Delta Air Lines Inc (DAL) Q2 2023 Earnings Call Transcript

Delta Air Lines Inc (NYSE: DAL) Q2 2023 earnings call dated Jul. 13, 2023

Corporate Participants:

Julie Stewart — Vice President of Investor Relations

Ed Bastian — Chief Executive Officer

Glen Hauenstein — President

Dan Janki — Executive Vice President and Chief Financial Officer

Tim Mapes — Senior Vice President and Chief Communications Officer

Peter Carter — Executive Vice President – External Affairs

Analysts:

Helane Becker — TD Cowen — Analyst

Ravi Shanker — Morgan Stanley — Analyst

Catherine O’Brien — Goldman Sachs — Analyst

Mike Linenberg — Deutsche Bank — Analyst

Sheila Kahyaoglu — Jefferies — Analyst

Scott Group — Wolfe Research — Analyst

Jamie Baker — JP Morgan — Analyst

Conor Cunningham — Melius Research — Analyst

Savanthi Syth — Raymond James — Analyst

Duane Pfennigwerth — Evercore ISI — Analyst

Brandon Oglenski — Barclays — Analyst

Alison Sider — Wall Street Journal — Analyst

Leslie Joseph — CNBC — Analyst

Mary Schlangenstein — Bloomberg News — Analyst

David Slotnick — TPG — Analyst

Presentation:

Operator

Good morning, everyone, and welcome to the Delta Air Lines June Quarter 2023 Financial Results Conference Call. My name is Matthew, and I’ll be your coordinator. [Operator Instructions]

I would now like to turn the conference over to Julie Stewart, Vice President of Investor Relations. Please go ahead.

Julie Stewart — Vice President of Investor Relations

Thank you, Matthew. Good morning, everyone, and thanks for joining us for our June quarter 2023 earnings call. Joining us from Atlanta today, our CEO, Ed Bastian; our President, Glen Hauenstein; 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. Please — we please ask that you limit yourself to one question and a brief follow-up, so we can get to as many of you as possible. And after the analyst Q&A, we will move to our 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.

And with that, I’ll turn the call over to Ed.

Ed Bastian — Chief Executive Officer

Thanks, Julie. Good morning, everyone. We appreciate you joining us. Today, thanks to the great work of our team, we announced record revenue and earnings, reflecting the strength of demand for and momentum of Delta’s differentiated brand. During the June quarter, we generated earnings of $2.68 per share, a 90% increase over last year. This marks the highest quarterly earnings result in our history, an achievement that moves Delta beyond recovery and firmly on a great path forward.

Revenue was 19% above last year and we achieved a 17% operating margin. This resulted in operating income of $2.5 billion, bringing our operating profit over the last 12 months to $6 billion. We generated over $1 billion of free cash during the quarter, bringing our first half free cash flow to $3 billion. We continue to repay debt and we reinstated a quarterly dividend, signifying strong execution on our three-year plan and creating value for our owners.

At Delta, transportation is what we do, but experiences are what we deliver. And that’s made possible by the exceptional service provided by the industry’s best employees, the 90,000 Delta people continue to deliver for our customers during this busy summer season. Over the 4th of July weekend, our people delivered a great operation completing over 21,000 flights with a 99.5% completion factor and industry-leading on-time performance. The Delta people continue to be recognized. During the quarter, The Points Guy ranked Delta as the best US airline for the fifth year in the row with consistently high scores for reliability, customer experience, network and loyalty.

Sharing our success with our team is core to Delta’s culture and we continue to maintain our position of industry leadership on pay. During the quarter, eligible employees received a 5% pay increase on the 1st of April, and year-to-date, we have accrued over $660 million in profit sharing. In fact, more than the total profit sharing paid out for full year 2022. We expect our profit sharing payout next February. We’ll continue to lead the industry by a wide margin. We will always be guided by our values of putting our people and our customers first. They are the driving force of our success. I want to thank our entire team for all they do to Delta and our customers.

As I recently noted, the industry backdrop remains constructive. Air travel demand is strong and the consumer is in good financial shape, particularly the premium consumer base that we target. After years of spending on goods, consumers want to travel. It’s their number one big ticket purchase priority and they desire premium experiences. No one provides this better than Delta.

At the same time, aviation infrastructure is still fragile. And the industry continues to face multiple constraints across the supply-chain, aircraft delivery delays and training needs. As a result, we see a significant gap between the supply that is in place and what demand could sustain. And we expect this gap to remain for an extended period of time.

Turning to our outlook, with our first half performance and visibility into the back half of the year, we are raising our full year outlook and now expect earnings of $6 to $7 per share. For the September quarter, demand momentum continues. We expect to deliver double-digit revenue growth, a mid-teens operating margin and earnings of $2.20 to $2.50 per share. Glen and Dan will provide more details on the components of our outlook.

As we move to 2024 and beyond, our path forward is clear. The strategy that we shared at our Investor Day just a few weeks ago positions Delta incredibly well for the future. Our long-term priorities are to run the world’s best airline, unlock the power of our brand, transform through digital and deliver long-term shareholder value. Our strategy is underpinned by a commitment to financial performance, with a focus on free cash flow, return on invested capital and earnings durability.

We are currently executing ahead of our three-year financial plan and are well-positioned to achieve our 2024 earnings target of over $7 per share. On free cash flow, we introduced a new goal to generate over $10 billion of free cash flow from 2023 to 2025. Strong cash generation will enable us to return our balance sheet to investment-grade metrics, while consistently reinvesting in the business.

In closing, thanks to the outstanding work of our people, Delta continues to set itself apart. We have unique opportunities to grow earnings by leveraging our powerful brand, extending our durable competitive advantages and accelerating our digital transformation. One other point I’d like to add, while our team has been hard at work returning the level of excellence to the skies that our customers deserve, we have not let go of our commitments to our community.

Our team was recently recognized as the number-one corporate blood drive donor with the American Red Cross for the sixth consecutive year with record units of blood collected. To me, these types of achievements are as rewarding as the great financial and operational results that we are publishing today and what makes this company truly great.

Thank you again. And with that, let me turn the call over to Glen and Dan to go through the details of the quarter.

Glen Hauenstein — President

Thank you, Ed, and good morning. I want to start by recognizing our people for their exceptional work during the always challenging peak summer travel period. Thank you.

Delta produced record June quarter revenue of $14.6 billion, up 19% over last year. Revenues were ahead of our initial expectations with momentum in June. June 30th was a new record for industry volume and our highest summer revenue day in history. Total unit revenues were up 1.3% over prior year on improved yield and load factor.

Consumer demand strength continues to be the primary driver of our revenue growth. Business travel in the quarter improved year-over-year, primarily driven by International. Overall, International passenger revenue grew 61%, led by the Transatlantic and Latin-America. Domestic passenger revenue was 8% higher on a similar capacity increase. Premium revenue grew 25%, supporting growth in unit revenues and continuing to outperform main cabin. Delta Premium Select is now offered on over 80% of our wide-body fleet and customer response to the product has been terrific with returns outpacing our expectations.

Total loyalty revenue was up 20% versus last year with continued momentum in our American Express co-brand portfolio. Remuneration of $1.7 billion was 22% higher year-over-year with $3.4 billion through the first half. We are firmly on track to exceed the $6.5 billion target for this year and focused on reaching our new long-term goal of $10 billion.

Turning to the outlook, for September quarter, we expect total revenue to be similar to 2Q, increasing 11% to 14% year-over-year. On capacity outlook of 16% growth, unit revenues are expected to be 2% to 4% lower. While the deceleration from the June quarter, this is consistent with historic performance between 2Q and 3Q when factoring in the holiday shifts and tougher international comps as we lap — as we lap the removal of restrictions.

Domestically, demand remains robust and our core hub rebuild is advancing with growth focused in Atlanta. In our coastal hubs, we are leveraging facility investments and progressively improving margins. On International, demand strength is continuing and we are confident in delivering record profitability and margins across all three international entities. System bookings for travel beyond Labor Day are encouraging into the fall.

On corporate, we expect steady improvement in demand. Our recent corporate survey shows businesses expect to increase travel in the second half with several of the least recovered sectors conveying optimism for increased travel in the fall. Similar optimism was reflected in Morgan Stanley’s recent Global Corporate Travel Survey, where respondents indicated travel was expected to grow 9% year-over-year in the second half and 8% into 2024. Delta’s capacity growth will normalize to mid single-digits in 2024, enabling us to further improve reliability, optimize the network and drive efficiency to reduce unit costs and support margin expansion.

With an integrated and proven commercial strategy and the best people in the industry, we have significant opportunity ahead. In closing, I am so proud of the team for delivering a great first half of the year and excited about the momentum we are building.

And with that, I’ll turn it over to Dan to talk about the financials.

Dan Janki — Executive Vice President and Chief Financial Officer

Great. Thank you, Glen, and good morning to everyone. In the June quarter, we delivered earnings of $2.68 per share and operating margin of 17%, ahead of our guidance and a significant improvement over last year. Our non-fuel unit costs were down — were up 2.4% year-over-year. Fuel prices for the quarter averaged $2.52 per gallon, including a refinery benefit of $0.04.

We generated operating cash flow of $2.6 billion. And after reinvesting $1.6 billion into the business, free-cash flow was $1.1 billion. Liquidity ended the quarter at $8.8 billion with adjusted net-debt of $19.8 billion. During the first half of 2023, we repaid $3 billion of debt, including $1.4 billion of early repayments with a focus on our high cost debt. For the year, we expect to repay over $4 billion of gross debt, resulting in interest costs over $100 million lower than our initial expectations.

Our leverage ratio improved to 3.2 times on a trailing 12-month basis. This is down from 5 times at the end of the year. During the quarter, we announced the reinstatement of a quarterly dividend, opening the shareholder base to yield focused investors.

Now moving on to guidance for the September quarter and full year. We expect mid teen operating margins and earnings of $2.20 to $2.50 per share in the September quarter. Non-fuel unit costs have reached an important inflection point. We expect non-fuel unit costs decline 1% to 3% year-over-year in the September quarter. This is consistent with our expectations for a low single-digit decline in the second half of 2023.

Rebuild costs are substantially behind us and capacity is returning through our most efficient core hubs. July marks our peak ASM production for the year and capacity seasonally declining in the fall and winter. As our capacity growth normalizes and enables our operating teams to drive efficiency, we have over $1 billion opportunity from initiatives across the enterprise as hiring and training slow and our workforce gains experience. Improving our non-fuel unit cost is an enterprise-wide priority and remains within our control.

On fuel, we expect the September quarter fuel price to be between $2.50 to $2.70 per gallon. This includes a four-set refinery benefit. As part of our routine maintenance done once every five years, the refinery will undergo a turnaround in mid-September that will continue through November. With production offline during this period, we expect the refinery to breakeven during the second half of the year.

With our second quarter performance and our third quarter outlook, we now expect the full year earnings to be $7 — $6 to $7 per share and an operating margin greater than 12% and free cash flow of $3 billion. Delivering these financial results also positions us to reduce our leverage ratio to 3 times by the end of the year and significantly improve our return on invested capital. For the full year, we expect our return on invested capital to be approximately 14%, a six-point improvement versus last year.

In closing, we’re ahead of plan in 2023 and in 2024 remain confident in delivering earnings per share of over $7 a share while generating over $4 billion of free cash flow and in achieving our investment-grade metrics. As we shared at Investor Day, we see significant opportunities beyond 2024, as we build on the strength of the core airline, leverage our existing capital base to grow high margin revenue streams and delivered durable earnings through a full economic cycle. We couldn’t do this without the hard work of our employees who are delivering for our customers every day. I’d like to thank the Delta people for all they do.

With that, I’d like to turn it back to Julie for Q&A.

Julie Stewart — Vice President of Investor Relations

Matthew, can you please remind the analysts how to queue-up for questions.

Questions and Answers:

Operator

Certainly. [Operator Instructions] Your first question is coming from Helane Becker from TD Cowen. Your line is live.

Helane Becker — TD Cowen — Analyst

Thanks very much, operator. Hi, team. Thanks for the time here. I just have a point of clarification and then my question. The point of clarification is, Dan, could you just say that you’re going to do for more than $4 billion in free cash flow for this year and is that an official guidance update? And then my question really has to do with, as you think about your digital footprint and the technology investments that you have to make, how are you thinking about what’s customer facing versus what’s back office and the cost to invest in, in both? Thank you.

Dan Janki — Executive Vice President and Chief Financial Officer

I’ll start with the first one. And as it relates to free cash flow for this year, 2023, at Investor Day, we raised our guidance from $2 billion to $3 billion, $3 billion to number $4 billion this year. And we expect as part of our three-year plan, we said that we’d be at $4 billion greater in 2024. And Ed talked about the three-year collective plan that we’re working towards, which is over $10 billion for the cumulative period of ’23 through ’25.

Ed Bastian — Chief Executive Officer

And Helane, on your question regarding digital, I think I mentioned a couple of weeks ago at our Investor Day, I consider this one of the most important activities and investments that we’re making in the company. We are — on the one hand, we’re far along, we’ve been working on this for a while, but clearly, we have a lot to go as well. And most of the work that we are doing is clearly within the run-rate, our capex run-rate. I don’t anticipate any increase in capital as a result of that. If anything, a lot of the work that should start sunsetting by the end of ’24 in terms of moving our infrastructure to the cloud will start to dissipate and that will create even more — more capacity within the existing spend level for digital.

Helane Becker — TD Cowen — Analyst

Thank you. That’s very helpful.

Operator

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

Ravi Shanker — Morgan Stanley — Analyst

Thank you. Good morning, everyone. Glen, you commented on the fall, any chance you can expand on those comments a little bit more? Especially US domestic, I think you spoke about corporate a little bit. I think most folks are focused on what the demand looks like beyond the summer, which is obviously very, very strong right now.

Glen Hauenstein — President

Right. We see a strong demand, both domestically and internationally as far as we can see. And we can see, internationally, probably to the end of summer [Indecipherable] in October and see very, very strong results there. And domestically, we’ve seen some very positive trends. I think that was one of our increases in the June quarter, we talked about on the earnings and we’ve seen some inflection in terms of close and build, we’re starting to look better as we look later in the summer, and we’re very encouraged with those trends as well.

Ravi Shanker — Morgan Stanley — Analyst

Great. And as a follow-up, maybe to Ed or Dan kind of, you’re going to hit your long-term EPS target of $7 at the high-end of your guide this year, which obviously is very, very impressive, but I think what’s the next bar here, what’s the next step? Are you looking at $10? And obviously you just had gave us kind of the long-term outlook at the — beyond Analyst Day in terms of the initiatives out there, but where do we be thinking in terms of kind of financial targets to long-term?

Ed Bastian — Chief Executive Officer

Hi, Ravi. Yeah, we’re going to — we need to get to $7 first before we talk about what’s next.

Ravi Shanker — Morgan Stanley — Analyst

You’re only halfway through, through your plan.

Ed Bastian — Chief Executive Officer

Yeah. We want to just increase the current — the current year guide. We will most likely some point next year, hopefully the first half of the year, have our updated long-term plan conversation where we can — we can talk about where we see the long-term financial targets for the company going. But right now, we want to focus on — we’re in very busy part of the year. We want to deliver a great operation for our customers and we’ll talk — we’ll talk more over the course of next 12 months as to how far the EPS can get.

Ravi Shanker — Morgan Stanley — Analyst

So very high quality problem to have. Thank you.

Ed Bastian — Chief Executive Officer

Thank you.

Operator

Thank you. Your next question is coming from Catie O’Brien from Goldman Sachs. Your line is live.

Catherine O’Brien — Goldman Sachs — Analyst

Hey, good morning, everyone. Thanks for the time. So yesterday we had a pretty sizable month over month step-down in airfare CPI. I did some quick analysis that shows that, that data isn’t very correlated to the industries rather than our yield historically, but it doesn’t feel quite right to fully ignore a data point like that. I guess, did you see anything similar to that step-down in your own data, maybe on domestic or lower-end of the fuels — fare spectrum. I know you’re guiding to a decel in 3Q versus 2Q better than what myself and industry was forecasting about a deceleration. Is it as simple as that? Or are there flaws and how that CPI data is calculated where it’s relevant to Delta? Thanks.

Ed Bastian — Chief Executive Officer

Well, the methodology is a sample of a sample. And — so we’re not seeing the same and it’s a different data point than what we have and what we’re seeing, so I’ll leave it to that if you want the definition, which I think explains why there may be a big variance to what you’re seeing. We can forward that to you.

One thing through the call because I know we — a lot people had this question. Just think about where we were last May and June. Demand has just turned — turned on in a crazy hot way, supply was really low. People didn’t care where they were going or how much they spend. They just wanted to go someplace. And we’re seeing fares of up 30%, 40%, 50% and lot — particularly in lot of the domestic markets where they could travel to. That’s obviously not sustainable. And that’s the concept that you — that’s into data that’s being compared to as well. So we’re now at a much more normalized level of stability in the fare environment, particularly domestically. And I think it’s a really poor comparison to try to — to try to draw what that one CPI print was off of the survey of the survey and how that relates to Delta for the future.

Catherine O’Brien — Goldman Sachs — Analyst

I very much agree. Maybe one more for Dan too. Dan, you’re well on your way on your $3 billion free cash flow target, I understand fuel has been volatile to see how the ATL shapes up in the back half of the year. But if your free cash flow was to come in better, would there be upside to that $4 billion plus debt paydown you spoke to? Is that at all cap by your level of pre-payable debt or you’re happy to pay prepayment penalties that means you take down that interest cost burden faster and de-risk the business? Thanks for all the time.

Dan Janki — Executive Vice President and Chief Financial Officer

Certainly. Any — we — as we’ve talked about, paying down debt is a priority here, generating cash, paying down debt, two head-to-head. Any additional cash that we generate, we certainly would pay down debt with it. I think you’ll see us. Even in the back half of this year, we will be over that $4 billion that I talked about our gross debt pay down. And our team has been — Ken and the team out there have been really good about doing what we’ve done year-to-date. We’ve done it actually through open-market repurchase and other activities and we’re just kind of continue to work down the debt.

Catherine O’Brien — Goldman Sachs — Analyst

Great. Thank you.

Operator

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

Mike Linenberg — Deutsche Bank — Analyst

Yeah. Hey, can I — I just wanted to touch back on, I think, Ed, you talked about summer being strong, maybe Glen also added to for international, right, not summer, but international being strong extending into the fall. And I did note that for many of your seasonal European markets, it does look like you’ve extended the season into November, December instead of restarting in April and May, it seems like they’re coming back in early March, maybe even February. What is — is there a secular shift that is going on here where you’re just picking up more and more international to longer season? Maybe, these markets are becoming more mature on one hand. And my follow-up would be, when you look at your domestic, what — what’s the load factor points that are being driven by international? Is it 5 points of load, 8 points of load factor that are on a connecting itinerary? Thanks for answering my questions.

Ed Bastian — Chief Executive Officer

Sure. On the seasonality, we have extended a lot of those seasonal deferrals were because of the way we did maintenance in the past and we’re adjusting that. I think what we wanted to accomplish for most of our markets is at least a full-season of summer IATA, which is, of course [Speech Overlap] over. So you’ve seen a lot of extensions into that period.

We’ve seen travel patterns emerging post pandemic to Europe, that tend to see that Southern Europe has a longer season than it has had historically. And so we’re taking advantage of that. While Northern Europe does have a much shorter season and so trying to work both of those issues to create a network that produces the best returns on a year-round basis. And we have a lot of improvement. We had a — we’re going to have a really great summer and our goal is to have a great winter as well. And so that’s [Technical Issues].

And on the domestic portion of international journey, I think in the last call, we said it was about 10 [Phonetic]. And I think that’s about where it’s staying. And again that depends whether you call domestic portion of international journey to the long hauls or to the short haul, including the Caribbean and Mexico. And so the number I’m giving you includes the Caribbean and Mexico, which is really part of North America. If you took the truly long-haul side of that, it would be a lower number.

Mike Linenberg — Deutsche Bank — Analyst

Okay. Thanks very much.

Operator

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

Sheila Kahyaoglu — Jefferies — Analyst

Thank you. Good morning, guys. And great quarter on profitability. You raised the margin guidance for the year for 12% for 2023 that implies a 100 basis-points of improvement in the second half. How much of that is coming from fuel and non-fuel costs you mentioned that down one to three points? Is it all just cost benefits or are you assuming some continued to be [Technical Issues] Atlantic like there just talking about and benefit from domestic hub restorations?

Glen Hauenstein — President

Yeah, when you think about it first half to second half, couple of things to think about, certainly non-fuel is the biggest driver there. We were up in the first-half and we down low single digits in the back half, that’s your real benefit related to that on that basis. The other benefit you have is, when you think about the halves, you really have a second quarter pretty similar, but you have a fourth quarter versus the first quarter performance in that half performance. And when you put all of that together, that also drives that margin performance first half versus second half.

Sheila Kahyaoglu — Jefferies — Analyst

Great. Thank you. And then if I could just ask a follow-up on cash. The capex assumption, does it still remain 5.5 [Phonetic]? And should we think about the skyline at 43 aircraft for the year given you mentioned some delivery constraints?

Glen Hauenstein — President

Yes, we’ve held our — even as we updated our free cash flow for the year from two to three, we’ve held our capex at 5.5. We’re still holding right around that 42, 43 aircrafts for the year, that can always move around as it has a year by a few.

Sheila Kahyaoglu — Jefferies — Analyst

Thank you.

Operator

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

Scott Group — Wolfe Research — Analyst

Hey, thanks, good morning. Glen, you said that the third quarter RASM would have been in line with seasonality, if you make a few adjustments. Can you just maybe give a little bit color on the adjustments you’re sort of thinking about? And then just — I don’t know if I heard it yet, so maybe just share domestic versus international RASM expectations for the third quarter?

Glen Hauenstein — President

On the seasonality between 2Q and 3Q, we had some of the day shift, the outbound 4th of July was in 2Q, which are some of the best days of the summer as we pointed out in this. So if you take that and adjust for that, we’re about a point off into the normal and hopefully we can make that point up in the quarter. But if you look back to last year, I think that’s the more important comp when you see the deceleration from one to a midpoint of minus three. Last year’s international RASM went between 2Q and 3Q, was up 16 points as the restrictions — travel restrictions went off in 2Q, so that — had that big surge in demand on a limited capacity last year. So, I think we’re really — we’re looking at a 2Q to 3Q that’s really right in line with what we think — what we think the seasonal norms are.

Scott Group — Wolfe Research — Analyst

Okay. Helpful. And then, Dan, I don’t know if I’m getting a little ahead of myself, but when I think about the inflection in CASM in the back-half of this year, that’s still with a pilot deal. So as we look ahead to next year, I know you’ve already set down low single digits, but am I wrong in thinking that first half is going to be better than that?

Dan Janki — Executive Vice President and Chief Financial Officer

Well, the pilot deal you have throughout this year. And as we’ve talked about, you have it in every quarter, and it’s about four points along with the wage increase overall for the entire Delta workforce that came through for the year. When you think about next year and you think about that what we talked about is low single digits, really, we’ve out there with mid single-digit capacity growth, you get that benefit.

And then as you get into the scale and efficiency and rebuild, that is another element that we will benefit from. So we get efficiency, you won’t have a repeat of the rebuild that we had this year. And then the offset to that is the continued movement as it relates to a couple points when you think about pilots and wages into next year. And that’s what gets you to low single digits is the general framework associated with the drivers there.

Scott Group — Wolfe Research — Analyst

Okay. All right. Thank you, guys.

Operator

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

Jamie Baker — JP Morgan — Analyst

Hey, good morning. So Glen, does your third quarter RASM guide assume any share pickup at the expense of any competitors that may be alternating their distribution strategy, you’re rethinking their Northeast footprint?

Glen Hauenstein — President

There’s two questions in there. And the first question is, I think, our third quarter is based on what we see in the second quarter and moving forward and there haven’t been any changes to distribution strategies in the quarter. So I’d tell you, it’s what we see today, just moving forward from there. And on the cessation of the NEA, listen, we compete well in New York. We’ve had a long — long history of competing well in New York, and we’re really confident that as it evolves, that we’ll be able to continue to win in New York, which has been our long-term strategy for 10 years and we’re not deviating from that.

Jamie Baker — JP Morgan — Analyst

And on the — thank you. And on the corporate survey work, any shifts in how individual sectors are responding? For example, is the messaging from your tech customers unchanged from what it’s been, that sort of thing?

Glen Hauenstein — President

I think we pointed out that the laggards are the ones that are most encouraged as you get to the fall. And I think Ed has always said, and I agree with him 100% that your propensity to travel is directly related to whether or not you’re in the office. And as we see more and more offices trying to reopen or reopening and people are trying to get back into the — the corporations trying to get people back in the office. I think that’s a great constructive backdrop for us as we head into the fall and the post Labor Day period.

Jamie Baker — JP Morgan — Analyst

That’s great. Thanks for that.

Ed Bastian — Chief Executive Officer

Jamie, I would like to add one additional comment to it. All these comparisons in terms of corporate travel, unfortunately, are still all made to 2019. And we lose sight of the fact that our economy is 20% plus or minus larger than it was in 2019. So what you’re talking about actually, there is a lot of room to improve for corporate America on travel. And I think that’s part of the underpinning why we think there’s going to — you’re going to continue to see some steady — steady improvement here this fall, and you’re hearing it from the travel managers as well.

Jamie Baker — JP Morgan — Analyst

Good. We have been doing great. Thank you everybody.

Operator

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

Conor Cunningham — Melius Research — Analyst

Hi, everyone. Thank you. Just to follow-up on Jamie’s question. So you do sound a bit better on corporate travel recovering in the back half, but I’m just curious — just to be clear, is that in your guide or is that additional upside if those things do come in a little bit better?

Glen Hauenstein — President

We have a continued slow and steady build in our guide if it was to accelerate beyond what it’s been doing, that would be upside.

Conor Cunningham — Melius Research — Analyst

Okay. That’s helpful. And then just on the domestic RASM, I think you guys are going to be one of the best in the industry, if not the best. I was just curious if you could unpack what was the outperformance? Is that purely just your core hub rebuild in coastal investments kind of coming in at higher unit revenues? Just trying to understand what — maybe back to Catie’s question, like the differences between regular economy seats and what Delta kind of offers out there? Thank you.

Glen Hauenstein — President

Well, I think we said that it’s been continuing to be led by premium products and services. And our domestic rebuild has, as we’ve spoken about earlier, initially focused on the coastal gateways and now — right now moving back into the core. And so we have the lapping of the investments we’ve made in the coastal gateways coming out of COVID, now producing very good returns for us as well as the investments in that — in the core, which of course come in at higher unit revenues. So I think it’s a combination of those two factors moving together.

Conor Cunningham — Melius Research — Analyst

Thanks again.

Operator

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

Savanthi Syth — Raymond James — Analyst

Hey, good morning. Just curious on the international capacity, it’s been growing at a faster pace than domestic given that, that’s where the restoration has been to a greater degree. I was curious how long you expect international capacity growth to kind of continue to outpace domestic here?

Glen Hauenstein — President

Well, as our capacity trends down as we head out restoration into a more normal growth cycle, I think you’ll see a pretty even distribution between domestic and international as we head into ’24. We really haven’t given any guidance on that yet. And internally, we haven’t even completed our ’24 plan yet, but I would expect it to be very similar split between domestic and international.

Savanthi Syth — Raymond James — Analyst

Got it. And if I might just ask on the Latin entity, Glen, just — could you provide a little bit more color on what you’re seeing especially broken out between kind of near international, which recovered first in kind of the South America markets?

Glen Hauenstein — President

Yeah, of course, we’ve been really thrilled with the results with LatAm and the improvements in our South America revenue base. So South America is moving at a great clip. And again, the short and medium haul, Latin America markets were some of the first to recover, and they’re still continuing to be strong, but not posting those great — the giant games they did in the early part of the recovery.

Savanthi Syth — Raymond James — Analyst

Excellent. Thank you.

Operator

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

Duane Pfennigwerth — Evercore ISI — Analyst

Hey, good morning and congrats on the strong results. On your Transatlantic JV, I just wondered if there is any new approaches, maybe any learnings through the pandemic that will change the way you operate going forward versus maybe what you’ve done in the past? How much each side flies, things like that?

Glen Hauenstein — President

We have a great Transatlantic joint venture. It was the first one and the most integrated and the one that we think has huge customer benefits and it’s always evolving and that’s the great — and we have great partners that want it to evolve. So we are continuing — evaluating how we approach the marketplace together. You’ve seen some swaps in the fall from things that we have flown or things that our partners are now going to fly. And so I don’t think there are any huge headline changes, but it’s always evolving.

Duane Pfennigwerth — Evercore ISI — Analyst

Okay. And then maybe just for my follow-up on seasonally shaping capacity. It looks like nominally ASMs peak in July. They stepped down a little bit in August and they stepped down a little bit again in September, which seems to make some sense. Not all your peers are kind of taking that approach. In some cases, August is bigger than July, etc. So is this just getting back to kind of your view on normal seasonality? Or is this more operationally driven?

Glen Hauenstein — President

No, absolutely. It’s more normal seasonality. Of course, in the South, you have the schools going back earlier and earlier. This year, for example, schools go back in Georgia, the first of August. And so we’re through the summer travel period in the South, where the North tends to go back after Labor Day. So if you look more granularly, you’d see the Southern — the Atlanta hub and the South trends down in the second half of August, and we keep the Northern tier operating a little bit longer and then pull that down after Labor Day. So we are actually getting much more back to where we want to be as we say we come out of restoration to a much more normal seasonality.

Duane Pfennigwerth — Evercore ISI — Analyst

That’s helpful. Thank you.

Julie Stewart — Vice President of Investor Relations

We’ll now go to our final analyst question.

Operator

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

Brandon Oglenski — Barclays — Analyst

Hey, thanks for letting me ask one here. Glen, so I guess, and I know we’re not guiding to 4Q here, but implied revenue in 4Q maybe feels a little bit softer in 3Q for the full-year, just given your full-year guidance, sorry. Is that conservatism around the off-peak periods like we were talking about back in 1Q with booking trends that have just changed and cancel fees that — or the lack of cancel fees that have changed consumer behavior?

Glen Hauenstein — President

I just think we know the least about 4Q right now. And so as we get towards the end of this quarter, I think we’ll have a much better view that we could share with you on the October call.

Brandon Oglenski — Barclays — Analyst

Okay. I appreciate that. But I guess can you talk maybe structurally how are you approaching the off-peak period differently than earlier this year?

Glen Hauenstein — President

Well, I think what we have left to go in the year as we have — we have to get through Labor Day, of course. And I think we have good visibility through Labor Day. Then we have October, which is historically a very strong travel month for business, so we’ll see how that unfolds. And then we have the holidays, which are the peak holidays. That’s all that’s really left in here and we have good bookings for the holidays. We have good visibility on that. So it’s really going to depend on. And I think it’s potential upside as you said earlier, does business travel more — return more than we expected. And if so, then we have some good upside for the back half of the year. If not, we’re going to trend where we see today.

Brandon Oglenski — Barclays — Analyst

Okay. Appreciate it. Thank you.

Julie Stewart — Vice President of Investor Relations

That will wrap-up the analyst portion of the call. I’ll now turn it over to Tim Mapes to start the media questions.

Tim Mapes — Senior Vice President and Chief Communications Officer

Thank you, Julie. Matthew, if you would please just remind the members of the media about queuing up for the call and we will jump in with members of the media.

Operator

Certainly. At this time, we’ll be conducting a Q&A session for media questions. [Operator Instructions] Thank you. Your first question is coming from Alison Sider from Wall Street Journal. Your line is live.

Alison Sider — Wall Street Journal — Analyst

Hey, thanks so much. Yeah, I wanted to ask about ViaSat yesterday reported it had deployment issue with its recently launched satellite. Just curious if that causes any potential problems for Delta’s free WiFi plans, either for like the current — what’s currently in place or for the future rollouts and if you have to consider any kind of alternatives?

Tim Mapes — Senior Vice President and Chief Communications Officer

Hi, Ali. Obviously, we’re disappointed as ViaSat was with the news yesterday, but we’re committed long-term and they will get through this. We see no meaningful impact to our — to where we stand currently with our domestic capacity, and we’re working closely with them to make sure the domestic performance maintains what we’ve been seeing, which has been great. I think if anything it may cause a delayed rollout on some of the international markets. But it’s too early to tell.

Alison Sider — Wall Street Journal — Analyst

Okay. Thanks. And I also wanted to see if Delta has any view on some of the proposals that Congress is considering around simulator training counting towards pilots’ experience hours? Is that something you’d do favorably or if Delta would have any plan to offer a training program of its own if the Senate proposal goes through or how you’re thinking about that?

Peter Carter — Executive Vice President – External Affairs

Hey, Alison, it’s Peter. Delta has not weighed in on those particular proposals. We think the way pilots are trained is obviously incredibly effective and it’s important to maintain those type of training requirements.

Alison Sider — Wall Street Journal — Analyst

Thank you.

Operator

Thank you. Your next question is coming from Leslie Joseph from CNBC. Your line is live.

Leslie Joseph — CNBC — Analyst

Hey, good morning, everyone. Also wondering if Delta has any view on raising the pilot age potentially to 67, if not beyond that at some point? And then also with the affirmative action ruling from last month, is Delta reviewing or looking at its current DEI policies and they’re expecting any changes that has to make? Thanks.

Ed Bastian — Chief Executive Officer

Leslie, I’ll take the first. No, we don’t have a point of view on that. I think that’s something that within the pilot community, there’s a lot of different opinions around. So we’ll stand by and observe and watch how that discussion unfolds. Peter will touch on the affirmative action.

Peter Carter — Executive Vice President – External Affairs

Yeah. Hello, Leslie, I will tell you at Delta, we continue to be fully committed to our DE&I objectives. And also, we don’t have an affirmative action program at Delta. We always hire the very best.

Operator

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

Mary Schlangenstein — Bloomberg News — Analyst

Hi, good morning. Thank you. With your expectation that the corporate travel recovery is going to slowly continue during the fall, will that step up enough that it will make up for any decline in leisure travel after schools return? Or do you not expect to see that historical dip in leisure travel this fall?

Glen Hauenstein — President

Well, I’ll just give you a view of what we do see because domestic demands, of course, come a little bit later on. But for international travel post Labor Day, we see very robust leisure demand continuing through the October period. So combine that with, hopefully, we’ll get some upside surprise on the increase in business, but we’re not really counting on anything more than what we see today.

Mary Schlangenstein — Bloomberg News — Analyst

Okay. Thank you very much.

Operator

Thank you. Your next question is coming from David Slotnick from TPG. Your line is live.

David Slotnick — TPG — Analyst

Thanks very much. Good morning, everyone. I wondered if Delta has any contingency planning or views surrounding the legislation that potentially affect in credit card fees and charges? I know that would probably have a significant impact on your MX revenue? Are you planning for if that works in play through or have it make up for that or anything else? Thanks very much.

Peter Carter — Executive Vice President – External Affairs

Hey, David, it’s Peter. Obviously, that’s legislation that we’re watching carefully. And if in fact it becomes the law, we will — we will adjust accordingly, but we don’t really think it has a good opportunity to be ultimately signed into law.

David Slotnick — TPG — Analyst

Thank you.

Tim Mapes — Senior Vice President and Chief Communications Officer

Thank you, David. Matthew, I think that will wrap it up for questions from members of the media.

Julie Stewart — Vice President of Investor Relations

Alright, thank you everyone for joining us and I hope you have a great rest of your summer and we’ll talk to you in October.

Operator

[Operator Closing Remarks]