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Well, last month, Delta Airlines forecast profit in sales that fell short of Wall Street's estimates for the final months of the year, suggesting a slow recovery from a challenging summer travel season. For an update on the business and the latest on Delta's partnership with the private on demand aviation provider wheels Up, we bring in Ed bast And, CEO of Delta Airlines and George Mattson, CEO of wheels Up, both joining us from Atlanta. We should note that Delta
does own close to forty percent of wheels Up. That's according to Bloomberg Data. Guys, thanks so much for joining us. We're going to get to the wheels Up partnership and the exciting news that you guys have when it comes to new aircraft. But I wanted to ask each of you the same question that I've asked every CEO that I've spoken to over the last week, and I want to start with you, what does a second Trump administration mean for Delta Airlines.
Well, I think you've seen from the market's reaction there's a lot of optimism in the corporate community. I know for Delta specifically, and aviation industry. The president, the former president now the current president elect, knows our industry quite well, was very supportive as we worked with him in his previous administration, particularly as we went through COVID, got the support.
We are the original industry that got the Cares Act started, and the support to keep our employees employed, and we look forward to continuing to work with him in a second administration.
What about ED when it comes to regulation during the next administration, because I think many people would say that Biden administration took what some would call it hostile stance on airline M and A. Do you expect that to change under Trump? Will it lead to a new round of airline consolidation.
I don't know about consolidation.
I guess as possible, but I can tell you that the Biden administration, particularly the Department of Transportation, who we work most closely with, we were quite frustrated with the amount of regulatory overreach that we saw continuously through the last four years. And we hope there's a new sentiment that's pro employee, pro consumer, pro business, and a good balance between the three.
And George, let's ask that same question to you you think about a second Trump administration, what would that mean for Wheels Up?
Yeah, thanks, Kate.
I think as Ed said, you know, the prior administration, we're in the prior administration. Obviously, there was a strong support for aviation in general, US aviation in particular. And you know, what really drives our business as much as
anything else, is a good, solid, strong economy. Obviously, the markets have reacted very positively to the results of the election, and the economy appears to be quite strong and resilient, and I think ultimately that's going to support our business plan went forward.
And let's also talk, of course about the relationship between your two companies, Delta and Wheels Up. And Ed, I'll ask you this question. Delta, according to our data, owns more than a third of Wheels Up. You've also supported Wheels Up with credit and access to capital. Why own so much of Wheels Up? What is in it for Delta?
Well, what's in it for Delta is the opportunity to create a new level of premium in commercial aviation that hasn't previously existed in terms of a partnership. And more than just a partnership, it's an ecosystem that's linked between private and commercial. We know many of our private aviation consumers also fly commercial fly in Delta, and we want to make it easier for them to make those choices when they have the opportunity to fly private and vice versa.
When there's private aviation consumers that may occasionally need a commercial flight, whether it's going to Europe or some other place, we want Delta to be their airline of choice.
Ed.
Would you consider buying the company completely?
No, that's not in the carts.
We deliberately wanted to make certain we had investors with us when we made this decision, and I think having the external validation of investors beyond just Delta was helpful.
Hey, George, I want to talk about the fleet because there was big news last month when Wheels ups it would buy the Embray or Phenom fleet of from Grand View Aviation. It's one hundred and five million dollars deal. It's part of this three year plan to transition to Embraer and Bombardier challenger aircraft. You're also though, moving away from Cessna citations. What's the thinking behind this apart from just a newer fleet.
Yeah, thanks Tim.
When I arrived here just over a year ago. Have you spent eleven years on the Delta board. We obviously had a number of first aid priorities, but one of the priorities over this first year was building a long term strategic plan and a fleet plan that supports that plan. We have a significant, loyal, strong member base, a really strong brand. Most of our members have been individual leisure customers. We are increasingly becoming a provider of choice to corporate customers.
I think through our Delta partnership that's only going to become more important going forward. As we looked at our fleet, it was a little older than we wanted it to be, and it was a little bit more complex than we wanted it to be, with four fleet types operating, which
we've now distilled down to two fleet types. And in deciding to modernize the fleet, what we did is we basically selected the two most popular aircraft types in their respected categories, with the deepest install bases the largest secondary markets in order to be able to buy those aircraft at fleet scale over a period of time.
This is going to.
Really significantly transform the product offering we're able to deliver the customers, the experience, the reliability, the efficiency that comes both with the aircraft themselves and also the simplification of the fleet. We're going to enhance that fleet with best in class connectivity. I think Delta was a real leader in providing free, high speed satellite Wi Fi on the air aircraft.
We've announced a commercial partnership with Go.
Go to provide a similar low Earth orbit satellite Wi Fi capability on all of our aircraft. We're very excited to I've been able to jumpstart this fleet transition by acquiring brand View, which has the largest.
Fleet of on demand feed on three hundred and three hundred e's.
In the market, and that tr transaction is going to close very very soon, and we're going to immediately be able to offer that at fleet scale to both our charter customers but also our programmatic member customers.
And I think when you look.
Forward at the progress we're making financially in the first year, this fleet modernization is an important unlock for the next phase of that of that profitability journey as well.
And I also want to talk of course about Delta's fleet and ed we have to talk about Boeing. You're a major Boeing customer, and to put it mildly, the company has had a lot of problems. They've recently raised new capital though they've gotten past the workers strike. But that being said, how quickly do you expect Boeing to actually get back on a normal production schedule here? And are you anticipating further delays when it comes to deliveries and certifications.
Were, as you may know, not anticipating any Boeing deliveries because we have none outstanding in the next couple of years, so in the immediate term we're not impacted at all. But I do believe that they have made the right decisions around raising capital to invest in their business, around a concerting, Their employees are properly taken care of and compensated, and so they can get back focus on delivering high
quality airplanes to our industry. I think it's going to be a number of years before you see a steady stream of airplanes starting to return, and well, hopefully sooner, but I think we are all realistic that this is going to be a very challenging turnaround still to come.
When you say a number of years, would you count that number on one hand or two hands?
A couple fingers?
Okay, so a.
Couple I like that Hey, we're speaking with that Bashion, CEO of Delta Airlines and George Mattson, CEO of Wheels Up, both joining us from Atlanta. Ed, well, we have you give us an update on capacity in the market.
Here.
We hear it's improving, but is it improving for both premium and economy seats right now?
The market has rationalized. I think this past summer we saw in the US marketplace there were a lot of seats for sale, had a pretty big impact on pricing. A number of the airlines, particularly those on the lower end of the price scale, have been struggling. They all most of them have lost money this year, lost money in the in the peak summer even and have had to implement a number of self help measures to ensure that they can find better balance between supply and demand.
On the premium side, that's where growth has been in the industry, and Delta has led the way. And you know, any of the airlines, there's a couple of us out there that are more focused on premium have done quite well over the past couple of years over those that are that are more in the commodity sense. We're price is the principal determinate of the consumer purchase. They've struggled and they continue to struggle, and that's why you see the supply and being rationalized.
So that's the view on the commercial airline demands. George, give us a peak inside what demand for air space looks like, because you think about coming out of the pandemic, we know that there was a big uptick when it comes to private jet travel. What are you seeing right now, especially as we head into some of these peak travel demand periods.
Yeah, I think in general, I would just say that the industry remains quite healthy.
We certainly saw.
A very big sort of demand bubble from COVID, and when people did start returning to flying, a lot of folks who hadn't flown private started to fly private, and so we've seen that, I would say normalize. The industry feels relatively stable here, but I think when you look kind of medium and longer term, has really strong macro headwinds.
Right.
I think you know, the vast majority of of aircraft private jet aircraft are.
Still wholly owned by individuals or.
Corporations, and so the opportunity for on demand and fractional providers to continue to grow I think remains very strong uh as as as commercial aviation becomes in some ways more challenging with congestion and other and other challenges, I
think it becomes a more a more interesting alternative. And I think one of the really interesting things about what we're doing with Delta is really trying to break down the barrier that has always historically existed between commercial and private aviation into one, you know, seamless aviation solution.
And so I think as we are successful in doing that, we're going to draw more.
Participants into the industry hopefully through our offering and expand expand the market in the in the process. But to answer your specific question, I think generally things feel quite healthy right now.
Yeah, So George, help us understand the profile for somebody who would you know, maybe they're a Delta one customer, but they're also able to fly wheels up. What is that look like from an income perspective, a net worth perspective where they'd actually make the jump and they'd make that choice the most recent Bitcoin rally not necessarilywithstanding.
Yeah, Look, there's different there's different cuts at what at sort of what level of income or net worth constitutes the ability to fly private.
I've seen numbers in the mid single digit millions of dollars of networth. I've seen numbers that are higher.
I've seen a study that suggests ninety percent of people who can afford to fly private under that definition have never flown private. So and so you know, you have if you think about our partnership with Delta Airlines, a couple of really big pools of potential customers. One is the forty five thousand or so Delta corporate customers, where Delta is often the leading provider of travel period to
that company. And so we're offering this within that framework as an additional alternative, as a sleeve, if you.
Will, of an existing broad corporate agreement.
And then when you look at the individual customer, which is sort of just your question, you know there are many If you believe that ninety percent of people who can afford to fly private never flowing private, well where are they? They're in the front of the cabin generally at the commercial airlines, and you know there may not be you know, flying private every time. But again, this idea of a solution that could be commercial, or it could be private, or it can be a hybrid of
the two. Is where I think we're going to find demand for those for those customers from those customers, and I think there's a lot of them out there who don't quite know how to access our industry quite yet, and we're trying.
To fly that.
Hey, Ed, I got to another capacity question for you, because I know that you're already thinking about how things look in twenty twenty five. We're already looking forward to spring break in summer peak flying season. With Boeing's recent strike your turbofan maintenance, do you see a shortage of capacity across the industry or at least at your airline.
I would expect for for the next year, though we haven't given guidance for next year. Actually stay tuned next next week, next Wednesday, we have our investor Day in New York, so maybe you can get it, you can get some insight. Then I expect the industry is going to move as the economy moves. Is an industry that's driven by the economy, not just US, but on a
global scale. And for those carriers that are premium, such as Delta, we have the ability to drive probably a little higher capacity than the broaduct economic growth.
Okay, and Ed, I know that well I don't know. Actually, it doesn't seem like there's still any lingering effects. When it comes to the crowd strike issue that you had over the summer, I know you recently filed a lawsuit against CrowdStrike. You've said you've suffered about five hundred million dollars in financial impact from that event. As the dust has settled, what are the long term applications, what's the financial implication, Well.
The implication is exactly what you said. There was a five hundred million dollars immediate impact from those five days, and there were additional damages on obviously the brand and the remaining impact as it took some time for our customers that were really disappointed to come back to Delta. So all of that's included in the lawsuit that has been filed and will be pursuing vigorously.
But from a go forward basis, we learned a lot.
We thought we were surrounded by the very best that you can protect yourself with both CrowdStrike and Microsoft, and we realize that you can take these guys at anywhere close to face value in terms of what they tell you they're responsible for. So we've all learned to dig in deeper as to how these systems and processes flow.
And it's not just Delta. I think it's the world at large, thousands and thousands of companies that were impacted on a global scale, not realizing how CrowdStrike was injecting directly into the kernel of the operating systems, potentially fall
health code which is and then Microsoft distributes it. So that was a huge learning for us, and we've done the audits immediately and we'll be we've already made made some pretty significant changes in our technology security infrastructure to prevent that from ever happening again.
Well, really appreciate the detail that you gave us there. We'll keep an eye on that lawsuit, but while we still have you guys, only a couple of minutes left. Most people think about commercial and then they think about private. But George, I'm really interested to hear about how you're thinking about these charter operators such as JSX, for example, where you can get on a thirty seat jet at an airport, either a private airport or a commercial airport, and they seem to be a lot cheaper than of
course chartering a private jet. Is that a threat to your business? You think about the convenience and the affordability of some of these operators, and they seem to be picking up steam.
Yeah.
No, Look, there's certainly been there's certainly been some progress made in the introduction of this sort of hybrid commercial private by the seat.
Product or alternative.
It's still quite different than private aviation, really more kin to commercial aviation frankly, in that you know you're buying a seat. It's not private, it's scheduled on their schedule and so on.
So look, there may be a place for it.
I mean, it's operating under a fairly unique set of regulations called Part three eighty.
It's a bit of a different construct.
It's being looked at in different ways by different folks.
But look, we see it as an alternative that certainly people consider. Look, if you're one person or two.
People traveling and you're looking for something other than commercial, and you know you don't want to get your own plane, it.
Sort of fits that niche of the market. If you will you're traveling with your family or a larger group. Frankly, private aircraft of your own can make as much economic sense as that alternative.
But look, there certainly has been some growth within that segment and it remains to kind of be seen where it goes from here.
Hey, guys, really appreciate you both joining us and spending quite a bit of time with us this afternoon. Know you're both busy. That was Wheels Up CEO George Mattson, also with Delta CEO Ed Baston, both joining us from Atlanta.