricane Milton in your guidance and how you're thinking about it?

It's too early to give you that, Savi. We'll have to see what happens. If we're fortunate and it's moved out quickly, it will be modest, but we really have to see.

Understood. Thank you.

Thank you. Your next question is coming from Mike Linenberg from Deutsche Bank. Your line is live.

Yeah. Hey, Glen. I recall -- I want to say this was either the last conference call or maybe it was a conference where I think you were asked about where organic demand was relative to the fact that we were seeing demand up 7%, 8% in the summer. And I think you had indicated that actually a lot of it was promotional – driven by promotions and then our organic demand was maybe closer to about 4% domestically. When I heard you talk about in the comments in your script, you talked about domestic where it seems like supply and demand are now in sync. And if I look at where domestic supply is right now, it is about 1.5%, 2%. Are you sort of indicating that maybe domestic demand organically is around 2%? Are we running a little bit better than that? Can you just – some additional color on that?

Yeah. I think we haven't gotten there yet. So it's really impossible for me to say. But I would -- I think we are still in that kind of 4%-ish. So we'll see, if capacity is up 1.5% or 2% as we get through these next few months. And we see continued positive momentum in yield that will tell. And I think that's what we're encouraged about. And that's what we're excited about as we head to the end of this year as we think this balance has been -- has not been as good in quite some time.

Great. And then just my second question, I think, on the distribution front, it does look like you've -- I believe, correct me if I'm wrong, you may have recently sort of renewed your agreements with all of the GDSs. And I know that you've been moving more into sort of the -- on the NDC side with respect to distribution. How should we think about that, your cost of distribution. Is that going to be maybe a potential tailwind as we head into 2025? Thanks for taking my question.

I think our strategy is really one, we want to meet customers where they want to be and if they're going to use -- if they want to use OTAs, if they want to use GDS, we want to have the best suite of products in each one of those. And over time, I think you've seen a decrease in distribution costs and will that continue? I don't know, that's what consumers want to do. And I think our job is to make sure that we have best-in-class products on the shelves at all of our distributors.

Great. Thank you.

Thank you. Your next question is coming from Conor Cunningham from Melius Research. Your line is live.

Hi, everyone. Thank you. Really outside of you guys and United, the industry continues to try to reinvent itself through product and network changes. When you think about the opportunity that presents to you, just how aggressive do you like pretend -- like thinking -- or thinking about being just given the turmoil and others, like, you’re already deepening your moat like in real time. I’m just trying to understand how deep it is or how deep you can get it from here? Thanks.

First, I think we'll have much more to talk about that at Investor Day because that really goes to the strategy in the next three years. But I think our strategy is consistent to develop free cash flow, pay down our debt and that to be a great moat in the long-term. So maybe I'll turn it over to Dan to talk about that.

I think as you -- Conor, as you -- we want to build off of our success that we had. And if you look at it even over the last decade, but even over the last 18 months, that durability of earnings to be double-digit when the industry has been down and to deliver double-digit margins over that period of time, I think, continue to speak to the durability of the franchise and the ability to create the profitability but generate the cash. And Glen picked up on a word there, which is consistency. You're just going to consistently see us do it, whether it's how we execute commercially, where we put our aircraft, the amount of aircraft that we're taking, the investment back in the business, we're just -- that consistency of executing the strategy has always been core to Delta and will continue to be core.

Okay. That's helpful. And then we're starting to hear a little bit more or see the products that the domestic leisure carriers are offering. And when you look at Delta Comfort+ in that offering and compare it to what the industry is announcing, you talked a little bit about Delta Sync, but what else is there to kind of to widen that gap to the new products that are already out there or that are being announced, I should say? Thank you.

I hope you're available in November to come to our Investor Day because I think we'll have a lot of exciting things for you to take a look at.

Coming out theme today.

Hey, Conor. This is Ed. And Glen is right. We'll be spending a lot of time talking about that next month. But this is a platform we've been on for 15 years, right? So I understand how others are now looking to adapt. It's really hard to change course and to try to catch what is a train that's moving at a pretty good speed. I should say, a plane really moving at a pretty good speed or whether it's the investment in the lounges that you're seeing and the Delta One experience, the free Wi-Fi, and I know everybody wants to do free Wi-Fi now. And we’ve been out on this for years. And so we’ll continue on the pace we’re on. We’re not going to change course. If anything, we’re just going to continue to accelerate.

See you in a month. Thank you.

Thank you. Your next question is coming from Duane Pfennigwerth from Evercore ISI. Your line is live.

Hey, thanks. Good morning. Just on seasonality, obviously, there's a lot of or a bit of noise right now in the baseline with hurricane impacts and with holiday shifts here in October. But as we look at volume growth for the industry, it looks like trends are following much more 2019 baseline than they are really last year. And so I wanted to ask you, do you see seasonality changing on the leisure side or on the corporate travel side, and was there anything about this time last year that was an anomaly?

Well, you mentioned one, it was the shift of the Jewish holidays into October for September, of course, the hurricanes. But I think if you take a broader longer-term vision, we have seen really, August, in particular, but to a slightly lesser extent, July become less peaky, particularly in long-haul international and that September and October are becoming prime travel months. And I think that's something that will continue as schools continue to go back earlier in a lot of the country. And the weather in Europe in August is really hot and that people who have choices when they can take their vacations, are moving into, let's call it, more temperate months. Corporate, we haven't seen much change year-over-year, but I think it's continuing to shift travel to Europe, in particular, from July and August peak to a September and October peak.

That's helpful. And then just -- thanks, Glen. Just for my follow-up, as you think about more modest fleet growth, less training investment, less maintenance investment, maybe there should be a question mark at the end of that one, going forward. What inning are we in for productivity recovery at Delta and what metrics should we be watching on that front? Thank you.

We are -- thanks, Duane. Yes. We're still in the early innings of where we -- and we're pleased with the progress, if you look at how we ended last year in the last six months and you look at this year up, low-single digits. We expect to be 2% for the year on non-fuel cost. You're starting to see that. I think one of the proxies that we've always talked about is that we put the workforce in ahead of the operation and growth and that you'd see efficiency come off of that. So if I point you to something, look at third quarter workforce year-over-year, it's up 1.5% and the network is up over 5%, right? So you're starting to grow into those resources and drive that efficiency across your work groups. But as I talked about, different parts of our operation are a different journey and we're just starting. As you know this year, we made an incremental investment in maintenance that we talked about, the $350 million, that's having the impact that we wanted, maintenance cancels are down 75% year-to-date year-over-year. And so -- but that part of the productivity will start as we get into next year and the year beyond and the year beyond, as we make progress against that. The same with our crews. And so you're seeing it in operations that have already started, airport operations, our customer care operations, making good progress on efficiency and more will kick in as we go through next year. And we'll get the benefit of the full year of having our core hubs restored, which are a low-cost -- that will be the full impact next year, and we're going to continue to get utilization out of the fleet and better utilization out of the regional aircraft will be by next summer, 100% restored on those and continue to get better wide-body utilization as we get this extended flying season and counter seasonal flying. So all those are -- the things that you saw started today are things that you're going to hear us talk about at our Investor Day, and you're going to hear us through '25 and '26 just be components that we can build on.

And Duane, technology also plays a big role in that continued productivity opportunity as we now have our team fully up to speed and the development, the experience set where we want it to be, we'll be able to leverage those tools a little better going forward.

Great. Appreciate the thoughts.

Thank you. Your next question is coming from Scott Group from Wolfe Research. Your line is live.

Hey, thanks. Good morning. So I know, Glen, you don't typically talk much about like monthly trends, but just directionally, just so we understand, can you maybe give some color, like, is October in your view of December, right, if we eliminate the November and the elections, are October and December positive on unit revenue?

Yeah. We're not going to give that level of detail, but I would say that October and December are significantly better than November.

Okay. Fair enough. And then, Dan, can you just maybe talk about some of the puts and takes to be thinking about for CASM next year? I know we'll get probably more of a guide at the Analyst Day, but just directionally just puts and takes to be thinking about?

Yeah. I’d say building off of – thanks, Scott. Building off the previous question, and we will share more at Investor Day. But the context is, again, consistency, right? Things that you saw this year, we’re going to continue to invest back into our workforce, continue to invest back into our brand. You’re going to see those consistently. But at the same time, you’re going to have the benefits of efficiency growing into that workforce. You’ve got the elements that I talked about with maintenance. We know – we put the incremental investment in, we’ll start to get those elements back the crew, the other components associated with that. And then as Ed mentioned, longer term, technology, you start to get it next year, but that will come for years to come, the industry is built for it and we’re built for it.

All right. Thank you, guys.

Thank you.

Thank you. Your next question is coming from Brandon Oglenski from Barclays. Your line is live.

Hey. Good morning, and thanks for taking my questions. So Ed or Glen, you guys did volunteer, so maybe I'll try to provide a little bit of a preview of Investor Day out of here. But you did talk about Atlanta being up in the summer schedule next year. I think you even have a news article saying flights could be up high-single digit levels. Can you maybe specifically speak to that aspect of the strategy as you look forward without maybe giving too much away?

Sure. We have really wanted, as we've said earlier in the -- coming out of COVID to solidify our positions in the coastal cities. And I think as you look at where we are today, clearly the leader in Boston, we assert ourselves as the leader in New York, made incremental improvements in Seattle and widened our lead in Los Angeles. So I put a checkmark on those. At -- to the detriment of the core hubs because we just didn't have enough assets to do it all at once. And so we're really focused, and we'll talk much more about this next week. Next year is really about some incremental adds, of course, that are key to continuing our journey in the coastal gateways. But a vast majority of that going back into our core hubs as the regional jets come back to full utilization as we can push utilization up. And I think if you take a long-term view of Atlanta over the -- not just last year or the year before, but where we've come, it's really about driving efficiency through our core hub, which represents about 30% to 35% of our total unit revenues that flow through here and really driving efficiency through that with larger gauge with actually fewer frequencies still than we had in '19, but seats that will be above that level. So another push through gauge through Atlanta as well as then taking those smaller airplanes and building our feed network back in Detroit and Minneapolis. So we're really excited about where we're going to go next year. We're going to have much more details about that all next month, but we're pumped about where we're headed for '25.

Really appreciate that, Glen. And then, Dan, maybe just as a quick follow-up on that. I mean does this have broader implications for your airport costs because those seem to be part of the inflationary pressures here on the industry at whole. Going back to your core hubs, does that have a positive impact looking ahead?

Yeah. When you look at that airport line, you see it in the SEC filings, right, for the quarter and year-to-date, it's up over 20%. And a third of that is these investments we made that we're making in these generational assets. And as Glen always reminds me, they're always the most expensive on day one and you grow into them over time. So the opportunity in front of us is to grow in and get better utilization out of those assets that we've invested in over this period of time. And you see it throughout the network. It's all the places that Glen talked about in regards to the New York markets with both LaGuardia, JFK, LA, Salt Lake City, but also the investment we consistently make year-in and year-out through Atlanta and continue to make that the flagship of Delta. So it will give us continued leverage.

The thing I would add, Brandon, is that the bulk of those investments are behind us. And as we see what's going on in the industry, we know there's other airports, not necessarily Delta core hubs that still have work to go. So this is something that we're going to be able to leverage over the next few years, having made the investment and starting to drive better efficiency. And I think it will be a unique opportunity for us.

Thank you.

Thank you. Your next question is coming from Tom Fitzgerald from TD Cowen. Your line is live.

Thanks very much for the time. This past summer, United launched an advertising network, depending on the success of that, is that something you'd look to be a fast-follower on?

This is Ed. We'll have to see what it is. There's a lot of advertising and promotion being talked about. There's not a lot of doing on that front. We're very comfortable with where we sit in that space with the free Wi-Fi, Delta Sync and the continued investment in personalization. We're not looking to push ads or try to monetize our customers as much as provide greater value to them. And I think that's the sustainable strategy over time.

Thanks very much. And then just if I may, a quick modeling question. Does your fuel guide include a refinery -- or assume a refinery benefit or a refinery headwind? Thanks again for the time everyone.

Yes, Tom. It has a few cents loss so a headwind as it relates to the guide.

Thank you. Your next question is coming from Ravi Shanker from Morgan Stanley. Your line is live.

Great. Thanks. Good morning, everyone. You guys were pretty vocal on the 2Q call that the industry had to take out capacity in 3Q and 4Q. From where you sit right now, looking at 1Q capacity, how do you feel about that? And do you feel like it's in a good spot or maybe there's more to come out or kind of how does that evolve?

I don't think we want to comment about any individual. But in aggregate, I think we're encouraged by where the industry is finishing this year and likely that the way things have been loading into the schedule availability tapes, that there's probably more to come out of the first quarter, but that's a hypothesis, not a fact.

Understood. And maybe just a follow-up for Dan. Congrats on the investment grade here. Obviously, kind of big change from the pandemic time. Where does that lead the balance sheet kind of going into '25 and how do you think about continued debt paydown versus cash return?

Yeah. That's another one we'll spend time within next month, so stay tuned on that. But again, back to consistency, we're going to be continuing to be focused on cash generation, consistent reinvestment back into the business and with a primary focus on debt and debt paydown, continue to strengthen the balance sheet, and effectively returning capital that way to investors through the accretion of the equity value of enterprise value.

Understood. Lots went back next month looking forward to it

Thank you. Your next question is coming from Sheila Kahyaoglu from Jefferies. Your line is live.

Hi. Good morning, Ed, Glen, Dan. Maybe two questions on premium. So if you look at premium cabin, it's outperformed main cabin by 9 points over the past two quarters versus the previous trend of about 5 points. So first, I guess, can we talk about the spread? How long does that continue? Does main cabin catch up or does premium have more to go?

I'll take a stab at it, and Dan, feel free to add your comments. I think it's a little bit of both. I think we've got main cabin underperforming, and that was really what drove capacity rationalization, I think, by the industry because if all you have is main cabin you need to fix supply so you can get your unit revenues moving in the right direction. So I think we've seen that occurring right now and through the end of the year is that those incremental cuts -- capacity cuts come into play. So I would assume that main cabin, as we exit this year, is starting to improve on the margin. But we also think there's more to go on the premium products. And I think not to keep harping in on saying, come next month and join us for our Investor Day. But I think we'll be able to unveil why and how we think those can continue to improve over the medium and long term.

Yes. I agree with both.

Maybe the second question on that same topic. How do we think about the margin implications of the benefit in the main cabin catch-up, which is clearly underperforming? Does it have a lesser impact on margins as we head into '25 or do you see premium and main continuing to grow at the same rate?

I think, yeah, I think that's hard to say that we parse that out at this point in time. But I think what we're seeing is a much more constructive backdrop in both, whether or not it's the continued increase in business travel as well as better distribution of our products and services in the premium cabins or whether or not it's the better supply/demand balance and coach. But I think all of those are coming into play as we head towards the end of this year.

Yes.

Thank you.

Thank you. Your next question is coming from Andrew Didora from Bank of America. Your line is live.

Hey. Good morning, everyone. Most of my questions have already been asked. But I know I've kind of asked this on some past calls, but as we prepare for Investor Day next month, and we think about the long-term free cash flow generation potential at Delta. Dan, can you just give us a sense of kind of when you become a cash taxpayer? And I think when you were a cash taxpayer pre-pandemic, your cash tax rate was in the low to mid-teens. Does that still hold? Any color around that would be helpful. Thank you.

Certainly, I'm happy to talk about cash taxes. It's a pleasure to actually be in a position where in a plan and horizon, we will be a cash taxpayer. We expect to start paying some cash taxes next year as we burn through the deferred tax asset positions that we've had, and we'll step into that over the next three years. And as you think about that -- the stabilized cash tax rate, it really depends also on where tax policy goes, legislation goes, but think of it as it will progress to the high-teens, maybe the low 20s, but we still have many years in front of us related to that.

Got it. That's helpful. And then maybe just a second one for Glen. Just from transatlantic commentary seems very positive. It seems like competitive capacity there looks pretty constructive over -- from what we can see in schedules. How would you rank the potential for transatlantic revenue generation amongst all of your entities as we head into 2025? Thank you.

Yeah. I think domestic is going to be quite strong given the capacity levels that we're exiting the year from, and I think transatlantic will follow right behind. We have a lot of lapsing in Pacific in terms of capacity that we've added up this year that I think will be better next year. So we have some uplift there. And then, there's been -- again, we haven't talked about it much on this call, but there's been a significant amount of capacity rationalization in the leisure markets in Latin America, which I think should serve us well. So hopefully, we're looking at all of them turning into positives sometime next year, but I'd say probably domestic and transatlantic being the strongest of the two.

That’s great. Thank you.

[indiscernible] I'm sorry.

Matthew, we will now go to our final analyst question.

Certainly. Your next question is coming from Stephen Trent from Citi. Your line is live.

Good morning, everyone and thanks very much for taking my question. Just wanted to dig in a little more. You mentioned your technology investments. I think I recall seeing Delta TechOps is using drones to help with -- in equipment inspections. And could you mention maybe sort of broadly thinking how you may deploy innovative solutions across your business? Thank you.

Sure, Stephen. Again, we'll talk a little bit about this next month. But we have, I think, great opportunities with the technology foundation that we've built. We are in the very early stages of understanding the potential of AI for our business, and there's no question that there are some really interesting applications to drive better predictive modeling and opportunities, whether that's on the revenue front or on the efficiency and the cost front. And the thing with AI is that you need to -- especially as you scale it, you need to make sure that your foundation is clean and reliable. And that's what we've been working on doing. So big opportunities to come, and stay tuned.

Super. Well, I'm looking forward to November and thank you very much for the time.

That will wrap 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 don't mind, while we transition from the analysts to members of the media, if we could repeat the instructions and for the call queue, please.

Certainly. At this time, we will be conducting a Q&A session for media questions. [Operator Instructions] Thank you. Your first question is coming from Leslie Josephs from CNBC. Your line is live.

Good morning, everyone. Thanks for taking my question. Just curious on the shoulder season, you mentioned, Glen, I just wanted to clarify, you said that September and October are more like the previous July and August because of the weather changes. And then, I also wanted to ask about your premium product offerings. You've been investing a lot, obviously, the LA and New York Delta One Lounges and just lounges in general. What are you thinking about for hard products, specifically Delta One? And what are some of the features that customers are asking for that maybe you're not offering now or what are some of the areas that you'd like to improve there in the cabin? Thanks.

Well, Leslie, I think what I said was, October and December are the better months in November is the one that's off trend because of the election. So I think that's what I said on the earlier call. Yeah, September 2. And October looked a lot like September.

Okay. I thought you mentioned talking about the heat in Europe. I wasn't sure if that's like a permanent shift.

The transatlantic demand profile is switching from July and August being super peak to more of a -- not having as big a peak in July and August and moving that travel into September and October. So it's an interesting change.

Got it. It is hot. And then on the hard product, what's your thinking there, especially for the [Multiple Speakers]?

I think you have the whole Investor Day next month that we want to talk about it. So I don't think we want to unveil it here on this call, but hopefully, you have time to join us, and we'll talk a lot about where we want to take premium products in the next four to five years at that meeting.

Okay. Thanks.

Thank you. Your next question is coming from Alison Sider from Wall Street Journal. Your line is live.

Thanks so much. Curious, I had an air traffic control airspace question. Curious, what you're seeing in New York, if the shift to Philadelphia is kind of how that's working out for your other New York operations, if you're seeing the hope for benefits or if you've had any problems there?

Hey, Ali. It's Peter Carter. So we were with the FAA about a week ago talking about all of this. And what I would say is that the N90s shift seems to have gone well, but we still have the same constraints in the New York aerospace that we've had for the last couple of years. So as we all know, there's a shortage of air traffic controllers. And I think the FAA is obviously engaged in trying to solve that, but it's going to take some time.

And is New York kind of still the major -- that airspace is kind of like the major bottleneck in the system? Like, how much does that ripple out to the rest of the country?

It's New York -- Florida, we're seeing some constraints as well.

Thank you.

Thanks, Ali. Matthew, we have time for one final question, please.

Certainly. Your next question is coming from Mary Schlangenstein from Bloomberg News. Your line is live.

Thank you. Earlier when you were talking about the rebuilding of the core hubs and you made a reference to getting all of your regional feedback up, can you give just sort of an overview of what happened with your regional feed since the pandemic and how that like maybe what level it dropped to and how it's rebuilt?

Certainly, as you know, pilot constraints as the majors were hiring early in the recovery period put a lot of strain on availability of pilot crews for the regional carriers, all of them and we've been working very closely with them. And now that the industry growth are patterns are back to more normalized requirements or next year, we think the industry will generate about 5,000 new pilot jobs, which is about what it did in 2019. So returning to more normalized pilot hiring across the industry. The dearth of capacity in terms of pilots available for regionals is dissipating very quickly. And so, in the beginning, we probably had only 35% to 40% of our capacity available. Most recently, this past year, it’s been more like 65% to 70%. And by next summer, we think that will be back to 100% of the capacity that we had available in 2019.

Thank you.

Thank you, Mary. Matthew, that will wrap us up on the media questions, please.

Certainly.

Thank you for joining the call today, and we look forward to talking to you again in January. I think many of you next month at our Investor Day. Thank you very much.

That concludes today's conference. Thank you for your participation today.