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I'm here with the Man of the Moment CEO Ed Baston, CEO of Delta, on the one hundredth centennial celebration here at the New York Stock Exchange. It's also a wonderful day, not just because of that Ed and welcome, it's also there seems to be a light at the end of the tunnel. How relief are you about what's going on in Washington, DC?
Well, more importantly, I'm glad we got to our one hundredth centennial and so proud of our people. First US airline to reach one hundred years of age. But yeah, we're hoping that the vote comes back tonight and we get everybody paid. Most importantly, all those essential workers, controllers, the security agents, the regulators, that everyone in the system. They do such amazing work. They're heroes doing this for a month and a half without pay, showing up every day, and we appreciate them.
So I'm happy about that as well.
How long will it take before we don't see any delays or any expected delays tied to the shutdown.
I think it'll happen pretty quickly.
I think once once people start getting paid, and I know Secretary of Duffy is committed to getting those those paychecks out right away. So over the next couple of days, I think you'll see things starting to turn to normal. Yesterday was actually a pretty good day.
The weekend was tough.
We had weather, We had a lot of staff shortages and many of the ATC towers that cause delays and cancelations. Looking ahead, you know, weather holes, and I think the outlook for the weather is not too bad. It should be by Friday, I think we should be back pretty close to normal.
Do you think Thanksgiving we'll also be back to normal.
Thanksgiving will be great.
Okay, Listen, we know the importance of Christmas and Thanksgiving and the holidays. That's our super Bowl and that's what we rehearse and plan all year long.
We're going to be in really good shape for that.
Have you seen anybody make any cancelations or not make plans anything that sort of highlights the concern around some of the delays that we've seen from the government shutdown, And it's understandable.
We've seen some reduction in bookings, not material, but you know, maybe five to ten percent from where we would normally be.
The first, one of the frustrating things to.
Me is that heading into this period when they decided on Thursday to start canceling.
Flights, we had tremendous momentum.
The revenue based business going double digits, Premium categories all going, you know, double digits, if not more, We're going really strong. And then you know, you get into this situation, all those travelers say, well, maybe I'll wait and see what's going to happen here. So we did see some refunds, We did see some kind We were very flexible in refunds.
If people wanted their.
Money back, we were happy to, not happy to, but we wanted to make sure they were being taken care of. But I think as soon as people see it's ready to go, they're going to come right back.
Do you think there's going to be any permanent hit to the fourth quarter earnings because of the shutdown.
You can't make up one week of delta. We had little over two thousand cancelations. You can't make that up within the quarter. So yes, there was an impact, like there's going to be in all the airlines. It's transitory. I think everyone understands why it wasn't our doing it. Was something that you know, we were used almost as a political hostage to get the government back together, so be it. But the good news is that the outlook is really strong and the holidays will be a good.
Test of that.
You talked about how July you really started to see things pick up and accelerate, and we've heard that from a lot of the airlines. Do you have visibility into the first quarter that this could continue and that this is just gaining steam?
Yeah?
Yeah, our visibility is about ninety days out, so you're going into January, so we would see the return traffic from Christmas and New Year's looks really good. So I see no reason to think that this thing is going to slow down. And again, it's in our category, which is our sweet spot, is our premium traveler. So whether it's our international travel or business travel or a higher end people that wanting a premium service and premium product.
We're in the experience economy, and the one thing we've learned over the last several years is that the greater the experience, the more people willing to pay for it, and the demand is even higher. The more commodity your experiences, the less people are willing to evaluate and so we're in the sweet spot. We're leading the premium experience in the airline category, and I think we're going to have a really good next year.
I'm glad you mentioned that we often talk about Delta and how this is the Delta economy, how you guys are leading in the airline space. You also highlight how different it is with respect to the premium offerings and some of the profitability there versus the rest of the business. I know that premium and loyalty account it for about sixty percent of revenues so far this year versus fifty seven percent last year. How far can this go? Is this sustainable?
I think it is as long as you're giving people value, and they get great value from us because we unlock those opportunities, you know, as long as people want to go and explore Riod where I was just at a couple of weeks ago and were announced a direct flight to Riod from Atlanta next year, or Australia or the Maldives or anywhere you want to go within our country to reunite with friends and families and have a getaway. If you're a premium traveler, Delta is your first call and we love that.
How much is international increasingly a part of that? I know that Korea Air was something that Delta has a partnership with, and increasingly these new routes are coming out. How much is that the expansion planned?
Very much so well?
Today about two thirds of our revenues are US, one third is international. In the second century, which starts to January one, I think we're going to see that start to get closer to fifty to fifty, and eventually international will overtake.
The domestics system.
One of the things I tell people wherever I go is that we're a growth industry. Only one in five people in the world have ever set foot on an airplane.
When you think about that, it's pretty amazing. We take it for granted here and if you told someone here in the US you haven't been an airplane, they think you're living in a cave somewhere, right, But the world hasn't experienced air travel, and we got to find ways make it affordable, to make it sustainable, to make it accessible, and that's what we're focused on.
How much have you seen I know the international inbound travel to the United States took a bit of a dip after Liberation Day. Have you seen it really coming back or is this primarily US travelers going overseas.
It's still mostly US travel heading overseas, and we supplemented with more US point of sale over center, but the international travelers are coming back.
People don't. People want to be here.
So I think once the trade uncertainties were starting to lift, once people saw that, you know, what immigration was about and where people you know, were potentially vulnerable as compared to people that have passports and have normal business. Those are the people we want coming into our country to be able to spend time with them and invest in
our economy. People getting much much, much more comfortable. And the place you see it the most, the most important is in the international business, because international business is really.
Picking up a lot.
I love that you're celebrating one hundredth centennial because it highlights how big of a moment of change we're in currently too, And I would love to take some time to look forward in the next two years, next five years, next ten years, next century, what air travel is going to look like given some of the massive changes that we're seeing just technologically as well as societally.
Well, I think you'll see the demand strength continue to build. We know through our history people just want to travel. They want to go as long as again you do you make it accessible, affordable, sustainable, Those are priorities.
In order to do that.
It means the new planes need to come in much more fuel fisient than the planes that we've taken. Looking for new, new, new form factors in terms of what that airplane looks and the the the body, the aerodynamics of the planes of the future are. We're doing it with a small carrier today called Jobi. You know, the electric vehicle takeoff. It's not going to replace Delta, but it's going to be able to get people moving quickly
from from home to airport to their destination. And that's going to be I think with electric and battery power. It's going to be an interesting innovation that we face. We have, but we have so many ways in which people want to continue to move and.
Continue to explore. We need to have the technology advance.
So a lot of time with Boeing and Airbus and the engine manufacturers and understanding.
Where they're headed because they really drive those opportunities.
But then looking also at the partners were built with Uber with which I'll be back here at the exchange this afternoon. We got an exclusive relationship with them.
With YouTube TV.
We've announced this year an exclusive relationship with them with DraftKings with Starbucks. So many brands kind of want to sit next to the premier travel leader because we draw hundreds of millions of people an opportunity, and we draft off each other, and so you're building an ecosystem, and that ecosystem will increasingly get and people love loyalty, they love.
Brand experience, they love their points, they love acknowledgment and recognition on both platforms.
Do you think that there's room for more than the handful of the premier airline brands at the top. Do you think that for the low cost airlines there's enough room in that future vision of the airline space?
Well, I know they're all trying to get there. This is hard. This is hard, and it takes.
Years of investment and reliable product category, the consistency at the service level. It's the people on the plane. I always hope you we may have great hard product, it's the soft product that matters, and it's the consistency and the delivery that our people make that make the difference.
For the experience that's going to take years and no, I think some of them will improve, but I think it's I think it's a long so it's a tall ask for some of the lower end carriers to find price points where they can actually compete compete with us on