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I am here in Atlanta, Georgia with the CEO of Delta ed Bastard here alongside me. After that earning support yesterday and that projection of twenty percent earnings per share growth in twenty twenty six. Now that you've had a day to suggest, have you been surprised by the market's reaction and frankly by the lines of inquiry that you got yesterday.
No, really, First of all, thank you for coming down. It's great to have you on our campus down here
in Atlanta. There were a lot of expectations. We have a lot of momentum in our business, and as we're going into the year, we've seen the first part of the year, the momentum picked up yet again in the early early days of January, and so as a result of that, I think our our investor base was curious as to whether they see that momentum continuing to build, continue to the flatline to bop around a little bit.
And we just finished a year where we saw some pretty significant challenges, whether it was the Liberation Day impact on consumer sentiment and shutdown of the government and the airspace and the latter part of the year, so we wanted to make certain we had a little bit of wiggle room, some caution as to how we thought about projecting the year out. And so I think there was more inquiries to just how much caution is there and what couldt look like?
Right, And so I think that's more of what we saw.
So we'll get into what great could look like. Let's get into the caution and some of the things that are less foreseeable, including a proposed ten percent cap on credit card rates. And it raises this question about the loyalty program at Delta, considering the fact that American Express and the partnership there contributed something like fourteen percent according to my calculations of the revenue growth over the past year. I'm just wondering how big of a hit is this.
Have you started to map that out at all?
I think it's early. I think it's premature. Listen, that's not our business. As the financial services world and the bank and climate. I think the banks that have already come out and spoken about it are expressing a tremendous amount of concern. So I understand it would require legislation, is what I'm told, And we know the challenges of getting anything through Congress these days. I also think the
knock on effects are pretty significant. When you think about, you know, what seems to be maybe a good idea to help the lower income strata given some income tax or tex some interest rate relief, The reality is is going to eliminate their ability for credit and it's going to freeze up, you know, tremendous amount of credit lines that the banks aren't gonna be able to afford to provide. So I'm not it's not my business. Of course, we're
going to work closely with America Express. The second factor is is that Amex is a premium card provider, so that's really not the income level that we focus on in our business.
At the same time, there is a sense that's a growing part of the revenues. We saw an eleven percent increase in the contribution that this particular aspect made to to Delta's revenue. So I just wonder how much do you expect that to grow? All things being.
Equal, we're expecting high single digit growth in the current year. We've been seeing double digit growth for the last several years, and it's a really important part of our business model. But I don't think it's something that we look back and start getting concerned. I think this idea has a lot of roadblocks and obstacles ahead of it.
One thing that you said in an interview with the colleague talking about what could great look like is that effectively all the growth that you've seen so far has been from the premium cabin not from the main cabin.
Why do you think that is.
Is it because of just incredible strength at the premium end, or is it because of weakness in the main cabin I.
Think the main reason is the demand set for the premium seats and the premium product that we offer is a continues to.
Be at a record high.
The more we look at the health of the consumer, we talk about the K, we're at the top.
End of that K in terms of who our consumer is.
And when you have a high demand set, that's what drives pricing strength, and that's what drives the growth that we've seen the last several years. That said, on the main cabinet, it's still a big part of our business. It's what pays the bills i'd like to think of, and as we see some of the rationalization that's occurring because you have a lot of lower end airlines with low end seats, too many seats chasing still enough low
end consumer demand. That space is where a lot of the rationalization and you see it in the industry currently. As that backdrop continues to get into a healthier environment because all those airlines have to find a way to earn their cost of capital, they're not going to be around and so as a result of that, whatever happens there, we will benefit from that and we'll keep that premium demand set growing.
So well, we're not growing in that.
Space, but it will still be a good one for us in terms of improvement.
You've talked about consolidation in the lower end of the industry and how you expect this to be a pretty big year of that as people try to justify their existence and survive. Would you play in that and anyway would you make any acquisitions.
We're not going to comment on that question, but you know, when you look at who Delta is, you can answer that question for yourself.
Well, I guess the other question is how much is the growth going to come from organic versus inorganic? Is there sort of a plan, especially given how much you've reduced leverage to really increase by acquisition some of your capacity.
Well, when we look at that growth for US, international.
Is a big part of our growth strategy, and we announced yesterday a big new order for the blowing Dreamliner. We're very happy about that, excited about that. People think about our industry, they come to me, they say, where's the future for travel going to?
Come? From? One hundred years old? It is international.
When you think about only one in five people in the world have ever stepped foot on an airplane.
That means you have to go new places.
You have to find new opportunities to grow and expand, and that's going to be the statement of the second century of flight. I believe it's about making the world a much more connected place than it is today.
You know this comes at a time the international travel growth that the rhetoric between trees has been incredibly heated and more about putting up walls. Are you concerned that that could have consequences and put barriers When you talk about the international travel and the growth that you're seeing in that sector, there.
Have always been walls. There's always been in politics, there are sailings. What we look at the world today.
We know the one thing that really does unite the world is when you can actually travel and see and experience and get to know people, and you bring the countries physically closer together. So yes, it's not going to be a straight line up in this business. We know there's a lot of terribulence in the sky, not just in the business models sometimes, but when we actually do physically get connected back together and the world come a closer place, that's where real opportunity.
Since you're talking about the demand so far this year, and you've seen I believe, record demand so far in the first week and a half of January, I'm just wondering, is it mostly still coming from premium? Is it equal across all tiers? Is it also an economy to the same degree that you're seeing in terms of the robust interest at the top.
End, It continues to be at the top end, it continues to be in business. We're seeing double digit growth in business at the start of the year. We had our largest weekly sales in our history just last week, up double digits over the same week a year ago. So if this demandset continues, we're going to have a great year.
So I have to end with this because my colleagues asked me to do this. The lounges, the regular lounges.
Not the Delta one.
They're getting really crowded. How are you going to manage that considering that a lot of people have complaints about that.
Well, we've been experiencing that for the last handful of years, and it's a problem. What no good deed goes unpunished. You know, you build something great and everybody wants to be in there, and it's doesn't feel as exclusive any longer. We've been working through that for the last several years. American Express is our close partner on that expresses building lounges. We're building new lounges where you've got the Delta one
lounges that are coming. We're going to continue to build more supply and more capacity to take care of all of our great customers.
Ed Bastin, thank you so much for being with us today. Really appreciates speaking with you.